Archive for the ‘Startups’ Category

Marc Barros on the shift from Product to Marketing/Sales

Marc Barros, the founder of Contour cameras wrote a great follow-up to my post on your company’s shift from a product focus to building out a sales and marketing organization that’s definitely worth reading. A few excerpts here:

1. Make A Clear Definition of Success

Early on, often before you raise venture capital, you want to create a clear picture of what the future looks like. That picture can include a range of things such as how you define your culture, values, employee morale, size, revenue growth, market domination, etc. Equally how you define success could range from world domination (e.g., Square) to building a small company focused on great products (e.g., 37 Signals).

Whatever the definition for success is, the best companies know this early on. They are already thinking about how they transition from their initial customers to growing the business. So when they do raise venture money they are clear about what the money is for and how they are going to use it to complete their ultimate vision.

At Contour we weren’t clear early on about what we wanted to be. At the core we were always focused on building great product, but along the way we didn’t shift our priorities from the best products to reaching more customers. We weren’t sure if we wanted to lead the market, follow the market, just make the best products, be a niche brand, etc. Instead we invested a little bit everywhere, never recognizing when we should shift from satisfying our early customers to a focus on how to reach a lot more of them.

2. Every Company is Building a Brand

Just because you are a product-focused or technology-focused company doesn’t mean that you aren’t building a brand. You are.

No different than Apple, your brand matters. The name, what it stands for, what it feels like, even what it smells like. Some of the best technology companies have built the stickiest brands. Look no further than Google, who through Marissa, was obsessed with its brand. I’m sure there was a lot of tension within Google about what was considered on brand, regardless she was consistent in protecting its image. Another great example is Intel. Technology at its core, they spend serious dollars to brand “powered by Intel” at a consumer level to make no doubt consumers wanted their technology.

If you recognize early on you are building a brand, it helps to lift your head up above the product/technology and begin thinking about how you are going to scale your platform.

3. Don’t Divide Your Organization

A traditional way to see the world is to divide the company between the functions: sales, marketing, product, finance, operations, etc. This is consistent with how we are taught to run a company and with how people view their roles within the organization. This is even consistent with how Seth phrased it, shifting from product to sales/marketing. I have come to believe it’s the wrong way to lead a company, especially early on.

It’s true your company will have specialists that can handle customer relationships, design things, write code, etc. But it doesn’t mean all of these people have to be working on different objectives.

If we remove the functional titles for a minute and talk about what the company is trying to accomplish it becomes much clearer. Early on you are finding your customer and building a product to satisfy them. As Seth says you are constantly cycling between customer feedback, improving the product, and getting more feedback. This process can sometimes take years until you have built a great product that your customer can’t stop using with a business model you think is sustainable. To do this well you often hire designers, engineers, and product managers. Before you know it your team is great at understanding the customer need and building a product.

Skipping forward you decide you want to really “grow” the business. If we forget the traditional functions of “sales/marketing,” and rephrase the objective, we’d say the goal is to get more customers. The more customers, the more revenue, and hopefully the greater the profits. There are a variety of ways you can grow your customer base. Getting new customers could be through adding new features (product), hiring people, traditional marketing efforts (social, advertising, SEM, etc), or even traditional sales efforts (sales teams, distributors, affiliates, new channels, etc). The important shift here isn’t the shift in hiring more sales people or more marketing people, it’s the shift to recognizing the most important thing is to get more customers. If the whole organization is thinking about this, including engineers, I bet you would come up with a variety of ideas and priorities to meet this. And instead of just the sales guys thinking about sales, you involve the whole team.

I believe the best companies focus the whole organization on a few priorities and therefore get the mind share of every employee towards the same goal.

Lastly, don’t rule out the need to shift the mix of your team mix, especially if your business isn’t generating enough cash flow to support the people you hired and your new growth objectives. At least by making these changes it would be clear to the whole organization that you are focused on growing your customer base.

February 5th, 2013     Categories: Marketing, Startups    

Shifting from a product company to a sales/marketing company

targetAt the risk of overgeneralizing (although to be fair as a VC that’s pretty much my job description) and understanding that there’s plenty of grey area here, I’ve really been noticing recently just how challenging it can be for organizations to move from being product focused to sales and marketing focused. It seems worthy of a post (and hopefully getting some feedback on).

