Web X.0

Exit strategies

Hey - back to blogging...

In nearly all the business plans I review for Tevel (the non-profit angel club I volunteer at), the last section outlines the company's "exit strategy". I was wondering if that's some sort of requirement in writing business plans for investors? I don't remember ever writing anything like this in any of my biz plans.

As I wrote a while back, I think it's alarming when a company that has not even been funded yet is talking (or even thinking!) about exit strategies. In my book, a startup can only have a single strategy and that's about how to grow it's business. If "exit" is your strategy, it is almost guaranteed that you're building for something small that will be easily swallowed (or worse - crushed) by the acquirers you're aiming for. That's a terrible strategy (unless your plan is to get hired to a company via an acquisition), and not one I ever want to invest in.

I've learned that exits have 2 inherit properties:

1. They hardly ever present themselves the way or at the time you'd expect in advance.
2. Real exit opportunities emerge only when you're focusing on building a great business, not on exiting.

So my advice to entrepreneurs (especially those applying for Tevel) - drop the silly nonsense 'exit strategy' section from your biz plan, and focus on the 'company strategy' instead...

{image CC by tracer.ca. Thanks!}

Rating VC answers, part II

Fred Wilson just posted about saying "No" to entrepreneurs. Reminded me of a post I wrote a while back rating VC answers from the entrepreneur's perspective.

As difficult as it is to have someone not share your excitement with your venture, getting a clear 'No' is one of the best outcomes of a VC meeting because it lets you move on quickly.

I'm looking forward to getting many clear "No's" in the near future!... ;-)

10 tips for greening your startup

Danny Cohen from Gemini started a great thread titled "All Startups should be Green" (disclosure: Gemini is an investor in my company, outbrain). I couldn't agree more (OK - I already confessed to being a tree hugger in the past...).

I thought the best way to promote this idea, is by listing 10 super-practical tips for things you can do in your startup and help the planet be a little better off:

1. Print double-sided: It never stops to amaze me how 99% of the office print-outs are done on a single-side of paper. You can easily save 50% of the paper consumption by simply checking the "print duplex" option in your printer settings (most office printers support this feature).
   The only documents that should be printed single-sided are: documents you need to feed into a fax or a copier, and final versions of legal documents (those will eventually end up in copiers down the road).
   
   
2. Don't do tchochkes[1] - This one is particularly annoying to me, because it's a classic lose-lose-lose situation. It's beyond me why any company wastes money on crap that no one even wants (who the hell uses a mouse pad?!?!), that reflects badly on your brand, and that absolutely sucks for the environment??[2]
   
   
3. Install a water filter - Bottled water is evil evil evil. There is not a single reason in the world to drink bottled water in an office environment. Instead, install a simple filter in the kitchen sink, and use that. You (or your employees) will also save a ton of money.
   
   
4. Print locally - I confess to making this stupid mistake many times in the past. If you're going to exhibit in a big conference, you're probably preparing a ton (literally) of marketing materials. The most obvious way to do this is - print everything with the printer closest to your office, and then FedEx it to the conference.
   But it turns out that boxes of paper are probably the most wasteful thing that you can stick on a plane. So instead, spend 10 minutes online and find a print shop that will take your PDF and run the print job locally (where "locally" means where you're going to use the materials, not where your office is located...). Again - you'll not only help save the planet, but also save big $$'s...
   This tip is especially true for companies in Israel...
   
   
5. ...or even better - don't print! - Even better than points #1 and #4 above is - don't print at all! PDF's are so much more friendly to the environment...
   
   
6. If you ship physical products, don't package them with crap - Packaging materials, especially most of the foams and polystyrene (Kalkar for our Hebrew-speaking readers) are the worst offenders to the environment as they use up a lot of volume, and never break down.
   
   
7. Embed green in your products - The best example I've seen recently is Google Maps. When you print a Google Map, this little message shows up on the paper... excellent! --->
8. Reduce junk mail - I use a service called GreenDimes, and I highly recommend it (though I think it's US-only for now).
   
   
9. Switch to CFL's - This is a real no-brainer... switch your office lighting to CFL's (compact fluorescent light bulbs), and you will not only help the planet, but also save $$'s on your electric bills.
   
   
10. Plant a tree - we sometimes get so obsessed with hybrids and recycling and forget the simple things. If you have a patio or a campus that allows for it - plant an occasional tree.
    

Have a good practical tip? List it in the comments below.

Also, if you found this useful, why not digg it and help spread the word?

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[1] I guess that 'promotional crap' is the best definition I can think of...

[2] I can guarantee you that the stupid stress balls you got for 2c-per-unit (logo slapping included) were not manufactured with sustainability as the top priority...

