Half Engineer / Half Business Guy

Starting Your Business And Becoming An Entrepreneur

Category: Moving Beyond The Idea

You Don’t “Just Need Engineers”

As I’ve spoken to new business-side entrepreneurs recently (even those, like me, with advanced engineering degrees), one of the most frequently asked questions has been: “How do I build an engineering team?”

It’s a very tough question! In this post, I’ll describe my team’s experience.

REMEMBER – YOU’RE BUILDING A TEAM

When my co-founder and I decided to pursue Catapulter, we knew it was going to be a complex technology, so we couldn’t just run out and “find some engineers”. We needed to build a team.

For some perspective on what NOT to do:
http://whartoniteseekscodemonkey.tumblr.com/

Here’s how we did it:

  1. Ask Experts Who We Need
  2. Post Jobs & Network
  3. Interview
  4. Get Lucky (Networking & Perseverance Make Luck Happen)

WHO DO WE NEED, ANYWAY?

The first step was figuring out what the Perfect Team would include.

We had a good idea, but we wanted to defer to those who knew from experience. We reached out to as many people as we could find in the entrepreneurial community, to figure out what types of folks would really make the most sense to round out our team.

We met with developers, startup CEOs, VCs, and even a mathematician at Apple, and after a few meetings, we narrowed it down. Besides the fact that we knew we needed a talented CTO (see here why you need a technical co-founder), we specifically needed a mathematician / algorithm guru, and a CTO who could knock out the front-end, but also work with some heavy data processing on the backend.

JOB POSTING & NETWORKING

Now that we knew who we were looking for, we started networking and posting jobs everywhere we could think of.

The easiest way to find a high-quality co-founder is through someone whose opinion you respect.

We basically set up as many discussions as possible with folks in the entrepreneurial community, particularly developers, to find someone who might be interested. First, we asked friends who they knew, then asked those people who they knew. (Whether or not you find someone, you’ll definitely learn something!)

You may have the “perfect person” in mind…but the best folks usually have plenty of projects to work on. There’s likely going to be quite a bit of luck involved – who’s super-pumped about your idea, who happens to have the right experience, and who’s available.

Another way to find folks is by posting to job boards and email lists.

We received a number of quality applications through both entrepreneurial email lists like the Philly Startup Leaders and school job boards like UPenn’s. (We also got a lot of noise, so be prepared to screen!)

With school job boards, there’s a timing consideration based on when each of the various divisions of the school searches for jobs. It turned out that one specific engineering school was recruiting when we posted our Algorithm Developer position, and we received a huge number of applications from that group.

For tips on job postings / intro emails, check out this post from a Penn CS Major.

One important note: If you’re not a developer yourself, there are going to be some people who tell you you’re just a “business person”, you’re useless, and no engineer should ever talk to you. There are certainly folks for whom that’s true…just don’t let it be you!

INTERVIEWS

We found our first team member (our Lead Algorithm Developer) through a school job listing. He wrote one of the few cover letters we received (about his genuine interest in algorithms!), had excellent routing/networking experience, and was a leader going in. We interviewed a number of folks, but he stood out at the interview. He didn’t overpromise, he told us what he could and couldn’t do, but was confident that he could figure out anything.

And he freaking rules.

From the same job board, we found a few students who were interested in the CTO position. We ended up selecting one particularly energetic student before a final round startup accelerator interview…

GETTING LUCKY, PART I

In our interview, the partners of the accelerator gave us the business, and really pushed to figure out how talented our new teammates were. A few days later, our new CTO called and told us, without explanation, that he was out. Shortly after, the incubator called and told us they liked the idea and the team…except for our CTO.

At the time, we were bummed out. We were so close…but now we were a tech startup without a CTO! We didn’t realize how lucky we were to have another opportunity to find the right person.

In any case, we knew we needed to figure it out, FAST!

GETTING LUCKY, PART II

We hit the phones again, now networking with people we knew who already had great jobs. We knew it would be tough, but we also knew we had a fantastic idea, an awesome algorithm developer, and a real opportunity.

Running out of network, I called up one of my college buddies, a super-talented engineering classmate of mine who already had a fantastic job. There was no chance he’d leave, so I decided to ask if he had any friends who might be interested.

However…by an amazing coincidence, it turned out he had recently built a trip planning website in his spare time! AND he was the jack-of-all-trades type of guy who could knock out the front end but work on the heavy processing in the background. AND he happened to be casually looking to join a startup. Booyah.

