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THE NETHERLANDS EVOLVES INTO ONE OF THE WORLD'S HIGH-TECH STARTUP CENTERS, VC INVESTMENTS HIT $500+ MILLION IN 2014

It’s a fascinating time to take stock of startup innovation in the Netherlands, a rare turning point where you can watch the hard work of the past give way to the immense promise of the future.

Behind London and Berlin, the Dutch startup scene is already considered to be one of the most prominent in Europe. (If it feels unfair to weigh an entire country against individual cities, consider that the Netherlands has 17 million people crammed into an area half the size of South Carolina.)

Startup Juncture reported 75 major deals in 2014, for a total of roughly $560 million in investment. Ten companies raised over $9 million. In the past few years, especially, each successive quarter has seemingly brought a new standard for sheer volume of activity. The road to this point has been long and deliberate, and Dutch entrepreneurs deserve credit for what they’ve managed to achieve thus far.

And yet, to herald Dutch innovation as it currently stands is to unveil a project that’s still only just underway.

The Dutch, on the whole, speak better English than probably any non-native population in continental Europe, one of the hallmarks of a consistently excellent education system that also scores among the highest worldwide in math and science metrics. Strong economic foundations in industry and commerce offer a dependable framework for continued growth.

Nellie Kroes, the "Internet-Tsar" of Europe (Click Image To Enlarge)

And under the proven leadership of Neelie Kroes, the so-called “Internet-Tsar” of Europe, the government’s recent commitments to tech entrepreneurship may mark a bellwether of a new era in startup proliferation.

The early strengths of the Netherlands’ budding startup scene — software, space, smart energy, financial tech, digital health, sharing technology and 3D printing, among others — coincide with the overall direction of global innovation. And the Dutch prowess for high-tech hardware, in particular, has drawn investment interest not just from the United States and Europe, but also from China.

Netflix and Uber both recently decided to establish their European headquarters in Amsterdam. And given the Netherlands’ favorable tax code, strong international travel infrastructure, and newly released startup visa, you can expect other global brands to follow suit.

All of this progress, again, is many years in the making. But it’s hard to look at the Netherlands and not get the sense that 10 or 20 years from now, people will be pointing to this moment and saying the same thing.

 

Startup Origin Story

Talk to the people at the heart of the Dutch startup scene about how things got to this point, and the first two names you’ll hear are almost always the same. Founded in 1991 and 1996, respectively, Booking.com and TomTom are among the most successful Dutch companies in any field.

Booking.com has gone through two nine-figure acquisitions and facilitated tens of millions of reservations since its launch as a foundational travel site. TomTom, which once made watches and basic GPS devices, now has more than 4,000 employees and high-tech software products in 41 countries. Both are still based out of Amsterdam, but the startup scene around them has changed dramatically in the meantime.

For many years, industry leaders told me, growth was plodding and disjointed. The Netherlands has a strong tradition of entrepreneurship, but the transition toward startup culture was a slow one, and it was years before the corresponding success stories started to emerge.

2006 brought a watershed moment, in that respect: The Next Web held its first conference in Amsterdam. The now-annual event offered budding local leaders a unique window into the global startup world, and offered the world a unique window into the potential waiting to be tapped in the Netherlands.

To this day, no business gathering has done as much to foster international transactions or showcase the Netherlands and its capital.

The global financial crisis of 2008 was a doubly sharp blow, arriving just as the Netherlands’ startup scene was starting to take coherent form. But in the past five years, Dutch entrepreneurs have bounced back in a big way. Where name-brand multinationals like Heineken, Shell and Phillips have struggled to grow, startup entrepreneurship has taken root, giving younger, more agile companies the support system they need to flourish.

Rockstart, an accelerator that has become a center of Amsterdam’s startup scene, hosts its demo day. (Click Image To Enlarge)

In 2011, Rockstart, one of the country’s most prominent incubators, accepted its first class.Startupbootcamp, founded a few months later, has gone on to become one of the most well-recognized names across Europe.

Startupbootcamp Stats since the encubator was founded in 2010 (Click Image To Enlarge)

At around this same time, a steady, decade-long shift within the Netherlands’ major universities began to manifest in strong, localized ecosystems that retain more and more of the tech talent that previously went to more traditional industries.

As is usually the case, the government’s involvement lagged behind the rest of the market, but StartupDelta, a publicly backed initiative launched in 2014 and led by Neelie Kroes, has taken on an important coordinating, supporting and promotional role within the broader ecosystem.

Steve Blank, a Silicon Valley serial-entrepreneur, academician, and author of "The Startup Owner's Manual: The Step-By-Step Guide for Building a Great Company," visited Rockstart Accelerator on July 6th 2012 and had an all-around session with 10 startups of Class of 2012. Among the things he talked about is what makes Silicon Valley the capital of the tech startup world and what can the Dutch and other Europeans do to boost entrepreneurship and create a more startup-friendly environment. Steve Blank gave them 5 suggestions.

 

Today, startup leaders we spoke to estimated the following startup statistics for the Netherlands:

• 100+ deals of under $500,000 a year and by all indications these transactions will only continue to flourish.
• 33 Dutch companies had raised more than $88 million during the first quarter 2015.
• Median deal was almost $1.15 million.

This makes Q1 2015 the most prolific quarter on record in terms of sheer volume, according to Startup Juncture. (Check out Founded in Holland for a good survey of the scene.)

Dutch companies have seen an encouraging degree of interest from foreign firms. For instance, with more than 25 million active users, WeTransfer, recently brought in $25 million in Series A funding from a European venture firm, at a valuation said to reach as high as $200 million.

More importantly in the long run, there are as many as 15 locally based venture capital firms active in the market, as well, a handful of which are reliable sources of Series B funding or higher.

For our intense days beginning October 20, 2014, the Consulate General of the Netherlands in San Francisco, in partnership with DutchBaseCamp, brought 11 of the hottest Dutch Startups to Silicon Valley. Crowdsourcing platform Seezers was one of these participants! Want to find out more about us? Check out http://www.seezers.com!  Notice how well these startup founders speak English.

 

Amsterdam: The Capital

Only someone who’s never been to Amsterdam could associate it with the Red Light District and legal pot, instead of with the museums, restaurants, architecture, parks and bike-friendly cobble-stoned canalways that make the Dutch capital one of the culturally richest cities in Europe.

It may seem superficial to say so, but one of the biggest advantages Amsterdam has in the tech world is that it’s a place where people want to live — and can actually afford to, even on a startup budget. Local leaders recognize how attractive their city is, and they’re not shy about selling it on those terms.

Bas Beekman, the program director at Startup Amsterdam, told us.

“We have a huge labor pool coming to Amsterdam, because it’s a beautiful city that’s still affordable.  When people are thinking about where to go to work, or where to go to start a business, that’s important.”

Some organizations have gone to additional lengths to incorporate the city itself into their business cultures.

With 67 companies working alongside one another in 6,000 square-meters of ultra-modern office space in the heart of the city, B.Amsterdam, the former IBM building located at Johan Huizingalaan 763a, 1066 VH Amsterdam, stands as one of the physical and spiritual centers of the Amsterdam startup scene. The view from the rooftop park is the envy of the city’s business community, and the facility itself hosts a design academy, gym and post office, and events ranging from art exhibitions to business conferences.

Nestled along one of Amsterdam’s scenic canals, Rockstart is a leading incubator with prime canal real estate. After just two years of activity, its 20 graduates have raised $19 million in funding and created 150 permanent jobs. Founders Oscar Kneppers, Rune Theill and Don Ritzen are widely acknowledged as pioneers of Amsterdam’s startup scene.

Startupbootcamp, an accelerator based in B.Amsterdam, hosts one of the Netherlands’ liveliest demo days and was founded by Patrick De Zeeuw, Alex Farcet, Carsten Kolbeck and Ruud Hendriks in 2010. It also has placed a special emphasis on “smart city and living space” solutions, with titles like smart energy, smart building and smart retail leading its upcoming course list.

ACE Venture Lab has taken a different approach to enmeshing itself within the city. By forming pipelines with leading educational institutions, like the University of Amsterdam, it has drawn a diverse range of young entrepreneurs into its upcoming class.

The Next Web, which includes a publication that today is led by Martin Bryant, has grown into a 30-person umbrella company that puts on conferences, academic lessons and more.

Wherever you turn, there is a certain buzz to the activity, the sense that Amsterdam is the perfect place to be and the confidence that what’s happening there matters.  Beekman said.

“What we say is that if you can’t make it in Amsterdam, you can’t make it Europe.”  

Between its long history of entrepreneurship and small but savvy market, known for trend-setting early adoption of tech products in particular, Amsterdam is “an ideal launching pad for startups.”

It also helps that Amsterdam is the focal point of Dutch venture capital.

Prime Ventures, Van den Ende & Deitmers Venture Capital Partners, and henQ are the city’s leading firms. And with $167 million in European Union funds to distribute, the Dutch Venture Initiative is another important contributor.

Between them and Nick Steven, the organizer of Startup Weekend Netherlands, and Leon Pals, the chairman of the Startup Foundation Experience, a major international event, Amsterdam has a solid foundation to work off.

But on the whole, venture funding is still in short supply, as it is in so many early startup scenes. “We’re one of the richest countries in the world, but we don’t really invest in startup yet,” said Beekman, who’s happy to see the local government stepping up to provide institutional backing.

Additional leaders include Jeroen van Duffelen of ACE Venture Lab; Boris Veldhuijzen van Zanten and Patrick de Laive, co-founders of The Next Web; Amsterdam’s Deputy Mayor Kajsa Ollongren, who oversees Startup Amsterdam; Arthur Kosten, who founded Booking.com along with former CEO Kees Koolen and CMO Pieter van Doorne; Maarten Beucker Andreae, who sold his marketplace to Ebay; and Marcel Beemsterboe.

Delft: Student Center

Amsterdam is, and likely will continue to be, the best measure of the Netherlands’ success in the startup world. But Delft is perhaps the best indication of where it’s headed.

With students comprising between 10-15 percent of its roughly 100,000 people, Delft is a “nerdy city and a young one,” says Wouter de Bruijne, the commercial director at YES!Delft, one of the country’s first startup incubators.

It has the largest number of student societies in the Netherlands and a leading medical school to go along with the Delft University of Technology, the country’s largest tech university.

Engineering and hardware are among the strongest academic focuses available in the city, so it should come as no surprise that students are the driving force behind its tech scene. As their interests migrated toward entrepreneurship, so too did Delft’s.

de Bruijne told us.

“Ten years ago entrepreneurship wasn’t that common, but we’ve seen that shift on the university level, and from the government.”

Funded by the Delft University of Technology, the city government and local industry interests, YES!Delft is itself a product of that process. Now entering its second decade of activity, it receives as many as 500 applications a year, from the Netherlands and across Europe, and has attracted $300 million in investment, according to de Bruijne.

YES!Delft celebrating its 10 year anniversary. (Click Image To Enlarge)

“It takes 10 years,” de Bruijne says, “to build a stable tech company, and Delft is just starting to see its first batch of real successes.”

Nerdalize has pioneered a compact home-heating system that runs off computing power, converting the Internet’s waste into a sustainable living technology. Another smart energy company, Eternal Sun, has honed a patent-pending solar simulator that can be used to test renewable energy technologies, like those being developed by ABB, the first industrial robotics company to manufacture robots in the United States.

Ampelmann, meanwhile, has stuck to the traditional energy industry, building a hydraulic gangway that attaches to offshore oil rigs and compensates for wave motion.

This cross section, though limited, offers a good look at what is already becoming Delft’s defining feature. Amsterdam is known for its software companies. Delft is all about high-tech innovation.

Now, it falls on local leaders like de Bruijne to keep pushing things in that direction. “When we started, we were still trying to do everything, but we learned eventually that that wouldn’t work, and so as we matured, we learned where we fit in,” he said.

As he sees it, the future of the Dutch startup scene in general will depend on whether the Netherlands’ tightly knit cities can distance themselves enough to hone their individual characters. de Bruijne added.

“The coming years will show how stable this whole innovation industry is.  We’ll show what we can do as a country.”

Eindhoven: Invention City

De Bruijne’s right about the importance of specialization in the Netherlands, but you don’t need to wait for “the coming years” to understand why. Just venture an hour inland, to the proven deep-tech epicenter that is Eindhoven.

For the time being, Delft does not come close to matching the density or proven output of Eindhoven’s high-tech hardware industry. But if it’s any consolation, neither does the rest of the world.

In 2013, Forbes declared Eindhoven to be “hands-down the most inventive city in the world.” According to data compiled by the Organization for Economic Co-Operation and Development, Eindhoven produces 22.6 patents per 100,000 residents. San Diego, the next closest, produces 8.9.

Bert-Jan Woertman, the marketing director at Eindhoven’s High Tech Campus, told us. 

“This city lives tech.  We live, breathe, and eat hardware for breakfast.”

Eindhoven High Tech Campus (Click Image To Enlarge)

Like most things in Eindhoven, the High Tech Campus owes its existence to Philips, the Dutch multinational whose trajectory over the past century from light bulb manufacturer to diversified technology giant has transformed the once-small town into the fifth-largest city in the country and its industrial leader.

Other multinationals, like Amazon and Intel, have since been drawn to Eindhoven following acquisitions, but Philips still holds the most meaningful presence — so much so that some of its numerous spin-offs have become major international players in their own right.

