photo credit: Marco Bellucci

There are a few ‘best’ questions related to startups which pop up in our mind now and then. Questions such as - when is the best time to startup? Which sector is the best to startup in? Which is best - funding through revenues or investors? In this post we attempt to answer these questions precisely. The post is inspired by a very good article I came across recently.

The Best Time
Anytime is a good time to startup with a slight tilt towards starting up during a recession. And why is that? That is because if you survive turbulent times then you definitely learn how to manage a business given any other time or scenario. The tough times teach you. On the contrary if your startup has flourished because of the boom period then it will be difficult for you to sustain in times of drought.

What do GE, Disney, HP and Microsoft all have in common? They were all startups that took off the ground during steep declines in the U.S economy.

The Best Sector
If we take a close look at all companies today, we will find out most of the companies started as outliers (extreme deviation from what their original idea was) , and then with time grew in mass and had a bunch of companies following them to form a so called ‘best sector’. Was there an aircraft manufacturing sector before a Boeing? Not really. So the tip here is not to worry about the sector, just do your business where you have a sustainable competitive advantage in what you’re offering.

Investors
Always keep in mind that investors have different motivations from entrepreneurs. As an entrepreneur, you want to build a company over a long term and as an investor, you want to exit with a good value over the next 7 years (entrepreneurial investors are really rare to find).

Your first option should be getting your funding from customers (revenues i.e.) And if you need outside investors then keep in mind the time frame in which you have to generate real value and a ground-breaking idea that will get you an actual investment. And of course, shape your pitch according to different investors – be a good marketer.

photo credit: striatic

I will first start by explaining what a ‘Crocodile Salesman’ exactly means – a person who doesn’t listen, only talks (sells). Big mouth and no ears, they’re people who are always (mostly) talking. Perhaps they have the best product/service to offer, but only pitching without listening won’t do them any good.

Mark Suster explains the ‘Crocodile Salesman’ in three scenarios in his recent post. Here is a brief outline of what he had to say:

1.   When You are Selling

As a startup entrepreneur ‘selling’ starts coming to you naturally. Entrepreneurs are so engrossed in promoting their product/service that listening to others becomes practically impossible. Startup founders are in sales mode from the launch day.

A humble advice to all startup entrepreneurs here is to ‘listen’ and understand. Everyone understands you have something great to offer, but blatantly pitching without listening can be very harmful. Recognize a problem and offer a solution, don’t keep offering solutions to problems you don’t even know about. Crocodile sales are seldom productive. They just make you sound desperate.

2.   When Hiring Sales People

It’s the time when your startup decides to hire a sales person. Beware of the crocodile salesmen in such a scenario. How to identify them? A most common trait among these people is that they keep talking about themselves and their achievements for what may seem like ages. More than wanting to know about their role, they will be busy bragging about how good they are. The interview remains one sided – such people can’t encourage discussions. They may be really good but not apt for a sales position in a startup.

3.    When Pitching a VC

Raising money for your startup is definitely selling your idea. But also make sure you research your idea, build rapport and credibility and understand what the VC has to say. Avoid being a crocodile salesman.

I know because many entrepreneurs I spend time with I can tell are in their own brains when we’re meeting rather than trying to understand what my position is.

photo credit: billaday

The Wikipedia definition of a Term sheet – a bullet-point document outlining the material terms and conditions of a business agreement

It can be described as a non- binding document (like a Letter of Intent) which records two or more parties’ intentions to enter into a future agreement.

Venture Capitalists (VCs) backing out of a term sheet agreement for any reason can be very harmful to a company’s reputation.

If the VC has agreed on the conditions of a term sheet earlier, and then for some reason has backed out, then it’s not his fault. The term sheet by no means is legally binding upon any party involved in the contract.

VCs generally have valid reasons before they decide to back out from investing. Any void term sheet can be devastating for a startup company. If one VC backs out of an offer, then other ‘potential investors’ will look at a startup suspiciously and raising investment will become difficult.

Just remember – be diligent, don’t over promise and NEVER forget that a term sheet is not legally binding.

Read the following articles for a greater insight on the matter:
http://www.readwriteweb.com/start/2010/02/how-your-term-sheet-affects-yo.php
http://cdixon.org/2010/02/03/backing-out-of-a-term-sheet/

It was at Bessemer that I learned you never back out on a term sheet except in cases of fraud etc. I never saw them back out on one nor have I heard of them doing so

photo credit: lumaxart

Interviewing developers is much easier than interviewing marketers

But still, you do need a marketing team (and a good one of course) and above all you want to be fair in deciding whom to hire.

