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Tuesday, October 14, 2014

Be The Last Mover Says Peter Thiel

Peter Thiel might not need an introduction being the founder of PayPal, an early investor in Facebook and one of the most successful people in the Sillicon Valley. In a recent talk at Stanford University, Peter gives some very interesting thought provoking ideas. I highly recommend watching the full session in the video linked here.

The main theme of the session provocatly named "Competition is for Losers" is that there is a very big difference between creating huge value and capitalizing on the value that you create. Almost every company that was good at capitalizing on its innovation became a monopoly according to Thiel. These companies were the last mover and not the first mover.

I liked Thiel's analysis about the value of the revenue streams starting 10 years from now. The only way to ensure your company will be in business that long is to prevent other companies from moving in. Thiel lists a few ways to build that barrier the most important one today is network effects which is why so many companies focus on various types of people networks (social networks, messaging, shared economies, ...).

Sunday, October 12, 2014

Getting Employees to Work Long Hours

In most startups I worked for one of the topics that captured the founding team's attention was the number of hours worked by employees. I'm saying founding team rather than management team on purpose here. I haven't seen management teams regard work hours as something that should be optimized.

Why founders want everyone to work long hours

I guess there are a few reasons why founders care about this topic more. One reason is that by nature founders are very hard workers. You don't start a high risk company because you want to increase work life balance. You do it because you realize that you enjoy working 14 hours a day and so you would be better off working for yourself. Another reason is that the impact of putting extra hours is much more significant in smaller companies that are normally highly focused and are constantly chasing unrealistic deadlines. Finally, founders are building the company culture in the first 1-3 years of the company and long hours are helping with creating a culture of hard work, and making the company into a central part of the employee life.

Management teams in bigger companies don't optimize for hours

There are some pretty good reasons not to optimize for work hours. Its rare to see management teams in bigger companies obsess over this topic as long hours lead to burnout, disguised unemployment and reduce the focus on results.

Getting employees to work longer

So the bottom line is there are reasons for and against optimizing for hours. If you are interested in getting more hours from your employees you might find these tips useful:

1) Come to the office later and stay later
Most of the people in your team will feel uncomfortable leaving the office before you and are likely to leave shortly after you. This means you get will get more hours from your employees if you work more but you actually don't have to show up that early to get the same impact. Most people get up and go to work shortly after that. They would also not risk showing up late if you sometimes show up early in the morning.

2) Be accessible when not at work
Quickly answer your employee calls, texts and emails 24/7. There is nothing more demotivating than having a question and realizing your boss doesnt care enough to answer.

3) Pay for extra hours
Assuming you motivation for getting more hours is not free labor its redicilous to expect your employees to work over the weekend to meet a deadline if you are not willing to pay them for their time. In Israel it is also required by law and most startup companies gather a liability by ignoring the law and signing their employees on a waiver that is not legally viable.

4) Offer on site parks to the ones who stay late
At one company I worked for employees were encouraged to order in free dinners when staying over 8pm (we eat dinner late in Israel). Some companies have an on site gym that opens up only after 7pm. The parks might vary based on your employee's needs. The basic idea is to figure out what is it that requires people to go home by a certain time and try to offer that on site so they can stay longer and sometimes after.

Sunday, February 2, 2014

Are We Running Fast Enough?

It is common for entrepreneurs to ask themselves: "Are we running fast enough?". It seems like other companies are moving forward and making progress. New competitors start popping and the media seems to be covering anything but your startups.

Of course all startups need to move fast. Each founder or early employee should step on the throttle and never let go but is it really the time hire 20 people yet? How do you know?

I like to use the metaphor of a road vs. a maze. Startups start in a maze and until they can figure out how to get out of the maze quickly, they can't and shouldn't run very fast. This should usually be your high level plan:
  • Step 1 - Burn as little cash as you can while you figure out the path out of the maze
  • Step 2 - Raise enough funding to get out of the maze (probably 2x more than you think)
  • Step 3 - Run fast
During Step 1, you need to be patient. It might seem like things would go faster if you have 7 people instead of 5. I say it's not really that much faster anyway. Any VC backed company can put more resources and run faster even if you have 7 people. At the same time, if your path to glory suddenly gets blocked by facebook moving into your space you would really wish you had 5 people in there so you have more time and cash to pivot and find another opportunity to pursue.

The reality for startups is that they can't outrun the big guys on the road. They need to find the mazes and win by outsmarting, being nimble, agile and lean.

If you are not sure if you are already on the road or still in a maze, you can use the "Product Manager Test" to know for sure. Try to imagine a product manager in a big company trying to pitch your idea to his CEO. If you are on the road, a good product manager should be able to pitch it - "here is the customer, here is the revenue projection, here is the business". Most startups however are still in the maze. there are too many unknowns, monetization model is unclear and no one can explain how to get distribution. In that situation, a product manager will not put his career on the line and no CEO will raise that in a board meeting. Only entrepreneurs are crazy enough to do it. 