FEI, for instance, is a premier manufacturer of electron microscopes, and NXP Semiconductors and ASML Holding are among the top semiconductor firms in the world.

The High Tech Campus was itself a Philips research and development lab. Now, with some 135 companies — including 60 startups — and 10,000 researchers representing 85 countries, it churns out around 40 percent of all Dutch patent applications.

Whether it is indeed “the smartest square kilometer on the planet,” as its reputation boasts, it is certainly the most prolific, highly concentrated engine of deep-tech entrepreneurship in the country.

In its second demo day this year, Startupbootcamp HighTechXL drew $6.3 million in funding for its 11 featured companies. As Woertman points out, those sorts of numbers may not raise eyebrows in Silicon Valley, but “that’s pretty amazing for Europe.”

What’s more meaningful, in both the long and short term, is that Eindhoven is creating a lasting culture of entrepreneurship.

Eindhoven High Tech Campus corporate brochure from Tommy Toy

 

Conclusion

Access to capital is still the biggest barrier to growth in the Netherlands, mostly because access to capital is still the biggest barrier to growth just about everywhere.

Other than that, it is hard to find many weaknesses in the current framework.

The Dutch market itself will never be a huge force across the board, but the Netherlands is a wealthy country that can offer locally based startups a good gauge on the developed world, and there are enough permanent industries to provide a stable foundation for the domestic scene.

Looking outward, the Netherlands is perhaps better prepared than any second-tier tech scene in the world to rise to true prominence. As demand for high-tech hardware goes, so too does the Dutch potential.

The only real question is whether the Netherlands can retain the talent it is already producing.

Close integration with the rest of Europe is a two-way street: easy come, easy go. Whatever advantages the Netherlands has as in terms of early-stage development, there’s nothing to stop more mature companies from leaving in pursuit of sunnier weather in, say, Madrid, or higher valuations in London.

With that in mind, the government’s still young efforts to promote and bolster the Dutch startup scene — Startup Amsterdam, for instance, was only founded last February — could prove decisive going forward.

For now, though, Bert-Jan Woertman is speaking for the whole country when he says,

“We continue to grow, we continue to attract talent from all over the world, and with our focus in high-tech, I think we’re very well-poised for the future.”

COMMENTARY:  

2014 A Breakthrough Year For Dutch Startups

Amsterdam, 29 January 2015. 2014 has been a breakthrough year for the Dutch tech start-up ecosystem. Government has stepped up its game, accelerators and incubators are thriving and more capital than ever is flowing towards start-ups. Active early-stage investorSanoma Ventures summarises its year in the SanomaVentures 2014 infographic.

Click Image To Enlarge

Government stepping up support

The importance of start-ups for the economic development has been acknowledged by the Dutch Government, which has taken concrete action to create a more attractive environment for entrepreneurs. Criteria for temporary VISA have been eased for start-up teams and budget for government loans or guarantees for venture capital funds and innovative starters has been widened. Special envoy Neelie Kroes has launched the StartupDelta programme, with the mission to make The Netherlands one of the leading start-up hubs in Europe. As part of this initiative, the City of Amsterdam has announced an investment of €5.2 million to support start-ups and increase access to working spaces, talent and capital.

Accelerators and incubators thriving

University incubators and commercial accelerators have expanded their activities and new programs are emerging. Utrecht Inc. ranked as the world’s second fastest growing ‘knowledge based incubator’ and Amsterdam’s ACE VentureLab ranked third as best new academic incubator. Leading European accelerator StartupBootcamp expanded their presence in The Netherlands with an E-commerce program in Amsterdam and a High-Tech program in Eindhoven.

SanomaVentures crossing borders

In 2014, SanomaVentures received over 350 investment requests, talked to 124 companies and negotiated with 28 entrepreneurs, which ultimately resulted in 4 new investments. Besides these new investments SanomaVentures executed 6 follow-on investments in existing portfolio companies, of which 2 alongside international VC’s. The 14 companies in SanomaVentures’ portfolio realised an average revenue growth of 90% in 2014 and currently offer employment to over 220 people. Many portfolio companies expanded internationally; SanomaVentures itself opened a second investment office in Helsinki, Finland.

More capital

European venture capital investment last year reached its highest level since the dot-com boom according to data provider Dow Jones VentureSource. The Netherlands has not been an exception to this trend. According to a list of investment transactions compiled by StartupJuncture, Dutch tech start-ups raised a record €500 million in 2014. Adyen was the first Dutch start-up to reach the so-called unicorn status, raising €200 million at a valuation of $1.5 billion. More Dutch start-ups than ever raised series A, B or C financing rounds, such as Peerby, Blendle, 3Dhubs, CataWiki, ElasticSearch or Takeaway.com. The larger, later-stage financing rounds were mostly coming from international investors, who seem to have discovered The Netherlands as fertile grounds this year. Also more Dutch seed and early-stage investors have entered the market. SanomaVentures, active since 2012, participated last year in seven of the fifty-five listed deals between €0.1 million and €5 million funding.

Amsterdam -- A Mecca for Startups

Amsterdam is a city known for business with an edge. The Financial Times has called it "A haven for troublemakers, philosophers and dreamers since the 16th century." It had the marijuana-tourism market cornered for decades. The sex-work market is legal and regulated. No business model is out of the realm of possibility in Amsterdam. So it shouldn't come as a surprise that the Dutch capital is now emerging as a powerhouse for startup activity.

With a population of roughly 800,000, Amsterdam was named by Inc.com as a startup hub to watch in 2014. It's unlikely to dethrone the largest tech capitals in the world—Silicon Valley, Beijing, and New York. But as Liza Jansen atQuartz highlighted on Tuesday, the cost of running a startup in Amsterdam is noticeably cheaper than in those cities: An Amsterdam startup is looking at average expenses of $3,121 per month, compared to $4,854 in NYC and $5,332 in San Francisco. It's easy for entrepreneurs to find English-fluent coders and programmers there, too, says Jansen.

What's equally interesting is how the city is mapping its growing startup culture. Startup Amsterdam, a website launched by a public-private economic board, has released a topographical guide to the startups that call downtown Amsterdam home.

According to Startup Amsterdam a total of 289 early stage starups are currently located in Amsterdam, Netherlands. Out of this total, approximately 78 are digital startups.  (Click Image To Enlarge)

Dutch startups raise €500 million in 2014

2014 has been an active year for Dutch startup investment: we listed 75 deals with a total investment of EUR500 million for Dutch startups: Dutch startups raise real money! Here is the complete list and overview of funding trends.

Funding is one of the most elusive aspects of the Dutch startup ecosystem: Although we have a mature financial system and low interest rates for other investments, many startups dit not get funding as a xmas present this year. Throughout the year we have tried to cover all deals that did happen. This is part of our goal to provide realistic data to all startups. Now that the year is almost over we decided to build an overview of all the deals in 2014. The result was surprising: more than one startup funding event per week, and thanks to a last-minute € 200 million contribution by Adyen, the total amount in the table is € 500,1 million (and five unknowns of at least € 100.000 each).

Courtesy of an article dated July 5, 2015 appearing in TechCrunch, an article dated December 25, 2014 appearing in StartupJuncture, an article dated January 28, 2015 appearing in SanomaVentures, and an article about the offices of Startupbootcamp.com, and an article about the stats for Amsterstam encubator Startupbootcamp.com   

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THE STARTUPS GUIDE ON HOW TO GET MORE TWITTER FOLLOWERS

There are plenty of articles circulating the web about how to get more followers on Twitter, but when it comes to growing an account for a startup, it’s a whole different ballgame.

Why? Because if there’s anything I’ve learned since launching my business three years ago, it’s that startups don’t have many resources, i.e. people or money. That makes growing any social media account more difficult, but because of the nature of Twitter, it’s often considered the hardest.

Twitter isn’t a straightforward social network – there’s a culture that one must adjust to, a language to be learned, and unique etiquette rules to follow.

Let’s face it, Twitter isn’t easy.

But that doesn’t undercut it’s innate ability to become a branding channel, major lead magnet or powerful customer service channel. So when it comes to plotting out a strategy to get more Twitter followers for a startup, I tend to recommend a grass roots approach. This strategy can be used for any business, but if you’ve got the resources or money to spend, other routes may be easier or less time-consuming.

However, as an advocate for many of the old-school strategies, I can guarantee that the quality of these followers will be excellent. All accounts attract spam and deal with some of the more unsavory folks in the Twitter-sphere, but if you follow this guideline, those folks will be cut to the bare minimum, and you’ll be left with the cream of the crop.

1. Outline who you want to follow

I’m a massive fan of Twitter lists, and to be successful with the execution of this strategy, you’ll want to get specific about WHO you intend on following. By that, I mean listing out keywords for demographics, interests, hobbies, values, and topics that relate to your target audience

If you don’t already have a Ideal Customer Avatar for your startup, make one because it will greatly improve the keywords used to find people on Twitter AND they’ll likely follow you back. If you aren’t sure how to create an ICA, check out this great article HERE.

But you won’t just want to follow your target audience, you’ll always want to include influencers, businesses in your industry, competitors, industry news, and fun accounts to that list. Fun accounts can be folks who share quotes, humor or anything to add some spice into the mix. We want to be purposeful about who we follow, but allow for a diverse mix.

This list will aid in making sure that similar to the thesis of a paper, you stick to the overall goal of who to follow online.

2. Utilize Advanced Search

Once you’ve got a solid list together of WHO you want to follow, now it’s time to go start finding them. You can easily use just the Search function on Twitter to find lots of people with the list of keywords we created in Step 1, but to get really specific, Twitter advanced search offers many options for getting extra particular.

This comes in handy particularly when location is taken into account. You can search for local topics, national discussions or trending topics in certain areas. This can be huge for local startups who would like to start building relationships with local businesses and add the local flavor into their content stream with events and promotions.

But overall, Twitter advanced search can be utilized to search for discussions surrounding your brand name, its product or service, people who share your content or interact with you. Armed with the list built in the first step, you’ll never have a shortage of quality people to follow.

3. Bulk follow

Now that you’ve pin-pointed who you want to follow and where they are, it’s time to roll up the sleeves and start investing time into bulk following. To prevent this practice from being impersonal or unethical, make sure to utilize the keywords from the lists you developed, and take the time to read their Twitter bios of the accounts you’ll follow. My personal preference is to not follow people who don’t seemed aligned with the same industries as I am, have the same values or interests, or haven’t put time into their accounts. Mostly, I’m trying to make sure that I find quality people on Twitter who want to engage and get yappy with me.

This is the hands-on approach to growing followers that many tools handle for you, but if you follow the two previous steps fully before following people in bulk, you’ll keep the less quality follows to a minimum, which most tools can’t promise (except SocialQuant).

Plan out a specific amount of time to bulk follow per day, schedule it out on your planner, and stick to it.

And if you really want to be particular about who you follow, don’t just read bios, but click on accounts, check out the content they’re sharing, and if you click Follow, interact with some of it before heading off. Not only will that increase their chances of following back, but it will let them know right away that your account is being managed by someone who will interact.

4. Check out other Following lists

When I first got wrapped up in Twitter’s web back in 2009, there wasn’t a lot of information on the web about how to find the ‘right’ kind of people. Originally, I followed news organizations and celebrities because no one I knew was on Twitter yet. It took me a few months before I started finding accessible journalists, marketing professionals, and bloggers. And once I started finding real people whom I enjoyed, I began pilfering their Following lists to find other people to follow. And it was fantastic!!

When you come across an account that aligns with your brand and has a respectable amount of people they’re following, check it out and follow the folks that work for you. This can work perfectly with competitor accounts and will cut down on the amount of time spent locating people you’d like to follow.

5. Get involved with Twitter chats

If anything is exploding on Twitter lately, it’s Twitter chats, and they are an excellent way to find great people to follow. They offer the opportunity to talk about subjects of interest or that relate to your industry/brand and can introduce you to a whole plethora of new folks looking for the same.

Here’s a good source for all the available Twitter chats (click here), and if there isn’t one for your industry, I’d recommend starting one. Either way, choose one, jump in and share conversation with other folks – they’re highly enjoyable.

6. Tweet often, post consistently

If you want to find followers and get people to follow you back, then it’s going to be key that you establish your brand as credible and trustworthy. This is achieved by tweeting a minimum of 15-30x/day, and being consistent with that approach. Tweeting so often may seem crazy if you’re new to Twitter, but since it’s a drip feed of content, you have to have enough tweets to be relevant or no one will ever see you.

But consistency is the most crucial part of any social strategy. If you can only post a few times a day to start with, begin there and then add to it. Whatever is possible for you, make a plan and stick to it. If you show up consistently, other people will do the same. And vice versa.

7. Create Twitter lists

I spoke about my agency’s Twitter list strategy before, but in addition to those lists, and specifically for startups, I’d recommend creating these lists:

1. A list of people who interact with you. Make this a public list and any time someone interacts with you or your content, add them to the list. I’d suggest calling it something flattering, for example, ‘People Who Engage’ or something that gives them props for being engaged people on Twitter. They’ll be alerted once you add them, and will most likely follow you back.

2. A list of people in specific industries. Remember all those keywords I asked you to create earlier, group them into general categories and create lists for them. As you’re bulk following, you can add people to lists who you find additionally interesting or relevant.