That’s what networking gets you. You make your own luck. And now we had a CTO.

GETTING LUCKY, PART III

With the new team, we spent the summer at Betaspring building our alpha product and beginning to test with users. At this point, our database was rapidly expanding, and we wanted an experienced engineering leader to focus on managing the growth of our technology, and our growing data acquisition and storage needs.

Over the summer, we had continued to network and post on job boards, but hadn’t found anyone. We had been interviewing a number of candidates through the normal channels, but none really fit the team

Then one day, while cleaning out my email, I found one that had slipped past…

Well after we had selected a CTO and began at our accelerator, a really talented candidate who fit the bill had sent us an email. He had experience as VP of Tech/Product at other heavy-data startups, where he had guided nascent technologies through rapid growth.

It only took a couple of phone calls and a video chat with the writer of this email, but it was clear he was the man for the job.

PIECE OF CAKE, REALLY…

And like that, we had three killer engineers making up Catapulter’s core team.

The perfect team needed a jack-of-all-trades CTO, an algorithm developer, and an experienced data-processing guru and technology leader, and somehow we got them all.

The main take-away for me: you have to network, and you have to try everything. It took a ton of legwork, but as a result, we built the absolute perfect team.

It was totally worth it.

Building A Screencast (“Canned”) Demo Video

WHY WOULD YOU NEED A Screencast Demo?

There are many places you’ll want to live demo your product, but also a number of situations where a demo video will be preferable.

Examples include a walk-through video on your website’s front page for first-time users of your site, or an investor pitch before you’re comfortable running the working version of your product live.

At a very early stage, if you don’t have your web product built out enough to be viewed, but your product is novel, a screencast demo may be a good way to show an investor what your product “feels” like, rather than just giving them an idea. It’s much easier to fall in love with a product when you get to see it in “use”, rather than look at a screenshot or just have it described to you.

Just to make this demo, you’ll have to do at least some UI/UX design and testing, rather than just visual design. (In this post on UI/UX design, I describe various ways to mock up a site)

You Don’t Have To Hire Someone (wHEW!)

Fortunately, it’s actually pretty simple to do yourself with one of a range of tools built specifically for screencast creation. Paid tools I’ve been recommended include Screenflow, Camtasia, and iShowU.

However, I went cheap-o, and loved the results: Screencast-O-Matic. It’s not the most beautiful website I’ve ever seen – but $9 for a year with the Pro account did the trick. The best thing about it (aside from the name) is the simplicity of the interface. It’s got just a few features, and they are the exact ones you need.

Unfortunately, the microphone on your computer sucks, and it will be very obvious you used it when you crank your demo volume up for a room full of listeners and you’re bombarded with whirrs and buzzes. Get a decent mic for your demo (if you’ve got a solid headphone/mic combo this can work too).

What should you include?

In total, your demo should be between 1-2min. You should show:

  1. The Core Features that define your product. E.g. if it’s a travel search, show travel search, which is: Enter city, enter dates, hit “Search”, get results, see detail and buy
  2. The Wow Factor – Make sure this is a real “Wow”. Don’t go crazy here showing a bunch of mediocre details, which happens WAY too much. Pick a couple of killer moves. E.g. Show a truly amazing deal your site can find, or some feature that no one has yet.

You’re going to want to add detail to show everything that you can do – but that’s for the next meeting and the next demo. Don’t BORE them! VC Mark Suster puts it well:

“DO NOT make it a features & functions presentation. Unfortunately most people do…Lame. You’re showing them features, not value. Value is when you frame the demo in terms of why it solves somebody’s true pain point.”

The best way to get this down to the core points is to write a script. If you just try to walk through your site on the fly, it’s easy to show too many features, and not hit your points hard. Write a script, then reduce it down to the Core and the Wow Factor, and expect to record multiple times and refine.

My final tip here – talk while you’re recording the visual part of the demo to keep pace, but voice it over later. You’ll sound much better.

BE EXCITING

As Mark Suster mentions in his post, there are a TON of bad demos out there. Avoid walking through your product and checking boxes with a monotone “and then you do X, and then you do Y, etc.

Content:

The best way to build your demo is to build it like your pitch. Don’t just tell your listener what’s happening next, make them WANT that next step. Describe the problem, and help them feel the pain point your product solves. They should think “Damn, I really want to fix this…but how??