Questions/conditions for hiring developers are quite straightforward. They either know or they don’t – do they solve problems easily? Do they say the right things? Do they know what they’re doing? Selecting developers is more towards the objective side while hiring marketers is more subjective.

Here are a few tips for hiring that ‘dream marketing team’:

Active on Social Media
Does he have a decent amount of followers on Twitter? Can she get people to become a fan of your startup product/service on Facebook? Is she an active content writer or does he have a separate marketing blog? Yes, ask these questions and make sure they’re ‘virtually active’ before hiring them.

Modesty
A startup operates in an ever-changing environment. Product, expectations, definition of a customer changes almost everyday, and marketing strategies must be invented and reinvented frequently. You need someone who is modest enough to accept what he doesn’t know and be motivated to work on it.

Someone who is detail-oriented
A big NO to someone who thinks they know everything. Willingness to learn and attention to detail is a key characteristic of a marketer.

Analytics/Measurement
Measuring the effectiveness of a marketing effort at an early stage of a startup can be somewhat unreasonable. Don’t hire anyone who thinks like that. Make sure the person believes in measuring efforts (of any kind) and is willing to take responsibility of success or failure.

Mutual Respect with developers
Developers and marketers don’t get along too well – a belief (I disagree though) many have. Make sure that the developers have a sense of respect for what the marketer is doing and they like him/her.
 
For more detail on this topic visit OnStartups

photo credit: Jakob Montrasio

Considering the recent world scenario, we think of China either when Copenhagen Climatic issues come up or its recent tiff with Google regarding hacking and censorship. And rightly I believe. Keeping all the issues behind, China still recorded a magnificent growth recently.

An American Entrepreneur in China (Calvin Chin) wrote a guest post in TechCrunch about the startup Culture in China. He recently also attended the World Economic Summit in Davos (Switzerland).

Calvin Chin talks about how the Chinese Government has put stability on the top – with the goal of lifting millions of people out of poverty (and yes at the cost of freedom of information). He believes that in China emphasis is laid on stability which allows big decisions to be made quickly.  

Many tech startups in China know that the stability of the government is paramount for economic growth (despite the freedom to operate is limited). As soon as the government legislation changes, they don’t sit and whine but work towards doing the best they can in the existing framework. For example; when the government decides to censure microblogging sites, startups use the existing infrastructure to set up a microblogging site that screen Tweets. The lesson here is that as a startup founder – you don’t have the time to sit and cry over spilled beans but instead react to the situation by taking full advantage of what you have.

There are many lessons a startup can learn from startups operating in china. The article on TechCrunch provides a great insight to this matter.

The thing is while the majority of Chinese netizens really don’t care that much about what’s going on outside of China, the ones who do care, people who would start companies, people who want international news, all know workarounds to use services they like or read about sensitive topics from other perspectives

photo credit: Jeff Belmonte

A startup’s model/product usually undergoes a significant change from the point of founding to the point of funding. How the capital flows into a startup is very critical and quite difficult to manage.

Startups can either have too much capital, too little capital, or poorly applied capital – and execution of the startup model in presence of any condition mentioned above can be harmful to the business. Capital investment of a startup determines two crucial things; health of a startup and more importantly, the relationship between a startup and its investors. The concepts of capital discipline and slow capital provide a framework for managing this relationship.  

Capital Discipline – to raise and use capital wisely. Take a lean oriented & customer – focused approach. A minimum-product viable strategy will be ideal to get money and feedback from early adopters. Raise ‘just enough’ capital and try being independent from the time framework since sometimes it may takes years to achieve what your startup model actually aimed for.

Slow Capital – A sense of urgency is important for capital investment but don’t rush to conclusions. This point is particularly beneficial for investors as well-thought investment decisions are precisely what they’re looking for.

Start with small investments and grow with the company.

Capital should be poured into a startup depending on its stage of development.

Capital should be consistent, transparent and disciplined. This is the key for a startup to be successful and to get off on the right foot.

We suggest you read the article at GigaOM for more detail

And that requires a new sort of relationship between startup and investor, one in which the historic friction associated with bringing capital into a startup over time is reduced or eliminated.

photo credit: Pardesi*

A very common similarity that I have noticed in human behavior is that ‘we want to do something, but we don’t end up doing it’. I want to have a successful career but I disrupt my interview. I want to be thin but I over eat. I want to excel in my job role but I don’t complete my tasks for the day and so on.

