Feeds:
Posts
Comments

Archive for the ‘Business Development’ Category

Shortly after the announcement that Mint.com was to be sold to Intuit in a $170m Cash Deal, CEO and Founder Aaron Patzer shared his step-by-step strategy for Mint’s growth at the Vator.tv Juice Pitcher event.  Aaron breaks down his 3-½ year journey with Mint into three phases of development, and each stage’s goal, expected expenses and runway until next round.

Here’s the 22-minute video, and my notes below for those of you who don’t have the time…

Awesome, insightful and very helpful to see behind-the-scene basics of a successful startup to exit in the Valley…

PHASE I: Garage Stage (<$100k)

–        Goal = Build a Prototype

–        Pre-Revenue Valuation: How a company is valued prior to revenue.

  • “Rule of thumb around the Valley is to…”
    • Add + $500k / Engineer
    • Subtract – $250k / Business Guy
  • …Reason being, web startups need Engineers to build while there is little to do for the Business Guy at this stage.

–        Mints Expenses: Calculating Phase One expenses, Burn Rate, and Runway before next round of funding (based on $100k).

  • Founders at $30k Salary for living expenses. (Aaron’s Salary = $30k)
  • Engineer First Hires at $30-50k, + 1-3% of company.  (Mint’s 1st Hires at $36k + 1 ½ to 2% Equity)
  • Legal Fees deferred payment for 0.5 to .075% of company.
  • Example: 2 Founders + 1 Engineer = $150k / Yr Burn
    • Resulting Runway = Must raise Seed Money in 9 months.

PHASE II: Seed Money

–        Goal = Release Alpha Launch and get it in front of users.

  • Alpha should be usable but not polished.

–        Headcount should be around 5-6 ppl.

  • 3-4 Engineers
  • 1 Product/Front-End
  • 1 Biz Generalist

–        Mint had raised around $750k at this point.

–        Mint’s Expenses:  Calculating Phase Two expenses, Burn Rate, and Runway before next round of funding (based on $750k).

  • Salaries = at $50-90k
  • Overhead = + 20%
  • Legal = $25k General + $2k/mth
  • Total = $600k / Yr Burn
    • Resulting Runway = Must raise Series A within 12 months.
  • Note on Legal Fees: “One thing VC’s won’t tell you is how much the legal fees will be and that you’ll be paying theirs and yours…”
    • Paid around $60k in Legal Fees on $750k, leaving them with $690k.

–        Revenue Projections:

  • “…they’re going to be total bullshit.” And everyone knows it.
  • What Matters Most is…
    • A Huge Market Opportunity
    • Per use/client revenue
  • How much will you make per user, per year?
  • Calculating Opportunity:
    • #User Base x Rev/User/Yr = Opportunity

PHASE III: Funded

–        Goal = Launch a real product and grow a profitable business.

–        Be Aware of Hidden Expenses

  • Patents, Trademarks, Consultants, Legal, etc.

–        Mint’s Expenses:

  • Salaries + Overhead = $200k / Yr / Person
  • Legal = $10-50k / Mth
  • Total = $6m / Yr Burn
    • Resulting Runway = Must be profitable within 2 years.

SUCCESSFUL EXIT MORE THAN $$$

–        Boost in Self-Confidence

–        Gratification of creating something from nothing.

Read Full Post »

I was passed this interview of Marc Andreessen by Charlie Rose and it is a must see for any entrepreneur, investor or businessperson involved in technology or the future of the Internet.  Marc Andreessen has an impressive resume as an entrepreneur, investor, and software engineer that founded Netscape, co-authored Mosiac, co-founded Ning and also sits on both ebay and facebook’s board of directors.  In this interview, Marc has offers thoughtful insight on the past, present and future of technology, the web and the major players involved.

The video is almost an hour, but well worth the time invested.  Also I’ve noticed that there are a lot of folks on YouTube have seen clips but are looking for the full version (56 Minutes) which can be found here on either Google Video or Charlie Rose’s website.  Enjoy…

Read Full Post »

Price TagsWhen starting a business online, one of the toughest questions entrepreneurs face is, “what should I charge?”  It is so difficult today because no matter where you turn someone is offering a similar product or service for less or free.  So how do we compete with free and still be profitable?

“Back in the day,” entrepreneurs only had to worry about what the guy down the street was charging.  It was a bigger world then and you’d physically have to walk down the street to compare prices, and therefore the race to the bottom not as fierce.  But with the Internet, we have access to the competition at our fingertips, and more and more of the competition are just giving stuff away.  So again, how do we decide on prices and compete with free?

FREE IS NOT THE ENEMY

First, we have to stop seeing free as the enemy.  In many cases it is unfortunate, but however you look at it, free stuff is inevitable in the online marketplace.  If it is inevitable then, you have a choice to either adapt and change with the times or struggle to keep your doors open.  Mind you that I’m not saying ‘everything’ should free, but entrepreneurs need to be aware of it, recognize it as a tool, and incorporate it into their strategy.

