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entrepreneur/mother/education revolutionist/high tech addict

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Hats Seeking Heads: Partners Needed

The hardest thing when founding a startup is to build the founding team. Some lucky entrepreneurs cook their startup right from the beginning through brainstorming with others, and voilà – team! But there are many entrepreneurs who come up with an idea and then start looking for their partners.

The relationship between cofounders is a lot like the relationships between spouses. So you’d want to make the right decisions and make sure you work great together. I recently read an amusing article on Inc. magazine suggesting a camping trip to test potential partnerships. I will be perfectly happy with testing the waters in an incubator or accelerator too. I don’t really feel the urge of eating dust in the desert. The thing is the article is about choosing your partner, assuming you have a pool to choose from. It’s not about finding them.

And finding partners is tricky.

So I started off with one potential partner, then a second one tagged alone, the first one said he is not seeking any active role in the company, and his job will probably be done before the production begins. The second one seemed promising as we met a couple of dozen times, but his availability seemed limited, until he finally admitted that assuming the risks and responsibilities of setting up a startup isn’t really what he is looking for right now. And woops! I have one and a half advisors, but no partners.

I advance in very little steps towards developing my own product, or at least its offline test version (I am not a programmer), but the search for co-founders is a real distraction:

hats

Can’t raise money to pay for the development of the product if there’s no team to meet the investors. Investors, as we all know, invest in people first, ideas second.

I can’t recruit developers if I can’t pay any salaries.

Risk assuming entrepreneurs who are looking to join a startup based on someone else’s idea are nowhere to be found here, in Israel. People either have their own idea or they expect salaries pretty much from the start of the startup. And the investors keep expecting established teams and launchable products (if not launched with traction…).

But keeping an optimistic and keeping an open mind I’ve met several great people over the last few weeks. One of them actually gave me several ideas about other less common founding models: for instance, to have a potential team ready to meet investors and declare their intention to join the startup as soon as funds are there to cover their costs is one of them.

Does it really work?

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The Curse of Traction

02-06-2013 11-53-54
http://www.thefreedictionary.com/traction

“We would need to see a product/evidence of traction in the market before discussing further”. You can’t call yourself an entrepreneur if you haven’t heard this sentence before.

But there are companies in need of funding even before there is a product which can attract any traction. And long gone are the days when investors could expect entrepreneurs to work on developing, launching and marketing their product, then growing its traction – for periods of time ranging from 8-18 months, with no income what so ever.

So whenever I hear this kind of sentence, especially after my first introduction was “there’s no product yet and I am not looking for funding yet”, I get upset. Why did that investor ask me to send him my introductory papers, if this is the reply I get from his assistant or partner or co worker? What kind of a conversation is that?

It makes me feel the venture capital industry is getting older and bored. Remember “venture”?

Here’s from The Free Dictionary:

  ven·ture  (vnchr)

  n.

  1. An undertaking that is dangerous, daring, or of uncertain outcome.

  2. A business enterprise involving some risk in expectation of gain.

  3. Something, such as money or cargo, at hazard in a risky enterprise.

It’s the “risk in expectation of gain” that has kept the VC industry going. It’s pretty obvious most investors would do anything to reduce their risks, leaving fewer investors to support younger riskier startups. Pulling out the “traction curse” whenever they want to simply say – `hey, we have less riskier businesses standing in line for our money, why should we gamble on you?`

I have a split loyalty here:  I am married to a VC man, yet I am trying to found a startup. So I totally get VCs wanting to cut down their risks and go for surer promises. Obviously if I have a product, it was already launched, I am gaining traction – then I am a safer bet than the entrepreneur I am right now, with a brilliant idea, that needs funding to pay programmers to start developing the product that only I am sure is going to be a hit.

So?

I guess I will just have to dig deeper. I know that out there some investors who are ready to put their money in early stage startups are still looking for great opportunities. It’s going to be a long and hard search. But I know they’re out there and I will start looking for them when I am ready to start looking for funding.

And as for that VC who sent me the automatic traction curse, I think that when I have a product and traction, you’d probably be at the bottom of my list. Simply because I prefer investors who communicate and listen, not just tell.

Just for fun, here’s a song I heard this week, and really listened to the lyrics. I call it “The Entrepreneurship Hymn”. What do you think?

 

The Pitch & The Name, The Chicken & The Egg

Last week I took a rare drive to the TechAviv Founders meetup at Herzliya IDC. Not a drive I take lightly, mind you. But a rare opportunity with the kids taken care of, my lift both ways arranged, and enough coffee to keep me alert at the hours which are correctly referred to as “twilight”.

It was a great opportunity to meet with the community of entrepreneurs and investors I am proud to be a part of. Was nice to meet old colleagues, some new ones and of course Yaron Samid, who first introduced this meetup as a guest in a meetup I organized some years ago (continues here ).

