#NapingStage marketing people at startups are becoming more product managers than brand builders

July 10, 2015 Mukund Mohan 2 Comments

Yesterday we talked about the changing nature of the sales person’s role at the #napkinStage of a startup. While many people still prefer the “closer” to the pipeline builder, I think if you have a great product that customers can try, use and then buy you dont need to “close”. Customers will “buy” or “close” themselves. Enterprise and SMB software use to be “sold” not “bought” – that’s now changed. Only if you have a poor quality product or an expensive one, do you need to “force” people to buy.

Today I am going to talk about the role of Marketing folks in the #NapkinStage of a startup. While many startups may not hire a marketing person early, I think the role of the “marketer” is being performed by someone who is responsible for “getting traction”.

10 years ago, the Marketing person at a startup was focused on building analyst relations, attending and participating at events and building a “brand”. They spent a lot of time with agencies building the right creatives, making sure they had good “brochures”, giveaways and promotional content.

Changing Role of the SaaS Marketing Professional

The marketing person’s role is now more like an early stage product manager – I call them opportunity managers than product managers actually.

If you have a good product, then it sells itself in a 15 min demo (or a 3 min video). Yesterday, one of our companies (Beagel) told me about how they have a 70% conversion to paid customers in less than 30 min, so this is not a rarity.

The role if marketing manager is now focused a lot more on metrics like Customer LifeTime Value (LTV), CAC (Customer Acquisition Costs) and CTR (Click Through Rate), then results of “Brand surveys”, or “generated leads” and analyst reviews. They are becoming more data driven.

Attending events, writing whitepapers and delivering webinars is being replaced by creative copy writing – SEO, engaging on social media (Twitter, etc.).

With this change it is becoming obvious that most marketing is now focused on measurable outcomes associated with revenues, business and product than purely brand.

Surprisingly, even at larger companies (such as Microsoft), I am finding that most Marketing folks are coming to learn about these techniques of “Lean marketing” from the startups at our accelerator.

Tomorrow I will talk about the changing role of the #NapkinStage development team and how they are becoming more Customer service organizations than product engineering.

Marketing, Sales

Most early sales people at startups are becoming more marketers than closers

July 9, 2015 Mukund Mohan 7 Comments

Over the last 6-7 months I have been helping #napkinStage companies hire their first few sales people to grow from the founders selling the product to growing a sustainable team to help sell.

The most important thing I have noticed is that most of the sales people are learning the science and art of marketing – building an email list, engaging on social media, writing short opinion pieces on trends, etc.

The primary reason is that most of the sales folks at startups have to build their funnel first, and most of them have few relationships or existing customers to get referral customers from.

10 years ago, or even 20 years ago, most of the techniques sales people used to fill their funnel was “cold calling” or “smile and dial”. There were few emails as well, but largely attending events to network and cold calling were the prevalent strategies.

Now targeted emails have replaced cold calling. Initial connection on social media – Twitter, LinkedIn have replaced connecting at an event. Writing a blog post or participating on a podcast have replaced sending PDF files of marketing collateral.

The role of the sales person as a closer is becoming less relevant now, and their role as a facilitator is becoming more important. The effective sales professionals I know are learning the art and science of coordinating a concerted campaign to get access to individuals within an account who can help become champions at a prospect.

Changing Role of the SaaS Sales Professional

Sales people are becoming more “industry experts” and learning about events prospects should be attending, having an opinion on current trends and curating content that they believe will be useful for their prospects.

That used to be the role of the marketing person.

In tomorrow’s post I will examine the changed role of the marketing person. Their roles are moving from more being more art and creative to science and data driven.

Mobile

What Google and Microsoft found out about Smartphone hardware

July 8, 2015 Mukund Mohan 5 Comments

May 2012 – Google bought Motorola for $13 Billion

Oct 2014 – Google sold Motorola to Lenovo for $3 Billion.

Sep 2013 – Microsoft bought Nokia for $7.2 Billion.

Jun 2015 – Microsoft wrote off the Nokia acquisition.

So both these companies spent a lot of money on buying “patents” or “trying to get into hardware”.

So, what did they find out about hardware?

