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Thursday
Saturday
PiPress puts Clove story behind paywall
Since the PiPress put @jojeda's story on the release of the social media app Clove I am helping to launch with partners Craig Condon & Tim Erickson, here is the text of the story:
Clove looks to spice up the Web
Social-networking app will be 'open'
By Julio Ojeda-Zapata
Social-networking services like Twitter and Facebook have spawned a dizzying array of software tools to make these services easier and more powerful to use. And with apps such as TweetDeck and Seesmic Desktop starting to dominate, prospects for upstarts are increasingly uncertain.
Clove, a social-networking app being developed in Minnesota, aims to stand out with a novel approach: It will be "open" in the sense that any outsider will be able to augment its social-networking capabilities.
Clove, due to be officially offered in test form next week, will initially give users access to their Twitter and Facebook accounts, as well as multiple RSS feeds. Support for more services, like Flickr, is coming.
But things will get much more interesting, developers Craig Condon and Tim Erickson say, when Clove developers begin to combine or "remix" information from two or more social networks or other sources.
In one example they've been concocting, product specifications from the gdgt.com social-networking site for gadget lovers would be blended with pricing information about those products via BestBuy.com.
Condon and Erickson have built a company dubbed Spice Apps upon Clove and other apps, all named after spices. There's Basil, a Web-based audio player in development, and Ginger, a Web video player.
Condon and Erickson are getting marketing help from a third partner, Kim Garretson, who intends to release themed versions of Clove in partnerships with other companies. One themed app in development is dubbed "Living Home" (named after a CD-ROM-based publication from more than a decade ago).
This variation of Clove would pull in decorating, design, remodeling and gardening information from a variety of Internet-based sources and display them within the application.
Clove is not the first Minnesota-born social-networking desktop app trying to make a splash this year.
Skimmer, developed by Minneapolis-based Sierra Bravo for Minneapolis-based Fallon, has integrated access to Twitter, Facebook, Flickr, YouTube and Blogger. Skimmer, like Clove, is built atop Adobe AIR software that permits the apps to work on almost any computer, such as a Windows PC or a Macintosh.
Julio Ojeda-Zapata can be reached at jojeda@pioneerpress.com and 651-228-5467. Follow twitter.com/jojeda.
Clove looks to spice up the Web
Social-networking app will be 'open'
By Julio Ojeda-Zapata
Social-networking services like Twitter and Facebook have spawned a dizzying array of software tools to make these services easier and more powerful to use. And with apps such as TweetDeck and Seesmic Desktop starting to dominate, prospects for upstarts are increasingly uncertain.
Clove, a social-networking app being developed in Minnesota, aims to stand out with a novel approach: It will be "open" in the sense that any outsider will be able to augment its social-networking capabilities.
Clove, due to be officially offered in test form next week, will initially give users access to their Twitter and Facebook accounts, as well as multiple RSS feeds. Support for more services, like Flickr, is coming.
But things will get much more interesting, developers Craig Condon and Tim Erickson say, when Clove developers begin to combine or "remix" information from two or more social networks or other sources.
In one example they've been concocting, product specifications from the gdgt.com social-networking site for gadget lovers would be blended with pricing information about those products via BestBuy.com.
Condon and Erickson have built a company dubbed Spice Apps upon Clove and other apps, all named after spices. There's Basil, a Web-based audio player in development, and Ginger, a Web video player.
Condon and Erickson are getting marketing help from a third partner, Kim Garretson, who intends to release themed versions of Clove in partnerships with other companies. One themed app in development is dubbed "Living Home" (named after a CD-ROM-based publication from more than a decade ago).
This variation of Clove would pull in decorating, design, remodeling and gardening information from a variety of Internet-based sources and display them within the application.
Clove is not the first Minnesota-born social-networking desktop app trying to make a splash this year.
Skimmer, developed by Minneapolis-based Sierra Bravo for Minneapolis-based Fallon, has integrated access to Twitter, Facebook, Flickr, YouTube and Blogger. Skimmer, like Clove, is built atop Adobe AIR software that permits the apps to work on almost any computer, such as a Windows PC or a Macintosh.
