Act like the leader. Simple advice but I see companies not do this all the time. You’re the leader in this space – act like it. Don’t be ashamed, bashful or defensive about it. This doesn’t mean beat the “we’re the biggest player in town” drumbeat all the time. It means leverage that fact and all that goes along with it to do things that the industry leader does – highlight customers, talk use cases, get more press, hold a user conference.
Act big. You define the game. You are the leader, you set the rules, you define how the game is played.
Don’t react. Smaller (ankle biters) can sometimes bate you into being reactive. Avoid this temptation. Stay above the fray, stay on course (that doesn’t mean be blind to what you’re learning in the market or what others are doing, but don’t fall into the trap of chasing your smaller competitors around).
Stay innovative. You want to keep your competitors scrambling to keep up. You’re already ahead in the market so you can do this effectively. But only if you keep innovating and pushing the industry. Don’t give anyone else the chance to catch up.
Leverage your leading position. This isn’t always possible, but if there are things that you can do from a product perspective that leverage the much larger data set and broader use cases you have access to do them.
Companies rarely grow in a straight line (or the fabled exponential one). Building a business isn’t about getting from point A to point D by passing through points B and C. There are fits and starts. Amazing discoveries and heart wrenching realizations. Huge highs and low lows.
Trada – which has built a large crowdsourced marketplace for search optimization – has been through its version of this crazy growth curve over the past 5 years. We’ve learned a ton and along the way have delighted a large number of customers. But we’re having one of those non-linear moments at the business and came to the realization that we needed to shrink to grow. So we took the harsh medicine and significantly cut back the Trada staff. The result was a business that has real revenue and customers, is growing and bringing on new business, is continuing to build and innovate product and is profitable.
I bring this up because it’s been falsely reported in a few media outlets (and on Twitter) that Trada is shutting down (purposely not linkning here – any reporter who can’t even perform the most basic due diligence on a story doesn’t deserve the extra traffic). Trada is not shutting down. The move the company made last Friday was bold, dramatic and painful. But it was the best thing for the business and its customers. This isn’t the first time we’ve seen a business retrench (Gnip, for example, cut back to 6 people a few years ago before profitably growing back to 80 and counting).
As I’ve said before, building a company is often a 10 year + journey. We have plenty of distance to go still at Trada.
This has come up a few times so it seemed worth putting out there. It’s important to get a consistent set of terms when talking about your business. For example when you say sales do you mean booking or revenue? When you talk about revenue do you mean recurring or total? Is churn net of upsells or is an upsell a new sale? If bookings are the total contract value of everything you sold in a period, how do you normalize for different contract lengths? Are renewals counted in bookings or broken out separately? However you do it, just be sure to be both consistent and clear about what each term means.
Below is something I’ve used for several of our recurring revenue businesses to make sure everyone was talking the same language:
MRR – current monthly recurring revenue (if we had one time revenue, number would exclude it; total revenue includes MRR and any one time or service revenue, etc.)
Bookings (or “Sales”) – the total contracted value sold in the period we’re discussing (so a month to month customer’s “bookings” contribution is 1 month revenue; a 2 year sign-up’s booking value – the full two years; basically it’s what we hit the credit cards for for our new customers)
New MRR – Also a bookings number but this normalizes for the monthly/annual/2 year booking but simply taking the one month value of all the customers sold in the period we’re talking about.
ARR – current monthly recurring revenue times 12
Churn – Monthly value of customers who didn’t renew. I don’t like netting this out of New MRR (as some do). Should be tracked separately.
MRR last month + New MRR – churn should equal next month’s MRR
There has been a well documented and discussed deep decline in the cost to start a technology business over the past ~ 15 years. From the days where every website was custom and each site element was a de novo build to today where virtual servers are easily and cheaply spun up and down and where frameworks exist for just about every feature and functionality that you could imagine building, the cost of starting a tech business has gone from $5-$10M to maybe $50k or less. It’s a remarkable trend and one of several key factors driving the Democratization of Entrepreneurship.
But is it possible that the cost of starting a tech business has fallen to less than zero? In some cases I think this is now the case. It’s now possible for entrepreneurs to seed ideas into the market and get people to put their money where their mouths are before even laying down a line of code. And this trend is true perhaps even more powerfully on a product level from existing companies.
