Do More Faster

by Brad Feld

  I've found that to make the decision to focus on one area instead of expanding into several is a tough one. Like many decisions in early-stage companies, it comes down to part instinct and part assessment. Building an early-stage business requires many moments of scratching your head and then putting your head down again and executing only to lift it up again to see what has been accomplished. Defining an achievable and worthwhile goal (for example, being among the top five in keywords on Google) was helpful. Staying with that goal enabled us to persevere through the ups and downs and the inevitable wonderings of “Wouldn't life be easier if we did something else?”

  In the early stages, when Cooler Planet was about two years old, we could look back at how dumb we were at the beginning. It's amazing that we were still in business after a couple of years. But we were rewarded every time we decided not to switch markets and to stay focused on bootstrapping our business. We remained singularly focused on being the leader online in the solar market and we continued to think that we could achieve that goal!

  Andy and his partners at Cooler Planet threw away the same rabbits that Dick Costolo did when he was focusing on what matters. It's so easy to be distracted by a new market, a new potential customer, or a new competitor. Instead, by having a clear goal (“have all the feeds,” “be among the top five in all keywords for solar”) you can regularly determine if you've achieved a definitive leadership position. As an early-stage company, you should make sure you own your hill before you go try to conquer another one.

  Chapter 53

  Know Your Customer

  Bill Flagg

  Bill was the former co-owner and president of RegOnline, a company that provides online registration software. He currently invests in and owns several companies in the $5 million to $50 million range, including Survey Gizmo and SnapEngage. He has been a Techstars mentor since 2007.

  A real business boils down to one thing—serving people’s needs and getting paid for it in a way that you can operate profitably. The best way to do that is to know your customers.

  At RegOnline we constantly listened to what our customers needed and wanted. This process started with my business partner Attila, who built the first version of our software on the basis of what one of our early customers requested. Attila then turned to the next customer, and the next customer, and the next customer until we had 5,000 happy ones.

  Over time we began to expand our sales and marketing activities to be self-service, where our customer didn’t have to talk to a salesperson to sign up. We constantly looked for how we could make it easier for prospects to find what they wanted in our product by listening to what they asked the salespeople on the phones and then repeating that information in a simple way online.

  Getting inside my prospects’ and customers’ minds was one of the most valuable activities I did at RegOnline. Getting face to face at trade shows helped me learn and play back what customers wanted. Sitting in on our public online demos to hear the questions prospects asked helped me get in their heads and understand what they were thinking. We did usability testing to see where our prospects and customers would trip up and fall when trying to do business with us. We’d take all of this information and iterate like crazy on the stuff that confused people or simply didn’t work the way they expected. Our ultimate goal was to create a completely frictionless experience for our customers, resulting in a situation in which it was easy for them to fall in love with our service and with us.

  We wanted our customers to know that we respected the idea that we were in business to serve them and that we didn’t expect to get paid if we didn’t do it correctly. We decided to put a message on our invoice that said, “If you are not completely satisfied with your service, mark down this bill as you feel it is appropriate and tell us where we can improve.”

  Ford Motor’s Bill Ford shares ideas on knowing the future mobility of customers.

  There are so many distractions that we faced as entrepreneurs— building cool technology, getting funding, hiring the right people, renting office space, creating partnerships, and dealing with acquirers—that it’s easy to lose sight of the reason we are in business. Make sure you stay focused and listen to what people need and help them get it. Then do that again, and again, and again.

  Chapter 54

  Beware the Big Companies

  Michael Zeisser

  Michael was senior vice president of Liberty Media Corporation and has been a Techstars mentor since 2008. He served as Chairman, U.S. Investments, for Alibaba Group from October 2013 to 2018, and since June 2018 has been chairman of XO Group Inc.

  Entrepreneurs at Techstars often ask how big companies can help startups. An endorsement from a big company in the form of a distribution agreement or a partnership can be hugely valuable. Big companies can bring money, access to customers, and reputational benefits to your company as long as the big company doesn’t accidentally kill you in the process.

  I have witnessed startups overinvesting in developing a relationship with a big company. They poured too much time and attention into developing a deal, and although the deal ultimately materialized, its benefit fell far short of expectations. In discussions with big companies, it is very easy for entrepreneurs to develop “happy ears,” the tendency to hear what one wants to hear while overlooking the signals that suggest otherwise. My advice for startups is to be merciless in dealing with big companies. Yes, they can be your friends, but they can also destroy you.

  The problem is that the risk is completely imbalanced. Whether something happens will typically not make a huge difference for the big company, whereas it could be a matter of life and death for the startup. While there is no fail-safe way to protect yourself, there are a few key pitfalls to avoid.