Julio Ojeda-Zapata can be reached at jojeda@pioneerpress.com and 651-228-5467. Follow twitter.com/jojeda.
Tuesday
Real Time Web validations & recent conversations on starting up
Validation for my key messages for founders came from several sources over the last two weeks. I’ve spoken with academic thought-leaders, corporate strategy and innovation experts and founders of new deals. And my Twitter stream has delivered new evidence of my premises via VCs and Silicon Valley reporters.
Here are some notes from these discussions and resources:
1. Entrepreneurs can’t construct much (or any) of a winning formula on a white board (and neither can I as an advisor).
The key is speed. Launch, be transparent with your premises and propositions. Ask the market to vet and validate your ideas.
In the book Unleashing the Killer App: Digital Strategies for Market Dominance, there is a quote along these lines: "The dirty little secret of the ‘Strategy Industry’ is there is no science to successful strategy creation. The best course is to take your ideas and expertise and go by gut in launching fast and tuning to the marketplace. The winning entrepreneurs who do this also benefit from lucky foresight. Put yourself in the best position for lucky foresight.
Look at eBay, Google, Twitter and YouTube. In my opinion, none started with a strategy, or even a business model that stuck. Instead, they launched fast on a hunch and passion and had the lucky foresight for the market to embrace them. Here is my top line view of how these companies started:
* eBay's idea: PEZ candy dispenser collectors should have a better way to connect with other collectors
* Google: Search shouldn't suck (no notion of advertising as biz model)
* YouTube: We want to share our videos easier (no notion of revenue)
* Twitter: Our last project didn't work, what else can futz around with & see what people think of it (no business model)
2. I need “xxx thousand dollars and x months to build my site”.
It’s no longer surprising to me that first time entrepreneurs still think that Web site development to market their product or service is a big hairball to swallow prior to launch. I recently met with an entrepreneur trying to raise a million dollars because she'd gotten a quote for $400K and 4 months to ‘build’ her site. In that meeting, I showed her on the Web two platform providers, one for content publishing, and one for video curation, both freemium and both ready to go for her best guess at her look-and-feel, brand and her professional services business. Last I heard she launched within a couple of months on her own dime.
A fresh case history that validates the two premises above is Mint.com, sold to Intuit for $170M two years after launch. If you’ve time, watch this video of founder Aaron Patzer. Listen to how little cash the founders used to bootstrap the quick launch on their premise that personal money management should be easier, and even a bit fun. And watch how their first site design evolved from market feedback.
Mint.com launch story.
3. Fresh insights from others.
When colleagues say they still don’t get Twitter, I point out that it’s really at the front lines of the emerging real time Web, where you no longer have to search for what you want. Instead, what you want “just shows up”. I point out that I used to do up to ten Google searches a day, and check my Google Readers a few times too. I do neither now. Instead I watch my Twitter stream of the 400 smart and connected folks I follow and when they share something of value to my work and interests, that’s where I go on the Web.
Here’re some shared discoveries from last week:
From VC Steve Jurvetson:
Successful companies need co-founders who let each other run with their individual expertise via mutual respect:
Steve Jurvetson on co-founders getting out of each other's way
Shared by recent VC Eric Olson
Statistical analysis of the companies profiled in best-selling books about entrepreneurship showed that luck played as big a part as operational excellence:
Proof on the value of 'Lucky Foresight'
And lastly, more validation of my first point about launching fast and going by the gut: If you fail, that’s a good thing:
Embracing failure for those who launch fast via their guts.
UPDATE 11/2
Just this morning VC Fred Wilson's blog post includes more validation. The post is about what his firm does with its Thesis for categories it invests in. Wilson is an investor in Twitter and other red hot Web application deals:
"i try to make our thesis public every day on this blog. there's no way i would ever try to keep it a secret since this community helps us develop it"
Here are some notes from these discussions and resources:
1. Entrepreneurs can’t construct much (or any) of a winning formula on a white board (and neither can I as an advisor).
The key is speed. Launch, be transparent with your premises and propositions. Ask the market to vet and validate your ideas.
