Its a well known fact that the infrastructure costs of building a software / Internet startup have dramatically reduced. Although the costs of developers have dramatically gone up by the same percentage, the productivity per employee hired has also gone up dramatically. Given that a developer can now manage instances, push to production etc., the need for DevOps is moved to a much later day, lowering the number of people needed at a startup.

A decade ago most companies were focused on building a business – long term focus, building processes to scale and grow.

5 years ago companies started to focus on building a good product.

The new law of the valley startup (2012) is build a feature.

See if there’s any traction.

Build next feature.

See if traction has increased.

<Rinse & Repeat>

Why has this happened?

1. MVP: Most people are taking the Minimum viable product to its extreme (or bare minimum) and valuing a shipping feature over a feature rich product delivered later.

2. Try your idea out: Most of us have a idea (we think) is going to change the world. The world though, has other plans. It does not like change. Small, incremental changes are acceptable (maybe) but large ones, take time. So lets push a simple small change to the user (customer) and see their reaction.

3. Too small to fail. If all a feature takes is 3-4 weeks to build, the cost of the development is low. Amazingly low. And at that point, failure (or lack of traction) does not matter. Its okay for the product to not fit the market, because the product  was not built anyway. Its just a feature that was built.

4. It helps with prioritizing features of your product. If all you build is one feature, the next one is customer driven (mostly). If a feature does not get traction, it does not matter. Remove it to add another.

5.There’s no long term without short term. I heard PG say this from another friend. If you dont get some short term traction or wins, there’s no point in thinking what the world would look like when you are dominating it.

So my fellow entrepreneurs, build a feature.

Ship. See if it gets traction. Build more. Keep shipping.

I was at the Citrix Synergy conference (San Francisco) last week presenting Hey Maya.We were one of 5 companies presenting from a pool of 80 that applied to the Citrix Startup accelerator. Each company was given 6 minutes to present and 2 minutes Q&A by the judging panel.

The judging panel was a few VC’s (Ignition, Azure, Andreessen-Horowitz), and Jason Calacanis.

Besides these guys there were 6 others from Citrix.

We did not win. Script Rock did an awesome job and they deserved to win.

Jason did his best Simon Cowell impersonation and was thoughtful, constructive in his criticism and very specific in his feedback. The rest of the guys did not have much time to ask questions or provide feedback or did not really think much of our pitch – either ways, it was okay.

The surprising part is how many people just echoed his exact comments back to me, in fact using the same words he did and a good measure of cliche’s thrown in.

Either they all thought of the exact same thing, (which I doubt) or they all just followed his lead.

Every time you make your company’s pitch as an entrepreneur to VC’s realize that they are in the selection business. They see over 1000’s of pitches each year and are bound to notice patterns. Some of them are personable and thoughtful, but many are just pulling cliche’s from the bag.

“Its not a big market”, “You need to focus”, “Its not differentiated enough”.

While these high level pointers are largely useless, and most VC’s wont have more time to tell you any thing more, a few folks I have met actually offer solutions and not just problems.

If the market your targeting is small, are there other ways to position it such that you go after a big market?

If there are too many “features” you are looking to develop is there one that really sticks out to them as “something that has legs”?

If the product is not differentiated enough, are there 1-2 things that might make it different?

I would highly advice you to ask questions of the VC and put them on the spot to really offer “constructive criticism” and not just banalities.

You’ll then really know the good investors from the herd.

If you are like me, I would like to get more data from potential customers before I launch my product. Usually I need answers to question like:

1. What are the top 3 features you are willing to pay for?

2. At what price point would this become a must have product to you?

3. Where do customers go to look for information about my product?

I have tried Google Consumer Survey and its working out well so far.

If you are a startup I’d highly recommend the Rs.5 / response initiative ($0.10) and its a very small amount of money to spend as insurance to get live feedback from many customers.

If you want to learn about how to do it, here’s a simple tutorial.

I have always operated under the assumption that being open and transparent is good for me. It reduces unnecessary clarifications and confusion at a later day. As I have more experience dealing with investors now, I understand the shades of grey that exist in the startup world. This post is based on my experiences of raising funds from institutional funds and is valid for those entrepreneurs who wish to raise money from a VC or an angel network.

Most technology entrepreneurs would know chess, but many may not know poker. Both games are largely strategy driven and there’s relatively more luck involved in poker than chess.

When it comes to fund raising is it more like a game of chess – your opponent can see all your pieces and is aware of your moves but not your strategy OR is it more like poker –  the winner is determined by the ranks and combinations of their cards, some of which remain hidden until the end of the game.

Lets focus just on the initial rounds of funding (after series B, fundraising is more like craps :).

At the friends and family round, it does not matter which game it is more like. Since your F&F are betting on you, they don’t like to play regular games, only mind games – “I was saving this money for your sister’s / niece’s wedding, but since you are starting a business, I know  you will return the money many-fold in 2 years”. (Cue: forced laughter, but quickly realize this is true).

At the seed round (lets say this stage comes after the F&F round), most entrepreneurs are going to angels, angel networks or venture capitalists (those who invest in seed stage). With most individual angels the game is boring. They either like you & your space and invest or not.

With angel networks and VC’s, it gets interesting.

There are very few investors who you are going to play chess with. The large majority are keenly aware that the game is one of poker.

Industry executives and analysts often mistakenly talk about strategy as if it were some kind of chess match. But in chess, you have just two opponents, each with identical resources, and with luck playing a minimal role. The real world is much more like a poker game, with multiple players trying to make the best of whatever hand fortune has dealt them. In our industry, Bill Gates owns the table until someone proves otherwise. ~ David Moschella

Am I suggesting you hide information from your potential investors? That might be what you take away from this post, but that’s not what I am implying.

Most investors will tell you they like transparency, but it only applies to you (there are some exceptions to the rule, and Shekhar Kirani & other Accel folks are ones that comes to mind as upfront folks) and your data. They need not disclose the other 4 investments they are considering in the same space, nor that they are merely kicking the tires with no real intent to invest in this area.

So what are the things you need not disclose upfront:

1. Who are the other investors you are talking to? This needs to be treated as your confidential, proprietary information.

2. What are the criteria you would chose an investment from them versus other competing firms? You can put a wish list, but its really not going to change things much.

3. What stage are you at in your fund-raising process? Have to talked to many folks or a few? Do you have term sheets from anyone else? This is largely for these investors to understand the “level of competition” for this deal. I would not advice you share this information with them.

P.S. As with any game, (s)he who cheats is asking for trouble. They may win a round or two, but in the small world of startups, everyone knows who the cheats and unethical folks are. So, don’t lie and certainly don’t withhold any material information such as customer losses, co-founder issues, etc. You will open yourself up for unnecessary legal trouble if you don’t disclose those.

Be a force of good.