  First, find the real decision maker. Although they don’t like to admit it, most people in big companies have very little authority to make decisions. For someone to succeed in a big company, conforming is usually more important than achieving results, so big company people will rarely tell you an inconvenient truth and almost never say no. If you are not getting straight answers, you are not talking to a decision maker and the big company is likely telling you “no” in its own language.

  Next, realize that you cannot create the need. Entrepreneurs are by nature evangelists—they think they can change the world. Believing that you only need one more meeting or one more phone call to convince the big company that it needs to do business with you is understandable, but it is a huge mistake. You will end up spending much too much time trying to build a relationship that will be futile 99.9% of the time. Don’t fool yourself.

  Finally, fail fast. The biggest mistake startups make when dealing with a big company is to be blinded by whatever shiny brass ring they are pursuing and to fail to consider the opportunity cost associated with not pursuing alternatives. Opportunity cost can kill a startup. When dealing with a big company, you should have a vigilant discipline to align invested efforts and expected outcomes. When these two factors get out of alignment, the startup is taking on too great of a risk. Yes, occasionally there are Hail Mary passes, but relying on them is no way to build a company.

  Many startups have benefited from using the shoulders of giants as a springboard for growth. But risks and incentives are usually not aligned between startups and big companies. The startup should approach opportunities in a spirit of partnership but never let happy ears get in the way of facing the music.

  Virtually all large companies have people with titles like “Vice President of Corporate Development” or “Senior Vice President of Business Development.” In many cases, the actual role is “Vice President of Not Corporate Development” or “Senior Vice President of Keeping Entrepreneurs Away from the People in BigCo Who Actually Get Things Done.” These people are often fun to hang out with, charming, and will fill you full of hope and excitement—but they rarely can get something done with a startup unless someone on the product or sales side of BigCo demands it. As Michael says, bewar
e.

  Chapter 55

  Throw Things Away

  Eric Marcoullier

  Eric was the cofounder and CEO of OneTrueFan. He previously cofounded Gnip and was the cofounder and CEO of MyBlogLog, which was acquired by Yahoo! in 2007. He has been a Techstars mentor since 2007.

  In late September of 2009, I met with Gnip board member and lead investor Brad Feld. It had been a few weeks since we’d spoken face to face and the meeting quickly turned into a litany of reasons why I was stressed about the company. I felt like we were headed for insolvency in 12 months and I was powerless to fix it. When Brad mentioned that I sounded pretty unhappy, I threw caution to the wind and told him just how miserable I was. And suddenly, I found myself resigning as CEO.

  I had not begun the meeting with that intention, but as I spelled out the sense of inertia that had taken over Gnip, it seemed like the logical decision. We had tried multiple times to expand on the core tech platform, and every time, it appeared that we weren’t making progress. I felt like we had more drama than companies many times our size. And I was bored out of my mind with what I was doing on a daily basis. During the meeting with Brad, I spontaneously decided it was time for me to go.

  Brad and I discussed the repercussions of leaving and they all sounded better to me than crash landing a company for the next 12 months. We parted that day with the understanding that I would take 36 hours and reconsider my decision. Afterward, we would get back together and sort out next steps for Gnip.

  That night I went home and told my wife I was leaving the company. I started reaching out to friends who might help me find some consulting work to ease the sudden loss of income. I reached out to several other friends to inquire about startup ideas that had been rolling around in their heads. I was leaving Gnip.

  But an interesting thing happened the next day. When compared to that most drastic step a founder can take, Gnip’s problems suddenly seemed very small. An inflexible technology stack hamstrung us? Burn it to the ground and start over. The handpicked team that kept building variations of the tech stack? They could be let go. Our existing customer base? The recurring monthly revenue, while not inconsequential, didn’t come close to achieving break-even. We could nuke that, too. The product vice president I had hired was awesome, but he was essentially filling a role that I desperately wanted and needed to fill. He could be let go, too.

  I called Brad and hashed it out with him. Then I called Gnip’s other investors and talked them through what I was thinking. An exchange with First Round Capital’s Rob Hayes summed up the go-forward plan:

  Rob: So, do you know whether there’s a business here?

  Me: We still don’t have a clue, but I know that we can find out a hell of a lot faster if we make these changes.

  Four days later I met with the team and laid off 7 of Gnip’s 12 employees. I sat down with the remaining team members and we started from scratch. We were going after solving the same problem, but with a completely new approach. Within six weeks, we built more new features than in the previous six months. At the three-month mark we were signing new customers and hiring additional team members. Things were back on track.

  Each decision made in a startup creates indelible history that colors all future actions. In the best of times, it creates a corporate culture that enables flexibility. In the worst of times, it creates handcuffs that keep a company from responding to the daily lessons that a startup learns. It’s easy to feel trapped by these handcuffs but if you change your perspective just a little, you might find that your hands are bound by nothing more than air, and the future is yours to create.

