Growth Times

ReadWriteStart, the entrepreneur’s channel of ReadWriteWeb, nicely published an article I wrote for them called 10 Principles For Not Killing Your Startup.

With the new wave of entrepreneurs brought about by the financial crisis, I suspect the mortality rate of startups is at an all-time high. I didn’t find robust data to back my observation yet, but I did come across a page that points out that, before the financial crisis:

• the chances were six in a million that an idea for a high-tech business eventually would become a successful company that goes public;
• a venture capitalist financed only six out of every 1,000 business plans received each year;
• and bankruptcies occured for 60% of the high-tech startup companies that succeeded in getting venture capital.

Wow. Persistence is paramount.

As you know if you have visited my “corporate” blog, my mission in life is to change that. Start-ups shouldn’t die. They should live, prosper, and grow into healthy businesses that make people happy.

So I tried to identify the most frequent root causes of death, and for each, I created a principle. You will find the result here: http://www.readwriteweb.com/start/2010/03/10-principles-not-killing-startup.php#comment-195260

Please help make the list stronger by commenting and offering additional principles.

Develop, Fund, Lead, Market commercialization, Entrepreneur, entrepreneurship, managing a startup, new business, product management, Start Up, start up mortality, start-ups, starting a business, tech ventures, venture

In my experience helping entrepreneurs, the most important success driver of any business founder is the capacity:

1. to know their success drivers,
2. and to keep everything they do tied to those.

So being able to keep one’s eyes on the prize and not get lost in the weeds is the top quality any good entrepreneur should cultivate. In this age of information overload, however, requests are being thrown at us from every direction, and in the midst of that flood it can quickly become difficult to discern what matters from the rest.

Luckily, whatever problems technology throws at us, the human brain can still solve.

One method I recommend to solve the focus problem is to create two living documents to keep you on track:

• A Masterplan, that lists both the overall goals for your business and the immediate milestones you are pursuing. Think of each as, respectively, your cardinal direction (I find that concept more flexible than a “destination”, which sets things a bit too much in stone), and the first island your boat should be headed to (in that same direction!)
• A To-Do List, prioritized roughly

A few implementation tips:

• Keep it simple. Both documents don’t have to be fancy. In fact, they really shouldn’t be. Try to keep them as concise and as clear as possible. The longer and fancier – as in feature creep - both documents become, the least chances you’ll use them and the more chances you’ll get lost on the way
• Use standard software. For the masterplan, use a text editor like MS Word. For the to-do list, use a spreadsheet program like Excel, with 2 columns: Task, and “Done” (and if you’re good at excel, you can add an automatic timestamp for the Done entry). If you want my excel template for the to-do list, email me at gregboutin “AT” growthroute.com
• Keep one version only. This one is obvious, but you should have only one version of each document. If you spread the information over more than one version, you’ll have version control issues, have conflicting objectives across the versions and won’t be able to assess the priority of tasks against each other as easily, so avoid that. Yes, even if you work on more than one business. If you want to create similar documents for your personal life, however, I recommend keeping those separate.
• Update them every time. Very important: always, always keep both of the documents updated. Those should be working documents. Remember, they should be the unique source of truth for your business goals and your tasks. Captains use maps, compasses and task lists for the same reason. Yes, captains have task lists too. Or they should, in any case.
• Start small. Iterate, completing each document over time, especially after each shower when you finally got some strategic thinking time!
• Prioritize to-dos intelligently. I suggest a prioritization based on a loose combined factor of importance and urgency as perceived by the entrepreneur. Some like to separate both, thinking what’s urgent is not necessarily important. I disagree. First, it complicates your list. Second, the more important it is, the more urgent it should be, and vice-versa. But sure, some things are very important and can’t be done today, due to some dependency. Then either list the dependency, if that’s an action you should do soon, or downgrade the to-do, or move it to the Masterplan and make it part of your ”first island”: it might be important but it’s not actionable immediately, which is the key criteria for a working list. What’s top of list is what you should do next.
• Align both documents. Check whether the actions you’re pursuing – which should be listed in your to-do list – further the goals in your masterplan. If not, or not much, scrap them. Understanding why some actions you listed do not align with the goals you expressed in the Masterplan may also lead you to revise those goals.
• Share, but own. You are welcome and even invited to share your masterplan with your trusted partner(s), and to ask them for inputs. But remember, you are the Captain, and for as long as you are, you continue to own and be responsible for those documents.

What’s your system? Have recommendations? Please share.

Lead building a business, business creation, commercialization, Entrepreneur, entrepreneurship, focus, innovation, masterplan, Start Up, tech venture, Technology, to do list

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To any current or would-be entrepreneur, I highly recommend the following video of a presentation this month by Aaron Patzer, CEO of Mint, which was recently sold to Intuit for $170 million.