We recently announced our investment in LeadPages – a platform that allows publishers to quickly create and host lead and conversion pages. The company actually started by selling the product that it was thinking of building, rather than building it first. Co-founder Clay Collins put out the idea for the LeadPages product on his marketing blog and before they had even scoped the project had $40k of pre-orders (paid pre-orders). With that money he built the beginnings of what became LeadPages.
Also in the Foundry portfolio BetaBrand is doing the same thing on a product level through its ThinkTank initiative. The idea is pretty simple – customers “vote” on new product ideas by agreeing to buy them. The ideas that get enough support get made.
Browse Dragon, KickStarter or Indigogo and you’ll see lots of examples of this (not every crowdfunded project fits this but many do) – show your support for something and if we reach a certain threshold, we’ll create it for you.
Another great example of a company taking advantage of this trend is Filament. It’s ThinkTank for web apps. As they describe it: “We show you a vision of a Web app. Your votes determine whether we build it, and its features.” Exactly what I’m talking about.
I think this trend is incredibly powerful. And we’re just at the start of it. Just as we’ve seen the control of IT systems become decentralized across organizations of all sizes, I think we’ll also see a similar decentralization of the product ideation and development process. And while not every product and innovation can be developed in this way, many many can, should and will.
I’d love your thoughts on this as well as other examples of companies getting creative about pre-sales.
In the news/hype cycle of venture and start-ups it’s rare when a single news item captures the attention of the entire community, even for a few days, let alone 3 or 4. But AngelList‘s announcement of “Syndicates” has done just that. And it was pretty fun to watch the reactions which ranged from: “this is stupid” to “this will kill venture investing as we know it” to “this will change angel investing forever” to everything in between (see for example, AngelList Syndicates Will Also Pit Angel Against Angel, The Great Venture Capital Rotation, Leading vs. Following, Some Thoughts on the Big AngelList Deal, and Is @AngelList Syndicates Really Such a Big Deal?)
Of course none of these writers know exactly how Syndicates (which in short creates the ability for angels on AngelList to build funding groups around a specific company and take a portion of the upside associated with the success of the company/investment) will really work and neither do I.
But I do know that Syndicates is an interesting idea – and perhaps more importantly, yet another example of how Naval and AngelList continue to innovate around funding models for early stage companies. But I think what everyone is forgetting in this debate is that the radical innovation here isn’t AngelList Syndicates. It’s AngelList itself. The idea to democratize capital formation is the important idea here and a continuation of a key trend around start-ups and venture capital of the past 20 years. And despite it’s name, AngelList is really about the entrepreneurs who start businesses more than it is about the people who back them (although for those outside of the valley loop, AngelList is also democratizes the funding side of equation – both key parts of the overall Democratization of Entrepreneurship trend that we’re witnessing).
In many ways, Syndicates simply codifies (and specifies a value for) what’s already going on around fundings on AngelList where people get excited about an idea, commit to funding it, and then try to get others to jump in as well. In that sense it’s not really innovative so much as it’s encouraging activity that’s already taking place, making the rules around it more clear, and trying to get as many people as possible to join the effort (which is what Angel List itself is about).
Rather than debate the hypothetical, today Foundry Group decided that it would be more interesting to jump into the middle of the topic we’re all talking about. We’ve been thinking for quite some time about how to better leverage some of the angel activity that’s going on in our community (and through our investment in TechStars and through our own personal investments in companies and venture funds the four of us are already involved with over 1,000 early stage companies). The creation of Syndicates presents a great way to do this. So today Foundry is announcing the creation of FG Angels, through which we’ll invest in approximately 50 AngelList companies through the FG Angels Syndicate. We’ll put up the first $50k into the syndicate and will cap total participation in each of our syndicate groups at $500k (at least for now). There’s more detail on what we’re up to on our post about it from this morning.
More than anything, Foundry Group believes that we exist to serve entrepreneurs and to make them successful (and that doing so is the best way generate a great return on our investors’ money). AngelList Syndicates supports this idea and the formation of FG Angels is our effort both to be supportive to the AngelList community and to take advantage of a trend that – good or bad for VCs or angel investors – is part of a tidal wave of change sweeping over our industry.