3. A list of people from Twitter chats. This is a fantastic way to keep track of people who interact with you during Twitter chats and kind of give them props for doing so. Similar to the list of people who interact with your brand, it will give you a frame of reference as to who they are, and be more flattering for them.

8. Promote your Twitter account

This is like, duh, right? But is it really? We forget (even I am guilty of this) to promote our social channels and then people are unable to find us or don’t know how.

When you create a account for your startup and you want to get more Twitter followers, do a few things:

1. Write a blog. It doesn’t need to be lengthy, but discuss why you want to have a Twitter account for your startup, what type of content you’ll share, and who will be managing it. By writing a blog, you’re cementing this event in the history of your startup and creating content to share. Plus, the blog can be the long-winded version of what you hope to do with it. Are you aiming to make it your main customer service channel? Have conversations with users? Talk about it. And then share it.

2. Include the blog and news in your email newsletter. If you don’t have an email campaign set up, then I’m virtually shaking you, but hopefully you’re at least collecting emails. And a new Twitter account is worth telling your audience about. If you don’t tell them to follow you, they won’t, so you’ve got nothing to lose. And keep the spammy content to a minimum by letting them know what’s in it for them if they follow you, i.e. content, news, customer service, etc.

3. Add a Twitter button to your website and any other relevant sites. If you don’t make it easy for people to follow you on Twitter, it won’t happen. People are inherently lazy, which is why we need this promotion section on this blog to begin with. So we must make it easy for them to do so.  

4. Share the blog on your other social channels, create quote cards with your tweet handle to announce the news, and talk about the Twitter account often. Once isn’t enough in social media land, so strive to be creative with your promotions. In addition, you can cross-promote social channels, i.e. use a tweet for Facebook or vice versa.

However, do NOT hook up social channels so that the same content is flowing out of more than one account. If you post the same things on two accounts, chances are people won’t follow both.

9. Humanize it

You can follow all these strategies, incorporate fascinating content, and use the right Twitter marketing strategies, but if you don’t humanize your account then it will be tough to get people to follow you back. And let’s be honest, that’s what we want, right?

Startups have it tough because there’s so many popping up on the social scene, and instead of having a big smiling face in the profile picture, it’s a logo, and no matter how cool that logo is, people aren’t as interested in following logos. It’s harder to develop relationships with people online when working behind a logo, but it’s done everyday, it just takes purposeful work to humanize the account.

To humanize a social channel means to make it seem more human, personal, like you’re having a conversation with a friend or someone you know. On Twitter, this can be achieved by sharing content that describes the values of your brands, photos and videos from behind-the-scenes, quote cards to motivate, or questions that generate conversations.

The more often people see personal commentary in the Twitter stream, the more likely you’ll be able to get more Twitter followers.

What strategies have I left out to get more followers on Twitter? Or what works best for you?

COMMENTARY:   In an article dated March 23, 2015, Joshua Steimle writes about, "Four Things I Learned Getting My First 4,000 Followers on Twitter."  Steimle says.

"I haven’t bought any of my followers or engaged in any sort of trickery to boost my numbers. It’s all organic. The only “trick” I’ve found for increasing the number of followers I have, beyond simply being active on Twitter, is to follow others. It seems most people follow back when you follow them."  [Steimle included a graph which shows this relationship]

Steimle repeats what social media marketing consultant Murray Newlands had to say about how to get Twitter followers:

“You can get pretty sophisticated, or desperate, trying to get more followers on Twitter, but don’t forget the basics. Use hashtags (but not too many, generally a maximum of two), tag others (where it makes sense, such as to credit them as the author of a link you’re sharing), include links, images, and video, favorite and retweet others’ tweets, and engage in conversations on Twitter, you know, be social.”

Steimle stresses the importance of adding images to your tweets.  This is something I do religiously, so I agree wholeheartedly with him.  He says.  

"Tweet a line of text and maybe it will get favorited or retweeted, but probably not. Add an image to the same tweet, and engagement goes up steeply. Twitter’s own data says tweets with images get retweeted 35% more than tweets without them, so take a little extra time and include a good image along with that tweet."

Steimle points out the importance of using social media tools that can help drive more traffic to your website or blog or Twitter page and increase your followers exponentially.   He says.

"If you use Twitter more than here and there, check out Buffer. It has become my go-to social media management tool. Buffer’s primary feature is the ability to schedule tweets, which is useful for me since I live and work in Hong Kong most of the time, while my audience is still U.S. centric. With Buffer and some help from Moz’s Followerwonk tool I can schedule my tweets to go out at the optimal times for my followers, which happens to be while I’m sleeping. But Buffer also makes it easy to  tweet content whether on the desktop or mobile, including images with a simple right click."

Like Steimle, I have grown my Twitter followers organically.  I never paid for followers like others do.  I take the time to check the profiles and content being posted on Twitter by any new followers.   Just within the last three weeks or so, nearly three dozen new followers turned out to be individuals or firms selling followers for a price or peddling a service I don't need and no tweets other than a headline.  I blocked all of them.  I want quality followers, and so should you.  I want followers who clearly follow me for my content, and who I will follow back if I find them complimentary to my interests.  You should do the same.

Courtesy of an article appearing in SocialQuant and an article dated March 23, 2015 appearing in Forbes

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10 QUESTIONS ENTREPRENEURS NEED TO ASK THEMSELVES BEFORE SEEKING VENTURE CAPITAL AND ASSESSING THE DEGREE OF RISK

In the first part of this article, we have seen what is venture capital funding and how it works. It is time now to take up how to get venture capital funding, or whether to go for it at all. What does it take for an entrepreneur to get funded, and what are the circumstances in which he may be better off growing his startup organically?

Here are the 10 basic questions an entrepreneur needs to ask himself before going off in a quest for venture capital funding.

1. Do you have a viable, rapid-growth, highly-scalable idea?

Every entrepreneur believes his startup is a winner, and that his business idea is brilliant. But that’s hardly enough. Other people have to see evidence of it to back the idea. Especially VCs. Your pedigree, academic credentials, and even the idea might get you a meeting with potential investors, but not further.

Sumit Jain, co-founder of CommonFloor, one of India’s leading real estate portals, learned it the hard way when he started his entrepreneurial journey. He and his co-founders were engineers from the prestigious Indian Institute of Technology (IIT), Roorkee.  He recalls.

“We thought getting venture capital funding will be easy. If we won’t find funding, who will? We pitched to so many VCs but nobody was willing to bet on us then. Finally, we decided to bootstrap and make our business work. In a year’s time, investors were coming to us.”

So, if you are comfortable running a small or niche business which you can make profitable, venture capital funding may not be your cup of tea. Bootstrapping with your own savings, or raising money from family and friends, would be a better option. On the other hand, if you have the ambition to launch a high-growth company – and deal with the stress that comes with it – then at some point you will need to go for venture capital financing. The right time for it is when your startup is poised to take off on an accelerated growth path into the big leagues.

2. Does your business suit the venture capital model?

As we have seen in Part 1 of the article, VCs need big winners. You can run a small, profitable business comfortably, but that doesn’t interest a VC. You should go to a VC only if you have ambitions to scale up your business with big infusions of capital. You should also be prepared to get onto a fast growth track, because your venture capital investors will want to sell their stake and reinvest in new startups.

3. What is the size of the market that your startup is targeting?

Some businesses are just too niche to be fundable. A US$20 million market size may be good enough to run a business, but remember that institutional investors are looking for a rapid scaling up – and for that, a market size in hundreds of millions of dollars is more like it, because if a startup manages to capture even a small share of that market, it will be large enough to give a venture capital fund the quantum of returns it needs for its investors.

4. Deep down, what is your reason for starting up?

Some people start up because they want to be their own boss. Others do it because they like the status of being an entrepreneur. A third kind of startup founder is driven by a passion to disrupt the status quo. Probably in most startup founders you will find shades of all three, but it’s the third characteristic that appeals the most to a VC. They are the ones who will not be satisfied with making a good living from their business; they want to change the world. Some introspection at the very outset can point to the road ahead that is most suitable for you. 

5. Are you ready to share control of your startup?

A VC-funded startup will go through several rounds of funding, and the founders will have to part with large chunks of stock in the process. Venture capital funds invest large sums of money, and in order to generate returns on those, they need to own significant percentages of their winning startups. For a founder, this means getting used to the idea that he can’t call all the shots in the quest to make the company grow large. Of course, that doesn’t mean the founder won’t become rich – even a small stake in a high-growth startup can be worth millions.

6. Which venture capital fund is right for you?

A multitude of factors come into play here, but the most important of them relate to the value that a venture capital fund can add to your startup, beyond the capital. The guidance of an experienced venture capitalist can prevent mistakes and turn errors into valuable lessons. They are well-connected with potential customers, investors, and acquirers, which is invaluable to a fledgling startup. Ideally, they should have experience in your field, but at the same time not have another startup in their portfolio that would be your rival. And finally, it’s always best to catch a fund in its initial investment phase, so that there will be more opportunities for follow-up funding.

7. Do you have the boldness and perseverance to cross the dark valley?

“When an entrepreneur succeeds, there is so much glamor and halo attached to them. What is forgotten or undervalued is the walk through the dark valley entrepreneurs go through.” Vani Kola, managing director of Kalaari Capital, shared that with me some time ago, and those words have stayed with me because we see it in so many successful startups we profile at Tech in Asia. Having been an entrepreneur herself, it is that elusive quality of perseverance that Kola the venture capitalist looks for in startup founders.   She says.  

“On the days when things don’t go great, this quality will see the entrepreneur through.” 

8. Do you have the team and leadership to grow your startup into a viable business?

However good your idea may be, or however strong your tech credentials are as a founder, if you don’t have a strong team or you can’t persuade a venture capital fund manager that you have the leadership traits and connections to build a great team, then he will be inclined to walk away from it. Getting from seed stage to the next levels before ultimately reaching the big exit point that investors are looking for requires organization and collaboration. That’s why a VC will try to figure out if an entrepreneur has the makings to be a good team leader.

9. How should you approach a venture capital fund?

You have identified a pain-point in the world, you have an idea to resolve that pain-point, and you have worked out a business proposition for it. You know how the business will grow, where the revenue will come from, who your customers will be. You have markets and their sizes in mind, as well as competitors and obstacles. Now, how do you take all that to a VC?

One way is to be selective, studying the past behavior of venture capital funds to see which ones may go for your startup. The problem is that the past is not always a reliable guide to how a venture capital fund will invest going forward, because it is in a constant state of flux.

The other way is to use a scatter-shot – that is, to fire off proposals to a multitude of venture capital funds in the hope that you strike upon one looking for a startup like yours.

There is a third way too, and that is to first find an incubator, accelerator, or a tech evangelist to back your idea. Screening startups and deals is a complex and time-consuming process. So it helps to have your idea vetted by somebody the VC respects. Pre-screened business opportunities save time for VCs, and have a better chance of being funded. The caveat is to look for a genuine backer with VC connections.

10. And finally, can you get a VC excited about your startup?

Venture capital investing is an inexact science – even more so than investing in stocks. Even after various checkboxes have been ticked and business models analyzed, the GP will take the final call from the gut. That is something to keep in mind.

With so many startups clamoring for venture capital funding, it’s the ones that get VCs to respond emotionally, and not just analytically, that are more likely to make the cut. It may come down to how well a GP connects with the founder or team, or whether he can relate to the problems the startup is trying to solve. Parag Dhol, managing director of Inventus (India) Advisors, is candid about it:

“One of the key reasons we choose an entrepreneur is if he has the passion. If he bores you, there is no point funding it.”

Karthik Reddy, managing partner of Blume Ventures, seconds it. “The investors who eventually end up cutting the cheque are those who become equally passionate about solving those problems. They see that spark in the entrepreneur. They see that market opportunity, just as the entrepreneur sees it. And at the seed stage, it is probably an extreme version of that shared passion and faith.”

The startup journey can be as exciting as it is fraught with risk. Paying attention to what goes on there can prevent sleepless nights and take you soaring into your dreamland.

COMMENTARY:    You have probably heard plenty of times that being an entrepreneur is a risky business, and investors talk all the time about reducing the risk. Yet everyone seems to have their own view of key risk drivers for startups.  Like bankers who rely on credit scores, financial ratios to assess the degree of risk associated with granting a loan, and the experence of the founders and management team, the first priority is to avoid startups without successful business models, look for an experienced management team with a proven trackrecord in the industry, solving a real need in the marketplace, a very compelling value proposition, a scalable business model, knowing and targeting the right target customers, and competing in the right market, not just a large one.  

