I’ve cleaned up my notes from the other day, both to ensure that I’ve reread all of them to refresh my memory, and to clarify some vague points and correct some mistakes. Two big posts this time, hope that works out for the rest of you.
Session 1 - The Art of the Start by Guy Kawasaki
“Art of the Start” is the name of his new book, available soon. BUY ONE!!
People came in from out of the country (lots of people from Canada).
He commented that the cover of his book is a stock photo from an online service. He paid something ridiculous like $1.50 for it, and commented that it could have been snatched up by anyone else.
He said normally he likes to use the top ten format. It gives the audience an idea of how long he’s going to be around. And if your presentation sucks, it gives the audience an idea of how long you’ll suck for. But he has a top 5 this time, there aren’t ten principles for starting.
Make meaning : not money, money is an outcome of making meaning (preserve something good, right a wrong, etc). During his Apple stint he didn’t hold to this principle, but he’s learned it over time.
Make mantra : simpler than a mission statement. So that if you ask anyone what the company does, they know IMMEDIATELY. Group design of the mission statement sucks, it ends up just being a flimsy wordy statement that no one remembers. Everyone uses the same kind of words. Not worth it for a small company, make a mantra. Example mantras for some companies: Disney = fun family entertainment; Nike = authentic athletic experience
Get going : the key is not slides and word, it’s actually getting going. Think Big. Think 10x better, think creating a new curve. Jump to a completely new curve. Find soulmates. There is a myth around sole entrepreneur. You should want to polarize people, the worst thing you can experience is indifference. You want people to either love it or hate it. Design different. Examples of alternate guiding principles to keep in mind are “I want one”, “My employer couldn’t/wouldn’t”, “What the hell, it’s possible, lets build it” (like Motorola with cell phones), “There must be a better way”.
Define a business model : Guy joked that perhaps more than anyone else, he wants just one more bubble. This time he knows just what to do. But if that bubble doesn’t appear you need a business model. The questions that you should be addressing : “Who has you money in their pocket, and how do you get it?”. Have a very exact and simple plan. Copy someone else’s model. Ask women what they think about your business model. Men have killing coded into their DNA, and when asked about your business plan men will always say it sounds good. If they really think its a bad idea, they see it as a great way to kill the competition.
Weave a MAT : starting a company is very much like a blasting site, the MAT keeps debris in. M = Milestones (proof of concept, complete design, prototype, ship testable version). A= Assumptions (test your assumptions in realtime, performance of product, test market size, how many sales call can a person make, what is the conversion rate, how may support calls does the average user generate, prices of parts and supplies). T = Tasks (major tasks necessary to hit milestones, renting office space, find key vendors, payroll, legal docs, insurance policies).
That is the art of the start.
Session 2 - Panel on Creating an Ecosystem
(Moderator) Guy Kawasaki - Garage Technology Ventures
Jeff Adams - Goldman Sachs
Dave Anderson - Mohler, Nixon, and Williams
Alan Jepsen - Comerica
Betty Taylor - Krause Taylor Associates
Mark Weeks - Heller Ehrman/Venture Law Group
Q - What is your impression of the current atmosphere for entrepreneurs?
Mark - not expecting another bubble, but the startup environment is great, there are lots of exciting ideas and people around these days. His suggestion is to become crisp and to the point if you want to succeed.
Betty - Current atmosphere resembles 1998, there is a lot of progress based on where things were 2 years ago. Lots more seasoned management, and they’ve defined goals well. Google brought in good management, others are doing similar.
Alan - no bubble any time soon. Entrepreneurs see problems out there still, but don’t have money to go after it. It ends up being frustrating both for the businesses and for investors.Thinks the bubble will never return (not in his lifetime).
Dave - people are using less to do more. Value for the dollar. Look at credentials of services firms to make sure you”re getting what you need.
Jeff - This is a great time, opportunity for people to open their wallets is getting better. Lots of talent to draw from. Great pool to form a company. IPO market is healthy, so that means a better liquidity path. Minimum configuration for a startup - something that people can be passionate about, good size, profitable for year, seasoned management, financial controls (big emphasis on that).
Mark says we should differentiate the early stage startup from later stage. The early startup does not need experience, they need passion. At the early stage you really need to find soulmates. (people make spreadsheets about billion dollar markets, but when you drill down can’t justify it), find people from other areas to help out.
Q - How does an entrepreneur pick a professional w/ your background?
