Early Stage Priority Confusion

During the early stages in a stressful, lonely place I call StartupLand, it can be overwhelming determining where to focus scarce resources, both people and money.  There’s endless product issues to address – customer features, performance, reliability, scalability – and if you have a Minimum Viable Product and a bit of luck there are existing customers to support and retain.  Add to the mix the need to both acquire more customers and add other strategic partners to complement your product.  Don’t forget recruiting, if you are funded and enjoy the ability to grow your team, sourcing and interviewing talent can literally take up 30-50% of everyone on the team in the early days.  Oh, and your Board and investors will require some care and feeding through reporting and monthly or quarterly meetings.  That’s a lot to juggle if you have a small team (5-15) trying to tackle each of these priorities.

So how and where do you focus scarce resources?

By being ruthless about both prioritizing and sequencing those priorities where maximum traction can be proven in the shortest period of time.  And by traction I mean proving that customers will buy your product at a price that has a path to sustainability.  In my experience, it means allocating resources in 2 primary areas in the early days:

  1. Harden the Minimum Viable Product.  Specifically, ensure the product 1) has only the most basic feature set, defined as the minimum set a customer is willing to pay for, and 2) is minimally performant, reliable and scalable meaning just sufficient in all 3 categories to retain customers and enable a six-month window of customer growth.  Probably the single biggest pitfall to avoid is allocating resources to make your product more feature rich than it has to be simply because you think your customer must have those features, all at the expense of making a more basic product work flawlessly.  Your customers probably don’t need those features yet and if you have any paying customers, then you’ve proven they don’t.
  2. Get and maintain momentum in sales/customer acquisition.  If one customer is willing to pay for your product as it exists today, then find another one willing to pay.  Then another.  There is nothing that defines traction more effectively than increasing customers and revenue.  You can be unprofitable and raise money with customer traction.  You can offset costs and hire more people with customer traction.  The world of possibilities to tweak, market and scale your business open up with customer traction.

At the end of the day, these are the only things that truly matter for an early stage startup.  Build the most basic product that you can sell, and then sell it.  And if you can sell it, then don’t build custom features, in fact don’t build any features beyond the product you can already sell until you have more resources on board.  Don’t harden the product for performance, reliability and scalability that you’ll need two years from now, harden it enough to get through the next six months of sales.

Sure, there’s lots to do from this point, but until #1 & 2 are achieved, nothing else matters, so don’t be tantalized to spend the cycles working on other high value, but optional workstreams.  Be ruthless.

Why Are You Here?

It’s a question that should be expressly discussed and understood by leadership team members in a startup, particularly amongst the founders.  It was the first agenda item at my first leadership meeting at BlackLocus and it ended up setting the tone for the rest of the day.  From that 15 minute discussion, I feel like I know my team members more deeply and can now focus on helping them achieve their aspirations.

Why is this question so important for me to understand in an early stage company?  Because I’m getting ready to go to battle with this handful of individuals and I must understand the level of motivation, commitment, passion and what drives someone to participate in the inherent ambiguous, stressful and all-consuming experience that a startup demands.

I’ve participated in a handful of these discussions in the past and they go one of two ways.  The abysmally useless way is when you go around the room and everyone says something to the effect of “I just want to build a great company” or “I love startups”.  The refreshingly transparent way is when you create a safe environment for full disclosure of both ego and monetary goals.  It’s perfectly OK to say, “I want to make a shitload of money by building a valuable company”.  In fact, that’s exactly what I said when it was my turn.  Its about creating a culture of transparency, honesty and mutual respect from the get-go.

A week later, I still remember precisely what each of my colleagues want to achieve from this experience.   One of the most honest and interesting aspirations I’ve ever heard came out of this session.  One person wanted to build a successful enough legacy to be invited to give a University commencement speech.  Not only is that honest, but its so cool and inspiring that I want to help them achieve it.

