Category Archives: Entrepreneurship

Entrepreneurship, Mentors

The fallacy of providing “great mentorship” in 1 hour chunks

4 Comments

I have a good friend who has been a successful corporate executive for over 15 years. Off the charts smart and with a keen sense for the “inner issues” driving other people, he is able to figure out the root cause of most problems faster than most people I know.

He does though have a lack of time, like most other people. Having been in a large company for most of his career, he wished to live vicariously through other people and was keen to “mentor” young entrepreneurs. My advice to him was to focus on helping younger people in his company rather than entrepreneurs. He seemed to think about my tip, but chose to ignore it.

He setup 1 hour mentoring sessions with 3 entrepreneurs who he felt were working on problems that he was keen to understand more about and wanted to help them while he learned more about the market they were targeting.

Each session was fairly standard and given his corporate background, were scheduled a month in advance with consistency and a sense of purpose.

After 2 sessions, 2 entrepreneurs said they were busy and could not make the call or be in person.

He did feel he brought value to them in both the sessions and heard from the entrepreneurs that his advice was valuable. While he was in the process of scheduling the follow up, one entrepreneur told him rather bluntly that he did not have the time.

My friend took it rather well, and wanted to understand how he could make the time more valuable. Both entrepreneurs said the same thing.

There were pieces of advice that they could get from my friend, but they did not have the time to execute on his suggestions and felt that while well meaning, most of the suggestions were not precise enough.

Note that they did not say that the suggestions were not actionable enough. They said that the recommendations were not precise.

I get nearly 2 executives and mid-career professionals from larger companies and older entrepreneurs wanting to be a mentor at the Microsoft Accelerator each week.

Most we reject.

Some because they just want to add the mentor title to their LinkedIn profile and dont have enough time to provide.

Most others because they want to compress the “mentorship” in chunks of 1 hour sessions every month.

Its hard to do anything well in 1 hour chunks in infrequent periods of time. Even if its frequent the context is fairly limited.

Its even harder to provide any value in a 1 hour mentorship session.

Which is the prime reason I am not taking any new “meetings” to provide feedback and advice to new entrepreneurs who are not in our accelerator.

There’s very limited to little value that the session can actually provide is my experience.

I might feel good about it, so might the entrepreneur for about 15 minutes after the meeting. When the dust settles, though, after a day or two, they realize the multiple edge cases and scenarios that my advice or suggestions wont really work.

If you think you can provide value in 1 hour chunks as a “mentor” I’d love to hear how you are doing it and how you measure the value of your advice.

Marketing, SaaS, Tips

The least action principle applied to the “call to action”

3 Comments

I met with an entrepreneur who has been looking to gain traction for his new SaaS application for payments. Having talked to a few of the top notch marketing and conversion experts in the Bay area to learn about drip marketing, which allows you to set a set of messages over time I was eager to help him figure out how to apply that to his problem.

The problem he had was that his “call to action” – what he wanted his prospects and customers to do was creating a “very high barrier” to prospects going to the next level with the website.

I find this often the case with many startups and SaaS applications in particular. The “barrier” for a prospect to become a customer is very high, so while you generate a lot of traffic and visits to your website, the number of conversions is abysmally low.

While you could offer better design, clear case studies, A/B test your pricing, there’s another technique that’s fast gaining traction among those that believe in a sales term called “lead nurturing“.

Its is the least action principle applied to prospect behavior. Before you “riff” me on this, yes, I believe physics gives the answers to most marketing problems.

The summary of this principle is

 “Nature is thrifty in all its actions”

So this principle applied to conversion marketing is to make users do the least amount of work to get to the “next logical step” in your progress to convert them to be a customer.

Instead of asking users in the first page to “Sign up”, which may well be your ultimate goal, ask them to view a video instead. Then sign up for a newsletter. Then send them 3 emails (over time, drip marketing, remember) to get them to review a case study, provide them with ROI analysis and finally ask them to sign up.

This entire set of steps can be done in days or in 2-3 minutes with a “guided” website interaction, instead of just a single call to action.

If you remember that most people want to do the least amount of work to get the maximum benefit, then you will appropriately break down your final call to action into multiple “Least User Interactions” each of which gets the user to commit some more (time, energy, etc.) to your application.

This is similar to the method FB for example applies to its interactions. You might just be a viewer of content, then your path to least action is a “like”, then you might comment, then set your status and finally upload a picture. There are more actions no doubt, but the path to least action is a like.

So when you look at your call you action, think about how you can break it down into multiple steps to get users to interact with your website without having to “commit” to marrying you before your first date.

Entrepreneurship

My latest piece on Mint: Question bank approach to learning from failures

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I devised a new system to help me make sure I can learn from my past failures in the most opportune time. I call it the learning question bank. The question bank is a curated list of failure learning condensed into one to three questions in each category that I ask myself when I am faced with a new problem which has possible associations with something I have failed at doing before. I review the questions in the bank after I meet entrepreneurs to evaluate their opportunity and see if they can learn something from my failure. I usually send them an email, post our interaction to give them my experiences via the story of my failure which brings the learning back to the forefront.

Read the entire piece at Mint.