Betty - when you select a PR firm look at their track record, and find out exactly who you are going to be working with. Get some references and then check them, to make sure their contacts are valid. What the firm brings to the table is access.
Alan - picking a bank, find a bank which is interested in emerging companies, one that can make connections for you.
Dave - need a relationship that will grow with the company. Partnerships can really help there. Sarbanes-Oxley probably does not apply to the garage startup, but once you have a board you need to start worrying. (Note from Miker - Sarbanes-Oxley is a set of accounting reforms, setting down stricter requirements for practices within public companies. People seem to be making a big deal about it just about everywhere I go.)
Jeff - finding an investment bank, just execute on your vision and Wall Street will find you.
Mark talking about finding a lawyer - everyone specializes in certain areas. You are going to have to work with multiple people. You can expect your lawyer to make introductions (for funding for example). Work with someone who has been through the process before, multiple startups, and that person can find you the people that you need. Find someone who can tap into the community.
Guy says as you’re seeking a funding adviser you should ask if they’ve got contacts to find funding.
Q - What can you do to find good board members, what makes a good board member?
Alan - used the example of retired people from within your domain. Because he’s at a bank, he needs to make multiple referrals so that they don’t get into legal trouble. You should expect the same from other sources of referral as well, so you should have a bunch to choose from.
Dave - Sarbanes-Oxley says you need a financial adviser on the board.
Jeff - the board of an early stage company is much different than that of a company in a later stage. Investors are very active early on, but as you become more mature you need stricter controls and need to transform your board as necessary (without sacrificing the guidance)
Mark - Expertise, expertise, expertise, and objectivity. Make that dream list and try for it, even if you know you won’t make all of them. Find the person who will ask hard questions.
Q - what is the max you would offer the Perfect board member?
Mark - it depends on what stages this person is involved in. If the person can only spend two days a month, its valuable but not the same as someone who can spend time to be part of the team. Someone who is part of the team is VERY valuable. Don’t get caught up in percentages.
Betty - Look at your customer base and then go looking for advisers.
Session 3 - The Art of Positioning and Presenting - Bill Joos
The number one problem is talking about what you do concisely. Two points to concentrate on when trying to make your description concise are market definition and value proposition.
Bill had a set of worksheets that he quickly skimmed through, giving examples of how they would be filled out for a company called BitPass (someone that Garage had worked with) and general descriptions of what each section should include and what purpose it serves. He said that completing the exercise will take many hours. Early on it’s a living document, but eventually you want to freeze it.
The goal is to identify a few foundation points: “what do you do things for?” (market position) and “what are you doing?” (value proposition). Once you have that base established use it as the yardstick for your other communications.
Case study of BitPass - BitPass identified three major phases of the online digital content market. Phase 1 - everything is free. Phase 2 - paid subscriptions. Phase 3 - individual purchases (“pay by the sip”).
Identify primary and secondary constituents. At first BitPass thought that primary constituents were content sellers, and secondary constituents were digital content buyers. It can take an hour to get a group to agree to what primary is. Just follow the cash, they should be the biggest part of the pie at the point at which you break even. What comes out of finding these groups is a clear market definition. What Bitpass decided was that the primary are tier one providers.
Next identify the burning problem. The only thing selling these days are painkillers (not steroids or vitamins). Then identify symptoms (how do I know if I have this problem?). Then put them all back together and try to find common aspects, and then refine the burning problem.
Once you have the burning problem you need to find the pain associated with it. Your key constituent must be able to instantly identify with the Burning Problem and Big Pain.
What kind of emotion is associated with the problem or pain?
Create the company tagline. The tagline should “hook ‘em” and get them to ask for more.
Market definition is pulled together from those previous answers (who, pain, and emotion).
What do you really do? List everything, and pick stuff out later on. Boil them down once you have the list. This is the composite essence of what you do.
Your value proposition. Category + position parameters + benefits.
So you end up with who, pain, emotion on one side and painkillers and benefits. Yin and Yang. Generally things take the form of the problem being in the negative, and the solution positive.
Competition - make a page for each competitor. This is done from the point of view of outsiders. Pick everyone who a knowledgeable outsider would think is a competitor (not just who you yourself consider to be a competitor). Be comprehensive, and consider grouping is there are a lot. Pull all the pages together and determine how you are different. We are unlike Company who does stuff because we do otherstuff. Everyone in the company should differentiate themselves from the competitors at every chance. It should be natural to follow a mention of a competitor with an automatic summary of what your differentiators are.