BlackLocus Wins “Best in Show” at Under the Radar

We’ve had a great two days at the Under the Radar Conference in Mountain View, CA.  It’s a commerce-focused event, featuring roughly 30 emerging companies in 5 categories that pitch in competition format to an audience and a panel of judges.  Today I had the opportunity to pitch BlackLocus under the “Measurement” theme to a panel of 3 judges including Liz Gannes, Senior Editor with All Things Digital, Will Lowry, VP AT&T Platform Partners and Mark Silva, SVP Emerging Platforms Anthem Worldwide.  The session was moderated by Rafe Needleman, Editor at Large for CNET News.  To see the 15 minute pitch and Q&A session, click here and go to 3:45 in the video if you want to skip the panel intros.

The good news?  We won the Audience Choice Best in Show award among the 30 companies and the Judges Award for our category!  We also met some leaders in companies that would be extremely valuable partners and most important, we connected with some large, Fortune 200 retailers that are prospective customers.  All in all, a great use of our time and money to participate.

The other good news (disguised as bad news)?  Along with positive exposure and press comes an onslaught of demands that stress the team to deliver on.  It’s a constant battle at this stage, how to prioritize activity and only that activity which has the highest return when there are dozens of things we know need to be done.  And priorities are not always obvious, these decisions require some stakes in the ground but more important, they require measurement, learning and adjustment to turn on a dime as information becomes available from customers and partners.

I’m returning to Austin today and looking forward to debriefing with the team and getting everyone energized about the path ahead of us.  Strap in, its going to get nutty!

Startup America Partnership, Austin-style

I was invited to attend a luncheon this past Friday hosted by the Austin Chamber of Commerce and the Austin Technology Partnership to discuss the soon-to-launch Startup America Partnership Austin program.  Startup America is a national program launched this past January at the White House and founded by the Case and Kauffman Foundations to further entrepreneurship across the country.  It’s mission is to provide entrepreneurs with the resources they need to conceive, launch and grow new companies and it is taking a local approach to mobilize resources supported by the muscle of a national brand.  There are some heavyweight influencers tied to this effort including Steve Case, Michael Dell, Reed Hastings (Netflix), Reid Hoffman (LinkedIn) and Magic Johnson.

Austin, through the leadership of the Austin Chamber, is taking a pioneer role in being one of the first handful of communities to officially launch its program under the SA brand.  The idea is to gather expertise, talent, customers, services and capital and package these resources at highly discounted rates and/or unique offerings to assist entrepreneurs at various stages of their company’s development.  Another large part of the Austin mission is to create a net inflow of entrepreneurs from other cities to choose and build their companies in Austin.

I was introduced at the lunch by John Price, a friend, serial Austin entrepreneur and Chair of SA Austin, who is spearheading much of the launch effort for Startup Austin in conjunction with other local organizations including the Chamber and SXSW.  In many ways, the story of my new company BlackLocus and its relocation from Pittsburgh to Austin combined with my relocation from Los Angeles, reinforces what Startup Austin is trying to achieve on a broader scale – promote entrepreneurship not just by home growing it, but also by attracting talent from other places in the country to start and grow their companies in Austin.

I’m excited to work with John in any way I can to assist in bringing additional talent and new businesses to Austin.

Texas Venture Labs / Austin Technology Incubator

My new company, Blacklocus, is an Austin Technology Incubator (ATI) company and we presented yesterday at the Texas Venture Labs Expo in Austin.  I stopped by to hear the pitches of 5 graduating companies, including ours.  I was deeply impressed by the presenting companies, at least 3 of them are truly innovating massive industries including online commerce (us!), nuclear power and combustion engines.  These programs are examples of increasing efforts by the University of Texas to integrate with the local business community to develop entrepreneurs, facilitate investment and commercialize research generated through the University.

Now that we are fully relocated to Austin, I’m really energized to get more involved.  There are several objectives I have for “getting involved” with the local entrepreneurial technology community:

  • Build the BlackLocus brand locally through thought leadership, mentoring and recruiting outreach.  The more we promote our vision and progress, the more attractive we will become to partners, customers and employee candidates.
  • Do my part to further entrepreneurship and development of high growth companies in Austin.  This community has so much to offer for entrepreneurs, venture investment, existing companies looking to relocate and I’d like to become involved in initiatives that promote and actualize those attributes.  Capital Factory and Startup America are examples of successful and far reaching programs to promote our city and develop successful new companies.  There is a real talent shortage here, as in many high tech hubs across the country, and it really is a zero sum game that we need to solve.
  • Actively invest in promising high-growth startups.  As I’ve written about previously, I’m active but picky in my search for investments in new companies where I have something to offer in addition to capital.