At first I thought it was a bit long, at 22 minutes, and so I figured I’d only watch the first few minutes. 23 minutes later, I am writing this blog post. Aaron goes over the start-up creation and growth process in practical details, even presenting slides from his own original pitch.

One thing, I’m not a fan of the first advice he gives, about focusing entirely on the product and hiring only engineers when you start, which has some truth to it in a number of situations but can lead to complete trainwrecks in others. Someone on the team needs to tie your development to a market need and a winning revenue model – it may not have to be a business person, and a well-atuned engineer can do that as Aaron shows, but it’s got to be someone with a certain ability to think ”market”. Leaving that detail aside, his advice is a gem.

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Develop, Fund, Market, Scale Aaron Patzer, entrepreneurship, Fundraising links, growth stages, Mint.com, Start Up

A great post today by Suzanne Dingwall Williams of Venture Law Associates LLP in Toronto, regarding the recent considerations by the U.S. to increase the number of H1B visas for skilled foreign workers, apparently thanks to a push by venture capitalists.

The stats she quotes are startling: 

“A recently released study by the NVCA notes that (a) immigrants have started more than 25% of U.S. public companies that were formerly venture backed, and (b) more than 50% of the employment generated by U.S. public venture-backed companies has come from immigrant-founded companies like Intel, eBay, Yahoo!, and Sun.

The New York Times has also taken note, citing Harvard Law professor Vivek Wadhwa’s claim that 52.4% of today’s Silicon Valley startups have at least one foreign founder. US VCs are figuring that, to expand domestic deal flow, they need to expand the immigrant entrepreneur base.”

Having lived in six countries including the U.S., I can tell for a fact that the amount of energy I deployed to learn about and obtain the visas and other administrative passes giving me the right to stay and to work is stupendous. In volume, it easily equals the time required to launch the operations of a start-up. This truly is wasted time. If the U.S. had made it easier for me to stay after my years at Stanford, I’d likely be there. I truly love Canada and Toronto is my favorite city in the world – but on a professional level, for tech entrepreneurs the environment is just not comparable to California. So the main advantage of Canada over the U.S., as Suzie points out, is that it is easier to immigrate as a skilled worker here.

But if that advantage diminishes, what’s left to retain immigrant tech entrepreneurs in Canada?

Better public support for start-ups? More grants? Sure, that’s one thing we have over the U.S. But it’s also a double-edged sword: in the previous years and months, the government and semi-public/nonprofit bodies have rapidly enriched their offering to better support the local tissue of tech entrepreneurs. That part is great. But a problem that’s not often raised -no one wants to publicly irk the hands that feed them, I guess- is the increasing institutionalization of venture commercialization actitivities that came with it: internal competition between agencies and “nonprofits” (whose employees clearly profited from this boom) are now leading some of them to expand into the private sector’s realm, for example by offering free market research and consulting services for start-ups. That move even goes against the public service mandate, as those services are generally only available to handpicked “clients”.

Even though it is motivated by a will to better support start-ups, it troubles me that the government and the bodies it supports increasingly choose to nationalize this activity as opposed to supporting the private providers already present. I didn’t leave the most successful communist country in the world – I’m talking of France – to land back in a growingly soviet-like environment, and have to make a living by begging for public grants! Hubs and catalysts are much needed. But it is to complement and promote, not replace, our private entrepreneurial ecosystem.

Sure, there is a lot of good work done hand-in-hand by private, public and publicly subsidized nonprofit organizations here, but when it comes to actual commercialization projects, it’s been my experience again and again that someone with a guaranteed salary and an institutional job simply doesn’t deliver as much value as a private sector provider whose next job depends on the quality of the one at hand. But unfortunately for us, it’s hard to compete with free. ”Free” also creates the wrong culture up north, with start-ups getting used to focusing on the technology and not investing much in commercialization and marketing, which obviously comes back to bite them. The higher valuation Americans place on commercialization activities, in my opinion, is another characteristic of the U.S. entrepreneurial ecosystem that still makes it more compelling than the Canadian one. With higher quotas for H1B visas, it won’t just attract better entrepreneurs , it will also attract better professionals to support those entrepreneurs.

As for VCs in Canada, there are few left, and so companies here are forced to look south or reduce their fundraising expectations and go after angels (who have done a tremendous job filling the gap left by VCs in early stages, but simply don’t have the same financial firepower). Interestingly, the VCs that are left also tend to only provide small amounts and thus really start looking more like angels with extra overheads. Among the Canadian clients I helped this year, and other start-ups I know here that received term sheets from Canadian VCs, not one accepted them. They went for local angels or U.S. VCs. Canadian VCs are stuck in the middle.