Dave McClure gave a great talk and conversation around pitching. It’s great to be able to practice your pitch in a sympathetic environment, and get a really useful feedback to help you improve.

I was surprised though at some of the pitches, not to mention company names I heard during the evening. It took me right back to my consultancy days, when most of my business was creating names and doing renaming projects for startups and helping them create their pitch and communications strategies.

Name Thy Baby

So let’s start with a name. Or – let’s not. If there’s one thing I’ve learned about naming companies and products is that too often people come up with a general idea for their startup and their second step is immediately to name it. As if this baby, if not named immediately, will never learn to walk. They take great pride of the name they have created, sometimes they sound prouder of the name then of the business.

But a better way to do it is to use a temporary name, working title, project code-name and delay the naming until you are sure of your markets, your business model, your marketing & communications strategy and the overall terminology your business is going to use. Not to mention languages. Lots of Israeli entrepreneurs assume English automatically – but that’s not necessarily your target audience or all of it. If you might be targeting more than English speaking markets, beware embarrassing mistakes like “Pajero” “Pinto” “Mist” etc.

It’s almost a chicken and an egg question, only people here are so certain the name comes first. It shouldn’t. Your pitch should.

The other thing I noticed about the recent names I heard was intentionally using misspelling or a mixture of words one simply can’t spell from hearing only. Be very careful about these inventions. You might be a tech genius but when it comes to naming, using an expert could be the wisest and most cost effective move you can do at this very early stage in your company’s life. 

But this is really just the tip of the iceberg. You can look at a sample process here or look for more great tips on Google.

Pitch At All Costs

It might be that 15 years as a journalist in print journalism made me very efficient with words, especially crafting headlines that can tell enough in a limited number of characters and leave enough mystery so the reader continues reading. But this is exactly what you should do when you are pitching your company to an investor, partner, employee or supplier. Don’t attempt to tell the whole story. One of the main things to remember of course is who your audience is.

Take the same news item and compare the headlines it gets on various media. The differences result from the audience a medium is directed at. The same goes for pitching. You should always prepare a set of pitches for potential audiences. Not totally different pitches obviously, but different ways of saying the same thing.

To make sure you are using the right pitch – prepare before you go to an event where you might meet Dave McClure, for example. There’s enough information online about him and what he is looking for. So if this guy is looking for companies with traction – and you have traction – then grab his attention with his declaration of interest. Not with the fantastic and original un-spellable name of your company, nor with the story of what it is you do – that does not belong in a pitch.

And just for the sports – if you want me to draft some sample pitches here for you – I dare you to send me a paragraph (up to 3 twits long -520 characters) – and I’ll do my best. First 5 to send me (comment on this blog post) –win.

The Age Of Hiring

Yesterday a job fair for the 60+ took place in Tel-Aviv. They say it’s a first. I read the story by Guy Grimland on The Marker (Hebrew) and all I could think of is how quickly we’re all getting there. To this age.

A year ago I founded a startup company with a partner who is 8 years younger than me. Recently we started to browse around for a technical partner to join our team. The oldest applicant we had was 52 years old. The youngest was in his late 20’s. Both had interesting résumés.  I can’t say it didn’t cross my mind that a 50 plus might be too old for a web startup but I quickly pushed this thought aside and decided the right thing to do would be to talk to both.

I was very impressed with the older applicant. Clearly his knowledge and experience have given him a lot of confidence, enough to be open to various ideas, tools and consideration. He has this authoritative tone needed if we want him to lead a tech department, yet seemed attentive and kind. It was the younger applicant, who despite a very impressive résumé, clearly a smart and talented young man, seemed simply cocky. Someone who wasn’t going to be a tremendous joy to work with.

It got me thinking again about the topic of age discrimination. Especially in high tech. VCs cannot tell me they are not influenced by the age (as well as appearance, and sometimes sex) of entrepreneurs presenting to them. There’s a very well known angel investor in Israel who would rather not talk to any entrepreneur who is over the age of 30 (especially if it’s a woman), and who is pretty proud of enjoying his version of “child labor”. His excuse is: young people (preferably before family-stage) are independent and can slave around the clock until they reach their declared goal. Older entrepreneurs might actually care about other things too.

But it’s the richer world that makes a smarter entrepreneur. True, you don’t need the richer version for every venture, but it can surely help. So looking at building a founding team I think there’s something smarter in diversifying not only sex, but also age.

VC Marketing 3: The Listeners

After a while the entrepreneurs seeking investment can get a pretty bizarre feeling. You are driving, yet you’re on auto-pilot, and you’re getting nowhere. Seriously, are we driving at all?

But then comes this surprise meeting when you realize that yes, there is a road, you’re on it, and you’re definitely driving. You lose the auto-pilot and you’re wide awake.