Us Mission Statements vs. Them Mission Statements. Mission statements can talk about the company or talk about what the company can do for customers.
Take the time to do it right. Its a great team building experience. And you can reuse the bits and pieces for other efforts.
Now comes the presenting part of the session
What and How - most people concentrate too much on what and not how. They pay a lot of attention to the content of their statements and not how the statements are presented. The split should be more like 50/50 between the two.
Start at the end: pitch decay says that most people forget very quickly. You need to find the most important 10 percent are really drive it. Put your most important point right up front, first slide. Most people put their big conclusion at the end, this is wrong.
Be brief: all VCs have attention deficit disorder. Kill geek speak.
Bait the hook: get them interested. You don’t want your elevator pitch to close a deal, you want them to get off the elevator with you and ask for more info. It should be a call to action.
Get high and stay high, stay up at a high level so that you talk about what and benefits, not how. They will ask for how when they are ready.
Obey the 12/15 rule, a dozen slides in 15 minutes. An hour meeting does not mean an hour worth of slides. He had a list of what should be on the slides, I’ll fill in the details here at another point.
Change people’s pulse: audience, bond with them, communicate on their level.
Tell stories that sell: Questions to ask when preventing are - What are the three most important things you could learn about my company? What interested you about our business plan?
Get a transition: Ask a rhetorical question.
Practice and integrate feedback: videotape yourself, use a timer to make sure you can do your pitch in the time you have.
Develop an attitude: never give up.
In summary, Bills own opinion of the most important are : begin with the end, be brief, change peoples pulse.
The Art of Raising Capital - Bill Reichert
Q1 - is your idea fundable? Not everything is. You need a business that has potential for sustainable rapid growth, get to significant size and scale (billion dollar level, something that gets easier as you grow, a positive feedback loop), ongoing disproportionate profitability.
Q2 - What is the best way to raise capital? Start smart, get details right at the start. Tell a good story, internalize. Make the numbers add up. Find the right investors. Build credibility. More about these individual points below.
Start smart - put together a simple clean corporate structure (incorporate and founders stock, don’t start as an S Corp and then try to evolve later on) You get into trouble if you start promising percentages. And you NEED to setup buyback agreements. When you bring in employees and consultants do it right, with documentation, and that you own intellectual property. Have standard agreements. When you get seed investments and loans make sure you have the proper documents and you’ve done it with the right structure. Assume everything you’re doing is going to be public, pay attention to governance. Get the right attorney.
Tell a good story.Know how to articulate the fundamentals of your business. Every investor keeps a mental scorecard: the team, problem/opportunity, tech, sustainable advantage, business model, partnership/leverage. Saying something like “well, you have to ask my CTO” is a bad thing. Listen to what VCs seem to be concerned about and pitch to those issues.
Make the numbers add up. If they’re trusting you with millions of dollars, they want you to know how the money is going to be made. Long term financial projections (even if they’re not sure bets, you have to tell a story using numbers of your vision of what the future will be.) Just make sure that your projections would look like compared to past great companies. Most people show numbers that put their company better performing than the greatest companies in history. Near term operating plan, capital requirements, capitalization structure over multiple rounds, levers of profitability, what are the key metrics, how are you monitoring and measuring them?
The right investor. Generate momentum, develop the technology model, start building the team, “here is what we’ve done with nothing, imagine what we could do with your investment”. Pick the right firms, and the right partners within those firms. Target your venture contacts, but then drill down another level and make sure that the people on that list are the right target.. And if necessary go back to your network and see if you can get an introduction to the right partner at firms you have touch points for. Nurture a syndicate of investors, find a lead who would draft a term sheet. Be honest and build trust, get a lead investor that will help you develop the syndicate. Manage the selling process, finding venture is just a different kind of sale. Be aggressive.
Build credibility. Customers, having customers is a great. Partners. Investors. Advisers and board members. Industry experts. Milestones. Don’t lie! Top 10 lies from people looking for funding (Our projections are conservative, our target market is 56 billion, we have a world class team (just say what the strengths are), our average sales cycle is 90 days, we have no direct competition, no one else can do what we do (say why your advantage is sustainable), all we need is 2 percent of the market, we’ll be cash flow positive in 12 months, our contract with Nokia will be signed next week, I’ll be happy to turn over the reigns to a new CEO).