Luckily for Canada, U.S. H1Bs are not as compelling as the permanent residence our country is handing over to skilled workers, since they are tied to employment – it’s E visas and green cards the U.S. should make easier for entrepreneurs to obtain (and perhaps they are working on that too, I haven’t checked). But if the great Canadian advantage in facilitating entry and residence of skilled workers goes away, there will be little left here for immigrant entrepreneurs. A Canadian spouse and public healthcare (also something the U.S. may address) as the main reasons for most of them to stay here doesn’t make for great headlines about the state of our entrepreneurial system.

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Canadian entrepreneurs canada, Entrepreneur, h1b, immigration, permanent resident, Silicon Valley, skilled workers, Start Up, tech venture, toronto, US, venture capital, visa

At Growthroute, we believe that start-up leaders should encourage candid inputs on their company and products, and be open to discussing things that don’t work. They should welcome that feedback at least as well as they receive compliments on their successes.

Highlighting deficiencies in due time (and offering solutions) gives entrepreneurs an opportunity to address them before they really hurt, while surrounding oneself with yes-sayers is a well-known recipe for failure – and yet still as common today as it was millennia ago. So you don’t want to surround yourself with either yes- or nay-sayers, you want smart folks who tell it as it is. In the age of twitter,  getsatisfaction, yelp and blogs, being able to productively process their feedback - even when perceived as harsh - is more important today than ever before. Not doing it means not getting it.

It all starts within

In my experience, rowing in the right direction as a company requires a unique ability to invite, intelligently filter and incorporate constructive criticism. This ability must be built into your start-up culture and processes. It is absolutely critical not to prevent anyone -be it in your team or outside- from expressing substantiated concerns – and even less substantiated ones. And that starts with not punishing them when they do. Companies who don’t practice this miss critical market signals and drown in their own self-delusion.

It also starts at the top. The founders are usually the single biggest impediments to fostering a culture of constructive criticism. More than any other type, entrepreneurs tend to be driven by a strong love of freedom and independence, and we also like to be solely associated with the decisions that led our companies to success. While entrepreneurship pride helps us at many levels, unfortunately, it also makes it harder to open ourselves to criticism and learn from it quickly. 

Have you experienced start-ups that felt a lot like the Church of Scientology? Where you were “in” or “out”. Part of the tribe, or outcast. Where performance mattered less than “fit” with founders, something so fickle it leaves everyone with a differing thought wonder whether they will be around the next day. You know, organizations where real decisions are taken behind close doors, people who don’t contribute anything are still around because the founders like them, and turnover is high.

Too many start-up founders think that to row in the same direction, team members need to be somewhat constrained in their ability to think critically. They establish a culture encouraging groupthink and “following the leader” – while punishing anyone voicing a different opinion on fundamental leadership matters . There, “team-playing abilities” actually mean “blind submission to the top”. That kind of personality cult and indoctrination may feel good for the founder but it’s not doing any service to the company. Silencing people who sighted the icebergs might help momentarily calm the passengers (including investors, often a key reason for the opacity  – more than anyone, they should encourage a culture of transparency) but it doesn’t make danger disappear.

As entrepreneurs, please, let’s not require anyone to “believe”. Belief is not prescribed, it is earned. No one “believes” because you ask them to or pay them for, they believe because there is a good reason for them to. It’s our job to give them a reason. Don’t ask your people to “believe” in you and your ideas. Make them believe in your company by showing its capacity to fix mistakes, to correct trajectories and to produce great things as a result. Hire not followers, but people who showed they can accomplish great things and have a commitment not to you or even your vision, but to the success of the company.

At a company I previously was involved with, I highlighted – only after completing plenty of value-added projects as most there know well- that product development was well behind schedule (several release deadlines missed) and politely suggested that for a while, one of the founders might want to spend his time make the technology work as opposed to dealing with other matters. Most people in the team had the same concerns. Opening up my mouth was not in my direct interest, but in that of the company, and that’s why I did it. I also thought the founder would be clever enough to integrate that feedback productively instead of reacting to it instinctively.

Saying it publicly was interpreted as a lack of faith, and I was fired summarily. Keeping in line with the overall philosophy, at the time I was warned against talking publicly about my experience – the kind of things that makes you want to write a blog post about it. Much time has passed, but the company stagnates with a solution that, by all accounts, still doesn’t work and does not achieve traction. Many of my colleagues there, including my successor, have experienced the same fate and been ousted – scapegoats are obviously in demand. If that’s the culture you want to create, be ready for the results. Very sad, especially since it would be so easily fixable, and so much potential is lost by this approach.