Waiting for the duck

What a wonderful quote[1].

Last week I was chatting with two old friends, each with a great product idea, and each one too afraid to go at it. Entrepreneurship is not about coming up with the-next-big-thing-idea... it's about jumping into the cold water and making it happen.

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[1] I borrowed this slide from Garr Reynolds' absolutely excellent Presentation Zen blog, who borrowed the quote from a Guy Kawasaki interview. I hope it's OK to post it here... in Hebrew we say "Hagonev Mi Ganav Patur".
 

Featuritis

From Wikipedia:

Featuritis is a term used to describe software which over-emphasizes new features to the detriment of other design goals, such as simplicity, compactness, stability, or bug reduction.

Featuritis is often accompanied by the mistaken belief that "one small feature" will add zero incremental cost to a project, where cost can be money, time, effort, or energy.

I recently met an entrepreneur who has been developing a web-based service for over a year, and was having trouble getting traction for it. He asked for my advice on how to improve his product so that users start flocking to it.

Two minutes into the demo, it was crystal clear what his trouble was - it was a classic case of Acute Featuritis. He was proudly showing off how his product did this, that, and the other 12 things, way more than any of his competitors ever dreamed of doing. He was shocked speechless when I told him I thought that the best cure for his product is to kill 99% of it and focus obsessively on that single aspect or feature that makes his product unique. That is the last thing in the world he expected to hear from me, and he seemed to be very disappointed with our meeting.

These are the common misconceptions about features, as they relate specifically to startups:

• "More features will impress prospective clients" - wrong! More features will create many more opportunities to disappoint and confuse clients.
• "My product has more features than my competition" - uh-oh! You are handing your competitors the biggest gift they could ever ask for - the ability to specialize more than you and do one thing really really great.
• "By having more features, I'm appealing to more potential users" - wrong again! By having more features, your product becomes less appealing to your best potential users, and probably not appealing enough to all the others you happen to address along the way.

The urge to add more features and appeal to a bigger audience always exists. But as an entrepreneur that's an urge that has to be fought daily. The best question to ask is: "What features can I afford to kill today?"

I find that the best way to think about it is this: If our users love the few things we do now, we can always add more features later; And if our tiny niche audience loves what we do now, we can always try to appeal to a broader audience later. Think about the alternative to this approach: "if lots of people don't really get all the stuff we're trying to do now, can we improve our focus later?....".

I think you know my answer...

outbrain, funding, bubbles, etc

This morning we announced the closing of our seed financing by LGiLab (www.lgilab.com),  GlenRock Israel (www.grg.co.il), and Sigma PCM (www.sigma-pcm.co.il) among others. We wrote about this on the corp blog, and more coverage is on Mashable, TheMarker (Hebrew only), alarm:clock, Ouriel's blog and StartupIsrael.

One of the reporters talking to me this week asked/hinted at outbrain being a bubble company founded with the intention to flip it to a Yahoo or Google in a few months. As I'm allergic to that notion of 'build-to-flip', I thought I'd share some highlights of my email response here:

I know this probably sounds to you like a Bubble2.0 thing, but -
My track record has been in building a long-term, sustainable, revenue-generating and independent company. That is the *ONLY* model I am aware of for building a company. I don't think there is such a thing at all to 'build a company in order to sell it'. The companies that are sold (or - flipped) are the very few that happened to luck out. Statistically I think you probably have better chances of beating a Vegas casino than you would in selling a company that was built to flip (and Vegas is much more fun than the blood, sweat & tears of entrepreneurship!!... ;-)

I think it's foolish to start a company without a clear path to making $$. Given my experience in building one of the only contextual ad networks in the world that's successfully competing with Google AdSense, I (and my investors) have a lot of confidence in our ability to monetize the outbrain service when the time is right. We all felt that focusing on that part of the business now would be a distraction, and I think our community members will agree.

Feel free to take the angle that will interest your readers, but you should just understand that my approach to building companies is very very very different from that of a 1st-time entrepreneur who's dazzled from acquisition like those that Flickr or del.icio.us had, and is starting a company that will be built with $50K and sold to Yahoo within a year for $10M. All that stuff is completely not in our lexicon... ;-)

What business are you in?

I recently watched Michael Eisner's show on CNBC (called 'Conversations', I think) in which he hosted Mark Cuban.

Mark had one of the best entrepreneurial sentences I've ever heard:

When I bought the Mavericks, everyone in the organization thought we were in the business of basketball. But we aren't. We're in the business of "Honey, what do you want to do tonight?"

Bingo!!