How can the rationale behind this behavior be explained? Seth Godin in his recent post explained the phenomena – why is it so difficult to do what we say we want to do?

Answer: The Lizard Brain (Resistance)

Resistance – The voice at the back of our head telling us to go slow, not take risk, compromise and back off. This resistance grows further as we get closer to an insight – the truth of what we really want. Lizards (a physical part of your brain) hate change, achievement and risk.

An advice to entrepreneurs is to block the lizard brain. Be open to change and development, compromise, have meetings, fear critics, take risks and pacify the lizard.

The lizard brain is here to stay – it’s your job to figure out how to ignore it

The lizard is a physical part of your brain, the pre-historic lump near the brain stem that is responsible for fear and rage and reproductive drive. Why did the chicken cross the road? Because her lizard brain told her to.

photo credit: Naj ( Desired Hopes © )

The world was closely watching and everyone in the media was fanatical about the launch of Apple’s new touchscreen tablet technology – the iPad. The outstanding feature that impressed everyone was the price (just $499). A lot has been written about the iPad but what we are concerned about is its business applications (especially for startups).

Startup entrepreneurs need to be on the go – creating documents, spreadsheets and presentations and also taking their product pitches with them to every meeting, presentation or event they go. iPad will make all of this easier and convenient.  For example: When they meet people at events, they can take out their iPad and flip through the presentation then and there. And also for VC presentations or bland elevator pitches – an iPad is certainly a smart purchase for an entrepreneur.

The price plus the benefits – A definite win-win situation for all entrepreneurs

For more details visit: http://www.readwriteweb.com/start/2010/01/what-the-ipad-means-for-startu.php

Keynote, Pages and Numbers will all be available on the iPad when it goes on sale in a few months - and all at just $9.99 per app.
 

photo credit: Alex E. Proimos
 

All startups, at some point have to confront certain questions relating to their existence – about their current situation and the future. “Is our startup heading in the right direction? Will we reach where we wanted to, in the given time? Should we be acquired? Or shall we acquire and progress”? – Some of the dilemmas every startup has.

In several situations, mergers and acquisitions seem just ideal for a startup. But despite favorable conditions, many startups actually decide opting out of a merger or an acquisition decision. And the most common reason behind this is the ‘people issues’ involved in the process.

Mergers and acquisitions involve real people with emotions, egos and aspirations. Deals between companies (legal entities with a separate existence) are just on paper, in reality deals take place between people with emotions and feelings. For example: As a startup founder you are ready to be acquired by another company on a lucrative deal but the position they are offering you in the company is way below what you expect. In that case, you may decide against the acquisition. Your emotion and ego gets involved here.

The top four significant ‘people issues’ in mergers and acquisitions are:
• M&A culture issues
• Human capital Integration issues
• Lack of employee engagement
• Leadership/management retention issues

The discussions did not make much progress as there was no agreement on the pricing and more importantly on the roles and responsibilities of acquired company CEO in the new merged entity.

It is extremely important to understand ‘the people’ in a startup/company and tailoring the deal according to them rather than forcefully placing people in artificial positions and roles.

And yes, ‘people issues’ matter to the success of mergers and acquisitions.

For more information on the issue click here
 

photo credit: alice_c

The concept of lean startups is gaining prominence in today’s economic scenario. The term lean startup stems from the term ‘lean thinking’ which means spending money wisely by identifying differences between value-added activities and waste.

Many startup owners commit the blunder of spending extravagantly as soon as they receive some funding. An advice here; even if a startup gets all money in the world, it won’t help unless you have a product or revenue model.

Funding shouldn’t be mismanaged; there is an ‘implied contract’ of getting the company to an agreed level in the hope of increasing the value of the business. The stakeholders in an early venture should also benefit for their contribution.

So, waste less on luxury items and develop a practical approach for creating and managing a startup that excels in low-cost experimentation, rapid iteration, and true customer insight.For a detailed insight, visit:
http://www.readwriteweb.com/readwritestart/2010/01/when-your-funding-is-your-wors.php

"In early-stage companies, you will regret such spending when you hit the bumps in the road where you wish you had that cash. Inevitably, you will hit such bumps. Plan accordingly."

Make sure you have a revenue model since the beginning and remember – ‘money should only be spent if it provides return’.