1. Are they software companies that dont “get” hardware?

2. Is hardware really that hard?

3. Will applying software distribution techniques, margins and marketing work?

4. Is hardware best left to partners who are better at building devices?

5. Why is Apple better at hardware and software but poor at services (remember iTunes Ping)?

6. Will Amazon (which took a big haircut on their hardware as well last quarter) also “give up” on hardware?

7. Why are PC hardware makers – DELL, HP, Lenovo – giving up their leadership on the phone to – Samsung, Xiaomi and HTC?

8. Do you need to have only one hit hardware product (iPhone) and still survive a string of poor also-rans (iPads, Apple TV).

9. Were patents held by Nokia and Motorola worth it?

10. Most analysts and industry observers called this years ago, but why did the CEO’s not see this coming – were their hands truly tied?

Learning, Tips

Which type of pivot is the hardest for entrepreneurs?

July 8, 2015 Mukund Mohan

If you have been working on your startup for any reasonable amount of time, you will learn quickly that the market and customer assumptions you make are quite different from reality in most cases. In some situations they might be relatively benign and still others they might take a complete change of focus and direction.

At the #napkinStage of the company, pivots are a lot easier to execute than at the later stages. Since the immediate impact is largely the time and effort spent on the idea, it tends to be easier to acknowledge, explain or work on.

In watching 14 entrepreneurs over the last 6 months, I have seen 5 companies pivot.

The hardest is the Market pivot – focusing on a completely different market than the one they focused on before – going from IoT startup to a data SaaS company. This type of pivot will take 18 or more months to execute. Learning about a new market is hard. Building relationships and understanding nuances of the landscape is even harder. It might seem easy since when you research on the Internet, but many markets are fairly opaque, till you spend more time learning about them.

The second hardest is the Customer type pivot – a company went from selling to consumers to selling to SMB with the same product. Changing the customer type or target customer is equally difficult. The hardest part is knowing and understanding the influence and decision making landscape if you are in B2B or to find the immediate value for the consumer if you are B2C.

The third hardest is the Customer problem pivot – one of the startups, realized, after talking to their target users that the problem more pressing was a different one and hence changed their product. If you already know your customer, but find out that the “latent” problem you perceived was different from the top 3 problems for your customer, then it is relatively less difficult to change course and pivot to the new problem. While communication with the internal team is still a challenge, these pivots tend to be able to execute faster.

The less harder pivot is the Business model pivot – a company went from charging on a SaaS monthly subscription model to a commission model on sales. By no means am I suggesting that a Business model pivot is easy. Having seen 2 companies of 14, just in the last 6 months, I think of all the other pivots, these are easier to execute and will likely take less time.

The first part of your problem is spotting the trend lines that help you understand when to pivot. The second (and likely more hard) part of your pivot is communicating – to your employees and founders, your customers, to potential and existing investors and to others who were involved – mentors, advisers, etc.

Entrepreneurship, Funding

Lessons from the Greek debt crisis for entrepreneurs

July 7, 2015 Mukund Mohan 1 Comment

Here is a hypothetical “real” situation. Lets say you raise some angel money from a few friends (IMF) and a few rich individuals (Germany and French banks). The money you raised is $250K, in a convertible note (loan).

The intention was to get product to market (stabilize your economy) with that money and hire 2 others besides pay for you and your cofounder. You detail that the money will last 5 months at $10K per month per person, plus expenses.

The angel investors are not happy that you and your cofounder are taking $10K in salary per month, which they feel is a lot (yes I know that it seems like a small amount in SF, or Bangalore as well), but really want in your deal (because they believe you will build a good business).

Then after 5 months, the product is not quite there and will likely take 5 months more to bring to market. You go back to your investors and let them know the situation. While not happy, they are still ready to back you and now are willing to put $25K for the next 6 months, and ask both you and your cofounder to forgo your salary (austerity) until product is shipped.

You and your cofounder realize there’s no choice but to accept the austerity measures and give in to better terms as well and think that the pain (no salary) will be short term so it would be worth it.

6 months pass and you need to raise more money. You have some early customers, the product is in the market. The money is needed to scale, grow and also to provide some relief to the founders in terms of getting paid.