Yesterday was a great introduction to a few programs dedicated for furthering local entrepreneurship and I look forward to becoming far more integrated over the coming months.

My 10 Favorite Startup and Tech Blogs

I subscribe via RSS to way too many blog feeds, most of them in the tech/startup/VC world.  Some of the authors contribute daily, others may write once per week but provide unique and well thought out content.  I’m focusing here mostly on non-news blogs (Techcrunch, Mashable, etc. not on this list) and instead on individuals with deep experience as entrepreneurs.  For a broader perspective on popular blogs by category, check out TechStartHub.  If you run a startup, are seeking funding, beginning a company and seeking advice or simply want to stay apprised of opinions and discussion happening in the tech startup ecosystem, then here are my recommended 10 must-read blog subscription feeds, in no particular order (click on the links to subscribe to RSS feeds):

Feld Thoughts.  Daily blog by VC Brad Feld, he mixes both personal and professional insights into his writing.  Brad has been an immensely successful VC, particularly over the past few years.  Naturally, he’s enjoying life and it comes through in his writing.

Startup Lawyer.  There is a wealth of archived content by lawyer Ryan Roberts that talks about how to structure your company, approach valuation, taking in money from Angels and VCs, etc.  He’s a pretty infrequent poster, but the archived content is valuable.

A VC.  Daily blog by legendary VC Fred Wilson.  Fred is usually on the bleeding edge of technology and has a point of view on just about everything technology, particularly trends in the use of technology and startups that are emerging in line with his thesis.

Both Sides of the Table.  Daily blog by another nationally recognized VC Mark Suster.  Mark is probably the most actively engaged and networked in the tech startup community outside of Robert Scoble and spends a lot of time and energy on his blog writing.  No short posting here, usually his writing is very comprehensive and with a strong point of view on his subject matter.

Ask the VC.  Separate blog curated by Brad Feld, he scours all of the VC blogs and re-posts what he believes is the most useful information that day.  Tremendous archived content here as well.

Digital Quarters.  A pretty infrequently posted blog by Ben Elowitz, founder of Blue Nile, but although infrequent, his writing is insightful and comprehensive around whatever topic he is addressing.

Steve Blank.  A serial entrepreneur and founder of E.piphany and eight or nine other companies, Steve Blank (now a professor) has a large following and impeccable reputation in the startup community.

Blog Maverick.  Always a contrarian view on many subjects by this now famous owner of the Dallas Mavericks, Mark Cuban.  He’s a pretty infrequent poster, but his comments are usually pretty insightful whether you agree with him or not.

On Startups.  Blog dedicated to the entrepreneur and written by Dharmesh Shah, founder of HubSpot and several other companies.

SplatF.  Combination news and blog site by technology writer Dan Frommer, he usually posts multiple times per day on whats going on in tech.  What distinguishes him from other writers is he injects his own point of view into news and current events.

Honorable Mention.  Robert Scoble.  Probably the most prolific and connected tech writer on the planet, so much so that its impossible for me to keep up with him and his posts.  He gets an honorable mention because he writes TOO much, but he typically is on the front lines of reporting.

Where’s Your Operating Plan?

Every business needs a 12-month operating plan, even startups at the earliest stages.  The only major difference between a startup Operating Plan (OpPlan) and a mature OpPlan is that the startup OpPlan will inevitably be wrong.  Then why do it?  Because it represents a stake in the ground, your living metrics, targets and milestones so that when targets are either missed or exceeded, it forces an internal review of “why” and then “how” to make adjustments to keep the business performance on track.  I’m going to focus here on the importance of OpPlans for early stage businesses.