DON’T BE FOOLED: FREE HAS A PRICE
Free Costs Time

Free Costs Time

In reality, Free is not free.  Free comes with its own price.  The price of free however, is measured by the span of our attention, in time.  I’m not spending dollars and cents every time I log into my Mint account or read an article from Hubspot, but I am spending my precious time.  It’s ironic, but in reality our TIME is much more valuable than money.  Time is a finite resource.  Time is what you spend every moment you’re logged into that free service.

The new question then, isn’t how do I compete with free, but how do I use Free and monetize the ‘time’ of our audience?

HOW TO USE FREE

Seth Godin, master marketer, writes high-quality articles everyday on his blog.  Doesn’t charge anyone to read it, even though he probably could.  But he still manages to sell thousands of copies of his book, ‘Small is the New Big‘ at $26 apiece, which…is merely a collection of some of these same Free articles.  Mint.com provides an incredibly valuable personal finance tool for millions of people, but doesn’t charge a cent to its users.  It does however make money on advertising and connecting its users to credit card offers and such. Hubspot.com is an awesome Internet marketing business that offers tons of free tools, info and articles to their audience.  This draws in prospects, and they then convert these prospects into clients.

SEEK BALANCE

Again, I am not saying that you shouldn’t charge people for your service and give everything away for free.  But unfortunately the online consumer expects a lot from businesses these days.  If you keep everything behind lock and key, it will hurt your business.

What you need is a balance of both.  Offer some free advice, blog about your topic, connect with your community, and show your target audience that you know what you’re talking about and can provide value to them.  This builds trust and loyalty.  As with the examples above, by balancing the scales of what you charge for with what you give away, you can create a natural draw on your audience and monetize their time.

LESSON LEARNED: Free does not come without cost and is therefore not FREE.  Free costs time to produce, and also to consume.

Update: This article by Chris Anderson, entitled “Free! Why $0.00 Is the Future of Business” is an awesome resource for those that may be interested in ‘Freeconomics’…enjoy.

Reblog this post [with Zemanta]

Read Full Post »

Brewers PitcherHaving been involved in a handful of ventures, I learned quickly to take advantage of every opportunity I had to practice “the pitch.” For any entrepreneur pitching their business can be a daily routine.  Most probably practice their pitch everyday, without even knowing it.  Talking to a friend, answering the “how are you” question at work, and making small talk at family gatherings are all opportunities to practice your pitch when the topic surfaces.

I want you to understand the importance of recognizing that these are all opportunities, so learn to PAY ATTENTION and take advantage of them.

WHAT’S IN IT FOR ME?

As an entrepreneur and in business, we should all be aware of how much we use our pitch.  Not only in presenting to an investor, but in all sales.  You pitch your ideas to your suppliers, partners, coworkers, bosses, clients, customers, everyone.  In some form or another, you have to answer their question, “what’s in it for me” and “why should I care?”

Not only do you need to “pitch” everyday, you better get good at it if you want it to be heard.  When pitching you will be challenged with a lack of time, distractions, questions, your own nervousness, or the headache you cannot kick.  Anything and everything will be clawing at your focus and can kill your effectiveness in appealing to your audience.  On the other hand, take every opportunity to practice your pitch, over and over again, until it is programmed deeply into your brain, and you will be able to pitch in your sleep.

THE 15-SECOND PITCH

I recently read an interesting article by the founder of Weebly, in which he describes his experience pitching to the Y Combinator out in Palo Alto, CA.  As founder David tells the story, he had about 15 seconds to pitch before being bombarded by questions.  The questions escalated to the point where he was actually carrying on two totally different conversations in the same room with different investors.

Wow, it seems you are going to want have this pitch second nature and know your stuff right?  Well it sounds like after a 15-minute push and few back-end hours, David ended up with the financing he needed for Weebly (Yay for him). But are you ready to be thrown into the lion’s den?

STEPPING UP TO THE PITCH

Currently, I am preparing to woo investors this year for my startup RentUpdate.com.  My partner and I are revamping the business plan and are preparing to start pitching to investors by mid-year.  Today, I had stopped by the office quickly to drop off some paperwork and I found an opportunity to practice my pitch.

While at the office, I ran into a co-worker who had asked me if I was still working on RentUpdate.  I was busy trying to get out of there and wanted to give him the 10-second spiel (thanks to Scott on the correct spelling for ‘spiel’).  Anyway I hesitated for a second, before deciding to take the opportunity to pitch him the business.  Pending my upcoming year I thought, “Hell, might as well start practicing.”  So I did, and about 10 minutes and a few questions later, he was interested and told me I should pitch the idea to my boss as a possible investor… Interesting.

PITCH TIL IT HURTS

Over the years what I’ve noticed about myself as a salesperson (the same that anyone should notice), is that I get better every time I make my presentation or pitch.  Different people, different responses, different environment, different questions, are all things that change with each new prospect.  Thus, with each new prospect and every pitch, I become more confident, refined and prepared to answer questions before they become questions.