The new investors though, are not giving you the valuation that will give you any relief and are not willing to pay for the “accrued” salaries of the founders. They also think that to grow the business, some of the loans from the angel investors needs to be “written off”. The previous investors will take a “haircut” on their debt.

Previous investors are unwilling to take the haircut, so your funding, goals and priorities are at am impasse. Neither side is willing to give up.

You now have 3 choices.

1. Exiting investors take a haircut on their debt, and their “investment” of $75K, is going to be valued at $25K instead, but they will be part of any growth going forward.

2. New investors are willing to value the previous investment at $100K (which includes the $25K in accrued salaries to founders for the last 6 months) and are willing to fund the company enough to pay salaries and support growth.

3. The founders are willing to take a haircut on their ownership (and give it to previous angel investors) and forgo their salary for the last 6 months as well.

That’s the Greek debt crisis and the options in a nutshell, with the players changed and the situation more complicated (Euro, Social programs, etc.)than I explained it.

The reality of the go-forward plan is that there will be compromises that need to be made all around. Founders, previous angel investors and likely the new investors will all have to find a solution to keep the company going.

Who’s the most vested – the founders (or Greeks) who have spent 12 months of their life trying to bring product and idea to market.

Who’s the least vested – the new investors, who are not going to invest unless they see upside.

Who’s taken a lot risk – the existing angel investors, who put money in expecting a return, but knew fully well that it was risky.

Asking the existing investors alone to take a haircut wont be right, neither will it be fair to have the founders take all the burden of the new investment.

Ideally if you can “carve” out a portion of the future potential for both founders and previous investors, it would be fair.

I have seen though too many cases where new investors “Cram Down” previous investors and in many cases dilute the founders way too much to have meaningful value going forward, which is why terms and provisions in the convertible notes are getting more difficult and involved.

What’s the best solution you think to the above problem? Who (all) gets the haircut?

Entrepreneurship

Rate of customer validation is the best indicator of #napkinStage success

July 6, 2015 Mukund Mohan

When you have an adviser or two on board, I would recommend a monthly check-in with your advisory deck to actually get advice. Since no amount of expertise and knowledge the adviser has will replace your daily “living” and “breathing” your startup, you will have to brief them on key accomplishments and a view of the “trees”. If you have chosen the right advisers, hopefully they will help you see the forest from the trees.

The biggest challenge is showing “early momentum” and traction. Most traction falls into 2 buckets – product or customers. Side note: When you are a larger company there would be many buckets that are news worthy – funding announcements, partners, awards, hiring, event attendance, etc. but, at the napkin stage, only product updates and customer updates are valuable.

In terms of product updates, changes, modifications and new features (including design updates) are worthy of putting on your monthly advisory update. The best updates I have seen as an adviser are those that are related to changes the product based on feedback from potential beta customers, especially if the feedback results in the customer willing to pay for the product.

The second set of updates are around customers. In this particular case, activity is an early indicator of traction, so I would try and focus more on trying to use as many referrals from people you meet to get introductions to other customers.

A trick that I have seen several people use effectively is to focus on getting 2 customer meetings or demos each day for the first 3-6 months during the customer validation phase.

The rate of early customer validation is the best indicator of early success is what I have found.

The rate of early customer validation is the total number of “prospects” or “Customers” you talk to in a given time period. So, the more customers you get a chance to talk to in 2 weeks, versus another competitor who talks to fewer customers in the same time period, the better are your chances of determining problem fit.

Management, Mentors

Advisory deck vs. Board deck – what’s the difference?

July 5, 2015 Mukund Mohan 1 Comment

I am on the advisory board of 2 companies and on the board of directors of 1. One way to think of startups as going through the “forever school of learning”.

Before MVP you have 4 seasons or primary school, then after MVP, before Product Market Fit, 4 seasons of middle school, then after raise your series A or 3 quarters of consistent revenue growth, 4 seasons of high school and finally after series B and beyond, 4 years of graduate school.

As you’d expect, the challenges (or courses) get more difficult as you progress. The early challenges are largely speaking to enough customers to get feedback and nailing the specifics of the problem you are working on with product updates and later on they tend to be about metrics, strategy and managing cash.