(If you’re giving an investor presentation, it should be woven in with your deck, where you present the problem, a description of your solution, then show your demo.)

In addition to the overall reason for your product’s being, you should be clear why you’re doing every little thing you’re doing in the demo. Don’t say “I’m doing X, now Y – instead say “I’m doing X, because I want to Z – and BOOM, there’s what I wanted”.

Style:

This is your product that solves this MASSIVE problem and is going to make A BILLION DOLLARS. Be excited about it for goodness sake! You don’t need to be a monster truck commercial, but avoid the monotone.

I also recommend using a bit of humor. Even the coolest product can have a boring part that needs to be shared. One that comes to mind is logging into your bank account with Mint.com – if I was investing, I’d want to see how you connect a bank account, but once I realized what was happening, I’d tune out as the presenter fills in some form. It’s a good time to crack a joke, make people happy and get the blood circulating.

MAKE IT BIG, FOCUSED, AND CLEAR

This is where the program you’re using really helps out. I have seen a ton of demos where people bring up their website on a huge screen, and absolutely nothing is legible to the audience. This makes for an incredibly boring demo, and people will quickly start checking email and ignoring you.

  • Big – Zoom in on the detail you’re talking about so the font is very readable, and the parts of your site that are unimportant for what you’re saying go away. However, you should leave some of “the rest” visible, so people still feel the context of your site
  • Focused – “Gray Out” the area around your focus area so people don’t get distracted by all the other fancy features still on-screen
  • Clear – Don’t show a bunch of power-user moves, keep it simple

As Always – Test And Refine

Just like your product, your pitch, and the rest of your deck, you should always test your demo with others and incorporate their input.

In particular, figure out which pieces of the demo don’t make sense to them, what they feel is missing, and – most importantly – watch their body language and figure out when they get bored, then make those sections better or remove them.

You Need A Technical Co-Founder

NO, YOU CAN’T JUST OUTSOURCE

If you’re starting a tech company, you need a technical co-founder.

Without one, you won’t be able to build your company. In addition, you won’t be able to raise money, because investors know how important it is to have a technical founder on the team.

There are a long list of reasons, but here I’ll make like an entrepreneur and show you the problem, then give you the solution.

Let me start by addressing the most common issues, usually preceded by:

“Sure I can start a tech company without a tech co-founder, I’ll outsource!”

PROBLEM: OUTSOURCING = MISALIGNED INCENTIVES

While outsourcing a website is possible, the incentives of whoever you’re sending work to is often the opposite of what you want.

Even for the most expensive contractors, their incentives are:

  • Do the least work possible while getting paid
  • Take longer than you want, if it means they can get paid more

Even a great provider has these incentives – they’ll just act on them differently. The best folks do work quickly to earn repeat business, and don’t charge for hours above their estimate. However, until you’ve had experience with someone, it’s hard to know how they’ll treat a job.

At Catapulter, while some of our contractors worked hard to earn repeat business, others did a quick, messy job and then demanded further hourly payments for edits. To be fair, that’s the lowest of the low, but it absolutely happens, particularly when you’re paying bottom of the barrel prices (common for early, low-cash startups).

(See my post on not getting screwed by outsourcing)

SOLUTION: TECHNICAL CO-FOUNDER

Above, I said that some of our contractors did a bad job. If we didn’t have technical co-founders, we wouldn’t even know it!

Fortunately for us, these were quick jobs, and we could afford to lose the $100 we paid. What if we had gone the outsourced route with a 3-month, several thousand dollar job, with no one to look over our contractors’ shoulders? It would have been a tough spot.

The reality is: you need a technical co-founder you trust. Someone who is not trying to make money from you, and wants your company to succeed.

Your Technical Co-Founder Will:

  • Screen and manage
  • Integrate
  • Do it the right way
  • …and, surprise – code!

Screen and Manage

If you’re non-technical, it’s very difficult to manage technical contractors because you don’t know what they’re doing, or how they need to interact with other contractors. Your technical co-founder will understand how the pieces fit together, and make sure that different components can actually integrate.

Also, you shouldn’t expect every contractor or even employee to be able to problem solve or think pro-actively. You’ll need to give guidance and feedback constantly, and if you’re not technical, you won’t be able to do this correctly by yourself.