Here is a priority list of key risk drivers that both entrepreneurs and venture capitalists should evaluate and minimize in starting a business: 

1. Team experience and depth risk. Here I’m talking about both the experience and track record of the founders in starting a business, as well as their experience and knowledge of the business domain. Like most professionals, when I get a business plan, I flip first to the founders section to see if it is a balanced team who has been there and done that.
2. Market and opportunity risk. There is always less risk with a well-defined problem in a large and growing market. All the people in China is a large and growing market, but all the people with cancer is much more well-defined. It’s hard to make money in a shrinking market, or with a solution that is “nice to have” versus painfully needed.
3. Competitive risk. Think seriously about the number and clout of your competitors. Having none is a red flag (may mean no market), but having more than a couple of large ones may mean this is a crowded space. Even in an open space, you need intellectual property, like patents, to keep potential competitors from overrunning you.
4. Financial risk. Very few businesses can be started without money. You as the founder will be expected to put your own “skin in the game.” The business plan should be realistic about how much cash will be required to break-even, and how big the return will be for investors in the first five-year timeframe.
5. Market entry strategy risk. The selection of an inappropriate pricing, marketing, or distribution strategy is a large potential risk. For example, many new social websites proclaim that they will offer a free service, and live on ad revenues (not likely in the first year without a huge marketing investment).
6. Political and economic risk. Sometimes founders are just in the wrong place at the wrong time. Recessions are a tough time to sell luxury goods. Under-developed countries may have a strong need for your product, but are often unstable and dangerous. Four specifics include tax rates, tariffs, expropriation of assets, and repatriation of profits.
7. Technology risk. New technologies, especially those characterized as “paradigm shifts” or “disruptive” may have long and costly acceptance cycles, or may run into unpredictable performance or manufacturing problems. Medical technologies have costly legal testing requirements, approval processes, and insurance validation.
8. Businesses with high attrition rate risk. Certain business sectors have historical high failure rates and are routinely avoided by investors and many founders. These include food service, retail, consulting, work at home, and telemarketing. On the Internet, I would add new social networking sites, and new matchmaking sites.
9. Operational risk. Some businesses require huge support or administrative infrastructures. For example, vehicle fuel improvements require service stations and maintenance shops nationwide, before they are viable. Even small operations can have breakdowns of specialized equipment and complex support processes.
10. Environmental risk. A nuclear reactor built on an earthquake fault line is a huge risk. Evaluate your business and location for sensitivity to floods, hurricanes, and catastrophic pollution problems, like an oil spill in the Gulf of Mexico.

The biggest risk of all is starting a company, any company, for the wrong reasons.    If your startup is clean on both of these lists, you will most likely build a successful business, get the funding you need, and have fun at the same time. What more could a budding entrepreneur want?

Courtesy of an article dated September 22, 2014 appearing in TechInAsia and an article dated April 10, 2013 appearing in Startup Professionals Blog

7 CROWDFUNDING TIPS FOR SUCCESS ON KICKSTARTER AND HOW CERTAN WORDS AND PHRASES CAN LEAD TO SUCCESS

Crowdfunding has quickly moved from trendy buzzword to a mainstream fundraising model. In less than five years, Kickstarter has attracted more than five million contributors pledging close to $1 billion, funding more than 55,000 individual projects. Rival fundraising platform Indiegogo can boast of a campaign that single-handedly generated $12 million in pledges. Numbers like these make crowdfunding an attractive option for first-time entrepreneurs and established businesses alike. But what, exactly, does it take to successfully fund a project?

To find out, I’ve asked creators of some of the most highly successful crowdfunding technology projects – each raised more than $300,000  -  to discuss their experiences using Kickstarter and Indiegogo, and share the secrets of their success. Whether you’re looking to raise a few thousand, or a few hundred thousand dollars to bring your product to market, here’s some hard-earned wisdom to consider well before launching your own crowdfunding campaign.

1. Solve a real problem

As with any sales venture, the first key to success is creating a product that people want to buy. Advises Adam Sager, whose home security device, Canary, raised more than $1.9 million on Indiegogo.

“Your responsibility is to produce a solution to a problem.  You need to be able to tell people right away how the product is going to solve a real problem that they have.”

If you can’t communicate the essence of your product and what it does in a sentence or two, you’re not going to attract significant interest from backers.

Many entrepreneurs have looked to their own personal experiences in identifying a problem to solve. Peter Dering, an avid traveler and photography buff, came up with the idea for his original Capture Camera Clip – an updated version garnered more than $800,000 on Kickstarter - because he got tired of having his DSLR hang precariously from his neck, swinging into things while backpacking through Asia.  He says.  

“I thought this was a problem enough people had, and that my idea for a product could solve it. Identifying a problem, and designing a solution that is solid, equals success.”

It’s great if your product can ride the wave of an emerging trend, but make sure you’re not too far ahead of the curve.  John Van Den Nieuwenhuizen, whose second version of the Hidden Radio, a wireless portable speaker, has raised more than $500,000 on Kickstarter says. 

“If your idea is too far ahead of its time, you’ll have to spend resources telling people why they need it.  When we came up with the idea for Hidden Radio back in 2008, we didn’t invent the category.  There were Bluetooth speakers already on the market, but they weren’t attractive and didn’t sound good. We felt we could make a beautiful design that had better sound.”

2. Do your homework

The success of any crowdfunding effort is inextricably linked to the amount of hard work you put into testing and refining your idea long before launching the campaign.  Phil Bosua, who raised $1.3 million on Kickstarter to launch the Lifx LED smart bulb says.

“Every hour of planning you do before the campaign saves you 100 hours of work after it.” 

Van Den Nieuwenhuizen’s vision for a portable Bluetooth speaker began with sketches a full five years before his crowdfunding campaign.  He says.

“You need to do your homework.  Once my partner and I had a design we liked, we submitted it to some design blogs. The response was very positive, with people asking how they could buy it, and all we had at that point was a rendering. We made our first prototype with a trip to the hardware store. It took us a year of looking in the U.S. and Asia to find the right manufacturer. But by the time we launched on Kickstarter, we were literally ready to begin production if we got the funds.”

The challenges you’ll face after the funding campaign are daunting and must be addressed early on.  Dering cautions. 

“You’ve got to have an e-commerce site up and running, a supply chain and distribution network, and way to handle fulfillment and warehousing.  Miss any one of these, and you’re dead. You need to be prepared to make your backers happy, and getting as many ducks in a row as you can before starting the campaign, allows you to ship your product to them quickly.”

Seeking advice from those who have more experience is always a wise move. Gabriel Bestard-Ribas, whose Goji smart lock raised more than $300,000 on Indiegogo, did just that.   He recalls.  

“I got advice from people who had run successful campaigns, asking for feedback on my idea.  But I also talked to people who had failed at crowdfunding. I learned what things to avoid, which is important.”

One thing to avoid is waiting for your campaign to start before doing any marketing. “Build your customer database well before going on Kickstarter,” suggests Van Den Nieuwenhuizen. “Even if you don’t have a prototype yet, you can release drawings or renderings on Facebook and Twitter. You get validation of your idea while building an audience and momentum for your crowdfunding launch.”

3. Bring money to the table

Dering says.

“Kickstarter shouldn’t be your first source of money.”

Indeed, every entrepreneur I spoke with for this story had already acquired some capital before launching their crowdfunding campaign.  

Jonas Gyalokay, creator of AIRTAME, a wireless HDMI streaming dongle, raised more than $1.2 million on Indiegogo says.

"Kickstarter shouldn’t be your first source of money.”   

But before that, he and his team had already poured in tens of thousands of dollars into the project.  He says.

“We invested our own money, using loans and pension savings as well as profit from some of our earlier companies, to buy food and pay our bills.  Another company I co-founded invested $10,000 for a 5% stake in AIRTAME. That paid for office space and some of the hardware we needed in an early stage of development.”

Your funding sources don’t have to be complicated. Bosua and his small team started Lifx with, He recalls.  

“$35,000 that came from maxing out our credit cards.” 

Marc Barros is a serial entrepreneur, whose Moment smartphone lens campaign attracted more than $100,000 in just its first 28 hours on Kickstarter.  He notes.  

“We spent about $80,000 to get to the Kickstarter stage, with prototypes, samples, and additional engineering support to help solve our problems.”

For those looking at mass market production, Barros advises,

“You should think about needing $500,000 to get from the idea stage to shipping a final product. Whether you raise that from your backers, investors, or supply partners, that’s about how much you need (with some wiggle room) to make and ship. You’ll encounter mistakes along the way and a little bit of extra cash makes sure you can deliver.”

4. Set a smart funding goal

When setting your funding goal, don’t confuse how much money you’d like to raise with how much you need to fund your project. Dering says of his first campaign. 

“I made a distinction between ‘expectation’ and ‘hope’ when setting my funding goal.  I expected to raise $10,000 but my hope was to be the top-funded project in Kickstarter’s history.” 

The browse pages of both Kickstarter and Indiegogo highlight not just a dollar amount, but your funding’s percentage relative to your initial goal. People love to back a winner, so blowing past your funding goal by 300% in the early days of your campaign can actually help attract additional backers. Of course, you need to set an amount high enough to cover the costs of actually manufacturing and delivering your product, but your goal should be one that you’re confident you can reach.

5. Make an effective pitch

Bestard-Ribas asks.

“Why do people support crowdfunding?  Because they are drawn to a vision. One they want to engage with. Many people think of their campaign as just selling a product. But you’re really launching your company to the world.”

Your presentation will have a huge impact on the success of your campaign. The financial cost of producing it is virtually zero. You can shoot the video pitch on your phone if you need to. But the amount of time and thought you put into this presentation must be significant.

Sager says.   

“We crafted a very focused message, and presented the product to show how it could impact people’s lives in a direct way. We didn’t start by talking about features. Instead we led with how we were solving a problem. It’s also important to make your team visible. Be very transparent and let potential backers know who you are. Trust is a big part of crowdfunding.”

Of course, when it is time to talk about features you need to emphasize what makes your product stand out from the crowd. Bestard-Ribas stresses that there are benefits to having competitors. He says.  

“There were three competing products that debuted before us.  They generated a buzz around the idea of a smart lock, so people understood our product already. What we had to do was propose why we were better. The competing models ranged from plain-looking to ugly. We had a beautiful, sleek design plus the ability to take and send photos of anyone activating the lock and entering your home. So those are the two features we emphasized.”

Rewards/perks are huge calls to action for potential backers. Get creative. Gavin Fish, VP of Sales and Marketing for Light Harmonic, whose campaign for the Geek Pulse, a portable DAC, has raised more than $1.17 million on Indiegogo, has taken full advantage of services unique to that platform. “One of the reasons we switched to Indiegogo for our second campaign was that backers could choose multiple perks.” Fish also made use of Indiegogo’s tracking tools to offer even non-contributors a chance to earn free products by referring friends who did become backers.

6. It’s not (always) about the money

Crowdfunding has several benefits beyond access to capital.   Fish says.  

“We were already well-funded as a company.  And we knew the high-end audio customer well. With the Geek line, we were looking to deliver a mainstream, affordable product, but we didn’t know what the mainstream consumer would buy. For us, the feedback from backers was much more significant than the money we raised. Near the end of our Geek Out campaign, for example, many backers began asking for a larger unit with more features. That feedback led directly to our second product in the lineup, the Geek Pulse.”

Bestard-Ribas also emphasizes the importance of the contributor community.  He says with conviction.  

“The feedback we get is 10-fold more valuable than the money we raised.  Normally, you’re working in the dark until you bring a product to market. With crowdfunding we get customer feedback before the product is finalized.”

And it wasn’t only customers that he was able to build relationships with. “The press coverage that our campaign received opened doors to partnerships,” he continues. “We had retailers and distributors reach out to work with us before the product was finished, which helped us to better fit their needs. Our partnership with Staples is an example. They got in contact with us during the campaign and now our product is part of their [app] ecosystem.”

7. Make the campaign your top priority

Managing an active crowdfunding campaign is an intense process.  Gyalokay says.  

“It’s not only full-time for one person, it’s full-time for everyone in the company.”

Sager agrees and he says in response.   

“When we ran our campaign, the entire team was 100% focused on crowdfunding.  We sent out multiple surveys to our backers. I personally answered 3,000 emails in the first week.”

Although it can be a nearly overwhelming experience, the campaign offers a valuable opportunity to engage with your backers.  Fish says.  

“We believe that if we can have a dialogue with the market, we can be successful.  We decided to host a separate forum for our backers, to continue the conversation beyond the crowdfunding campaigns.”

Dering says.  

“Feedback can drive product design.”

He recalls having to decide between two competing features in a new camera strap that was still in development.    He recalls.  

“We sent out a Kickstarter survey with a choice of A or B, and our backers overwhelmingly picked a winner.”

The challenge with feedback, of course, is knowing when to say no.  Sager cautions about being everything to everybody.  

“You’re going to have to decide which requests make sense to implement with this version of your product and which ones are better to save for version 2.  We made the simplicity of our product the priority and stuck to solving a specific problem instead of trying to meet everyone’s feature request.”

Social media and email can be very effective in spreading the word about your campaign.  Gylokay says.

“We prepared 100 personal emails each to send out when we launched the campaign. We made sure each one was personal and had a good dose of humility, while stating how important this project was to us and our lives. And of course we ended with a strong call to action.”

Sager adds.

“You need to make your campaign as easy to share as possible. That means all someone has to do is click one button. Don’t make it any more complicated than that.”

Heed the advice of these crowdfunding veterans and perhaps your idea will be the next crowdfunding success story.

COMMENTARY:   Kickstarter, the crowdsourced funding platform, is an all-or-nothing proposition. Either your project reaches its funding goal, and you get to work developing your product, or it doesn't and you go home with nothing. So what's the best way to ensure your passion project makes it past the finish line? Pay attention to your pitch.