Wednesday, January 15, 2014

David S. Rose - PItching to VCs is about selling YOU

Great talk by David S. Rose about pitching to VCs. The most important thing you are selling is YOU. That's kind of obvious but David goes into details about what qualities of yourself should be sold and how can you sell them.

I used some of the concepts in our last round. One of them was to maintain eye contact at all times. I didn't used a clicker exactly. It was an app on my iPhone called Keynote Remote that allows you to control Keynote slides on your iPad. The end result is quite impressive.

Tuesday, June 25, 2013

How I closed a round with 7 Investors: – Here’s why an Angel round is nothing like a VC round

When I started SOOMLA (, The In-App Purchase Store Solution, I thought fundraising would not be that difficult. In 2008, the first company I co-founded, EyeView (, raised a round from 2 Venture Capital (VC) firms when we were very green. This time around, it will be much easier I said to myself. I'm much more experienced, have put together a strong team, validated the heck out of our business model and have good relationships with most VCs in Abba Even Avenue (that's the Israeli version of Sand Hill Road for those not familiar with the Silicon Wadi).

I couldn't be more wrong.

Funding is never easy. Even when you hear stories about entrepreneurs who walk out of a VC with a personal check from the managing director, it is usually after 6 months of pitching and hearing 'no'. Moreover, the world has changed and raising VC money in 2012 in Israel has become harder. I soon realized that I had to restructure if I wanted to raise funding for SOOMLA.

Finding Angels
The first difference (challenge?) one notices right away is that while VCs are highly visible, Angel investors mostly fly under the radar. The reason is simple: in addition to being angel investors, they usually have a different day job (e.g. the CEO of some other company or an entrepreneur who sold their previous start-up). One of my investors doesn't even have a Linkedin profile. The truth is that anyone Executive in a big company can be an Angel, even if they don't know it yet.

I discovered potential investors in a few odd situations: interviewing for a job, swimming at the pool and taking my daughter to pre-school. In other situations, a VC referred me to an angel when I realized that I already met him before I knew he was an angel.

Connecting with Angels
Once I found Angels, I assumed it would be the usual investment pitch drill, but I was wrong. I went to one meeting, told the Angel that I want him to invest in my startup (he recently sold his company to eBay) and he completely shut down. The guy has the money and he is better off investing it for tax reasons so what went wrong?

Wooing private investors is very different from wooing VCs. Most angels you will pitch too are highly accomplished people that have a passion for building stuff and love to help. But they don't want to be thought of as a proxy for their money. When reaching out to Angels, it’s important to respect what they have accomplished. To make the Angels feel like they are part of the evolution of the company’s story (better yet, actually make them part of the story) and allow them to help with introductions.

As an example, I approached an accomplished entrepreneur as a potential advisor in SOOMLA. After he gave me some great tips I discovered he is also an early stage investor and he became our first investor.

Presentations for Angels
As you can imagine, the presentation one shows Angels is different from the presentation one would show to a VC. In my presentation, I told one Angel that we needed $250K to build a Proof of Concept (POC), and that later on, we are planning on raising $10M in 3 VC rounds. That was not a good idea. First, the likelihood for any startup to raise $10M from VCs is1%-3%. Second, and more important from the Angels perspective, if we were successful in raising 3 VC rounds later on, the result for the angel would have been a diluted position with no way to defend it.

It's not just the slides that need to be different for angels. The entire business plan needs to be leaner when pitching to Angels. As a result, we created a much leaner plan, focusing on the one thing that our customers were willing to pay for and showed how we can be breakeven in 10 months with no additional investment. Our PowerPoint presentation had no bullshit market forecast slides or barriers to entry analyses. Instead, it was focused on how to get revenue and be profitable. The examples we used were of companies that raised little and sold quickly in the sub $50M range.

I’m not going to include the slides I used. They are below average on any standard and most of the investors didn’t even see them. I can, however, refer you to the slides that Joel and Leo from buffer uploaded and stress out their most important point that you need to focus 100% on traction before you even think about raising money.

Starting to Close
Everything we learned brought us to a situation where we were able to generate a lot of interest and it was time to start closing. VCs normally initiate the closing move by giving a term sheet. With Angels, however, you have to make the first move. The right moment to start is when you have a weighted pipeline estimation that exceeds the minimal amount of the round. A weighted pipeline is a tools from B2B sales where you list all your opportunities and assign a probability to each one of those. Multiply the probability by the expected investment to figure the angel weighted contribution and sum all the contribution to get the weighted pipeline net. An important tip with regards to that is take off 20% from whatever probability you initially assigned.