Integrate

If you outsource components, they’ll have to be integrated. Integration takes an immense amount of time, and it’s not something that can be tacked-on to the end of a job. You’ll want someone internal to guide this process (if not do it completely), to make sure it’s done right.

Do It Right

As I mentioned earlier, a contractor is interested in completing the job, and maybe getting repeat business, not making your site as elegant and easy to maintain as possible. Your technical co-founder will want to drive this process, to make sure your site is being built in a scalable, updatable, low maintenance way.

Code!

Building a website is not easy. There are many moving parts, and there’s always something that needs to be fixed, changed or updated. You want someone on your team who you can count on for emergency fixes, to fill in the gaps between contractors, or add that one last little feature before the next release.

AND MOST IMPORTANTLY, THEY’LL STICK IT OUT WITH YOU

If you fully outsource your website, the folks building the website are doing it for a paycheck. If you stop paying the bills, they’ll stop building the site.

If you’re a new startup, you’re probably not loaded with cash. You want to find someone who’s going to stick it out with you when the going gets tough, and continue to move forward if you hit a rough patch.

Choosing Your Target Customers – Not An Option

Having now experienced two incubator classes and meeting an amazing number of entrepreneurs, I’m still surprised at how often I meet folks who have made significant progress on their ventures, but haven’t even discovered their target customers.

Ok – I get it. There are a lot of places your product can be used, and you won’t really know where it will catch on until you launch. However – you have to make an educated guess and TRY before you find out which market will work.

Dwight Eisenhower once said “Plans are worthless, but planning is everything,” and this is a perfect example.

Depending on your chosen target audience, you will change:

  • Marketing Strategy
  • Product Features
  • User Interface

…and not just by a little.

Depending on whether you choose between a market of internet-savvy young professionals vs. disconnected elderly, or consumers vs. businesses, you’re going to need to make major changes in your product and strategy.

A real example of two groups of customers we’ve looked at: Imagine creating a travel site targeted at i) businesses that sell to seniors vs. ii) direct to young consumers. The content, user interface, and marketing strategy are all entirely different, and building out and executing each will take months.

If you figure out your target customer before you build, you’re going to build a better product and a better company.

HOW DO YOU FIND YOUR TARGET CUSTOMER?

To get started:

  1. Brainstorm on the potential customers (market segments)
  2. Size of each potential target segment
  3. Assess intensity of need for each segment
  4. Is the segment addressable?

Brainstorm – I recommend getting all of your ideas on a whiteboard, powerpoint slide, or your chosen visual medium. It’s a good way to organize your thoughts about what is likely a large number of options.

Size of the markets – This could be a whole post in itself, but the key points are to keep your market size estimates simple and understandable, and use clear and backed-up numbers that directly relate to the segment you’re examining.

To make the right decision, you need to find a market size that’s directly related to some mix of revenue, profit and timing. Don’t fool yourself by leaving out steps (e.g. 100M potential customers is meaningless if your expected profit per customer for the next 10 years is measured in pennies).

[Number of customers] x [number of uses per year] x [amount they pay for similar solutions] is one set of data that will get you to a reasonable estimate.

In some cases, you may not be able to get a market size, but at least you can find metrics about a market that you can compare with other markets you do have more data on.

Intensity of the need – Independent of the size, how much does each segment’s customers need the product. One good analogy that I’ve mentioned in previous posts is:

  • Vitamins – Your customer doesn’t need this or know they need this yet. (E.g. Foursquare – Still arguable if this is useful, but has a huge audience)
  • Advil – Customer has a mild pain point, your product helps. (E.g. iPod – Couldn’t carry all your CDs)
  • Morphine – Customer has a major point, you solve. (E.g. Online flight search – Took hours and pain to plan a trip, or paid fees to travel agents)

Is the segment addressable? – Once you’ve figured out which large, profitable, market segments exist, you’ll need to figure out which ones you can actually address.

As one example, a group of entrepreneurs I know once looked into building an online university in a developing country. The market was growing rapidly, and potential customers were crawling over each other to get access to the current offerings.

However, it turned out that actually reaching that market was going to be too difficult for them, based on 1) laws governing businesses and even school accreditation, 2) language barriers, 3) cultural feelings toward education, both on and offline and 4) absolutely no understanding of the online market or how to navigate the online community to reach customers. Despite their initial excitement, they ended up passing on the opportunity.