Researchers at the Georgia Institute of Technology culled the 20,391 most common phrases that appeared in the text of 45,000 Kickstarters to try to decipher what makes the difference between the wild success of a project like the Pebble smart watch, and an abject, nameless failure. Their results "indicate a fundamental force which drives the 'crowd' to fund crowd-projects: language."   In other words, the words you use to describe your project matter, even in very subtle ways.

Some takeaways: Phrases that indicated that backers would receive something in return for their donation had a tendency to get funded. This should be pretty obvious. Gifts: We like them! So phrases like "pledged will," "also receive two" and "mention your"--all indicators of some kind of reward--tended to show up in projects that were funded. A surprisingly good predictor of funding success? The phrase "good karma and." Words like "encouragement,"  "given the chance" and "as people" worked, but offering to dress up as something as a reward (example: "a skype date with us dressed up as celebrities") did not. Nor did overusing phrases that hint at desperation, like "need one" or "provide us."

The researchers believe that these type of findings could be built into the design of a crowdfunding site. They suggest a help center that could guide new users.

Courtesy of an article dated January 24, 2014 appearing in Forbes and an article dated January 16, 2014 appearing in Fast Company Design

ECOMMERCE SITE ALIBABA FILES FOR AN IPO, AND WHAT YOU SHOULD KNOW ABOUT THIS YEAR'S MOST-HYPED IPO

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Alibaba filed paperwork on Tuesday, May 6, 2014 for a $1 billion public offering. It is expected to increase significantly and could become the largest tech IPO of all time.

If your first thought reading that is "What the heck is Alibaba?", you're probably not alone.

Alibaba is a household name in China and well-known among certain tech industry watchers and investors abroad, but it doesn't exactly have mainstream recognition among consumers in the United States. That might change after its IPO.

To help you get a head start learning about this fast-growing tech company, we've put together a primer on what Alibaba does, how it got so big and what impact it might have on other U.S. businesses.

What exactly is Alibaba?

The Alibaba Group is the largest ecommerce company in China and, according to some reports, the largest in the world. It primarily consists of two big shopping websites: Taobao, which launched in 2003 to compete with eBay in China, and Taobao Mall (or Tmall), an online shopping marketplace.

So basically it's just China's version of Amazon?

Not quite. Unlike Amazon, Alibaba doesn't actually handle any of the logistics — like fulfillment centers — for online shopping. It just creates the platform and user experience for consumers to shop from various brands.

Even that user experience is notably different.  Kelland Willis, an analyst with Forrester Research says.  

"When you are buying something on Amazon, you are engaging with Amazon.  When you buy on Tmall, you are engaging with the brand."

Alibaba's investments also extend well beyond traditional ecommerce. It has invested in a Chinese department store operator, mobile messaging app Tango and Weibo, China's version of Twitter which recently went public. It is also reportedly in talks to get back a stake in Alipay, a payment service like PayPal.

Screenshot of Alibana's Taobao Mall ecommerce site (Click Image To Enlarge)

Just how big is it?

Alibaba generated more than $3 billion in revenue for the fourth quarter of 2013, an increase of 66% from the same quarter a year earlier. Its gross profits for the quarter shot up by an even higher percentage to just under $2.4 billion.

The Wall Street Journal reports hearing from sources that the combined sales volume on Taobao and Tmall hit $240 billion in 2013. On Single's Day, which is essentially China's version of Cyber Monday, Taobao and Tmall topped $5.75 billion in sales. That's more than double the sales of all online retailers on Cyber Monday.

Alibaba is expected to go public with a market cap of around $165 billion, though some analysts think it may top $200 billion.

 Click Image To Enlarge

How does someone even build up a company that big?

Alibaba was founded in 1999 by Jack Ma, an eccentric English teacher-turned-entrepreneur who became interested in building Internet companies after going online for the first time in 1995 while on a trip to Seattle.

Alibaba Group CEO Jack Ma (Click Image To Enlarge)

The secret to Alibaba's success, according to Forrester's Willis, is a combination of launching when the ecommerce market was still small in China and going out of its way to build trust with consumers in the country.

Willis says.

"What Taobao did from the beginning was they created a set of regulations that absolutely ensured consumers get the product they ordered.  It builds trust with the brand. As a result, consumers thought of Alibaba Group as a whole as one they could trust to interact with."

One example of that is the option to pay cash upon delivery, after the shopper has had a chance to inspect the item in person. 

China's ecommerce market has also ballooned in recent years and is expected to be larger than that of the United States in the not-too-distant future.

Why is one of the largest companies in China doing a public offering in the U.S.?

Initially, Alibaba reportedly wanted to go public on the Hong Kong stock exchange, but decided otherwise because regulators in the country would not greenlight its proposed governance structure. But Alibaba stands to gain other benefits from listing in the U.S. as well.

R.J. Hottovy, senior analyst with Morningstar says.  

"By listing in the U.S. you open up the doors to a lot more potential investors.  There are some question marks about accounting and security rules outside the U.S. and European markets. The U.S. listing will add a layer of creditability."

Alibaba Group's headquarters in Hangzhou, China (Click Image To Enlarge)

Will the Alibaba IPO have any impact on U.S. tech companies?

The Alibaba IPO is coming at a time when investor sentiment for the tech sector has weakened thanks in part to sky high valuations. That could change if Alibaba proves to be a strong IPO.

Hottovy says.  

"If it was successful and did well and was priced with a premium valuation, I think that could have a halo effect on the broader tech space.  It could spur some renewed interest in the space."

At the very least, it will have a notable impact on Yahoo, which as a 24% stake in Alibaba and stands to net as much as $10 billion from the Alibaba IPO, depending on how it prices. That could give Yahoo and CEO Marissa Mayer the additional resources needed to make some big acquisitions.

COMMENTARY:   Among the biggest shareholders set to profit from the IPO is Yahoo, which holds a 22.6 per cent stake, and SoftBank, the Japanese telecoms group which has 34.4 per cent. While SoftBank executives have said it plans to retain the stake, Yahoo will sell part of its holding and its current director on the Alibaba board will step down.

Other known investors include Singaporean sovereign wealth fund Temasek and US fund Silver Lake. Mr Ma himself holds 8.9 per cent of the company.

Corporate governance activists, however, have questioned the board structure that Alibaba is proposing. Under the terms, a 28-member management partnership of senior executives from Alibaba and affiliates has the “exclusive right” to appoint a majority of the board.

With that level of control kept by the partnership, “it really all comes down to what is the quality of those independent board members,” said Gary Hewitt, head of research for GMI Ratings, a governance analysis group.

The company named only three members of a board that will have nine people: Mr Ma, Joe Tsai, the executive vice-chairman, and Softbank’s Masayoshi Son.

The company’s Chinese retail platforms had 231m buyers last year, just shy of one-fifth of China’s total population, and nearly 40 per cent of the number of Chinese who use the internet. Its ambitions are expanding, however, both across other sectors of China’s internet and outside its borders.

Its many operations include a small business loans division, a group buying site, cloud computing business and an online advertising exchange. It is affiliated with China’s largest online payments processing network, Alipay, although that business was spun off in 2011 to a separate vehicle and is not part of the listing. 

Alibaba has also embarked on an ambitious, multibillion-dollar string of deals to broaden its reach beyond ecommerce. So far this year, it has taken stakes in companies ranging from China’s largest video hosting site, Youku Tudou, to the US start-up Lyft, a car ride-sharing service.

Jixun Foo, a partner at venture capital group GGV Capital, which had been an early investor in Alibaba said. 

“You should think of them beyond an ecommerce player, just as Amazon is going beyond ecommerce to compete with Netflix, for example, in the so-called online video space.  They are testing the water on many fronts.”

Most of its revenue comes from online marketing, commissions on transactions and fees for its services. In the nine months to December 31, it generated revenue of $6.5bn and net income of $2.8bn, according to the filing.

Alibaba is being advised by Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Citigroup.

Courtesy of an article dated May 6, 2014 appearing in Mashable and an article dated May 6, 2014 appearing in the Financial Times Tech Hub

INFOGRAPHIC: WHY 9 OUT OF 10 BUSINESSES WILL FAIL WITHIN ONE YEAR

 

If you are a budding entrepreneur thinking about starting a new business, it is very important that you read the following infographic before you launch that business.  It may just change your mind.

Explore more visuals like this one on the web's largest information design community - Visually.

 Courtesy of an infographic designed by MergePay.com appearing in Visual.ly

ACADEMIA.EDU FOUNDER RICHARD PRICE'S GUERILLA TIPS FOR RAISING VENTURE CAPITAL, AND THE 10 SLIDE PITCH DECK

Above: Richard Price, founder of Academia.edu, has raised $16 million

I was 27 when I raised my first round of venture capital for Academia.edu, around $600,000 from some London investors. Since then, I’ve raised close to $18 million from investors like Spark Capital, True Ventures and Khosla Ventures. I’ve learned a few lessons along the way that I thought might be beneficial to entrepreneurs starting out.

Rule number one: You should be embarrassed by the sheer audacity of your vision!  Think big about what the company you’re building may be like in ten years if all your dreams come true. What kind of world would you want to create if you had a magic wand? That is what you want to be pitching to a VC, as that is the outcome that matters to them.

An entrepreneur will be thinking about today’s problems, and maybe thinking 6 months out, but you have to train yourself to look into the crystal ball and become eloquent about the ten year view. VCs know there is a lot of risk and they want to see what wondrous things will happen in return for the amount of risk that you are offering them. So offer them a lot of wondrous things.

When I first wrote down the mission statement for Academia.edu, I was embarrassed. We aspire to accelerate scientific research and help find cures for diseases by building a completely new system for scientists to share their papers and peer review each others work. It felt self-aggrandizing and arrogant to say that a tiny company with five employees could accelerate science. And yet, after saying it a few times and thinking through the narrative of how we get to that point, you start to get comfortable with the audacity of the mission. You will stop being embarrassed as the words trip off your tongue.

VCs are looking for the ten-year level of discourse, rather than the six month level of discourse. Being in an investor meeting is actually the one environment where you can let you imagination rip. It’s not only acceptable to do that but its expected.

Master the Macro Stats

Many entrepreneurs start by solving a problem they experience themselves.  They feel the problem intuitively and have an intuitive feeling that there is a decent number of people who experience the problem.  But that’s not enough.  When pitching a VC, you need to have at your command the macro stats for the industry, because that is how they compare your problem with another idea that someone else is pitching. Intuitions are not enough to make the comparison, and for the partner to pitch his/her colleagues – there needs to be some market data about the size of the market etc.

The reason entrepreneurs often skip this step is that it can be really hard to gather market sizing data. As far as I can tell, the only person who’s ever calculated the number of academics in the world is me.  Collecting that data took a decent amount of time.

Many entrepreneurs who haven’t done this work will bullshit or semi-bullshit when a VC asks a market sizing question, and the VC is very used to this, and is very good at detecting lack of expertness “um, yeah, er, the market size is $9 billion’. A VC sees straight through that because they get exposed to it so much. You need to answer in a really confident way with as much material as possible to overcome any feelings of doubt from the VC.

Resist the temptation to be overly obliging

You are asking for capital, but don’t think of yourself as a supplicant, and don’t let that control your intellectual approach. You are a busy person who is an expert on your space, and make sure they realize that.  If there is a poorly thought-out question or suggestion, don’t humor it just because you want to be polite. Be confident and treat it just as if one of your colleagues suggested it as opposed to some higher being. I.e. don’t be rude, but don’t give it any time if it is not worth any time.  Feel free to say ‘that’s not a scalable way of solving this problem; you just aren’t going to get the buy-in from users’.  You want the VC to realize that you are a formidable person who is going to impose their vision on the market place and nothing is going to get in your way. So be dominant in the room with the VC about your area of expertise, and don’t be meek and obliging.

On a second, but related note, if someone offers help and it is moderately useful but not that useful, don’t pretend it will make more of a difference to your company than it will.  When a VC is romancing you, and telling you about the advice they can bring to the table, the temptation is to romance back:

“Thanks! That would be so great! It’s a match made in heaven.”

Better to call it as it is – if the advice is helpful, great, but don’t go overboard in your enthusiasm.

Projecting a strong, independent stance is actually more powerful than being overly enthusiastic about the help or suggestions coming your way.  I only realized this point after Ben Ling at Khosla Ventures said,

“One of the thing we liked about you Richard is you’ve got your own clear vision of the company and you’d be open to ideas from Khosla, but not dependent on ideas from us, and that you’re going to be running the business as you see fit. We like that kind of founder.”

Lock eyes with everyone in the room

With some VCs you are in competition either with their iPhones, or with meeting fatigue, or both. It’s frustrating to pitch to a room of VCs where some people are checking their iphones, or their eyes are drooping.

How do you avoid this? A few tips. You want to lock eyes with VCs and just move around the room and continue to lock eyes, and never let your eyes hit the floor as you transition between points. If someone is looking at their iPhone you can continue to talk to them directly until they feel sufficiently embarrassed as they hear your voice coming in your direction to put their phone down and look up.

Interestingly enough I have never experienced this from a top tier VC – not once.  Top tier VCs uniformly give the entrepreneur their full attention, and it’s a rewarding experience to pitch them.

Another tip is that you don’t want the deck to control the flow.  Too much slideware and people’s eyes start to glaze over.  You should master the narrative and have every transition in your head, so that the deck just serves as a backdrop to the narrative you are offering, all of which fits together like a jigsaw puzzle. Ideally from the moment you walk in the room you have people’s attention, and they are looking at you, with their eyes locked on your eyes, and your eyes going from one VC to another, and you want to maintain this state till the end of the meeting.