These people can either invest or not, but you will remember them and their names, and you will follow them in years to come, because they did this one bit of basic marketing right.

They lost the auto-pilot!! They listened, communicated. They wanted to understand your message. Weren’t afraid to ask the tough questions or make suggestions. Yes those questions were directed at you, and not at every entrepreneur that came into their offices.

If the VC or investment firm has done their homework, you will meet their person who is the most-knowledgeable-in-your-area that they have. And if this person has done his or her homework, they would have researched your business, your industry and each one of the company’s partners to better prepare. Their listening has started way before your first handshake.

After all, they wouldn’t want to miss on a great opportunity only because they forgot to listen.

VC Marketing – They do it 2, Differently

Rise above the noise. Every marketer wants it. And yes, it’s true for VCs and angel investors too. Let’s be different. Let’s get noticed. Let us become entrepreneurs’ first choice.

One such investor, rising above the noise around me is Chris Sacca, with his fund “Lowercase Capital“. I love their web site. Or should I say his web site??

Unlike many VCs, made of a team of partners and professional employees proudly presented to potential investments and investors, Chris Sacca is, well, Chris Sacca. An accomplished venture investor and an entrepreneur. Lowercase is Chris and Chris is Lowercase.

If it wasn’t for the constant use of the word “we” on their web site Lowercase Capital could well seem to be a one-man-show. Its web site has a unique terminology and design. Somewhere between retro, old fashioned and good old westerns, this VC founder is featured under “proprietor” and the entrepreneurs wishing to get in touch are referred to as “prospecting”.

Their visual and verbal difference from the majority of venture capital investors and investment firms is not something they did because they just wanted seem different, or only to rise above the noise. Lowercase capital is stressing how apart it is from the stream under “creed” – their vision, a section opening with the words “Venture capital is broken”. Their appeal to entrepreneurs is coming from some point of empathy with the entrepreneurs’ deep pain and frustration which often accompanies the fund raising process. They are using good old fashioned sentimental motivation in marketing.

This is a web site entrepreneurs would want to read through and through. I am not sure anyone would bother to read all verbals on any VC web site. But here, you will. This web site gives you the feeling that it is indeed about compatibility and personal chemistry between you, the entrepreneur, and “the proprietor”. You would want to know what the other side is seeking and how to get them interested in your particular venture. So you will read every word there and make sure you can convince them that you are the entrepreneur who speaks the Lowercase Capital language. You and no other.

And to be sure you do – they offer you a guide, under “prospecting”. It is not a web form, but it is very much the format you are expected to use when applying. Use it smartly.

And last but not least – the call for action:
On “outfit”, the introduction section – “So take a look around this site and see if we are a fit. If so, we can’t wait to hear from you.”
On creed it is “We won’t be wearing a suit, and our lawyers won’t be in the meeting, but if you think we can help you, let us know.”
On prospecting it is “Now, send your pitch here and let’s get to it.”

Now, if that doesn’t get you on the move, what would?

Over Prepared? No such thing.

You can never be prepared enough for a meeting with investors. There’s always something you learn at each meeting. Some other question no one has asked before. All can become perfectly legitimate grounds for new ideas of your product’s development.

The question of entrepreneurs being prepared for a meeting with investors keeps surfing in various modes. As someone who was a journalist for many years, I always like to be prepared for meetings and realize it’s hard to be over prepared.

Which is why I smiled when I saw this question on Quora this week:
What are the signs of an entrepreneur who is over-prepared for meetings with investors?. I thought this could be posted by someone who watched too many of “The Mentalist” episodes…
David Rose, Managing Partner, Rose Tech Ventures, replied the top rated reply which I am happy to quote for the benefit of my fellow entrepreneurs:

“The sign of an over-prepared entrepreneur is…that he gets funded!
Seriously, it is impossible to be over-prepared when pitching to potential investors. You should know 110% of whatever there is to be known about your business, your market, and your competitors. You should be able to reel off the life histories of yourself and your team. You should be ready to give the investor specific details of every exit and acquisition in your space for the past five years. You should be able to do your full pitch in the dark, without slides, in three languages, both forwards and backwards.

And if you can accurately show how your venture relates to other companies in the investor’s portfolio, and how the investor can specifically help with your company’s future growth…you’ll be perceived as a smart, thorough entrepreneur who really did your homework.

Over-prepared? Nope, there’s no such thing!?”

At this point I need to stop writing my blog and go back to homework. There’s no such thing as over prepared.

The New King Is: Concept

There’s a new business category and I’m looking for the defining-term for it. For years I’ve been in and around the high tech industry. Worked with software, hardware and internet companies. Been involved in the venture capital funds industry and their pursuit of technological innovations.

But there’s something new out there. An innovative technology and the once so important technological barriers are not as important as they used to be. A winning idea and a thought through concept is the new king in town.

