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entrepreneur/mother/education revolutionist/high tech addict

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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?

VC Marketing, They do it too

A group of investors has been waiting for me to finish a few documents. So my guess is they might be surprised if I put up a new blog post before I submit their expected papers. Priorities, you know. This post got delayed. But along this ongoing process of funding my startup I can’t help but looking at my potential suppliers – those people with the money – and consider their marketing strategy: The investors’ marketing strategies.

As we, the entrepreneurs are searching for funds, and work really hard to market ourselves; we often forget that the people we try to market-to are also working hard on marketing themselves to us.

Investors, whether angels or funds, have to market not only to their investors, but also to the fund-seeking entrepreneurs. They compete on getting the best entrepreneurs coming through their doors first. Some acknowledge this reality better than others: The attitudes range between those who are playing hard to get to those who are open and accessible. Those you can only contact via a shared connection, to those who put their email-Facebook-twitter up there. Those who have you fill out forms to those who will happily get a friendly cup of coffee with you.

It was more than a decade ago that one of my clients was a major Israeli VC fund. I had consulted them on their web positioning and executed the project with the best GUI expert I have known, Yoav Perry, who happens to be my cofounder at Saveby, our startup. I just remembered that experience and considered the long way that web positioning and marketing tactics has made since. Well, at least in some cases. The most interesting cases are those revealing a unique positioning.

So starting close to home with the Israeli VCs I’ll disclose my interest first: My husband is Partner and CFO at Genesis Partners, one of the earliest and leading VCs in Israel. This is their homepage, the images switch randomly.

Genesis Partners Homepage
It's all about the people

The “all about the people” tagline says it all and markets to all direction: the people in the fund, the people trusting the fund with their money and of course the people that the fund invests in. Funds invest in people first, before the ideas.

The people are the fund’s greatest achievement. Which is why Genesis Partners have gone even further. They established “The Junction” – a shared workspace for entrepreneurs doing their very early steps towards a startup company. With an internet connection, a coffee machine and a conference room they fulfill the early stage entrepreneurs’ needs, and all that for less than the coffee costs. Did we mention marketing strategy?

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.

Who will invest in startups in 2009?

While working on the script for a demo to present my startup venture, I am approaching the dreaded point where I will need to get other people’s money to advance my vision. In other words: fish for investors.

‘Investors’ are like a dirty word nowadays. When talking to other entrepreneurs the word “investors” or “investment” is whispered. As if by saying it out loud the dream will crumble and disappear.

The gloom projections for 2009, based on the sad financial events at the closure of 2008, add to a global pessimist atmosphere. The “realists” I meet say to me, nodding their heads, “well… a startup venture?? Now??? This is really not the time, you know??”

Well, what can I say, it’s now that I have this idea, and not later. True, I assume the competition will be fierce and the chances of landing that deserved funding are lesser this year. But that does not mean that by putting my project on hold for two years I will be able to promote the idea faster or safer then.

So I am back to my desk. Following the financial news and learning of the financial figures. I am trying to adopt my message to current times and events and see if I can find that path into some investors’ hearts.

money

*Click to Play Money by Pink Floyd

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