In the book Unleashing the Killer App: Digital Strategies for Market Dominance, there is a quote along these lines: "The dirty little secret of the ‘Strategy Industry’ is there is no science to successful strategy creation. The best course is to take your ideas and expertise and go by gut in launching fast and tuning to the marketplace. The winning entrepreneurs who do this also benefit from lucky foresight. Put yourself in the best position for lucky foresight.
Look at eBay, Google, Twitter and YouTube. In my opinion, none started with a strategy, or even a business model that stuck. Instead, they launched fast on a hunch and passion and had the lucky foresight for the market to embrace them. Here is my top line view of how these companies started:
* eBay's idea: PEZ candy dispenser collectors should have a better way to connect with other collectors
* Google: Search shouldn't suck (no notion of advertising as biz model)
* YouTube: We want to share our videos easier (no notion of revenue)
* Twitter: Our last project didn't work, what else can futz around with & see what people think of it (no business model)
2. I need “xxx thousand dollars and x months to build my site”.
It’s no longer surprising to me that first time entrepreneurs still think that Web site development to market their product or service is a big hairball to swallow prior to launch. I recently met with an entrepreneur trying to raise a million dollars because she'd gotten a quote for $400K and 4 months to ‘build’ her site. In that meeting, I showed her on the Web two platform providers, one for content publishing, and one for video curation, both freemium and both ready to go for her best guess at her look-and-feel, brand and her professional services business. Last I heard she launched within a couple of months on her own dime.
A fresh case history that validates the two premises above is Mint.com, sold to Intuit for $170M two years after launch. If you’ve time, watch this video of founder Aaron Patzer. Listen to how little cash the founders used to bootstrap the quick launch on their premise that personal money management should be easier, and even a bit fun. And watch how their first site design evolved from market feedback.
Mint.com launch story.
3. Fresh insights from others.
When colleagues say they still don’t get Twitter, I point out that it’s really at the front lines of the emerging real time Web, where you no longer have to search for what you want. Instead, what you want “just shows up”. I point out that I used to do up to ten Google searches a day, and check my Google Readers a few times too. I do neither now. Instead I watch my Twitter stream of the 400 smart and connected folks I follow and when they share something of value to my work and interests, that’s where I go on the Web.
Here’re some shared discoveries from last week:
From VC Steve Jurvetson:
Successful companies need co-founders who let each other run with their individual expertise via mutual respect:
Steve Jurvetson on co-founders getting out of each other's way
Shared by recent VC Eric Olson
Statistical analysis of the companies profiled in best-selling books about entrepreneurship showed that luck played as big a part as operational excellence:
Proof on the value of 'Lucky Foresight'
And lastly, more validation of my first point about launching fast and going by the gut: If you fail, that’s a good thing:
Embracing failure for those who launch fast via their guts.
UPDATE 11/2
Just this morning VC Fred Wilson's blog post includes more validation. The post is about what his firm does with its Thesis for categories it invests in. Wilson is an investor in Twitter and other red hot Web application deals:
"i try to make our thesis public every day on this blog. there's no way i would ever try to keep it a secret since this community helps us develop it"
Sunday
Friday
About Realist Ventures & Advisory Services
Realist is an Innovation Accelerator. We advise VCs, angel and strategic investors, early-stage companies, advertising and digital agencies, major retailers and media companies.
We help early-stage companies secure their major distribution partners among mass retailers, major media companies and other technology companies. We have secured seed-stage and follow-on venture funding at all stages for a number of successful companies. And we advise agencies and Fortune 1000 companies seeking disruptive and sustaining innovation.
Our primary focus is consumer tech retail, consumer media and entertainment and advertising and marketing technology.
Kim Garretson (email me at kim at this URL)
Why We're Called Realist?
Because entrepreneurs working with us must realize that only one in five start-up companies stays in business more than two years. We improve those odds.
Realist is now one of Microsoft's Minneapolis Network Partners helping start-ups.
Visit Biz Spark
Sunday
Monday
Working On: My Prescription for Saving Newspapers. Pay Advertisers.