Every company has problems. What differentiates the winners from the losers is the ability to recognize those issues and address them quickly and openly. Even a core deficiency can usually be fixed quite rapidly, once spotted. One just needs to be able to hear the signals.  Foster an atmosphere of truth. Chances are everyone will row in the same direction if they feel you are going in the right direction and that they contributed to choosing it. People naturally want to believe and to contribute.

Same goes for outside critics

Repeatedly, founders make the mistake of thinking that journalists, product reviewers, bloggers, and other messengers threaten a company’s momentum. They don’t. What does is how good the company’s solution is, and how the company reacts to their feedback.

In practice, I am sometimes contacted and asked to comment on new products, especially on my blog Semantics Incorporated. I also pick new solutions on which I want to offer my impressions. In two cases since the start of this year, entrepreneurs expressed discontent when as part of my review, I highlighted a few core deficiencies (quite often even next to an ocean of praises!). One even launched personal attacks on twitter as a result (see my blog if you want to know who did ;)

I am not alone. In the recent and less recent past, unfortunately, I have witnessed quite a few entrepreneurs being keen on receiving public accolades but quick to dismiss any constructive comments – and even go out of their way to attack the commenter instead of recognizing her help, thanking her, genuinely asking for clarifications and clinically considering the comments as valuable inputs – which would be the right thing to do, and would gain them lots of public goodwill. Other entrepreneurs, like Andraz Tori when I criticized the email version of his product Zemanta (whose blog version I praise extensively and continue to use avidly – see at the end of this post) have done just that and earned my highest respect.

Being told that your baby is ugly is tough as an entrepreneur. I know that first-hand. But the good news is that, unlike the biological kind (for now), you are not stuck with this baby as is, you can improve it. And while you may have heard that your product is ugly, the commenter may have just intended to say that it would have more potential with some minor changes.

I work quite hard at trying to provide unbiased and productive analysis, and as a result my comments often highlight weaknesses and shortcomings, next to strengths and praises. I always strive to provide corresponding solutions. That’s nothing personal. I don’t make exceptions to that rule, even with friends, and I don’t want anyone, even friends, to spare me the truth either.  Now, don’t take me wrong, there are some rules of engagement: not criticizing everything with little or no substance and without trying to offer solutions, not using overly aggressive language, and not doing it with a hidden agenda, for example. But when assessing whether someone has crossed those lines, remember that the common entrepreneur’s bias works towards magnifying those signals and minimizing the actual information that they channel. So, before you throw down the gauntlet, take a minute, think about what the person is trying to say, and reflect on what could be useful in the context of your company.

Let’s not be utopian, human nature is at work here. Ego gets in the way. As a rule, we tend to prefer those who support us. But ask yourself: who, really, supports us? The ones providing constant positive feedback, even if insincere? Or the ones highlighting a potential trap that may prevent you from reaching our objectives? Don’t be so quick at dismissing constructive criticism and qualifying your commenters as biased or unproductive whiners. More often than not, they are not. The main reason most of us comment on things is ultimately because we want them to work better for us. When human nature becomes highly counter-productive, override it.

Of course, I am not interested in any feedback you might have on this post ;) (well, if you really insist, you can place a comment, and I also just claimed a GetSatisfaction page for Growthroute at http://getsatisfaction.com/growthroute - it may take a few days before they approve it, apparently, so please be patient and do return to it!)

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Paul Graham this month writes on the risk of VCs becoming irrelevant as the cost of start-ups “approaches” zero.

I humbly disagree. The cost is just shifting from hardware and software to talent, processes, and marketing programs.

Paul Graham is claiming from what feels like an “entrenched techie” standpoint that I noticed more than once reading his blog – which I do respect and admire – that “the web has made marketing and distribution free”.

Not so fast.

What wizard is going to run your cheap adword campaign (or maybe adword is dead too?) How are people going to find your site? What’s your sale process and have you understood your audience? How are you going to answer those service calls and emails? Are you going to run the next Google on the cloud? There are costs associated with all of that, and, even if they are compressed by technology too, the investments required to keep differentiating yourself are increasing.

What’s worse perhaps is that, with all its focus on IT, Paul seems to forget that not all start-ups are web start-ups. How about biotech, cleantech, robotics? Is marketing and distribution free for those ones as well?

There is, as always, some truth in what Paul is writing – the man is smart – but in my view, VCs are certainly here to stay and scale those start-ups that can make it into serious money machines. What do you think?

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Scale end of venture capital, growthroute ventures, innovation entrepreneurship, Marketing, Paul Graham, Start Up, Technology, venture capital, Y Combinator