PITCH TO EVERYONE

Take the opportunity to make your pitch to anyone that will listen.  Start with your significant other, your buddy, your parents, coworkers, whomever.  And you don’t have to give them the “FULL” presentation with slides, handouts, and special effects, but just give them the raw pitch.  Explain to them what you’re working on and why you think or “know”, it will work.  Practice changing it up and morphing your pitch to suit your audience.  Mom might not be so tech savvy, so dumb it down a bit (sorry Mom) so that she can visualize the concept and see its potential.  Your buddy on the other hand might be a techy geek, so get into the sweet Ajax features that you’ve got incorporated into the application.  Bump into the marketing guy at work, talk to him about your plan to spread the word and ask him if he’s got any ideas.

ADDITIONAL POINTS

  • Ask: Ask for questions, feedback and ideas. It’s amazing how outsiders can often see more and tell you more about your business than you can, because there on the outside looking in.
  • Embrace Perspective: Perspective is your friend.  Someone in a hole can tell you with great detail every aspect of the hole, but it’s probably a good idea to ask other people who are not in the hole what they think the hole looks like.
  • Get feedback and Pay Attention: If something is extremely difficult to explain to someone, then perhaps you’ve over-complicated it or perhaps you’re over-complicating the business itself.

Lesson Learned: Take advantage of every chance you get to discuss your business and practice your pitch with others.  See them as the small jewels of opportunity that they are.  These mini-pitches are helping you get ready for the big game.  So when the time comes and you have your 15 seconds to shine for that million-dollar investment, you can knock it out of the park.

Read Full Post »

Stop Watch3 Seconds and Counting…

When positioning a new Internet StartUp for release, it is imperative that your marketing message be clear and easily understood.

Remember that online, your visitor’s attention span is measured in seconds. Interest or engage them in those few precious seconds or lose them. Personally, 75% of my time online is spent scanning, not reading. My time is precious and with SO MUCH information available on the web, more is only a click away. So tell me you have what I’m looking for or I’m gone.

Simple, Clear & Easily Understood

A marketing message on the web has to be clear and easily understood. If I come across your site/service, I should be able to understand whom you are and what you do in three seconds or less. If there is a question about who you are…I’m gone. Developing and refining your marketing message is critical to online success.

Case In Point: TheEcoKey.com

Yesterday, I took some time to browse LinkedIn’s Answers section to see if I could offer some helpful advice to fellow entrepreneurs. I came across a question asked by Jennifer, founder of TheEcoKey.com. Jennifer was looking for advice on how to market and drive traffic to her newly launched website.

the eco key dot com

TheEcoKey.com is a great idea and has a great cause and story behind it (I encourage you to check it out). The problem, as I explained to Jennifer was that their message was unclear. I’d visited the website and could not help but be confused: “The Eco Key: Cleaning up our planet, one search at a time.” Umm… I don’t get it, and neither will anyone visiting the site without further explanation.

In order to discover why I should use TheEcoKey.com I had to find the tiny ‘about’ and ‘FAQ’ links at the bottom of the page for a further explanation and to find out what the heck is TheEcoKey… If I hadn’t been trying to help the EcoKeyers out, I wouldn’t have looked at the page more than a split second before hitting the back button. Sorry…I’m gone.

Lesson Learned: Be crystal-clear about who you are and what you’re offering. Spend as much time as needed clarifying your message so that it can be quickly and easily understood by your audience.

Read Full Post »

Probably one of the most straightforward crash courses on startup funding I’ve read, Paul Graham has written a must-read article on How to Fund a Startup. It’s a good twenty-minute read, but if you are an entrepreneur looking to or thinking about funding this article will be well worth your time. And other than rambling on, I’m going to simply point you in the right direction and leave you with a couple of my favorite snippets from How to Fund A Startup:

“Fear of failure is an extraordinarily powerful force. Usually it prevents people from starting things, but once you publish some definite ambition, it switches directions and starts working in your favor.”

“Competitors punch you in the jaw, but investors have you by the balls.”

Read Full Post »

I just came across a thought-provoking blog post from SEOBook.com called ‘How Your Competitors Can Help You’ and wanted to share.

The article asks some important questions for someone thinking about building a new site or online business and how analysis of your potential competition can provide you with insights and advantages. However, section 5 “What Related Markets Exist?” is what really struck me.

Looking for your next online business opportunity? Try this out:

  1. Pick a keyword that describes your target market: In this case “fitness”
  2. Run a keyword search using Google Keyword Search
  3. Look for patterns in the search results for closely related markets you can enter.

This is best described using the example from post:
Google Screen Shot“You might notice there are numerous searches for fitness locations i.e. a gym, a center, a club. So, instead of targeting fitness in terms of health, which would see you up against established health organizations and generalist publications, you might want to target the fitness center section of the market e.g. a comparison of gyms and centers.”

…Interesting no? Thanks ‘RyanD’ from SEOBook.com.

Read Full Post »