Although I've resisted joining the debate about saving newspapers, I've been surprised at not reading about models that turn the business on its head. That is, what if a newspaper could 'pay' its advertisers to be a part of its ecosystem as long as the resulting revenue generated by the advertisers was shared back in such a way that the newspapers profited?
Yes, this sounds crazy. But, I am working on a post about combining disruptive innovators in my Advisory Services wheelhouse in such a way to perhaps make this a viable business model, and one that could allow newspapers to continue to employ journalists and remain a vital linchpin among our connected citizenry. Look for that post later this week.
Yes, this sounds crazy. But, I am working on a post about combining disruptive innovators in my Advisory Services wheelhouse in such a way to perhaps make this a viable business model, and one that could allow newspapers to continue to employ journalists and remain a vital linchpin among our connected citizenry. Look for that post later this week.
Building External Innovation Networks
In the following blog post from June 24, 2009 in Knowledge@Wharton, the author says enterprises should look outside for innovation via networks. The following warning for why external networks fail is also pertinent to why Advisory Boards for emerging media companies often fail: The founders do not listen to the advisors, spending too much effort on their core beliefs:
'Despite their importance, alliances between companies only succeed about 40% of the time, said Wharton management professor Harbir Singh, a conference organizer and Mack Center co-director. "Why is the success rate not higher?" Singh asked. "How do we improve performance above 40%?"
Organizations grapple with how to build external networks -- what Singh calls "the extended enterprise" -- without shifting too much focus away from the core needs of the firm. "In order to be successful in the extended enterprise world, you have to invest in alliances and network capabilities," Singh said. "But from a 'focused firm' approach, you would say that alliance and network capability is secondary to the core focus of the firm.... Really, what it comes down to is the tension between creating shared resources versus protecting one's own resources."
Link
'Despite their importance, alliances between companies only succeed about 40% of the time, said Wharton management professor Harbir Singh, a conference organizer and Mack Center co-director. "Why is the success rate not higher?" Singh asked. "How do we improve performance above 40%?"
Organizations grapple with how to build external networks -- what Singh calls "the extended enterprise" -- without shifting too much focus away from the core needs of the firm. "In order to be successful in the extended enterprise world, you have to invest in alliances and network capabilities," Singh said. "But from a 'focused firm' approach, you would say that alliance and network capability is secondary to the core focus of the firm.... Really, what it comes down to is the tension between creating shared resources versus protecting one's own resources."
Link
Don't listen to family, friends & colleagues as your test market
Twice in the last month first-time Web-focused founders in my wheelhouse have stumbled over a common mistake that seasoned entrepreneurs would never let happen. They've turned to family, friends and colleagues to validate their launch plans. They think this activity follows the tenets of Web start-ups in having target markets validate concepts and in launching fast and cheap. Why not ask people in our marketplace to tell us what they think rather than hiring consultants and market research firms? The fallacy in this thinking and action is that these people are the wrong test market. Your first response to this premise might be that these folks don't want to crush your idea because of their relationship with you. And some do this. But in my experience, often an equal number generate concerns, questions and what-if suggestions, mostly lame. Why? Because they believe this is expected of them. Their minds say: "If the founder trusted me as a validator he or she must think I have some brainpower to help mold the launch. So, let's see? What thoughts can I create and say around concerns and ideas that make me sound smart?" Are any of these people truly representative of the fickle market that will stumble upon you, and know nothing about you, once you launch? Quite simply, no.
Here's one tale of the danger in this. A founder and his lieutenant were set to launch a Web service with a great URL that would instantly communicate its benefit. But then they asked family, friends and colleagues face-to-face and via an online survey what they thought of the business name. What came back were (expectedly) comments like: "Are you over-promising what you can deliver?" And: "How can you justify the quality claim your URL makes?"