You may have seen the video that Foundry Group produced a few years ago – a hard hitting glimpse into the life of a VC told in SNL style.
The video (and more importantly the song) was written and directed by my very talented partner Jason Mendelson. That’s his voice. That’s also his playing every instrument you hear on the track. Awesome
Well…we’ve been hard at work on another video (again written, produced and directed by Jason). This new one takes a look at some of the ways technology has changed our lives and asks the deep questions about whether we’re better off today or if things were simply better before all this gadgetry. It will be out in a few weeks. In the meantime check out the teaser to the new video below. You won’t be disappointed.
I don’t need to tell you about the devastation that has rocked Colorado over the past week. The rain started and it just wouldn’t stop. I’ve lived in Colorado for 17 years and I’ve never seen anything like it. People have lived here for their entire lives and haven’t. Our house and property only sustained minor damage (and we spent a few days without power and water; neither particularly difficult compared to what others are facing). It was heart wrenching to be glued to the news and local reports seeing pictures of our community – all around where we live; our neighbors; the places we go every day – become ravaged by floods.
We have many friends who sustained real damage to their properties and homes (and like most people effected by this storm the vast majority don’t have flood insurance). A number have been forced out of their houses – some for months. Our house is only a few miles from the town of Lyons, which was completely cut off by the flood waters and totally devastated. The entire town will be shut down for months while they rebuild power, water, sewer and other critical infrastructure. Every single person in the town of Lyons has been forced to relocate. There is a message board at the evacuation center with people searching for friends, family members and beloved family pets. It’s hard to imagine this kind of loss.
While Ryan, Jason, Brad and I started Foundry with a national vision, being part of the Boulder community was always core to the Foundry identity. We’re proud to call Boulder County home and fiercely loyal to our community. With this in mind Foundry is proud to join the relief effort by giving $100,000 through the Entrepreneurs Foundation of Colorado to the Foothills Flood Relief Fund. These funds will directly help victims of this catastrophe.
With this gift we’re also putting out the call to other funds who have connections to Colorado (either because they are located here or through their investments in the state) to match our gift of $25,000 per partner. To Colorado entrepreneurs and business people who have built their companies in this community, please do what you can to help. And a special shout-out goes to the Denver Broncos, who today announced that they were donating $50,000 to the relief effort. While that money will make an impact, I believe an organization as tied to the community and as successful as the Broncos can do better ($25,000 per player?) The team has the strong support of fans throughout Colorado. Now their fans need support.
If you have any questions about EFCO or your company or organization would like to direct a gift through them to help with relief efforts, please email me. If you’re interested in helping out directly, click on the “Donate Now” button at the top of this post. And, of course, if you’re interested in joining EFCO I’d be happy to talk with you about that. Together we can help rebuild.
Last week at the conclusion of the COIN Summit Colorado released an new brand for the state. The new branding effort was lead by Aaron Kennedy (of Noodles fame) with the help of a brand ‘committee’ (I was a member) and, importantly, a large network of ‘brand ambassadors’ around the state. The process was an interesting one and was designed by Aaron to be inclusive of opinions and ideas from around the state. The idea was to identify a unifying brand that could represent Colorado across a wide variety of uses (both inside the state and outside). The result is the image in the upper left of this post and the tag line “IT’S IN OUR NATURE”. The logo draws from the green on the Colorado license plate, using updated but similar mountain/peak imagery but also including CO and Colorado (I guess for the avoidance of doubt about what we’re talking about).
I think it’s impossible to undertake an initiative such as this and find any kind of true consensus. And I suspect that people reading this will have mixed reactions to the new logo and branding. That’s kind of the nature of the beast. You should see the size of the three ring binder that I received as part of the Brand Counsel that reviewed all sorts of information from focus groups and brand brainstorms (now would be a good time to point out that the funding for this project was all private – the state didn’t pay for the fancy binders and formal letterhead, etc that I received). Personally, I like the new logo a lot and I think it was time for Colorado to update its image. I also like that the state will be consolidating around the use of this logo but also be allowing companies from Colorado to use the logo to tag themselves as Colorado proud (there are derivatives of the logo that signify that products were Made in Colorado or Designed in Colorado, etc.).