Weighted Amount
Investor 1
Investor 2
Investor 3
Investor 4
Investor 5
Investor 6
Investor 7
Investor 8
Investor 9
Investor 10

Don't Stop Meeting until the Money is in the Bank
As soon as I reached that point I started discussing the terms with the angel who had the most potential of leading the round. While that investor wanted to lead, he wasn’t he didn’t know the industry well enough to make quick decisions about the investment. Without a leader, I was trying to close a round with 5 different angels at the same time. Each of them making different demands. Moreover, I had a risk that the entire thing will fall apart so I was doing that while taking more meetings with new Angels to generate a backup plan and keep the closing pressure. , which ended up being the winning tactic. One of these new angels liked what he saw and suggested leading the round. Once I had a lead investor on board, the remaining negotiations moved faster and the round closed pretty quickly. Ultimately, I lost that first investor, but it was a small price to pay. In retrospect, I'm not sure we would have gotten the lead investor without the first one. 

The importance of Angel investors in the investment eco-system is only increasing, which is why I want others to benefit from our hard learned lessons.

Friday, May 10, 2013

Launch is Dead (For Lean Startups)

Are you launched? Have you launch yet? When are you launching?
These are questions you hear quite a lot in an early stage startup. To be honest, the thought about doing a big launch like Steve Jobs, dramitcally unvailing our great product to the public and listen to the crowd cheering.

Ok, back to reality. The fact is that I'm always struggling with these questions. SOOMLA, my current company is doing a platform for mobile game developers - allowing them to add In-App Purchase Stores to their games. We are big advocates of 'Lean Startup' and so we had quite a few launch related events in chronological order:
  • Sep 2012 - Released our first 'thing' - an open source project for IAP in Android
  • Oct 2012 - A similar open source project for iOS
  • Oct 2012 - We participated in a Startup competition that is often considered a launch pad. We also received some coverage in TechCrunch
  • Nov 2012 - Our Cocos2d-x Plugin was completed and we received coverage in the official Cocos2d-x website 
  • Dec 2012 - Released an early version of our premium product (on top of the open source framework)
  • Jan 2013 - Launched a plugin for the leading 3d engine, Unity
  • Mar 2013 - Our premium product reached a level where the value outweighs the problems. Also started, charging money for it
  • May 2013 - Releasing a new version of our Dashboard - giving mobile game developers the ability to edit the stores on all devices in real time without a need for an update.
As you can see, the right answer for "when are you launching" would be "all the time". In a world where everyone is talking about lean startup, continuos deployment and failing fast, you can safely say that Launch is Dead. It might be still alive for hardware startups that have huge upfront investments and need to create a big hype to push inventory out. 'Launch' might also still be a valid event for big companies who can summon a press conference and get a lot of buzz going with little effort. For statup, however, the concept of launch is a pointless pursuit. Here are a few reasons for this.

First, as a startup, you want to launch as early as possible with a half baked product to guage the demand and test many other assumptions. Like in the case of SOOMLA, this means that there is no spceific launch date but rather a series of small iterations. 

Second, most startups get very little impact from the press they receive while launching. For B2B companies, there is an obvious mismatch in the target audiences but even for B2C companies, the small audience that will be willing to test the product is the early adapters that happen to belong in the niche target market that you are targeting (yes, you have a bigger vision but you are starting by targeting a niche) when you are crossing that with the audience of the publications the number you get is not very high. When we got covered by the press, the result was always a spike of traffic resulting in low conversion rates and after a few days we were back with our average number of visits. 

Third, the effort or cost for getting the press to notice you is quite big due to the amount of companies starting up every month. Reporters are constantly flooded with new companies and getting noticed requires a great deal of effort that you can't afford more than once or twice so it's hardly a strategy. 

So how are we getting noticed? For us, the answer is content marketing. Being able to produce valuable content in topics that interest your target audience is a great way to get your brand out there. Hubspot Walkme and Flurry are great examples of doing it right. There are so many ways you can leverage good content to get traction. I'll cover that in a different post.

Tuesday, March 26, 2013

Can iPad Replace My Laptop

That's it. My laptop is about 4 years old. It is a Lenovo U350 with an Intel Centrino. Used to be a decent machine when it was bought but feels really outdated now. About a year ago I gave it some new life by installing a brand new 8 cell battery, deleting and formatting the hard drive. It did wonders and lasted about 8 months before becoming too slow again.

So now it's time to get a new laptop and I'm playing around with an idea to use an iPad as my only carried computing device. My day to day tasks include:
- Blogging: Researching topics online, Writing, Editing and Moderating
- Product: Web applications, Illustrations
- Fundraising Materials: Making Slides, Image Editing, Illustrations
- SEO and Website: HTML editing, file uploading, Analytics
- Business Communications: emails, Notes, Calendar, Contacts

There are a few obvious advantages. The iPad is lighter, it makes better impression in presentations and meetings, it's has better battery life and it's quicker to wake up. Adding to that two important components: a Logitech keyboard and 4G connectivity results in an ability to work from almost anywhere without having to worry about carrying a big laptop and searching for WiFi.

I started on the blogging side. So far, it is a lot nicer with this setup. I didn't have to change much of the services I'm using with the exception of Typepad but It was time to move away to a newer blogging platform anyway (currently using Blogger and Tumblr).

I'm expecting that the other tasks will require a bit more flexibility and maybe a few paid apps. However, taking into account that a laptop would have cost a lot more, it's would still be a good investment.