What did they do? They huddled in their conference room for two weeks and filled the whiteboard with over-thinking about abandoning their launch plan with a new name and proposition. And they picked a new ho-hum name and URL. When I heard this and challenged them on this wimpy and wrong move, I offered the following: "On a Google search including the keywords embedded in your original URL, there are 622,000 results. On a search with the keywords in your new URL there are 124 results, most from a company that has branded one of the words. Do you think the 622,000 entities spent any time wringing their hands over their promise? And, by the way, here is how to add one bullet point to your homepage and one page to your site to explain your value in a few seconds."
Here's one tale of the danger in this. A founder and his lieutenant were set to launch a Web service with a great URL that would instantly communicate its benefit. But then they asked family, friends and colleagues face-to-face and via an online survey what they thought of the business name. What came back were (expectedly) comments like: "Are you over-promising what you can deliver?" And: "How can you justify the quality claim your URL makes?"
What did they do? They huddled in their conference room for two weeks and filled the whiteboard with over-thinking about abandoning their launch plan with a new name and proposition. And they picked a new ho-hum name and URL. When I heard this and challenged them on this wimpy and wrong move, I offered the following: "On a Google search including the keywords embedded in your original URL, there are 622,000 results. On a search with the keywords in your new URL there are 124 results, most from a company that has branded one of the words. Do you think the 622,000 entities spent any time wringing their hands over their promise? And, by the way, here is how to add one bullet point to your homepage and one page to your site to explain your value in a few seconds."
Sunday
Reactions to Eight Warnings
As expected, I chatted/emailed with a few colleagues reacting to my glum post on warnings for first time entrepreneurs. Among those reacting were a recent global media co CEO, an investment banker, a VC, one of my go-go deals about to land a venture round, and a deal where the first time entrepreneur is hanging off the cliff by his fingernails.
Most had a similar question: If the odds are so tough, the money so tight, and target markets so fickle, is there any hope? And more pointedly: How can you take money or equity from deals when you don't think they'll survive?
Fair - and expected - questions. And the answer is this:
Some deals do succeed, obviously, so I'm not suggesting all first time entrepreneurs abandon hope. And, I do work for funded start-ups that may not make it, but I've had to become a realist in constantly reminding my clients and co-founders that we are facing tough odds. The two key reasons why most of these deals face the long odds is because they are hamstrung in not having access to the right teams, and they can not launch as quickly as the market demands.
More on the Right Team with the Right Stuff
Why Silicon Valley deals have such an advantage, in my experience, than my home state of Minnesota, and other places, is that founders almost always have the right stuff, a rarity in most other places (Boston, Seattle and Israel also have good pools of the right talent).
I stress that it must be a founding team, and the best is a two-person team, that has at least one person who has previously built and launched a company similar to their latest undertaking. It can't be advisors or board members like me with similar experiences (failures included) to improve the odds. Why? Because outsiders do not live and breathe the daily creating-order-from-chaos rigors of a start-up. And, too often, first timers can not bring themselves to act on outsiders' advice, especially when it's so foreign to their previous business experiences.
So, my key questions to first-time founders are these:
1. Has one of you on the founding team ever built, launched & sold your product/service, or engaged an audience successfully, in a similar venture aimed at a similar target market?
2. If the answer above is Yes, how likely are you to invest enough of your own capital, or acquire seed funding from confidants, to launch within 6 months, and hold on long enough to ask the Market how it will want you to adapt to survive?
Most had a similar question: If the odds are so tough, the money so tight, and target markets so fickle, is there any hope? And more pointedly: How can you take money or equity from deals when you don't think they'll survive?
Fair - and expected - questions. And the answer is this:
Some deals do succeed, obviously, so I'm not suggesting all first time entrepreneurs abandon hope. And, I do work for funded start-ups that may not make it, but I've had to become a realist in constantly reminding my clients and co-founders that we are facing tough odds. The two key reasons why most of these deals face the long odds is because they are hamstrung in not having access to the right teams, and they can not launch as quickly as the market demands.
More on the Right Team with the Right Stuff
Why Silicon Valley deals have such an advantage, in my experience, than my home state of Minnesota, and other places, is that founders almost always have the right stuff, a rarity in most other places (Boston, Seattle and Israel also have good pools of the right talent).