Early on in their lives most companies are built around a focus on product. They tend to be engineering heavy, key deliverables center around feature releases and sticking to a dev schedule and success is measured by the progress a business makes on building and releasing product vs. revenue generated from that product.

Then, at some point in an organization’s life this focus starts to shift. It generally starts slowly. Perhaps a sales person or community manager/user advocate is hired. Sales and usage related goals start to show up more prominently in weekly reports. You start thinking about marketing and outreach. Eventually you realize that you’ve fundamentally shifted the focus of the organization from one that existed to build product and get early usage to one that is focused on scaling that early usage and showing that you have a customer/user acquisition model that actually works. It’s not that product goes away or that the product is somehow “done” (all great companies are intensely focused on product in my experience) but that almost complete emphasis that you had on product from the early days is replaced by a true emphasis on customers.

This can be a challenging time for an organization. For starters many CEOs of tech companies are product people. And frankly it’s easier to map out a product roadmap of success (delivery dates, feature completion, etc.) than it is to live in the more spurious world of early customer adoption and sales. I think companies that make this transition most successfully embrace this shift completely. They acknowledge it within their organization. They set clearly defined goals and report openly whether they are meeting them or not. They develop strong feedback loops between sales and engineering to ensure that the future product roadmap reflects the reality on the ground. They measure everything they do on the sales and marketing side to learn what is working and what is not. And, of course, they treat their early sales process just like they did their early product development – getting as much feedback from the market as possible and quickly shifting course (the equivalent of reprioritizing a feature or shifting a design principal) if something’s not working.

I’d love to hear your thoughts on this transition as we have a number of companies in the Foundry portfolio going through this metamorphosis right now.

January 24th, 2013     Categories: Startups     Tags: , ,

Introducing Colorado Entrepreneurial By Nature

When it comes to the question of nature vs. nurture for entrepreneurs it’s clear that both are important. While great entrepreneurs are born with at least the seed of that entrepreneurial spirit, it takes some encouraging – as well as plenty of guidance, help and support – to see that seed blossom. I’ve had the great fortune to experience the evolution and transformation of Colorado into a community that I believe is one of the most supportive of entrepreneurs anywhere in the country. In fact, Colorado has always had an entrepreneurial spirit – from before its founding as a state as a frontier territory supporting prospectors and pioneers, through its history of ranching, the oil and gas boom, as a hub for telecommunications start-ups, to its leadership in LOHAS businesses and the burgeoning green-tech field, to Internet and related technologies. Surrounding these business trends has been a Rocky Mountain lifestyle that has attracted entrepreneurs to our state since the 1800′s. These factors, combined with a support structure and philosophy of paying it forward, has turned Colorado into one of the best places in the country to start a business.

Today we’re launching Colorado Entreprenurial by Nature – a grass roots campaign created by a handful of entrepreneurs in our community to show support of that ecosystem. The goal is simple. We’re giving members of our community an easy way of showing their pride in the entrepreneurial community we’re building in our state. We hope that this will help us both encourage entrepreneurship in our community and attract new entrepreneurs to come to Colorado to start their businesses.

Joining is easy. Head to the Colorado Entrepreneurial by Nature website and download the badge (it comes in a number of different colors and sizes). Display it proudly on your company or personal website. We’ve made some stickers up as well which you can fly proudly on your laptop/car/bike/etc. They’ll be showing up around Denver and Boulder at a handful of coffee shops and other places where entrepreneurs congregate.

If you feel the way I do about Colorado – about living here and working here to support entrepreneurship – I hope you’ll join me in the movement.

October 22nd, 2012     Categories: Marketing, Startups     Tags: , , , ,

Your community of peers

Last week about 40 Foundry Group portfolio company CEOs and founders converged on Boulder for a half day of meetings followed by some social time. It was a truly amazing experience and such a great reminder of the importance of cultivating a peer group for you and your company.

We have a very active CEO and founder mailing list at Foundry, where there are daily rifs on any number of topics and where portfolio companies can reach out to each other for help and advice (we have a separate list for CTOs, one for Boulder companies and another for Bay Area companies as well – all designed to build Community – with a capital “C” – around the shared trait which is Foundry as an investor). These lists are great and have been extremely popular with companies (the four Foundry partners actively participate in the lists as well). It was creating this sense of Community around a shared investment from Foundry that precipitated the organization of the CEO/Foundry Summit. And interestingly, the entire thing was organized by the group, not by Foundry.