VCs like investing in people who know the value of their own time.  They will actually respect you more if you make it clear that you know your stuff and you are a busy person and that you will be respectful towards them and expect that they will be respectful towards you.

Richard Price is the founder and CEO of Academia.edu, a platform used by nearly 7 million academics to share their research freely. Backed with $18 million in venture funding from VCs like Khosla Ventures, True Ventures, and Spark Capital, Academia.edu’s goal is to get every single science PDF ever written available for free on the internet. One of Richard’s major passions in life before starting Academia.edu was philosophy. He wrote his PhD at Oxford on the Philosophy of Mind. 

Follow him on Twitter @richardprice100

COMMENTARY:   

Endless articles, books, and blogs have been written on the topic of business plan presentations and pitching to investors. In spite of this wealth of advice, almost every entrepreneur gets it wrong. Why? Because most guides to pitching your company miss the central point: The purpose of your pitch is to sell, not to teach. Your job is to excite, not to educate.

Pitching is about understanding what your customer (the investor) is most interested in, and developing a dialog that enables you to connect with the head, the heart, and the gut of the investor. If you want advice about pitching, you can ask a venture capitalist, but you probably won’t get a very good answer. Most VCs are analytic types, and so they will give you a laundry list of topics you should cover. They won’t tell you what really floats their boat, mainly because they themselves can’t articulate it in useful terms. “I know it when I see it,” is about the best answer you’ll get.

What is the investor most interested in? Contrary to popular belief, the venture capitalist sitting at the other end of the table glaring inscrutably at the presenting entrepreneur is not thinking, “Is this company going to make a lot of money?” That is the simple question that most entrepreneurs think they are answering, but they are missing the crux of the venture capital process. What the investor is really thinking is, “Is this company the best next investment for me and my fund?” That is a much more complex question, but that is what the entrepreneur has to answer.

To win over the hearts and minds of investors, your pitch has to accomplish three things:

• Tell a good, clear, easy-to-repeat story—the story of an exciting new startup.
• Position your company as a perfect fit with other investments the investors have made and their firm is chartered to make.
• Beat out the other new investments the firm is currently considering.

These latter two issues are beyond the scope of this modest guide. So for now, let’s just concentrate on telling a good story.

Tell a good story

Most of the articles on pitching are generally right about the topics, even if they miss the nuance (sell, don’t explain). But don’t take any template as graven in stone. Your story may require a moderate or even a dramatic variation on the list of slides below. You may need to explain the solution before you can explain the market; or if you are in a crowded space you may need to explain why you are different than everyone else early on in the conversation; or you may want to drop some very impressive brand-name customers before you explain your product or your market. The one thing you may not do is expand the number of slides to 20 (or 30 or 50)! Other than that, let the specifics of your situation dictate the flow of your slides.

Nevertheless, it is useful to have a guide. With the caveats above in mind, here is a basic outline for your pitch:

Cover Slide: Company name, location, tagline, presenter’s name and title.

If there are multiple team members participating in the pitch, put names on the next slide instead. Key objective: Everyone in the room should know the basic idea and value proposition of the company, including the target market, before the next slide is shown. All the words should not be on this slide, but with one or two sentences orally, reinforcing and extending the tagline, everyone should have a foundation for what is to come. Cardinal sin: Launching into your presentation with an investor at the table thinking, “I wonder what these guys do?”

Intro Slide: Team.

The three or four key players in the company. For some reason, everyone puts the team slide at the end, but investors almost always want to know this at the beginning, and it is just common courtesy to make sure everyone is introduced. But make this short, crisp and relevant. This is not the time to share everyone’s life story, or detail the resumes of all six members of the advisory board. Focus on a significant, relevant accomplishment for each person that identifies that person as a winner. In 10 to 15 seconds, you should be able to say three or four sentences about your CTO that says everything the investors want to know about him or her at that moment. Key objective: Investors should be confident that there is a good credible core group of talent that believe in the company and can execute the next set of milestones. One of those milestones may be filling out the team, and so it is important to convey that the initial team knows how to attract great talent, as well as having great domain skills. If there is a gap in the team, address it explicitly, before investors have to ask about it.

Slide 1: Company Overview.

The best way to give an overview of your company is to state concisely your core value proposition: What unique benefit will you provide to what set of customers to address what particular need? Then you can add three or four additional dot points to clarify your target markets, your unique technology/solution, and your status (launch date, current customers, revenue rate, pipeline, funding needed). Key objective: Flesh out the foundation you established at the beginning. At this point, no one should have any question about what it is that your company does, or plans to do. The only questions that should remain are the details of how you are going to do it. Another key objective you should have achieved by this point in your presentation is to make sure that if there are some compelling brand names associated with your company (customers, partners, investors, advisors), your audience knows about them. Feel free to drop names early and often—starting with your first email introduction to the investor. Brand name relationships build your credibility, but do not overstate them if they are tenuous.

Slide 2: Problem/Opportunity.

You need to make it clear that there is a big, important problem (current or emerging) that you are going to solve, or opportunity you are going to exploit, and that you understand the market dynamics surrounding the opportunity—why does this situation exist and persist, and why is it only now that it can be addressed? Show that you really understand the very particular market segment you are targeting, and frame your market analysis according to the specific problem and solution you are laying out. In some cases, however, the problem you are attacking is so obvious and clear that you can drop this slide altogether. You do not have to tell investors that there are a lot of cell phones out there, or that teenagers like to socialize. Save yourself, and the investors, the pain of restating the obvious.

Slide 2.1: Problem/Opportunity Size.

Even if your market opportunity is not obvious, in most cases you can assert the size of your opportunity on slide 2. But sometimes you may need a dedicated slide to clarify the factors that define the size and scope of the opportunity, particularly if you are going after multiple market segments. Or there may be a unique emerging trend that requires explanation. Do not use this slide to quote the Gartner Group or Frost & Sullivan; show that you really understand where your prospective customers are from the ground up.

Slide 3: Solution.

What specifically are you offering to whom? Software, hardware, services, a combination? Use common terms to state concretely what you have, or what you do, that solves the problem you’ve identified. Avoid acronyms and don’t try to use these precious few words to create and trademark a bunch of terms that won’t mean anything to most people, and don’t use this as an opportunity to showcase your insider status and facility with the idiomatic lingo of the industry. If you can demonstrate your solution (briefly) in a meeting, this is the place to do it.

Slide 3.1: Delivering the Solution.

You might need an extra slide to show how your solution fits in the value chain or ecosystem of your target market. Do you complement commonly used technologies, or do you displace them? Do you change the way certain business processes get executed, or do you just do them the same way, but faster, better and cheaper? Do you disrupt the current value chain, or do you fit into established channels? Who exactly is the buyer, and is that person different than the user?

Slide 4: Benefits/Value.

State clearly and quantify to the extent possible the three or four key benefits you provide, and who specifically realizes these benefits. Do some constituents benefit more than others, or earlier than others? These dynamics should inform your go-to-market strategy, and your product/service roadmap, which you will discuss later.

Slide 5: Secret Sauce/Intellectual Property.

Depending on your solution, you might need a separate slide to convince investors that no one else can easily duplicate or surpass your solution (assuming that’s actually true). If you are in a business sector in which intellectual property is important, this is where you drill down into your secret sauce. This is usually some combination of proprietary technology, unique team domain expertise, and unique partnership. Boil this down to simple elements and terms, devoid of jargon. Do not walk the audience through a detailed tour of your product architecture. Instead, highlight the elements of your technology that give you unique potential for leverage and scale as you grow. If you do slides 4 and 5 well, it will be easy to make the case for your …

Slide 6: Competitive Advantage.

You may be good, but are you really better than everyone else? Most entrepreneurs misunderstand the objective of this slide, which is not to enumerate all the deficiencies of the competition (as much fun as that may be). Just because you have really cool technology does not mean you will win. You need to convince the investor that lots of folks will buy your product or service, even though they have several alternatives. And don’t forget that the toughest competitor is often the status quo—most prospective customers can muddle on without buying your solution or your competitor’s solution. The best way to convince an investor that you really do have a better mousetrap is to have referenceable customers or prospects articulate in their own words why they bought or will buy your offering over the alternatives. Use this slide to summarize the three or four key reasons why customers prefer your solution to other solutions. Many entrepreneurs have been coached to use a four-square matrix that shows that they are in the upper right-hand quadrant, but this has become a joke in the venture community. Check-boxes are better, if they are not abused. Make sure your check-box criteria reflect the market’s requirements, not just your product’s features.

Slide 6.1: Competitive Advantage Matrix.

Depending on how important the analysis of competitive players is in your market segment, you may need a detailed list of competitors by category with their strengths and weaknesses in comparison with your company. Preferably, you develop this as a “pocket slide” to be used for Q&A, if necessary. Whether or not you present this slide, it is important that you do your homework on the competition, and that you don’t misrepresent their strengths or their weaknesses.

Slide 7: Go to Market Strategy.

The single most compelling slide in any pitch is a pipeline of customers and strategic partners that have already expressed some interest in your solution—if they haven’t already joined your beta program. Too often this slide is, instead, a bland laundry list of standard sales and marketing tactics. You should focus on articulating the non-obvious, potentially disruptive elements of your strategy. Even better, frame your comments in terms of the critical hurdles you need to get over, and how you are going to jump them. If you don’t have a pipeline, and there is nothing unique or innovative about your strategy, then drop this slide and make the elements of your sales model clear in the discussion of your business model (next slide).

Slide 8: Business Model.

How do you make money? Usually by selling something for a certain price to certain customers. But there are lots of variations on the standard theme. Explain your pricing, your costs, and why you are going to be especially profitable. Make sure you understand the key assumptions underlying your planned success and be prepared to defend them. What if you can’t sustain the price? What if it takes twice as long to make each sale? What if your costs don’t decline over time? Many investors will want to test the depth of your understanding of your business model. Be ready to articulate the sensitivity of your business to variations in your assumptions.

Slide 9: Financial Projections.

The two previous slides above should come together neatly in your five-year financial projections. You should show the two or three key metrics that drive revenues, expenses and growth (such as customers, unit sales, new products, expansion sales, new markets), as well as the revenue, expense, profit, cash balance, and headcount lines. The most important thing to convey on this slide is that you really understand the economics and evolution of a growing, dynamic company, and that your vision is grounded in an understanding of practical reality. Your financials should tell your story in numbers as clearly as you are telling your story in words. Investors are not focused on the precision of your numbers; they’re focused on the coherence and integrity of your thought process.

Slide 10: Financing Requirements/Milestones.

It should be clear from your financials what your capital requirements will be. On this slide you should outline how you plan to take in funding—how big each round will be, and the timing of each—and map the funding against your key near-term and medium-term milestones. You should also include your key achievements to date. These milestones should tie to the key metrics in your financial projections, and they should provide a clear, crisp picture of your product introduction and market expansion roadmap. In essence, this is your operating plan for the funds you are raising. Do not spend time presenting a “use of funds” table. Investors want to see measures of accomplishment, not measures of activity. And they want to know that you are asking for the right amount of money to get the company to a meaningful milestone.

Summary Slide.

This slide is almost always wasted. Most entrepreneurs just put up three or four dot points about how wonderful their investment opportunity is. Generally the words are the same words that investors hear from scores of other entrepreneurs, such as, “We have a huge opportunity, and we will be the winners!” Your key objective on this slide is to solidify the core value proposition of your company in words that are memorable and unique to your company. If the venture investor in the room has to give a short description of your company to his partners, these are the words you want used. This is a good place to reinforce your tagline, or mantra—the short phrase that captures the essence of your message to investors. The best solution to creating your summary slide is to imagine that this is the only slide you will ever be able to present. If you had to do your whole pitch in one slide (with 30 point font), this is that slide.

So here we have a good general outline for pitching your company. But remember, it’s about selling your investment proposition, not about covering points. Don’t get fixated on using this or any other template. You should know the issues about your company that investors are most concerned about. Those are the issues you need to concentrate on. Make sure you address all the predictable “burning questions” as early as you can in your presentation, even if it means violating the sequence above.

Tips on effective pitching

How do you turn a pitch from a monolog to a sale? Make sure every point you make connects with your audience. Keep your text very, very short. Really. Please. Use charts and pictures if you can. And engage your prospect. Ask questions. “Do you think this market opportunity is interesting?” “Have you seen anyone else addressing this problem?” “Do you think CIOs would be interested in a solution like this?” You may get some tough responses, but you will know a lot more about what is going on in the investor’s mind, and you will be engaging them in your story—instead of letting them play with their Blackberries under the table.