A final word on assessing potential market segments – This is a simple, structured way to start assessing potential target markets. However, there are plenty of strategies – e.g. acquiring low-profit users first to eventually reach high-profit users – that may suggest you choose a different course.

In addition, as you grow your business, you’ll eventually have to tap new markets.

What’s important about this framework is not that it gives you “The Answer”, but that it helps you frame each market and understand your opportunity. After this assessment, you can make strategic decisions – and if your strategy starts off by acquiring small numbers of unprofitable customers, you’ll be able to explain why.

NOW THAT YOU’VE TAKEN YOUR SHOT AT IT – GET FEEDBACK

This is one of the most important themes in entrepreneurship. No matter how smart you are, or how long you’ve worked in your industry: Make sure you ask for advice and feedback as much as possible. (And make sure you include people outside your company.)

Even though you and your team may have an opinion on the proper target market, it’s likely that other people, including potential investors, will be able to refine your logic, target weak points in your analysis that you can improve, or come up with ideas you’ve never thought about.

Treat this feedback like a survey, and aggregate the advice you receive to make decisions on your target market. Whether or not this actually causes you to change your direction, you’ll at least begin to understand the key questions that outsiders have on your business, so you can be better prepared to answer them in the future.

NOW THAT YOU’VE GOT THAT SETTLED – PROVE IT

To further support your selection of target market, you’ll want to find proof. Whether or not you intend to raise money, you’ll want to at least prove this to yourself (after all, you’re investing a lot of time and probably a high percentage of your net worth in this).

There are many ways to find proof, some of the big ones are:

  1. Survey – You can pay for Facebook surveys by demographic, or build a simple survey on the free version of a service like SurveyMonkey and email it to folks in your target audience
  2. Get people to sign up for something – Before you’ve even built a product, you can build a simple landing page with a platform like Unbounce, that gives users a description of your product/service and a place to sign up for beta invites/newsletters. If you can get huge numbers of signups with no product, it’s often a good sign the product is worth building
  3. Other tests – You may be able to create a specific test that illustrates the need for your product. For example, creating a popular twitter feed or email list that responds to requests for a certain type of information could show that there is a market for a paid product providing that information

Just remember, while the target segment’s need for the product may seem very obvious to you (e.g. if you’re creating a service for college students while you’re in college), it won’t be obvious to people who aren’t in your position and don’t spend all day thinking about your business.

Building your product and making it successful will take time, and it’s likely you’ll want to make a partnership or raise money before then. Make sure you find some way to show others why you’ve made the right choice.

…AND NOW YOU CAN BUILD

Once you’ve figured out your target customer, you can design your product, UI and marketing strategy around them.

One good way to help your team stay focused on your target segment is to personify the various customers within that segment. Select pictures, give each a name, and write a blurb describing who they are and why they need your product. Post their pictures on the wall, and bring these personae up as you design new features and strategies.

For example, if you are building a restaurant review site targeted at wealthy young male professionals, find a picture of a twenty-something in a suit, name him Stefan, write up a bio about his job at Goldman and his European girlfriend, and make it clear that he prefers his restaurants to be new, expensive, and next to a certain type of club. At the beginning, you may make pretty major assumptions like these, but as you continue to learn more about your customers, you can continue to refine each persona.

This makes it much easier to think specifically about whether Stefan would be into your new feature or service, rather than the sometimes nebulous concept of “our users”.

REALLY, IT’S IMPORTANT TO ALL ASPECTS OF YOUR BUSINESS

Choosing your target customers and building specifically for them will help clarify the goals of your company, and help you build a clearer story about your business for future customers, partners and investors.

Getting Smart On The Entrepreneurial Community

When you start out as an entrepreneur, one of the first things you’ll want to do is understand the entrepreneurial landscape – in particular, where to turn to find answers to the millions of questions you’ll have.

Though this isn’t fundamentally different from many other professions, I wanted to give a rundown of sources and strategies that will help you quickly immerse yourself in the startup world.

IMMERSING YOURSELF IN THE ENTREPRENEURIAL COMMUNITY

Where to turn:

  • Local Email Lists
  • Twitter Lists
  • Individual Bloggers
  • Larger News-Blogs
  • Quora
  • Mentors & Peers

Local Email Lists

One of the first things you should do is sign up for StartupDigest in your city. It’s a curated list of entrepreneurial events in many major cities, and you can use this as a basis for finding networking events and discovering which are the major entrepreneurial groups in your city.