The best example is Groupon. The ecommerce industry, and more specifically, the group shopping trend, is hot now. Very hot. Since Groupon’s rejection of a 6 billion dollar acquisition offer by Google, even those who weren’t quite there want to be related to the successful celeb.

Groupon was founded about 3 years ago, and is currently employing more than 3000 employees, according to its Crunchbase page. It started with an initial angel investment of 1 million dollars in 2007, an additional 4.8 million in 2008, 30 million at the end of 2009 and 135 million this year. But it is estimated that the company is going to make 500 million dollar in revenues this year. That’s revenues, not profits, in case you were wondering. Still – an amazing number. According to this article Groupon became profitable on it’s 7th month of operation. That’s impressive.

Groupon is an interesting example because it’s mainly a concept and not so much a technology. Since it’s an internet based company it’s considered high tech, but really, there’s a new category in town, and it’s not tech, it’s more of an innovative thinking, then an innovative technology.

To be fair, there are plenty of high thinkers out there. If I take only the group shopping market I can find the amazing Lifesta, offering a marketplace for the unused Groupon and similar deals. Yippit is a deal aggregator – reading deals from all location based deal-a-day web sites. The Gifts Project enables groups of friends to buy gifts together. Yardsellr.com is a new sell and buy concept. There is some technology in those, but it’s not the main thing, not even a barrier. The value of the concept is taking its rightfully owned central position. And now, thanks to Groupon, the market is finally realizing that a good idea is as valuable as a new technology if not more. The new barrier isn’t a complicated technology any more, it’s the concept and the people who create it.

This leaves more room for competition of course, but competition can also be good. It validates and strengthens markets. It inspires high thinkers and generates new concepts.

The chicken or the egg, marketing or the product?

Last week I participated in the Tel-Aviv-Yafo Entrepreneurs Meetup I organized. The meeting presented a panel of three, Danny Arazi, Ouriel Ohayon, Yaniv Golan and was moderated by Avichai Levy (about the participants). The debate was around the question “How early should a company begin to establish its brand and marketing strategy?”

It’s an interesting question and rather an emotional one. It is always emotional when you get to marketing. Being a marketing person myself I am lacking some objectivity. However the panel presented people like Ouriel Ohayon – a VC and tech oriented man and Yaniv Golan – CTO of Yedda, alongside the multifaceted Danny Arazi, and the more marketing oriented Avichai Levy, so it was a good opportunity to get a more comprehensive impression of the situation.

There were three of us when we prepared for the panel. Esther Loewy and Avichai Levy joined me. Esther is a Kellogg-Recanati graduate and a marketing communications consultant. We started with the gut feeling that the main problem the Israeli market is facing is either total disregard for marketing, or the opposite, “know-it-all” approach.

We felt encouraged by the discussion developed with the entrepreneurs from the audience, because it became clear there is a growing awareness of the importance of proper marketing strategic planning. However, the “know-it-all” approach seems to be leading the way even to this blessed result. VCs and angel investors are examining the marketing strategy of startup companies. It is rare that a startup will raise funds without any marketing planning.

However, some expressed their opinion that being marketing-aware is a needed requirement from anyone who wishes to establish a startup. Since at the beginning entrepreneurs are lacking the funds to hire a marketing function, they are required to work out their marketing strategy by themselves. And the general belief is – that if you can’t do it, than you can’t build your startup company. The result is – that more computer engineers or electronics engineers are doing marketing. It is not their specialty, nor their forte. But it is a necessity, driven by the market.

Quoting one of the panelists, Ouriel Ohayon: “But if your service is all about seducing, attracting and understanding the user, the marketing is a key competence of the company. Even more: the whole DNA of the company should be imprinted with marketing. From the CEO to the product team. Marketing is not a function or a title: it is the company. Marketing is about having a great product, a great user experience, a good logo and brand identity, a good customer service, a good distribution road map, a good customer acquisition program and even more important a good customer retention program.”

It is encouraging to think that investors hold marketing so highly. Repeating the DNA phrasing, Ouriel has rejected the idea of outsourcing or consulting. This has to be an internal value, he believes, outsourcing can come later.

But do all entrepreneurs have the marketing knowledge and qualities? People may be brilliant developers, but when it comes to marketing, a whole new set of tools, knowledge and …. well, eyes is required.

I think the solution might lie with cooperations and partnerships. And if you don’t want “to marry” a partner, there are ways to outsource tasks or get specific help or guidance from marketing professionals in many models: deferred payment or payment with equity, or an hourly based payment, which isn’t the same as a salary for a full time hi-level marketing professional. Using an outer source doesn’t diminish or belittle the entrepreneur’s initiative. If anything, it is a growing experience. The entrepreneur gets to learn of marketing and practice marketing thinking, since he must take and active part of any marketing strategy creating process. In other words, if you weren’t born with this DNA, why not use the available tools to acquire it?

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