It's so easy to describe what business *you* think you're in. The trick is to define the business *your customers* see you in. It's not about what your product does, or which cool features it has. It's all about understanding which piece of attention of your customers you're fighting for, and who are the others trying to get that same slice of attention.

This has got to be the #1 mistake entrepreneurs make (and I'm speaking from personal experience...) - falling in love with their product/features and believing that the product is the business they're in. This must be the silent killer of startups because it's such a huge mistake that's so easy to go unnoticeable...

Cuban, as usual, nails it.

Jim Lavoie speaking at BIF

A few months ago I recommended a video cast of Jim Lavoie (Rite-Solutions CEO) speaking about applying wisdom of crowds concepts within a corporation. That video is available here.

Looks like Jim was invited back to speak at this year's BIF (Business Innovation Factory) conference in October. It's taking place in Rhode Island and if you're in the neighborhood, my guess is that this is well worth attending.

Registration for the conference - here.

My Way, The Entrepreneur Network

I was recently honored to be invited by Tom Evslin[1] to join My Way - The Entrepreneur Network.

MyWay is one of the first FeedBurner Networks to be launched. It's an interesting experiment, and here's why:

• If you're a reader of this blog, you can subscribe to the MyWay feed (click here for the RSS feed), and receive more great content from the participating blogs. Tom says it better than I:
  "Participants in this network are experienced company founders who post about the joys, pains, and hard-earned lessons of startups - and whatever else is on their mind."

• If you're an advertiser, MyWay is an opportunity for you to get in front of a pretty targeted audience that's not too big to be a useless blind ad network, yet not too granular to be a hassle to manage. If you want to advertise on the blogs in the MyWay network, go here for more details.

It'll be interesting to see how this evolution of RSS pans out. Will a few great networks emerge out of it, providing real value to readers and advertisers? Or will there be so many networks that we'll all eventually prefer going back to the current Chinese menu paradigm of reading specific blogs?

More on all this over at Tom's blog, which I would otherwise recommend subscribing to, but there is no need now that you are subscribed to MyWay!

Comments with your thoughts on MyWay (as well as the FeedBurner Networks idea in general) will be most welcome.

[1] Tom is, among many other things, the author of the excellent book - Hackoff. I warmly recommended it on my post here. Or - just take my word on it, and order the book at Amazon here.

FrieNDA

Every entrepreneur (or woulda-coulda-shoulda entrepreneur...) knows this feeling:

The idea you have is so fundamentally amazing, that it will most probably be stolen and copied by the first person you talk to about it.

Now you have to start building your team and getting investors, but you don't want to tell people about the idea without an NDA, because they will steal it of course.

And that sucks big time. NDA's are terrible for many reasons, but the biggest is that it makes the signer of the NDA take a pretty big risk without knowing what he's about to hear. It's hardly a smart way to get the trust and passion from someone you really want on your team. Instead you get fear ("am I now forever in risk of getting sued just for listening to this stupid idea?") and resentment ("well - obviously I am a suspected idea thief around this table...").

Therefore my suggestion to all entrepreneurs is - dump your NDA's and rely on the FrieNDA[1]. The execution of the FrieNDA is extremely simple - it is basically a handshake accompanied by a request to keep the discussion confidential and not go and steal the ideas. That's it. Not only does this ensure better karma between the two of you, it is also much cheaper than an NDA!

Because these are the truths:

1. No one is going to steal your idea[2]. In fact, if your company is eventually successful, your original idea will only be one tiny contributing factor. And the guy you're talking to can't steal the 99,999 other reasons that will make your company a success (persistence, luck, people you hire, etc, etc, etc).
2. The NDA Paradox: An NDA is useless if the guy you're talking to cannot be trusted, and is needless if the guy you're talking to can be. So instead of asking people to sign an NDA that is either useless or needless, try to talk only to people you trust and handshake a FrieNDA with them.

The idea is the only thing you've got to try to get good people excited about your vision. You have to spread it around if you want to get stuff moving. And the best way to do that is by creating mutual trust through the wonderful tool that is the FrieNDA[3] .

I hope my lawyer ain't reading this blog... ;-)

[1] NDA's have their time and place of course. After trust has been achieved and the person you're talking to is excited about the idea and wants to dive into the nuts & bolts, it's a good time to cover the bases with an NDA. But for initial discussions about your grand idea, an NDA is bad bad bad.

[2] OK - there are exceptions. I would NOT recommend pitching your idea to a room full of hawking Google engineers, for example.

[3] I'm not sure who I should give credit to for this word, but I'm pretty sure I heard it from someone rather than invented it myself (whoever deserves credit - feel free to claim it in the comments below!)