While we had talked about putting together a CEO meeting a few times I think we were concerned about “forcing” everyone to show up by decree of their major investor and wanted to be sure that it was an idea that people really supported. So when Charlie Wood (of Spanning) and I were having lunch in Austin a few months ago and he brought up the idea, I encouraged him to take the lead and use the group email list to coordinate.

The response was overwhelming and a few days after Charlie’s initial email, the date and basic outline had been planned. The agenda was crowdsourced to the group, each session was lead by a different CEO and everyone paid their own way. The results were pretty amazing. The level of conversation was extremely high and the ideas that were passed around the room super valuable. A couple of very specific company challenges were addressed (and I think solved or at least put on the right track) and we generated a number of topics that we wanted to go even deeper on the next time we’re together (with the thought perhaps of doing entire events around just a topic or two and letting those companies in the portfolio who are facing specific challenges around those topics attend along with some outside resources to help us all out). Perhaps most importantly CEOs and founders from across the portfolio (and across the country) got the chance to meet and spend some time together – often people who only knew each other by email.

Being connected to the Foundry family was an easy way in this case to bring people together, but I’d encourage all entrepreneurs reading this to consider pulling together a similar get-together (large or small) of their peer groups. We’ve done this a few times before (Jason put together a Digital Home summit and, along with Walter Knapp from our portfolio company Lijit, I organized a Digital Media Summit in Boulder – in both cases the attendees were both Foundry portfolio companies as well as many other companies from within the ecosystem). While there’s some work involved, the pay-off is enormous. On the more casual side of the equation but along the same general lines, when I was in San Francisco last week I brought together about 17 of our Bay Area CEO/Founders for dinner. No agenda in that case, but plenty of conversation and connection.

I think the main point is that by actively creating Community you end up with a peer group that can be really helpful to your company. And you can determine the qualification for membership to create the greatest impact for you and your business (“all businesses in our building”, “businesses with female CEOs”, “businesses working on partnerships with XYZ company”, etc.).

I’d encourage you to think about how to create that kind of peer group for you and your company.

June 5th, 2012     Categories: General Company, Startups     Tags: , ,

The Seed Signaling Problem That’s NOT Being Talked About

There’s been plenty of chatter over the past few years about the potential pitfalls for entrepreneurs taking seed money from VCs. This includes a recent and very thorough overview of the issues by Elad Gil which I’d highly recommend reading, even if you’re already familiar with the issues around seed financing (and in particular the so called “party round” where everyone takes a piece but no one takes the lead).

I’ve noticed something recently that’s a bit of the flip side of the same problem that everyone is talking about but that I haven’t seen mentioned yet. I’m seeing an increasing number of Series A pitches where a company has at least one venture investor in its seed, the business is very clearly doing well and where the entrepreneur is simply not pursuing their existing institutional investors for money (note: please give me a little credit here for knowing the difference between an entrepreneur not pursuing money from their existing investors and their being told by their investors that they’re not interested; I’m talking about cases where it’s either pretty clear that the business is seeing excellent traction or where we’ve actually been able to confirm that they’re trying to go around their existing investors).

You could call this the VC seed signaling problem.

A VC throws some money around into a bunch of different seed rounds assuming they’re buying optionality for their Series A. But by essentially ignoring these seed companies some investors are showing them that perhaps they’re not the value added VC that they claimed to be. I’ve heard a variation of this themea number of times in the past few months. Entrepreneurs completely disappointed with the lack of attention they’ve received from their seed investors and as a result choosing to either try to keep them out of their Series A rounds or minimize their participation (most have received pro-rata rights as part of their seed investment so sometimes this becomes a negotiation – again, clearly evidence that these entrepreneurs are indeed telling the truth on this subject as their seed investors try to negotiate for more participation in the Series A).

I find this pretty amusing. At Foundry we view seed investing the same way we view all of our investing – we believe that we’re in this business to add value to the entrepreneurs and companies we back regardless of the capital we have invested (great post from Brad here explaining this in more detail). Clearly that view is not held across our industry.