Some additional tips to improve the effectiveness of your pitch:

• Make sure that everyone in the room is introduced. Rarely do entrepreneurs ask the investors in the room to introduce themselves. While it is appropriate to be familiar with each investor’s bio (assuming it is on the web), it’s fair to ask something like, “What investments have you been looking at recently?” And if there are some other faces in the room, you should absolutely have them introduce themselves and provide a little background.
• Don’t use a feel-good, visionary “Mission Statement” on your overview slide. Mission statements have also become a joke in the venture industry. It’s like saying, “Our projections are conservative.” Focus on making sure your statement of your company’s value proposition is crisp, clear, and unique.
• Prepare good use cases. Sometimes, no matter how simple and clear the description of a product, what the investor really needs is a concrete example of how people will actually use it. In some cases there will be multiple different use cases. You may need to explain these to get your point across.
• Drop names, early and often. If you really have some brand names involved in your company — as customers, as partners, as members of the team — don’t keep them a secret for the first nine slides; make sure the investor knows about them early in the presentation. But be prepared for the investor to contact every single name you drop — whether it’s a person or a company. If you are going to drop names, they had better be real.
• Make sure you can tell the entire story in 10 to 15 minutes. Even if you have time, your total presentation should be no longer than 20 minutes. You want to have time to engage the investors and discuss their questions or concerns. If you think you have additional critical points that have to be made, prepare “pocket slides” that you can put up if the topic arises.
• Average entrepreneur pitch: 38 slides. Average VC attention span/cranial capacity: 10 slides. Do the math.
• Learn how to control the flow of the meeting, without seeming inflexible or anxious. Watch and listen. Body language and questions will tell you if you are okay deferring a point or if you need to address it immediately. If you let your audience take over the flow, you will probably wind up creating a confusing, incomplete impression of your company. But if you don’t address the “burning questions” early and effectively, the investors won’t hear anything else you say.
• Don’t lie. You would think this goes without saying, but in their enthusiasm for their creations, entrepreneurs tend to slip across the line all too often. Please do not interpret our exhortation toas an endorsement of hype, exaggeration, misrepresentation, spin, or lying. The best salespeople are credible and trustworthy. It is more important that investors trust you than that they understand every nuance of your business.
• Pitching investors is different than pitching customers. If you have a sales presentation for customers, do not think you can simply modify it slightly for pitching to VCs. Start from scratch, keeping in mind with every slide that an investor has a very different perspective than a customer.
• You don’t have to be “conservative,” but you do have to be realistic. Almost every entrepreneur fails to be realistic about how long things take in the real world (vs. the spreadsheet world). Whether it’s the time to complete product development, or the time to close the next ten sales, entrepreneurs are pathologically optimistic. As with your financials, find examples of comparable challenges addressed by other companies, and use that data in your model.
• Never ever put so much text on a page that the investor has to read it. Everything should be short, content-rich bullets in a font large enough to read without squinting. The words are simply reinforcement of the points you are making orally. Pictures, graphs, and charts should be uncluttered and make clear, compelling points. If they have to be deconstructed and explained piece by piece, you will lose focus and momentum.
• And never use your presentation stack as a standalone document. It is perfectly okay if it is not readable when you are not around. That’s the job of your executive summary or your business plan.

A good pitch is very rare. It is so hard executing on everything else that has to be done to build a successful company, pitching often suffers. But the ability to pitch is a key indicator for investors—if the entrepreneur doesn’t know how to sell, how can he or she build a great company?

Courtesy of an article dated March 5, 2014 appearing in Venture Beat and Garage Technology Vendors "Perfecting Your Pitch"

STARTUPS, HERE'S HOW TO CUT THROUGH THE CRAP WHEN YOU'RE LOOKING FOR A CRM TOOL

There are too many Customer Relationship Management or CRM applications. Heck, there are too many CRM add-ons. Sales is our livelihood, and part of the job has become navigating the labyrinth of choices (and customizations) to make something that actually makes your job easier. Marc Andreessen says that software is eating the world, but for salespeople, software is eating us alive.

For the new SaaS company or sales organization, you have to hire the right people, find the right strategy, and define the right market. Now you also have to find the right Customer Relationship Management software. The thing that was meant to make your life easier — little software hacks and tweaks — has now become annoying on the same level as office management and HR issues.

Choosing and implementing the right CRM is a necessary evil, just like finding the right chairs and a reliable Internet provider. And, as you’d expect, All CRMs suck if implemented in the wrong way for the wrong type of company, just as they are all beautiful if they’re implemented correctly.

While building my startup — the proposal software Quote Roller — I’ve tried (and dumped) many CRMs for organizing sales, hiring, and fundraising. I’ve explored many CRM systems to consider integrating with our app, and I’ve whittled down a list of hundreds to only 12.

It’s been an awful rollercoaster, and I’m happy to share the ups and downs as a way of helping you find out what you do and don’t need to get.

You don’t need a CRM when …

… you don’t have a business (or a product-market fit) yet

It’s day 1. You have a chair and a desk and a computer. Don’t buy eight different pieces of software because you think you need to. When you need them, buy them. If you don’t know you need them, don’t. As a founder, you should start contacting potential clients before you even start the company. There’s no need to over-engineer at this point. Finding the product-market fit is hard enough already. Keep it simple (and free) using spreadsheets.

… when there is no sales process to organize

CRMs are made to organize repeatable sales processes and to organize processes that, at first, might not even be there. If you are just going after your first few clients, don’t mess it up with unnecessary data entry.

… you don’t know who you’re selling to

Once all the necessary tests are done, you should be able to answer the following questions:

1.   Who are your clients? Be specific.
2.   How do you find, contact, and persuade them to close?
3.   What is the approximate amount of money you can make on average from each client?
4.   How long is it going to take to close a sale?

… when there’s no use for the data

If you have a few people, and they’re still in the very early sales stages, there’s no process to break down for them. Making someone log a call isn’t useful unless you have a great deal of things to monitor and need organization.

Before you’re established, CRM can be a curse. Don’t buy it or use it unless it’s going to make your life — or your salespeople’s lives — easier.

PipeDrive vs Intercom: choosing a CRM based on your CLV

Your customer’s lifetime value (CLV) is the amount of money your company can make during a single customer’s lifetime. A higher CLV usually requires more time and effort to sell to. A six-figure sale may take months (if you’re lucky) or even years (if you’re realistic).

If your CLV is high, your CRM pipeline (the sales process’ steps) should have many stages and fewer deals in each stage. Creating a visual of your sales process makes it easy for you and your reps to see where things are with any prospective client and keep them from wanting to drown themselves mid-sale.

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PipeDrive CRM is a great pipeline visualization app for companies with a high-deal size and a low-deal volume, where a company is focused on high-value customers. By sectioning out each part of the deal, PipeDrive lets you break down the thoughts, feelings, and processes of a sale in a way that’s far more human.

We managed our seed round via PipeDrive, where investors were “contacts” and investments were “deals.”

Pipedrive is a great software. However, if you’re making a lot of low-value deals, it’s overwhelming and unnecessary. The process is probably as simple as “make call, send email, close deal,” and thus entering in the data becomes useless.

In many high-volume, low-value deals, the sales are likely inbound, low-touch, and automated, which is exactly what Intercom focuses on.

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Intercom is plugged into your website or app with a JavaScript snippet. It imports the client data and allows easy flagging, searching, and filtering in your client database.

Intercom also aggregates additional data about your clients from around the web — like location, social networks, and avatars — as well as from your own system – like the number of purchases, dates of first sign, and your last visit. The system maintains a history of messages sent to a client.

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Another neat thing about Intercom is that you can send custom and automated messages to clients in real time, enabling you to save money on email marketing apps like MailChimp.

Your goal with any CRM is to support your salespeople and their process and have an idea where your next meal is coming from. If your CRM makes this process worse, you don’t want that CRM.

Nimble vs Base: choosing a CRM based on how you interact with customers

What makes for the best CRM for a team often depends on the way you build leads and interact with customers. Some companies are prospecting via LinkedIn, some are cold calling, and some buy email lists to reach out to potential clients.

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If you sell using social networks, take a look at Nimble. Nimble’s integration with social networks is one of the best. Nimble imports your LinkedIn connections as CRM contacts and allows you to message them from the interface. Your message history attaches to your contact dashboards and deals. The same applies to your reps, so you can manage the sales process even if most of it happens in LinkedIn. Nimble also imports all contacts’ social streams, posts, and shares. That allows you to send relevant messages, much more personalized than cold, salesy emails. Similarly to LinkedIn, Nimble integrates, allows messaging via, and imports social streams from Twitter and Facebook. Plus you can take steps that show immediate customer loyalty, like following prospects on Twitter even before making a call.

Nimble also helps to set up “social signals,” or the notifications, for a contact’s birthday, new connections, career change, and more. For instance, you can automatically assign sales reps to prospect anyone who liked your Facebook page or mentioned services you provide in a tweet.

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Essentially, it cuts down on research time and supports a great sale. However, if most of the conversations are taking place over the phone, it’s a bunch of information that’s nowhere near as useful. For companies who are planning to interact with clients via the phone, Base CRM is a better option. Base has built-in voice over IP (VOIP) functionality with very cheap international calling rates, saving time on both call-logging and the physical act of calling (and money, I suppose). The calls are recorded and automatically attached to contacts and deals, removing the awful call-logging data entry of classic salespeople.

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Base is also great if you want your reps in the field. Imagine you have a team of five sales reps running around the city, talking to customers and closing deals. They need a tool with real-time access to contacts and deals in progress, and your sales manager needs real-time access to the deals they’re closing, places they’re visiting, and calls they’re making. The data’s already there without the reps having to struggle to log it.

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Base’s mobile apps (as well as helping you make calls) provide access to the CRM’s data and display an interactive map with all the nearby contacts. You get to know where they are geographically at any point. All this makes Base a perfect solution for companies that practice “outside” or “field” sales and close deals in person.

CRMs can’t save your business, but they can make it better

Many believe that productivity tools and CRMs are the golden goose — the way to make an organization ‘great.’ The truth is, if someone is a bad sales rep, they’ll only be more obviously awful in a CRM-based solution. Furthermore, adding a useless CRM to your business will make your employees hate you and slow down those that don’t.

A CRM is a force multiplier. Success in sales is made by people who deal with your clients, the relationships they build, the needs they identify, the support they offer, and, of course, the product or service they’re selling. A great CRM will support them and catapult them to success, but a bad implementation will steer them to drinking (or to your competitors).

About The Writer

Mikita Mikado is a software engineer and entrepreneur from Belarus, now based in San Francisco. He is the co­founder and CEO of a company behind Quote Roller andPandaDoc. He is passionate about building meaningful SAAS applications that help to save time and be more productive.  (Click Image To Enlarge)

WHY CONSUMER PRODUCT STARTUPS ARE GETTING VENTURE CAPITAL ATTENTION

Procter & Gamble, allow me to introduce hair-dye company Madison Reed and baby care and home-cleaning-products retailer The Honest Company. Gillette, perhaps you’ve heard of the shaving companies Harry’s or Dollar Shave Club? And Uniqlo, meet VANCL, the big, online, Chinese-branded clothing retailer.

These companies are part of a growing wave of venture capital investments into branded consumer goods predicated on using information technology to reduce costs and the Internet to market directly to customers. It’s all with an eye on replacing entrenched industry players, rather than selling those players the tools they’d need to compete against young upstarts.

One venture investor who is backing the eyeglass retailer Warby Parker said. 

“It used to be that tech went into the vertical and sold to everybody in the vertical. Now companies are saying ‘No. I’m going to directly compete with you,’”

That glasses company has set the standard for how startups can try to carve out a market in old-line industries with entrenched competition, according to a number of investors.

The Warby Parker investor said.

“This is a big thing in e-commerce.  You can’t compete selling stuff that Amazon has. Where you can compete is when you sell stuff that can’t be on Amazon.”

It’s the same realization that Fab.com came to in April of last year, when it decided to acquire the custom furniture shop Massivkonzept.  The investor said.  

“To be unique in e-commerce means you’ve got to own products, not just sell products.”

As a thesis, consumer product companies aren’t attracting the same amount of capital as technology offerings in enterprise software, security, or mobile, but the number of investments into companies selling low-tech or no-tech products like razors, soaps, glasses, or clothes, is growing.

For these companies, even grabbing 5 percent of the total market means billions of dollars in sales, investors said.

In 2012 and 2013 there were at least 26 investments made into consumer products companies, according to data from CrunchBase. That’s up from 16 in 2011, and 13 in 2010.

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The companies that have raised the largest rounds in this category include Harry’s, the razor blade manufacturer and retailer; Fab.com, which is now making its own furniture; VANCL, the Chinese online clothing retail behemoth; and Bonobos, which has its own brand of preppy upscale casual wear and suits for men. All told, the five companies have raised in excess of $1.1 billion.

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It’s also worth nothing that of the investors who are active in the consumer market, none is investing more aggressively in the sector than hedge fund investor Tiger Global Management, according to CrunchBase data. The hedge fund first invested in consumer retail branding in China with VANCL before applying the strategy in the U.S. with Warby Parker and Harry’s.

Other top investors active in the largest rounds for consumer brands include Andreessen Horowitz, Thrive Capital and Index Ventures, according to CrunchBase.

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 Renata Quintini said.

“It’s most importantly about leveraging technology to create new brands or extend markets into places where they haven’t existed before.  Now you have distribution channels, social media, and a lot more ways to touch consumers and establish relationships with them.”

COMMENTARY:    

Ten Keys to Successful New Consumer Products

Creating and launching new products successfully isn't easy.  In fact, the industry track record for new product success is dismal. A couple of recent studies place the failure rates as high as 95% in the United States1 and at 90% within two years in Europe.2  Getting beyond the five-year mark with a strong, profitable business is an accomplishment.  While there are no golden paths to new or existing product success, there are a number of principles that greatly improve the odds.  This is designed to outline some of the most important factors in marketing new and existing products successfully. 