First, what is an OpPlan for an early stage or emerging business?  Probably the most common mistake I see is equating the OpPlan to the 3-5 year financial projections spreadsheet that every startup creates to raise money.  While these projections are incredibly useful and contain many of the assumptions that go into the OpPlan, the OpPlan requires an extraction of key assumptions in written form that is easily communicated to everyone in the organization and certain external stakeholders (investors, Board).  Specifically, the 12-month OpPlan contains the following – think of it as an outline for a powerpoint presentation to share with employees:

  1. Statement of Vision, Mission and Strategy.  At the highest level, these should be really clear and posted on a few walls in the office.  How can you know what to do today if you don’t know where you are going and why?
  2. Core 12-month Objectives.  This should be 5 or fewer major objectives for the business that, if achieved, will define success over the next 12 months, at least based on what you know now.  They ought to be completely consistent with point #1 above.  These are not activities or tasks but rather major objectives (ie, “Achieve 5% market share in our category”).  They don’t describe the “how”, just the “what” and since there’s only 5, key stakeholders (Board, investors) should view the achievement of these objectives as a highly successful month/quarter/year.
  3. Key Initiatives and Priorities.  For the current quarter and in order to meet the Objectives, what are the key Priorities and Initiatives that the team will focus on?  We are now breaking down the Objectives in #2 into a manageable set of Initiatives, answering the “how”.  This list becomes the ultimate arbiter when resource conflicts arise (and they will).  Completion of these Initiatives should absolutely result in performance against the Key Metrics (discussed below).  These corporate Key Initiatives then drive more detailed plans within each functional area – Sales and Product priorities drive the product roadmap, which in turn helps to prioritize the Technology, Analytics, Support and Marketing/PR initiatives.
  4. Key Metrics, Target Values and Accountability.  For each Objective in #2, what must be measured (Metric) and what are the Target Values for each Metric that ensure the Objectives are met?  And who is responsible for achieving each Target Value?  Important to track Metrics monthly, understand why there are variances and, most important, take decisive action to address under-performance.  Examples of corporate metrics might be # customers, average revenue per customer, visitor conversion to sale %, hire 10 people, etc.  Ultimately, each functional area (sales, tech, marketing, support) will have their own set of Metrics and Targets that roll up into achieving the overall corporate Targets.
  5. Financial Projections / Budget.  To include Revenue and Expense targets and assumptions.  There are really two methods for determining Revenue projections – “Top Down” and “Bottoms Up” – and I think its important to have a view into both because they often tell different stories.  Top Down approaches begin with understanding the potential market size, assuming some penetration or market share to determine Revenue growth.  Bottoms Up, on the other hand, starts with understanding the sales cycle, product development complexity and available capital to determine a more “reasonable” picture of Revenue scale.   Another way to think about it – Top Down shows “what’s possible” in a world of few constraints and Bottoms Up is more in line with “what’s achievable” being more realistic about resource constraints.  But having a view into both allows for some analysis to answer the question “What additional resources would it require (money, people, technology) to scale the business faster?”

Finally, I highly recommend creating a “One Sheet OpPlan”, a 2-sided but one page document that has Key Initiatives and Priorities for the current period (quarterly) on the front and Key Metrics and Target Values on the back.  This document gets distributed to ALL employees so everyone is fully informed and aligned on what drives success and, more importantly, how individual efforts tie directly or indirectly to certain Objectives that drive that success.

This important process and document really forms the basis for instilling a Performance Based Culture within the organization by tying individual performance and compensation to company Objectives.

Detractors may say that this is all too much structure and process for a startup where you are simply trying to get the product right and achieve some customer traction.  I would agree that putting too much effort into planning when you are a team of 2 or 3 is probably not the highest and best use of time.  However, while the need for this level of thought into the business may vary, certainly by the time you are taking external capital into the business its important that everyone is aligned on where the business is going and what defines success in the near term, even if success is defined by “get 2 paying customers”.  Even an objective this simple requires sales, a product, technology reliability and scale, support, design, analytics, etc. such that each department has a list a mile long of things they can’t get accomplished due to resource constraints.  A well constructed OpPlan helps to coordinate priorities across departments and keeps everyone’s eyes on the prize.

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