April 23rd, 2012     Categories: Fundraising, Startups, Venture Economics    

I’m getting sick of the bullshit

I love the start-up world. I love working with founders and young companies. I love the excitement of working on business ideas that are new and different. I love seeing the success that often comes from this hard work. I’ve never before in my professional life seen a time of such innovation and creativity. At Foundry we see more business plans now than we ever have. And what’s more, more of those business plans are really interesting (and fundable).

It goes without saying that I love the business of venture capital. I love helping entrepreneurs work on their ideas. And I love helping companies figure out how to become as successful as possible. I love the challenge of trying to figure out the next great investment and the energy that comes from working with amazing and creative people.

But I’m worried and I wanted to get it out there.

I’m worried that in all the hype, in all the “we launched our company” events, and “we changed our name again” parties, and “we redid our website – come celebrate!” shindigs, and the SXSW parties, and the hoodies, and everyone who is “killing it!”, that we’re losing sight a bit of the really hard work that is creating and building a business.

I’m worried that in offering term sheets after a single 60 minute meeting, and in pricing early stage deals like they were already late stage successes and most egregiously by constantly running around self promoting and self aggrandizing, VCs are falling prey to a cult of personality about themselves and forgetting that their jobs are to help companies be successful. And as far as I can tell, very few seem to believe what I hold as a fundamental tenet of the venture industry, which is that entrepreneurs come first, not VCs.

Don’t get me wrong. I enjoy a good party (not to mention a good hoodie!). And I recognize the reasons to celebrate important company milestones and in going to industry events like CES and SXSW. And in bringing a bunch of customers, prospects and partners together at a social event. But I feel like I’m hearing less of “did you see XYX company’s great new product” and more “are you going to so and so’s party at ad:tech:”. I’m not exaggerating when I tell you that I’ve received 30 invites to SXSW parties but not a single invite to a panel session at the conference. And when someone tells me that someone is “killing it” (a phrase I think I hear 10 times a day these days), more often than not they mean “doing the job they were hired for”.

I hear more and more stories about companies making a pitch to a VC and having an offer before they walk out of the room (entrepreneurs: do you really want to work with someone who puts so little thought into their investment process that they would do this?). And the way VCs talk about the companies they work with has clearly shifted to be substantially more VC centric (lots of use of “I” and taking credit for company success as something they themselves created rather than participated in or helped with). And, of course, much has been written about rising valuations and the potential risk this poses to particularly early stage companies. Not to mention the increasing popularity of the “party round” where many VCs participate but no one actually takes ownership (also not good for entrepreneurs, in my opinion).

And it feels like a lot of this is for external show. I’m cool; I run a shit hot start-up; I saw [insert big name technorati here] at our company party last night. I’m in such and such company with [long list of other investors] and doesn’t that make me awesome. I’m awesome I’m awesome – look at me!! And not really about building great products or great businesses.

So by all means, lets keep having fun. But let’s also remember that the goal is to build great companies. And please – my fellow venture capitalists – can we take it down a few notches and remember that our role is a supporting one. If you wanted to be the star you should have become an entrepreneur.

March 5th, 2012     Categories: Startups, Uncategorized, Venture Capital     Tags: , , ,

When is your start-up no longer a start-up?

A few days ago I received an email asking me if I had a “rule of thumb for determining when a start-up can no longer be considered a start-up”. The sender proposed a few potential answers but I thought this one might be a good one to put out there for feedback from readers. His suggestions were:

*Two consecutive  quarters of positive free cash flow?
*Drop pooled benefits company like Administaff for in-house benefits administration?
*Anything > C round, seeking to lever w/ mezz debt or file S-1?
*Name of company becomes a verb in our lexicon?
*Receive gov’t stimulus funding?
*Oprah uses your product?

For a long time I’ve asked entrepreneurs at what point their company no longer felt like it was a start-up. The answers were remarkably consistent, although I don’t think exactly answer the question in the way that was meant above. In any event, most founders tell me that around 30 employees is when their start-up companies start to feel like real businesses (or at least feel “different” – I think largely stemming from the fact that around 30 employees is the time when a CEO no longer really feels like the know all of the people that work for them). Of course depending on their funding and growth expectations this can happen at many points on a company’s growth curve and spending money (i.e., hiring employees” is not the mark of a business), so I feel that a better metric is probably the right one. Or more likely several better metrics.

Thoughts?

October 20th, 2010     Categories: Startups     Tags: ,