I stress that it must be a founding team, and the best is a two-person team, that has at least one person who has previously built and launched a company similar to their latest undertaking. It can't be advisors or board members like me with similar experiences (failures included) to improve the odds. Why? Because outsiders do not live and breathe the daily creating-order-from-chaos rigors of a start-up. And, too often, first timers can not bring themselves to act on outsiders' advice, especially when it's so foreign to their previous business experiences.
So, my key questions to first-time founders are these:
1. Has one of you on the founding team ever built, launched & sold your product/service, or engaged an audience successfully, in a similar venture aimed at a similar target market?
2. If the answer above is Yes, how likely are you to invest enough of your own capital, or acquire seed funding from confidants, to launch within 6 months, and hold on long enough to ask the Market how it will want you to adapt to survive?
Eight Warnings for first-time entrepreneurs at the biz plan stage
While I post here infrequently because the start-up world does not need more noxious pollen wafting through the Web as if words on a screen can help entrepreneurs succeed, I needed to summarize the experience with many new companies over the last year. Here are my seven tenets for first time entrepreneurs at the business plan stage for business concepts focused on the Web. You'll see there is little advice here, mostly warnings.
1. You have a 98% chance of losing your money.
For your personal capital going into the start-up and when talking to family, friends and other seed investors, honesty in your odds for success is crucial. Silicon Valley honors failed entrepreneurs and the hard lessons they bring from their flame-outs. Don't ruin relationships for your future entrepreneurial pursuits by sugarcoating your odds.
Fresh case-in-point: A top Silicon Valley VC recently told me that after announcing an early-stage fund, they received 5,000 business plans, funded 5 deals, none consumer/SMB facing (see #4 below). That's 1%, with the cred of a top-tier VC to help them survive, succeed & raise more capital.
2. Content is pollen. Be allergic to it.
The Web has not needed new content-focused sites for years, ever since content starting doubling and tripling each year, while digital marketing dollars were increasing at under ten percent. Please don't start another one, and please never utter the phrase, "content is king." But look at the rotten heaps of content produce festering in big empty warehouses as an opportunity. One possible way? Please read this post about 'Content Curation' by my advisory services client Steve Rosenbaum of Magnify.net: Link.
3. Advertising is a cicada. Maybe you'll see it years from now.
Most cicada species hide as wimpy nymphs underground for 2 to 9 years before emerging with all that wing-rubbing racket. That's where traditional digital advertising is hiding right now, even in plain sight as ignored and obtrusive banner advertising. Start over on a biz plan that promises investors you'll garner enough revenue from "advertising budgets" held by agencies and their clients to ensure your success. If you survive 2 to 9 years, perhaps digital advertising will claw its way out of the muck to make a ruckus that helps/delights your audience (to then consider becoming customers).
4. Previous VP (or above) in large corporation? Seek an exorcism.
With apologies to my friends who've climbed the corporate anthill only to ruin their health and happiness as first time entrepreneurs: If you are about to undertake your first Web-focused start-ups, the absolute first thing you should do is seek out corporate execs who've failed miserably at their start-ups and act like an investigative reporter in digging out their stories. And don't just interview them. Talk to their teams who sunk with his or her ship. Once you've uncovered the demons, chase them from your every move and thought in starting your business. Better yet, find a co-founder and advisors whose job is to exorcise you at every utterance of "but when I was the vp of something at somewhere big, this is what we did."
5. Consumers/SMB your target? Retreat to the back room.
OK, if not advertising, are you thinking you'll sell consumers and small business owners (who act a lot like consumers) products and services as your revenue model? Remember Alec Guinness as Marcus Aurelius in the movie The Fall of the Roman Empire? His flair with the 'thumbs-down' kill-them-now motion is what should dance through your head if you are forecasting significant sales in your plan. OK, if not ad or sales revenue for your Web start-up, then what? Whatever it is, it must come from the back room and it must be organized and quantifiable data focused. That is, what data can you glean from what happens via the User Experience at the front end of your site that someone will find of value and pay you for?