Here is a template document I have used with my monthly advisor updates. Most of the startup CEO’s create this template on Google Docs. The other advisors update the doc with their comments and since we are all at different locations (and continents) it is easy to review the combined feedback.

There are 5 sections as you can see above. The section I value the most are the what they learned and what they accomplished.

Usually what I have found is that the CEO updates 3 sections – accomplishments, key metrics and areas they need help and the co founder or product person updates the remainder.

Most of the advisor meetings are about an hour a month with many shorter updates and conference calls in between.

Board meeting packages on the other hand tend to be more metrics focused. Here is a sample board deck that I have suggested be used (from IA Ventures) to my startups.

The key part of the advisory monthly update document is that it needs to give your team accountability and ensure the advisor has visibility into the progress so they can help.

Please let me know if you have a better template.

Entrepreneurship

8 great ideas and entrepreneurs from the Tamil Entrepreneur Forum 2015

July 4, 2015 Mukund Mohan

Yesterday I attended and participated on the panel and judged the Tamil Entrepreneur Forum 2015 event. It was a gathering of about 200 folks from the Tamil community all over the US. This was the first time we had a pitch session and Lena Kanappan introduced the format as a way to support early stage entrepreneurs.

There were about 30-50 companies that applied and 8 of them were chosen to present at the forum. Here are their ideas. There were 3 winners, and I’d love your perspective on who you like.

1. ElVitae: A personal branding app and service that’s focused on being the next generation version of About.me. Their goal is to help individuals build their personal brand using the mobile phone alone and help them showcase their portfolio, successes and work beyond LinkedIn and Twitter. ElVitae was “Elevate ~~your curriculum~~ Vitae”

2. FixNix: Already successful in India, FixNix helps smaller businesses manage their Governance and Compliance during audits. Especially useful for regulated industries such as Banking, Healthcare, etc. which have compliance requirements, they have significant customers in large banks and Indian enterprises.

3. IandMyDoc: A ZocDoc clone for primary care physicians, I and My Doc helps you book appointments, schedule visitations, manage your vitals and keep track of your electronic medical records.

4. Indian Moms Connect: An online blog, eCommerce site, Subscription service and community for Indian moms in the US (and looking to expand in India). They problem they were trying to solve is that Indian moms have a lot of questions when they have their babies – and unlike in India where their mom or in-laws provide a lot of that advice, in the US they are unable to get that support. This was an online community to help them.

5. StoryTruck: NetFlix for Indian books and magazines. They want to go beyond just Indian books, but right now they primarily have licensed books and comics for Indian kids. They have over 1000’s of downloads and a working product with 2 book publishers on board. Their focus is on vernacular (native Indian language) content initially.

6. Sway: Mobile phone based budgeting for Millennials. This app is a new generation version of Mint, but with a lot more “fun” elements to help the millennial generation plan, manage and spend money wisely. Initial traction with several 100’s of users.

7. YumPlate: AirBbB for neighborhood food. If your neighbor is cooking something, they can post it on YumPlate and you could buy it from them. We had invested in a company called Imly before in India.

8. Zailoo: A price comparison app for car rides. The app helps you understand the cost of your Uber, Lyft or SideCar (and others) car ride from point A to B, before you get on the car. That way you can know and compare costs before your go on your ride. A month old and already featured on Product Hunt.

The founders were all pretty enthusiastic and had good early traction (most of them) to prove that their idea had merit.

Sway, Indian Moms Connect and FixNix were the 3 winners.

Entrepreneurship

How can you tell if an angel investor is “real” or “fake”?

July 3, 2015 Mukund Mohan 3 Comments

It has become quite fashionable to be an angel investor. The last 5 years has seen an increase in the number of registered angel investors on various platforms – from a mere 3000, we are at over 25K in the US alone. That begs the question – do we have more people who have become angel investors now, or are people richer, or did we always have them and we just found out about them now?

Many high net worth individuals would like to be angel investors, but just don’t have the inclination to do the heavy lifting that it requires to help entrepreneurs, source deals and find follow on investing. Most are also fairly conservative, especially if they have made money at a larger company and not been an entrepreneur before.