For example, organizations that sponsor a good number of events in Philadelphia are the Philly Startup Leaders (PSL), Philadelphia Area New Media Association (PANMA), and co-working space Independents Hall.

Sign up for the email lists of what appear to be the major groups in your area and those you’re interested in – it may be a firehose at first but you will at least get a feel for what is and isn’t helpful to you (that’s what email filters are for anyway).

For example, the PSL email list is easily one of my favorite entrepreneurial resources in Philly. More than any other email list I subscribe to, PSL’s members are never shy to shoot questions out to the group, or hesitant to share their own experiences and solutions.

Another way to find local groups and events (though it’s not focused solely on entrepreneurship) is to search Meetup for entrepreneurial groups in your area.

Twitter Lists

One of the most important things to do, when you first start out, is figure out who are the big names in your industry. One good way to do this is to find Twitter lists with titles like “[Your City]-entrepreneurs-and-vc”. A good starting point is to find the leaders of the local groups I mentioned in the last section, and check out what lists they’re on.

To get started, I recommend checking out Mass High Tech writer Galen Moore’s @galenmoore/vc list.

(This, of course, assumes you’re on Twitter – which is an important piece of building your identity in the entrepreneurial community.)

Blogs

The startup world changes quickly, and much of the best and most up-to-date information is contained in the minds and blogs of the industry’s thought leaders. You’ll hear “check out this blog post by Fred Wilson” much more frequently than “check out this book”, by entrepreneurs and investors alike.

Here are a few frequently referenced, reputable blogs that I recommend:

If that’s not enough, you can take a look at OnStartup’s Top 40 Startup Blogs

Pro/News Blogs

As opposed to the more personal blogs listed above, the following blogs are well known, and more like traditional news sources:

  • TechCrunch – The best place to read breaking news on new startups, heavier bent on the west coast. Very well known, often gets great guest posts
  • VentureBeat – Similar to TechCrunch, but with a little less attitude
  • Inc. – A magazine (not a blog), but a great online resource for entrepreneurs, from general startup success stories to management and financial advice

Quora

Quora is a good place to shoot out questions about startups, and receive answers from other individuals, often reputable members of the entrepreneurial community. It’s basically a vastly better, tech-heavy version of Yahoo! Answers.

You can ask or search for any question you like, and topics range from high-level to company and even event-specific answers, e.g.

  • Should I develop my site with Java or PHP?
  • Who are the most prominent Super Angels in Silicon Valley?
  • Why did about.me sell so quickly?
  • Is it bad to follow too many people on Twitter?

Mentors & Peers

Though I’ll go into this in more depth in a later post, one of the most important ways you can get up to speed quickly is through mentors and fellow entrepreneurs.

Mentors can be investors or serial entrepreneurs with decades of experience, or they can be friends three months into their first startup. Building a company is an incredible learning experience, and anyone who’s spent significant time working on a startup is bound to have useful advice for a new entrepreneur.

If you’ve got a great business plan and a little luck, applying to an incubator is one of the best ways you can quickly build up a huge number of outstanding mentors, and get workspace among a group of peers building their early-stage startups.

So Get Going!

Starting a business is both extremely fun and extremely hard, and one certainty is that you’ll have a ton of questions. I recommend getting comfortable with the resources I’ve mentioned above, so when you do need an urgent question answered, you know where to turn.

Welcome to the community!

The Most Important Questions About Your Startup

Preparing your elevator pitch and pitch deck are going to help you fill out your business plan, and start to understand the core aspects of your business.

However, there are other questions, that aren’t directly assigned to a slide in your deck, that you’ll need to think through early on. Some will arise as typical follow-up questions after each presentation you give, and some will need to be addressed before you can successfully complete your deck.

THE MOST IMPORTANT QUESTIONS ABOUT YOUR BUSINESS (That aren’t in your deck)

I won’t get into answering all of these now, but here is a list of questions – in addition to those specifically assigned a slide in your pitch deck – that you’ll likely need answers for as you tell people about, raise money for and build your new business.