  About six months later, Brad and Eric had another meeting. This time Gnip was in a much better place, but Eric was once again unhappy. Unlike the last time, it had nothing to do with where Gnip was at. Rather, it had to do with the type of business Gnip was.

  Gnip provides web infrastructure to help aggregate social media. This is a highly technical problem, and as a result Gnip is akin to a plumbing business because they provide software wiring and data communication between other web services. Gnip’s customers were web services—both consumer and business oriented—that needed to deal with social data.

  Here’s one thing we haven’t thrown away: our very first Demo Day program.

  On the other hand, Eric had realized he was most happy in a consumer-facing Internet business. He was bored interacting with Gnip’s customers and wanted instead to be interacting with the end users that Gnip’s customers were working with. But, in the context of the business that was Gnip, this wasn’t possible.

  Fortunately, Eric had a strong technical cofounder who also had solid management experience. While Eric’s partner, Jud Valeski, hadn’t been a CEO before, most of the Gnip team was engineering focused and already reporting to Jud. After several days of thoughtful discussion, Eric decided to leave Gnip, and handed the reins to Jud.

  Under Jud’s leadership, Gnip continued to grow nicely. Their product relevance and market timing were excellent and they solved a complex problem for their customers extremely well. They were acquired by Twitter.

  Eric is good friends with Brad, Jud, and his other investors and he keeps showing up at Techstars and encouraging people to not be afraid to throw things away.

  Eric’s decision to “quit” reminds us of a well-known story about Intel’s Gordon Moore and Andy Grove. Their legacy product, the DRAM chip, was pirated by Asian companies within months of a launch, with a much lower price point. Intel would continually improve the chip, innovate, and lose market share and revenues. Finally, Andy Grove walked into Gordon Moore’s office and asked, “What would a new management team do, if they came in here and took our jobs?” and Moore responded, “Get the hell out of the DRAM business!” to which Grove said, “Well, let’s go out the revolving door and come back in and do it ourselves.”

  It’s a useful thought experiment for the startup entrepreneur: What would happen if you quit? What would happen if you changed your idea, or changed your product?

  Chapter 56

  Pivot

  Rob Hayes

  Rob is a partner at First Round Capital and has been a Techstars mentor since 2008.

  The one thing that the hundreds of founders I meet each year have in common is that their plan is wrong. Sometimes it’s the big things, sometimes it’s the little things, but the plan is always wrong. Founders who can pivot to a new idea given what they learn will survive their plan being wrong, whereas those who believe that all signs pointing to trouble are wrong are not going to survive.

  My favorite example of a great pivot is from a company originally called Riya. This company had developed leading-edge facial recognition technology at the same time that tagged photo sites like Flickr were becoming dominant. With Riya, you could point to someone’s face in several pictures and tell the service who that person was. Riya would then find all instances of that person in all your photos and tag them with the appropriate person’s name.

  It turns out that the service worked fine, but there was not as much user uptake as the company wanted. It was unclear whether there was a large, thriving business that could be built around this technology.

  That did not deter the founder, Munjal Shah. He pivoted quickly and repurposed the technology toward a concept called “visual shopping” and rebranded the company as Like.com. It turns out that while hard goods like consumer electronics generally have enough metadata around them to easily index for search (model numbers, brand names), most soft goods are much tougher to index (“a rug with blue flowers on it”). Riya (now Like.com)’s technology could be used to solve this problem. Like.com allowed users to search for things that look like other things; users could even upload pictures of things they want to search for and Like.com would find similar items.

  Munjal pivoted perfectly and since this pivot, the company has been doing very well.1 His lessons are those that every founder should follow—start with a solid plan, but always listen to your customers, employees, adv
isors, and your gut. When the signals suggest that the path you are on is not going to take you where you want to go, it is time to pivot.

  So how do you pivot? Always be ready. Listen to your customers—they will tell you what they want. And when the time comes, pivot clearly and decisively. Understand what can be reused, what needs to be thrown away, and what else has to be built. Ensure that your team understands the pivot and is on board. Manage your cash and make sure your business partners, including your board, understand what you are doing and are supportive. Finally, assess whether you have the right skill sets for the new direction.

  Every decision in the earliest days of your company is big. You are choosing north from south, but that cannot stop you from moving forward. Make decisions, always be assessing your situation, and expect to pivot as you find your way for your company.

  Note

  1Google acquired Like.com in 2010.

  Theme Five: Fundraising

  Most companies come to Techstars with a goal of raising money. One of the first things we do is make them take a step back and ask themselves, “Do I need to raise money?” We’re quite emphatic that the answer can be “No,” and that often the best answer is “No.” Many great entrepreneurs are bootstrappers to the core, and huge companies have been created with little or no outside investment. In every Techstars class to date, there has been at least one company that bootstrapped its way to success, such as J-Squared in 2007 and Occipital in 2008.