Funding, Tips

How do I close an investor who has shown interest in my startup?

6 Comments

I had discussions with 2 entrepreneurs who have received angel investor interest thanks to Angel List. They are doing well, getting traction and starting to get interest from potential seed stage investors. The question they had for me was to learn the art of the close. Much as I dislike the word closing a deal, I think its important to achieve the important milestone of completing a round of funding.

First its important to realize that most folks (nearly 95%) of investors do not whip out a check in the first meeting. They may make their decision within the first few minutes, but after that, its the delicate dance.

There are 2 primary strategies that I use to help move the funding round to closure.

First, build the relationship beyond the first meeting. The technique I use is “drip marketing”. Every so often after meeting with them I would send them an email (either every other day or once a week for 2-3 weeks) giving them an update one some progress in the business. The first email would be about a new customer win, the next about some potential partnership or a new press mention, etc. Usually most entrepreneurs send one follow up email and if they receive no response they stop.

I would actually send 2-3 emails and keep sending them an update until they say they’d like no more updates.

The second strategy to get their help or advice on opening a door at one of their portfolio companies. This could work against you if you cant close that opportunity, but usually they appreciate the fact that you followed up. This helps them understand your ability to follow through.

The final strategy takes more time and helps you more than them. I put together an operating plan. An operating plan comprises of 7 unique and distinct plans, each of which cover an aspect of your business – sales, marketing, engineering, hiring, finance, product roadmap and partnership plans. This plan has to document your assumptions as well so you can then have them help you validate those assumptions.

Here is my original BuzzGain operating plan (incomplete) from 2009.

You might think this is a lot of work, just to get their money after they “agreed” to give you money with a verbal commitment, but trust me this works you get things moving faster than if you did not use any or all of these strategies.
Try it and let me know if it does not work.
There is a method and template to each of your 7 areas, but we’ll cover that in a separate post.
Entrepreneurship, Management

How much traction is “enough” to get seed funded? or to get into an accelerator?

14 Comments

I had an interesting conversation yesterday with an entrepreneur who had an initial product that was built over 3 months and they were looking to get “traction”. The product was aimed at prosumers (professional consumers) or small & mid-sized companies. He was looking to raise a seed round of $250K and was wondering how much “traction” will he need to show so he can get funded by a combination of individual angels and possibly a seed fund. He’s in the US, so this framework is valid for both India and US.

Here’s a framework for you to think through the traction for your startup. You need to get traction post your MVP. Your MVP should solve a real problem that a potential customer has.

Having been in 100 presentations over the last 4 weeks alone (our demo day at the Microsoft Accelerator, 50+ pitches for our new batch at the accelerator and 30+ pitches at the 500 startups demo day) I can say some patterns emerge.

This is rule of thumb alone. This is NOT a guarantee of funding. I had a chance to talk to about 50+ seed and venture investors, so I know I am in the ball park, but YMMV.

Take your best case scenario of peak # of customers at 36 months (2 rounds of funding out). If you are a B2B startup that might be 500 customers in 36 months for example or if you are a consumer product, that might be 20 million users in 36 months.

The 36 months is critical. Its 2 rounds of funding. Seed and Series A. Or series A and series B.

The “traction” that’s relevant for your current stage should be in the range of 0.1% to 0.5% of your projected 36 month customer base.

0.5% means you can command the top end of the valuation. 0.1% means you are likely to get a serious look.

To get to an accelerator such as Microsoft or 500, you will need 20% to 50% of that user base to get a serious look.

Some examples:

If you are expecting 10 Million users for your product (best case scenario) for your product in 3 years (36 months) then you better have between 10,000 to 50,000 users when you go to get seed funding. To get into an accelerator you will need to have 2000 to 25,000 users at least.

If you are a B2B startup and you are expecting 5000 paying customers, in 36 months, to get seed funding you need to have 5 to 10 customers for a seed round (more is better) and at least 2-5 customers to get into a seed program.

Please let me know if you think this makes sense (Or not).

Thanks to Pankaj Jain and Dave McClure for helping review this.

Entrepreneurship, Funding, Tips

How to hustle your demo day to get maximum investor interest

Over 300 investors and startup enthusiasts were at the 500 startups demo day yesterday at the Microsoft campus in Mountain View. There is extensive coverage on all the major publications including TC, VB, Forbes, Biz Journals and TNW.

17 of the 30+ companies presenting were from outside the US, which was absolutely awesome. The 5 standout companies from my perspective were CompStak (US), Kickfolio (AUS), WalletKit (IN) and Supply Hog (US) and Gaze Metrix (IN). They represented a combination of great entrepreneurs, going after a large market, where you can make money, and with sufficient barriers given their stage of operation.

There are 3 observations that I had which might be best used by entrepreneurs who are pitching at demo day and want to hustle and help move their funding to closure quickly.

If you are a startup entrepreneur, at the demo day, its important to spend quality time (10-15 min at best is all you’ll get) with folks who you might be able to get follow on meetings in the next few weeks to help close your round. Identifying them and spending enough time with them should be your priority. The question is “Who are they” and “How do you identify them”? Its not easy for the first time entrepreneur, but you should look for seed-stage investors not big name venture investors or large funds.