• Key #1: Meet a genuine consumer need.  Too many products are in search of a market. Consumer research is critical. Products that meet a genuine consumer need have a basis for long-term consumer interest and purchase.  Sometimes those needs are latent and are created with an innovation in the market, such as with the invention of the internet or cell phones.  Do your homework. Talk to consumers.  Make sure there is a genuine consumer need to fulfill and that the market need is large enough to warrant the introduction.
• Key #2: Make sure product performance measures up.  Products that don't fulfill on their promise or fulfill the wrong need miss the mark and the market. Test the product in the lab and with consumers to ensure that the product not only delivers on the need but that the consumer perceives it to deliver on the need. Prospecting for new customers is expensive. Keeping good customers who are satisfied with the product's performance and who will tell their friends is invaluable for the long-term health of the product. It is also critical that the product is in step with the competitive market. If it performs well but another product is superior, product life may be short.
• Key #3: Ensure strong price-value relationship.  Consumers generally want to make the best buying decision possible for the money.  If the product solves a need and performs well but the cost is too high, the customer will look elsewhere.  The price of the product must be in proportion to the problem or need it meets.  Consumer research is critical here.  Don't forget the competitive assessment.  Price/value is usually relative to the other choices consumers have. Great value for the consumer enhances prospects for market longevity.
• Key #4: Proper positioning and differentiation.  Many times there is a great product that performs well, but the message to the customer is wrong. In a voyage to the moon, missing the target by just 2% will be disastrous for the astronauts.  Likewise, precise positioning of the product to the customer can make the difference between success and failure.  Many companies are too consumed with where they will advertise before carefully determining what to say-the message.  Advertising needs to be focused on a meaningful benefit to the consumer.  It also needs to clearly help the customer understand and feel motivated to buy this product rather than any other one available on the market.  When you are done, you want them to feel there is no better alternative than to buy your product. 
• Key #5: Carefully targeted advertising.  Once the proper message is determined and to whom it should be communicated, sometimes the media used doesn't communicate the message well, doesn't reach the target market, or is too poorly targeted to reach the target economically. The message and the media need to be carefully planned. There also needs to be enough critical mass in media levels to get above the general noise in the market. Reach and frequency are both important. At any given time, prime prospects for your product may be at varying stages of readiness to buy. You must be ready with your message when they are ready to enter the marketplace. Some purchases are considered more carefully than others.  Make sure you can inspire the appropriate level of confidence in your product and be at the right place at the right time with the right message for your customers.
• Key #6: Strong product economics.  Some products with a 30% margin can be successful while others with a 75% margin fail. Considering the entire equation of the product's economics is essential. What percent of sales will it require to reach and win customers?  What is the lifetime value of a customer?  What will it cost to deliver the product to the customer and then provide superior service to support customers?  Don't miss the hidden costs.  Make sure the margins are appropriate for the product.
• Key #7: Effective distribution channels.  Finding the correct channels to get the product to the customer can be as important as the product itself.  Many superb products fail because they don't reach the customer or enough customers.  If a customer loves the product but has difficulty buying it, success will be evasive. Consider not only where the customer can conveniently purchase the product, but also the competitive environment it will be in and whether the image of the channel will be consistent with quality of the product. The servicing of the product is also important. In the intensively competitive grocery aisle, being on the shelf near eye level to be seen can be the difference between life and death.  Many successful products have been built on a store-door delivery sales force that was constantly ensuring good presentation of the product.  Likewise, many products have been successful on the web by distributing through established successful online merchants rather than trying to create their own fulfillment system.
• Key #8: Being on the right timing.  Being early to market is valuable.  Many successful products were established by being the first to market.  However, it is equally important not to be too early before the market is developed.  Being a later entrant to market works best if you can improve on what is available.  There needs to be a reason for customers to want to buy your product over others that are available.  It is hard to start the race late with a horse that won't race as well as the leader.  Likewise, it sometimes requires stamina to develop a new market.  Patience may be the price of success.
• Key #9: Sufficient funding.  Most businesses take longer and require more funding than anticipated.  An investment banker once counseled us on a new venture to calculate how much we expected to need to launch a new business and then double it. Three or four times the estimate is often in order.  Make sure you have enough resources to launch and sustain the product.  It may be the best product introduction in years, but it takes time and resources to let people know about it.  Don't sell yourself short.  Running out of gas part way across the desert is very unsatisfying.  Make sure you have plenty of fuel. Cultivate stakeholders in the business who will help endure the ride.
• Key #10: Organizational support.  People create products, and they are needed to ensure their long-term success.  The organization becomes an extension of the product.  Great products with an organization that doesn't service the customer well are very vulnerable.  In addition, failure to see new threats or opportunities on the horizon such as new competitors, product innovation, major technology change, new governmental regulations, channel shifts or major changes in the economy could make the product obsolete.  A great organization, like a good commanding officer, will be scanning the horizon and have good sources of intelligence. It will also provide great support for those in the trenches with their product.

Product marketing can be highly successful.  Stack the odds in your favor by applying the ten keys to successful product marketing. 

Courtesy of an article dated January 27, 2014 appearing in TechCrunch and an article appearing in Prospecta Marketing

http://techcrunch.com/2014/01/27/no-industry-is-safe-from-vc-disruption/

HOW TO PITCH INVESTORS ON A CONNECTED DEVICE, AND THE 10-SLIDE ELEVATOR PITCH ALL-IN-ONE

How to Pitch a VC Redesigned from Slides That Rock

WHETHER YOU ARE MAKING A WEARABLE OR HOME AUTOMATION DEVICE, THESE ARE THE THINGS TO THINK ABOUT BEFORE PITCHING YOUR IDEA.

Renee DiResta invests in connected hardware.

She's a venture capitalist with O’Reilly AlphaTech Ventures, which has helped fund companies including LittleBits and Misfit Wearables (see below videos). She is also organizing a conference called “Solid” which is all about the future of manufacturing, with a focus on the industrial Internet of things. During a recent event at Smart Design, we asked DiResta to talk about what it takes to "win" in the connected device space. Here's what she said.

 

 

NAIL THE USER EXPERIENCE

DiResta says. 

“One of the things I see frequently do is Arduino-style projects that grow organically out of the maker ethos being pushed into the mainstream market before a lot of thought has gone into what the market segmentation’s going to look like, what the user is really going to need, and to what extent you can make the product intuitive out of the box.  I myself have received Kickstarter projects where I’ve taken it out, plugged it in and said ‘I can’t make this connect to the Internet. I have a computer science degree, and I have no idea what I’m doing wrong.’"

Keep in mind that companies like Apple have set the bar incredibly high. Consumers are now accustomed to taking a gadget out of its box, pushing one button, and having everything just work.

UNDERSTAND FULFILLMENT

DiResta says. 

“I was asked to do some advising at two of the hardware accelerators around here. One of the things we see very commonly is people will believe that they have an idea and then the Kickstarter will take off and they’ll find themselves unable to handle fulfillment or come up with an accurate timeline.   A lot of the mistakes I see as a seed stage investor are the mistakes of just naivety. Not making a thing that can be made.  Here’s this beautiful design, but where the rubber meets the road it’s simply not possible to have a bill of materials come in at a price you need to see."

The easiest way to overcome that problem:  Find a mentor, and invest the time in doing real research on the manufacturing process.   She says.  

"I came from quant finance and from software before that.  I found that literally just emailing people saying ‘Hey, I saw you were a buyer at Walmart in the home electronic department. Would you sit down with me and walk me through what it actually takes to wind up on your shelves?’ Not this theoretical, ‘Oh, we’ll have this massively successful Kickstarter raise, then they’ll reach out to me.’ Oftentimes it’s quite the opposite.  Just emailing people and saying ‘Hey, I’d like to buy you coffee and sit down for an hour and tell me about what it is you do.’”

GET A DESIGNER ON YOUR TEAM

DiResta says.  

“At the seed stage, one of the things we specify is that we like to see several different types of prototypes.  That you have your model side of it:  This is what it’s going to look like, this is an approximation of what we envision shipping to the end audience.  Versus what often comes in, which is the Arduino hooked up to the laptop. So we can kind of see the functionality and maybe see how it interacts with the software on one side of it, and also on the flipside see that you at least have a sense of what the design is going to look like. If there’s no designer on the team, which is quite common, we want to see that they have a relationship in place with an industrial designer who is helping them and that it’s an industrial designer who’s produced a product that’s come to market before and has an understanding of where their costs have to be.”

DO REAL-TIME PRODUCT TESTING

DiResta says.  

“Misfit Wearables is one of our portfolio companies. They did the Shine. They actually raised money prior to launching on Indiegogo. The Indiegogo launch was partially for marketing purposes. Indiegogo was selected in part because they offer flexible perks. And the really interesting thing about flexible perks is that you can adjust your customer offerings in real time.   So you can put out like ‘Hey, we’re going to offer 50 black Shines and see how quickly those turn over. Or people started writing in to them and saying ‘Hey, I’d really like my Shine to connect as a necklace.’ What Misfit was able to do is say we’re going to use this as a channel to reach our early adopter customers and really get a sense of what they want. They had already designed it. It was already made. There was already the core design of the Shine which was made in Korea, Vietnam, and the U.S.--it was a fairly complex process that went into manufacturing that device--they were able to take that and then say, ‘What do we need for our go to market strategy?’"

Misfit was able to do that in part because they had already raised funding.

ITEMIZE YOUR SPENDING

DiResta says.  

“I see some interesting things come in with financials. Everyone will tell you seed stage VCs discount financial models, that we don’t pay attention to them. In software that is more true than it is in hardware.  In hardware there’s nothing that terrifies me more than seeing ‘Oh, we’re raising $3 million of which $1.5 million is for hiring these four people and $1.5 million is how we’re going to get it made.’ We do look to see: Have you secured a contract manufacturer? Are you making it here in Asia or Mexico?  What does your bill of materials look like? What’s the margin you’re building in? Are you going to retail or direct to consumer? What’s your distribution channel? Have you given a substantial amount of thought to the business side? How are you taking this to market? What’s your market segmentation? Where’s your demand? Does your price tie into that demand? We do want to see evidence of a business plan and the fundraising ask tied to a plausible plan for execution.”

PREPARE A MARKETING STRATEGY

One area that startups constantly get wrong is marketing and branding, says DiResta.

"I think this comes partly out of the maker ethos, maybe the software startup ethos which is ‘if you build it they will come’--and that’s not really the case. Unless you have phenomenal SEO and this is the first one of its kind to ever be made…typing ‘baby monitor’ in is not going to pull up your brand new widget baby monitor, it’s going to pull up something made by Belkin.  If you’re selling a thing to somebody, it’s understanding that your fundraising ask should be tied to a marketing strategy and understanding what that’s going to cost as well.”

MAKE IT SMARTER

The connected device space is full of potential, but it's often at odds with entrenched consumer behaviors. That's got to change.  DiResta says.  

“One of the things that we tend to see is that humans are still very much the routers of the Internet of things.  Like your Nest tells you that something is wrong, but it doesn’t necessarily automatically address the problem by itself by talking to another control system.  So one of the things we’re interested in seeing is that point at which instead of it alerting you to the problem, it fixes the thing and then sends you a push notification ‘Hey, I changed your temperature’ or ‘Hey, I talked to your vent.’”

DiResta says.  

“I think Lowes is trying to go this route with their Iris system. I think Smart Things is doing some really interesting stuff.  We’ve also been watching it as what’s coming from the top down--the big company approach versus what comes up out of startups.  Some of the things Kevin Lee from Samsung spoke to about lack of standards, lack of interoperability is a concern. So it’s an area that we’re watching and saying ‘what is going to continue to develop here?’”

 

 

HAVE A KILLER FEATURE

DiResta says.  

“In software it's the idea of a minimum viable product. We encourage companies to articulate: What is your differentiating feature? What makes someone switch away from another product and use you? We see it the same way in hardware which is: Why would I use a Nest when I have a functional thermostat--what is the one killer feature that’s going to offer me?”

It’s better to roll out a version 1.0 that’s simple and let the product evolve over time.  She says.

"You don’t have to have every feature.  It’s like, your cell phone used to be an actual phone. I don’t remember the last time I used it to make phone calls.”

So how do you know when your connected device is ready for market, or at least an investor pitch?   DiResta says.  

"It’s done when you’ve identified that one killer differentiator that someone is willing to pay money for that solves a meaningful problem that’s big enough to make them switch away from their old method of behavior--whether that’s flipping a light switch or adjusting the thermostat with a dial.  And then rolling out that product, building it so that it’s modular enough that you can release some additional features through software rather than requiring a new hardware component is a fantastic way to build some modularity into that and save yourself the cost of having to produce a new run each time.”

COMMENTARY:   If you are an entrepreneur or startup with a great new technology product, I highly urge that you read "The Innovation Secrets of Steve Jobs" by Carmine Gallo before you launch your product or begin prototyping your product.   I mentioned these innovation secrets in my blog post dated October 6, 2011.  I also highly recommend that you learn how to properly pitch your idea to investors by viewing Dave McClure's "How To Pitch A VC" slide show (See above).

Courtesy of an article dated December 10, 2013 appearing in Fast Company