6. Utter these words & wash your own mouth out with soap: 'Our Strategy', 'Scale', 'No one'.
a. If you think you and your cronies are going to hammer out your unique strategy because you're so damn smart, read this quote & its full Web page:
Gary Hamel: the "dirty little secret" of the strategy industry, of which he is a leading practitioner, is that it "doesn't have any theory of strategy creation." The truly innovative strategies, he says, "are always, and I mean always, the result of lucky foresight."
Link to full page.
b. "We have to build the Web site/business to be prepared for scale."
I repeat: There is a 98% chance you'll never see enough customers/business to survive, much less have to worry about scale. (See No. 6 below)
c. "There is no one competing against us..."
....and all its variations. "No one is doing what we're doing." "No one has better IP than we've filed for." Blah, blah, blah. The truth is there is nearly a 100% chance that you haven't yet been left cowering in a corner when a competitor hits the front page the WSJ -- or even TechCrunch -- with an announcement of their millions of new funding (or big partnership) to give them the runway to figure out your business before you do.
7. Be a Sheep, not a Donkey.
Dolly, the cloned sheep, took 150 days to gestate; Daisy the Donkey took 374 days.
To launch a Web-focused business, commit under $250K of likely-to-lose it capital, rent or cobble together a Web front end, launch with a go-by-your-gut strategy, go-to-market in under six months, and test-and-tweak till the sheep and donkeys come home.
8. Persistence, in the face of failure, is pestilence.
Lastly, in reflecting on the disappointing start-ups in my Ventures & Advisory Services practice over the last year, each ignored some of the warnings above, and all exhibited this shortcoming. Internalize going in to your business, that you will walk away when your gut tells you to.
Link: read John Vespasian's post. Be sure to read about "realistic double vision".
An excerpt:
"To persevere in obstinate condolence is a course of impious stubbornness," Shakespeare, from Hamlet
Persistence is often presented as the key element of entrepreneurial success, but this approach misses 99% of what makes a business viable and prosperous.
No matter what goal we choose to pursue, our energies and resources will be always limited. Overemphasising persistence can lead to commercial arrogance and blindness.
A Final Note:
Naturally, I get pushback from most entrepreneurs on these warnings. My response? Smart investors like comparables. I ask: Tell me about another Web-focused start-up in your city you are familiar with that two years ago had only a business plan and a first time entrepreneur. Tell me what the status of the company is today? Again, from my work with VCs, those who invest at the earliest stages tell me today that if after two years a company is not on track to do $2M in revenue in the next 12 months, they'll never raise significant capital, and can either hope to be acquired, or stay small and be happy. For if they look up, what they'll see is 98 others hanging off cliffs by their fingernails.
1. You have a 98% chance of losing your money.
For your personal capital going into the start-up and when talking to family, friends and other seed investors, honesty in your odds for success is crucial. Silicon Valley honors failed entrepreneurs and the hard lessons they bring from their flame-outs. Don't ruin relationships for your future entrepreneurial pursuits by sugarcoating your odds.
Fresh case-in-point: A top Silicon Valley VC recently told me that after announcing an early-stage fund, they received 5,000 business plans, funded 5 deals, none consumer/SMB facing (see #4 below). That's 1%, with the cred of a top-tier VC to help them survive, succeed & raise more capital.
2. Content is pollen. Be allergic to it.
The Web has not needed new content-focused sites for years, ever since content starting doubling and tripling each year, while digital marketing dollars were increasing at under ten percent. Please don't start another one, and please never utter the phrase, "content is king." But look at the rotten heaps of content produce festering in big empty warehouses as an opportunity. One possible way? Please read this post about 'Content Curation' by my advisory services client Steve Rosenbaum of Magnify.net: Link.
3. Advertising is a cicada. Maybe you'll see it years from now.
Most cicada species hide as wimpy nymphs underground for 2 to 9 years before emerging with all that wing-rubbing racket. That's where traditional digital advertising is hiding right now, even in plain sight as ignored and obtrusive banner advertising. Start over on a biz plan that promises investors you'll garner enough revenue from "advertising budgets" held by agencies and their clients to ensure your success. If you survive 2 to 9 years, perhaps digital advertising will claw its way out of the muck to make a ruckus that helps/delights your audience (to then consider becoming customers).