Here are key “leading indicator” questions that I ask before I try and syndicate deals with other angel investors, which might be useful for you to consider. YMMV.

Have they invested before in a startup? The best indicator of an investor is if they have invested before. The time to make the first investment for a newly minted rich individual is close to 21 months. So, if in your discussions with a potential investor, they have never invested before, it is highly unlikely they will. Angel list is a good source, but not comprehensive. I would simply ask them this question. Or ask them for their previous investments? What companies have they invested in before?
Do they come referred as an investor? The best network is still word-of-mouth. They best referrals for angel investors is typically not other investors, but entrepreneurs is what I have noticed. Even if an investor “passes” on an entrepreneur’s idea, I have found that if they have been respectful, consistent and fast in their communication, the entrepreneur will refer “relevant” deals to them.
Are they accredited? When an investor has over $1 Million in investment capital (exclude the capital in their primary residence), or if they can show they have over $250K in annual income, they can be accredited. I have found the best way to determine this is ask the investor for who their financial consultant or tax consultant is. People who have that much money have a person for both or either. If they don’t, the signal I get is they are rather unsophisticated in their approach to investing.
Are they involved and connected with the local startup ecosystem? Most interested angel investors are either mentors or advisers at local entrepreneur’s hot spots such as accelerators or co-working spaces. If they are not connected, it is likely they are not going to invest, since they don’t value the experience.
Do they understand key terms and nuances? An experienced or willing angel investor understand convertible notes, equity rounds, key milestones and other “insider” terms well enough to not have you explain it to them. If you are educating the investor about angel investing, you are better of looking for someone else to do that, while you focus on your company.

What other questions would you use to differentiate between a “real” and “wannabe” investor?

Entrepreneurship, Funding

If you are #napkinStage what is the 1 thing to focus on to get traction with investors?

July 2, 2015 Mukund Mohan 2 Comments

I was at the Seattle Founders Institute graduation event last night with 40 others who gathered to see the 3 newly minted entrepreneurs from the program. From the over 100’s of applicants, there were 30+ who signed up for the program, and yesterday 3 folks graduated.

TeaBook is a monthly tea subscription. The founder has spent a lot of time in China to source and obtain unique tea’s that will be mailed to your home every day. The tea market is over $25 Billion and growing at 7% annually. They had a great story and compelling market presence. I personally felt the monthly subscription commerce business has many players, and I suspect in the next few years there will be much consolidation. The tea market itself has many competitors as well including TeaLet, teabox, Chahoney and LizzyKate. They have some early indication of traction, with some trials and some passionate customers already willing to sign up for the service.

American Giving – was focused on ending poverty in the US, with a researched philanthropy website. They founder was looking to create a indegogo style site, where philanthropists could research, back and support giving to Americans better. The potential to unlock over a $ Trillion in well researched giving would be large and they were looking to take a 15% admission fee on all giving.

MeltingSpot, has a 2 sided marketplace for helping consumers looking to meet “folks they like” near them. Think of “Tinder meets FourSquare”. They Melting Spot could be a bar, or a restaurant, who wants to “sponsor” a spot where people only interested in “animals” would be able to meet others. There are many dating sites and apps, and many social networks, but their focus was on helping folks in their local region. They would make money by charging bars to sponsor a “melting spot” – initial suggested retail price was $30/month.

All 3 entrepreneurs had great stories and did an excellent job showcasing the market (which was large) and spoke to their personal backgrounds as well. None of them had a working website or prototype (some mockups), but they had financial projections. They were all non developer or technical founders, looking for their CTO, but had the sales and marketing background and expertise.

All of them were looking to raise some money – from early seed (>$100K) to seed ($2 Million – teabook).

As an investor, the biggest challenge I faced was I was not sure how many more pivots were going to happen before they get Product Market fit. I suspect a lot more, because none of them had product shipping yet.

Which leads me believe that Kickstarter or Indegogo is the best way to show social proof, customer validation and early traction.

If you have an idea and you want to progress on the journey towards investment, the launch page with social proof, early orders on your crowd funding campaign, product prototype and having a well rounded team are a must have for #napkinStage companies. Those would be the things to focus on, more than distribution channels,

The personal blog of Mukund Mohan