First, realize that not all of the “investors” are really looking to invest. I had conversations for about 5-12 min with about 30-40 of them and over 50%  were at the event to “check out what’s going on” or “network with other investors”. Typically these were associates and vice presidents at very large funds (any VC firm with over $200 Million raised).  They are hoping to put new promising companies on their “watch list” alone. They rarely make seed stage investments, so dont bother spending too much time with them to “get their feedback”. I know it sounds nice if you say you talked to “investor X at some large and well known VC fund”, but that high wears off faster than the beer served at the event.

Second, since you will have with you a list of potential investors, coming to the demo day. I recommend you spend a few minutes making your target list and doing some research on them so you and your team can make sure you meet them at the event. The best case scenario is if you are interested in an individual and they liked what you said, so they reach out to you during the break or after the event.

The most likely scenario is that there are many others trying to get their attention, so you might miss getting a chance to get their card or setup a conversation for later. The best way to do this research is filter the possible investors attending on  AngelList. Dont just look at their investments, but filter by types of companies, the stage and industry (this you may have to do manually in a spreadsheet).

Third, dont expect to close at the event, but expect a lot of follow on interest via email, angel list and other sources. Realistically most investors (yes, even in the valley, which surprises most people) take between 1 to 3 months after meeting you at the demo day to close – which compares to between 3-6 months in India.

Entrepreneurship, Humor

The science of everything – How the arts are being “scienced”

3 Comments

Jay was a languages major at Univ of Michigan. He stated a strong dislike for physics and biology at school and never was a big math fan; claiming to be a free thinker.

Yesterday I was sitting on a mentor session he was having with an entrepreneur who was building an online eCommerce business. The entrepreneur was a engineering graduate from a top college in India.

“Dude, you are winging it”, admonished Jay when Sam, our entrepreneur was telling him about his “customer engagement” plan.

“Drip email marketing is a science, not a random set of messages you send to your installed base to see which one sticks”, he continued, “You have to test your subject line, the draw, the frequency, the images, the call to action, the sales copy, everything”.

Imagine that – scientifically measuring your copy – English sentences to see which one gives you the best returns.

Most everything is being measured and managed these days including many things that are pure art. Like the colors on your photo or the hues on your home page background.

I wonder if the more scientific it gets the more you need art and creativity to be different?

Entrepreneurship, Funding

Crowdsourcing our application process; Feedback needed

13 Comments

One of the things I am very disappointed with is that I know so little about so many markets and their opportunities.

As a selection team (we have 4 internal Microsoft and 6 external members – VC’s, angel investors and experts) we know more, but still our experiences are fairly limited compared to the entrepreneurs who apply.

We have so many applicants that are much more qualified than us, that it seems like we are under qualified to make these decisions on which companies to help and which ones to fund.

I have an idea for the next batch but I’d like some feedback.

Is it better to take a “wisdom of crowds” approach as well?

Should we take say 2-3 “slots” and provide the list of companies with an overview and plan and a selected list of say 100 people vote (with justification) on which ideas and companies should be funded?

Do you think it will work?

I dont want to give all the slots up for vote since there are some companies that are of strategic value to us.

One thing that it helps is avoid many more “Why did anyone fund this company” kinds of questions.

Please let me know your feedback.

Management, Tips

Differentiate with a personal touch and taking time

6 Comments

Given the huge number of applications we had for the accelerator, one choice we had to make was how do we let people know they did not make the cut.

Having been on the receiving end of many “rejection” emails, I hated the generic “We reviewed your application and did not think it was a fit”.

So I decided to send personal hand crafted, no cut and paste, emails to every founder we could not accept – either because of their traction, the market they chose, the incomplete team they had or the fact that there were 2-3 other applicants in the same space that were further along and had more to show.

Over the last 4 days I have reviewed hundreds of youtube videos, demos and password protected mockups and wireframes.

Its hard and takes a lot of time, but that’s how we chose to differentiate ourselves – With a personal touch and taking the time to be human.

Again, to all those that applied, many thanks.

Since you have my email address (and phone number) feel free to connect with me in a few weeks so we can find ways to help you in any way possible.

Entrepreneurship

Dont ever worry about the cynics – Do good for the sake of it

19 Comments

Most people want to know why we dont take any portion of company even though we offer so  much at the Microsoft accelerator.

The cynics even think we are in it to acquire these companies, or to force them to move to Microsoft technology. Its neither.

Its actually relatively simple.

Its to get more engaged with the startup community. At Microsoft we have multiple programs to do this including BizSpark, but we are not deeply engaged with startups as we’d like. We want learn about their challenges and how we can make our products a better fit for their needs as well.

I believe this to be true for my own personal life as well.

I spend a lot of time with startups (23 cities, 800+ people over 1 year), providing free sales training, spending my money for travel as well, with no intent of ever getting anything back.

I know critics and cynics thinks so I can build a brand or to “make lots of money later”.

Actually so far I have never made any money from all of these interactions and I never will.

Its simply because I want do good and I enjoy doing it.

So never bother about the cynics. Ignore them and keep doing good. It feels great and you’ll be better for it.