4. Previous VP (or above) in large corporation? Seek an exorcism.
With apologies to my friends who've climbed the corporate anthill only to ruin their health and happiness as first time entrepreneurs: If you are about to undertake your first Web-focused start-ups, the absolute first thing you should do is seek out corporate execs who've failed miserably at their start-ups and act like an investigative reporter in digging out their stories. And don't just interview them. Talk to their teams who sunk with his or her ship. Once you've uncovered the demons, chase them from your every move and thought in starting your business. Better yet, find a co-founder and advisors whose job is to exorcise you at every utterance of "but when I was the vp of something at somewhere big, this is what we did."
5. Consumers/SMB your target? Retreat to the back room.
OK, if not advertising, are you thinking you'll sell consumers and small business owners (who act a lot like consumers) products and services as your revenue model? Remember Alec Guinness as Marcus Aurelius in the movie The Fall of the Roman Empire? His flair with the 'thumbs-down' kill-them-now motion is what should dance through your head if you are forecasting significant sales in your plan. OK, if not ad or sales revenue for your Web start-up, then what? Whatever it is, it must come from the back room and it must be organized and quantifiable data focused. That is, what data can you glean from what happens via the User Experience at the front end of your site that someone will find of value and pay you for?
6. Utter these words & wash your own mouth out with soap: 'Our Strategy', 'Scale', 'No one'.
a. If you think you and your cronies are going to hammer out your unique strategy because you're so damn smart, read this quote & its full Web page:
Gary Hamel: the "dirty little secret" of the strategy industry, of which he is a leading practitioner, is that it "doesn't have any theory of strategy creation." The truly innovative strategies, he says, "are always, and I mean always, the result of lucky foresight."
Link to full page.
b. "We have to build the Web site/business to be prepared for scale."
I repeat: There is a 98% chance you'll never see enough customers/business to survive, much less have to worry about scale. (See No. 6 below)
c. "There is no one competing against us..."
....and all its variations. "No one is doing what we're doing." "No one has better IP than we've filed for." Blah, blah, blah. The truth is there is nearly a 100% chance that you haven't yet been left cowering in a corner when a competitor hits the front page the WSJ -- or even TechCrunch -- with an announcement of their millions of new funding (or big partnership) to give them the runway to figure out your business before you do.
7. Be a Sheep, not a Donkey.
Dolly, the cloned sheep, took 150 days to gestate; Daisy the Donkey took 374 days.
To launch a Web-focused business, commit under $250K of likely-to-lose it capital, rent or cobble together a Web front end, launch with a go-by-your-gut strategy, go-to-market in under six months, and test-and-tweak till the sheep and donkeys come home.
8. Persistence, in the face of failure, is pestilence.
Lastly, in reflecting on the disappointing start-ups in my Ventures & Advisory Services practice over the last year, each ignored some of the warnings above, and all exhibited this shortcoming. Internalize going in to your business, that you will walk away when your gut tells you to.
Link: read John Vespasian's post. Be sure to read about "realistic double vision".
An excerpt:
"To persevere in obstinate condolence is a course of impious stubbornness," Shakespeare, from Hamlet
Persistence is often presented as the key element of entrepreneurial success, but this approach misses 99% of what makes a business viable and prosperous.
No matter what goal we choose to pursue, our energies and resources will be always limited. Overemphasising persistence can lead to commercial arrogance and blindness.
A Final Note:
Naturally, I get pushback from most entrepreneurs on these warnings. My response? Smart investors like comparables. I ask: Tell me about another Web-focused start-up in your city you are familiar with that two years ago had only a business plan and a first time entrepreneur. Tell me what the status of the company is today? Again, from my work with VCs, those who invest at the earliest stages tell me today that if after two years a company is not on track to do $2M in revenue in the next 12 months, they'll never raise significant capital, and can either hope to be acquired, or stay small and be happy. For if they look up, what they'll see is 98 others hanging off cliffs by their fingernails.
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