I can’t help but point out the similarities of both the logo and the tag line to the Colorado Entrepreneurial by Nature initiative that I helped start with a handful of other local entrepreneurs (and that was announced about a year ago) – if you’re a Colorado business and you haven’t signed up and badged your website you can do so here. I think the similarities speak to the broad view of Colorado as a place where business and nature mix (and reinforce each other). And I’m really happy that the work that our small group did around EBN was validated by the much broader work of BrandCO.
Look for both the EBN logo and the new BrandCO logo to proliferate.
For years, many of our most high profile hardware investments have had a quiet partner. Dragon Innovation – experts at helping hardware ideas actually happen – have helped companies like Makerbot, Sifteo and Orbotix (all from the Foundry family) move from product idea to product reality. As the startup world shifts from an intense focus on bits to celebrating atoms and the “maker movement” of hackers who give those atoms life, there is bright light being shined on the ability of those makers not just to come up with cool ideas, but to take those projects from ideas, to prototypes to delivered product. This is where Dragon shines, and where they aim to completely change the way great ideas are planned, funded, made and sold.
Today, Dragon is opening up a platform focused entirely on great hardware projects and their makers. With the expertise of their years of consulting and hundreds of products they’ve helped come to life, they’re applying a different filter on the traditional hardware crowdfunding model (which is rife with failure due to improperly scoped projects and overambitious and unrealistic expectations). They’re building what they hope will not just become the platform for makers to launch their projects, but ultimately will become the center of the maker community – where makers come to get help from each other, learn about new products and get feedback on their ideas.
Of course the Dragon marketplace is also about the other side of the funding equation – the backers. The company believes the experience of backing a a company should be about both the project and the maker and they’re building tools into their site to allow makers to better interact with their backers, simplify and make more meaningful the project tiers and, most importantly, to back projects that have a high likelihood of actually delivering.
The company has launched with 8 initial projects (including a special edition of the Pebble watch). The company is also partnering with companies like GE and Qualcomm to help put more muscle behind what they bring to the table (look for more partnership and some innovative twists in the coming weeks). Go check them out!
Reputation matters. You know that and so do I. But it’s easy to forget that you’re either building or destroying that reputation in every interaction you have. Not to mention widespread reputation travels in our ridiculously connected world.
I was reminded (again) of this today from an exchange on our CEO email list (which includes about 75 CEOs of Foundry portfolio companies). The email read:
From: [CEO of Foundry portfolio company}
Subject: Have you done business with anyone on this list
I’m on my way back from [an] investor conference where we met a bunch of VC & Private Equity guys.
The event was really useful. Not only did I discover a whole bunch of folks wanted to speak with us about investing, but I feel like I’ve been through an intensive two day course on Series B/C financings. Plus, it was useful to network with a bunch of CEOs and I think we made a few sales in the process
If any of you have ever had any dealings with the firms and/or individuals below I’d appreciate your feedback/tips.
[this was followed by a list of 20 or so firms and individuals]
The response was close to instantaneous – probably 20 messages exchanged in the course of an hour or so listing out people’s experience with various firms. Responses ranged from positive: “Good guys, and super smart. Happy to take meetings.” and “He was nice, quick to provide feedback, clearly smart.”; to practical: “They want $5m run rate before investing” and ” Very good investors but super picky. Min check size $25M”; to negative: “The most negative experience I’ve had with a VC. …the partner was totally disengaged, dismissive, and rude.” and “Generic VC. Another friend has him as main investor and every board meeting is “Why can’t you grow faster.”; and “He came late to the meeting. Came off as arrogant and bored”
There were tons of other comments, but you get the drift. The point is that people talk (in this case the topic was VCs but you could imagine the same thread on larger technology company partnerships or the best tools for managing metrics across your business, etc.). And while there are always two sides to a story (and certainly everyone can have an off day) it’s important to remember that with every interaction you’re either building or harming your reputation. I forget this plenty. And this morning was a reminder of why I shouldn’t…