  1. Who is your target customer and why?
    • How will this shift over time?
  2. How will you acquire customers?
    • Already in the deck, but one of the most fundamental and complex questions in starting a business. You’ll need to go deeper than what fits on one slide.
  3. Why will someone pay you for this?
    • You’ve described how you intend to make money, but why do you believe it will actually happen?
  4. How will you scale your business?
    • When you hit 10k, then 100k, then 1M users, how will your technology/infrastructure hold up, and how will your strategy/customer acquisition tactics change?
  5. Why will your product be chosen vs. a competitor’s?
  6. And every entrepreneur’s favorite: Why won’t Google do it?

In addition, there will be a few questions specific to your industry or company that people will typically ask after you present. The best way to learn these quickly is to practice pitching and presenting your deck to folks who know your industry or the startup world well.

If you’re going to present, be sure to think through these questions ahead of time, and make sure you have clear and concise answers prepared. You may not have to go into major detail, but you don’t want to leave folks remembering an “ummm…” that hurts your credibility and suggests you haven’t fully thought through your business.

What questions am I missing? Let me know in the comments so I can continue to build up this post.

Writing Your Pitch Deck

Building a pitch deck is one of the best ways to make sure you’re answering the key questions about your business. There are a few standard formats you can use to make sure you cover the most important issues, one of which I will share a variation on later in this post.

Most importantly, make it short and sweet!

Would you want to sit around watching a presentation with a thirty page powerpoint deck? No. Now imagine if you were a VC and looking at decks was a major part of your job. They have even less tolerance, so don’t bore them!

Your deck should be 10 slides or less.

One good rule of thumb is Guy Kawasaki’s 10/20/30 rule: your presentation will be an hour, so it should have 10 slides, you should expect to present for 20 minutes (leaving 40min for discussion), and have no font smaller than 30pt (your audience shouldn’t be reading, they should be listening to you). Guy’s blog post on the subject can be found here.

Full disclosure: I don’t necessarily stick absolutely to the 30pt rule. In some cases, you can be concise with something smaller. (To learn more about making a deck awesome, you can read more detail in my post here.)

Another suggestion, from Fred Wilson, is to whittle it down to six killer slides. If you can communicate your business well in six slides, do it, but I would still recommend starting with a standard ~10 slide deck to help you think through the key issues of your company, then refine.

THE TEN SLIDE PITCH DECK

There are many variations on this theme, and two folks who often receive credit for this structure are Guy Kawasaki and David Cowan. (I’ll let them duke it out). This is my variation.

The Deck:

  1. Cover (contact info)
  2. Problem
  3. Solution
    1. Good place for a demo
  4. Business model
  5. Why you?
  6. How will you get users?
  7. Competition
  8. Who are you and why will you kick everyone’s butt?
  9. Timeline / milestones
  10. The ask (and routing #)

Cover page

On your cover page, make sure to include your name and contact info. Make this really clear so the audience remembers you and can reach you again.

Problem

As I mentioned in an earlier post on creating an elevator pitch, your audience isn’t sitting there thinking about how much they need your product. Your goal here is to set the stage so the audience gets emotionally involved and thinks “I wish somebody would DO something about this!” and your solution scratches their itch.

Make sure that your audience can relate to your problem statement. For example, the investor you’re speaking to may not “like, totally hate it when he can’t post his class notes to just his boys on his tumblr”, but will understand how painful it is when he can’t send a powerpoint deck to the LPs invested in his fund.

Finally – I recommend trying to be entertaining here. Presentations can get boring, especially if you’re a VC who listens to similar pitches so frequently. Make them laugh, make sure you give them something they can relate to emotionally, and jolt them out of slide monotony!

Solution

A description of what your product does to solve that problem.

Make sure this is concise and clear (for pitfalls, see my post on elevator pitches). Preferably, use visuals to make sure this hits hard in one glance, rather than making the audience read bullet points and think to put it all together.

Solution, Part II – Demo

During this slide, or just after, is a good time for a demo or screenshots. It’s good to show that you’ve made progress, and it will likely answer a lot of the “how will you do X” questions your audience will have.

Make sure your demo is quick and snappy. Don’t make a 3 minute video describing all your features. Test your video with people ahead of time and watch when they get bored. Then speed these parts up or remove them. This should be 1 or 2 minutes max.

Business model

This is the slide where you tell people how you’re going to make money. I recommend also including a market size or some data implying the market size.

However, don’t put a bunch of boring stats – your market size should pop (a chart, visual or large number). If your numbers are not impressive, find numbers that are, or you may have a larger problem than slide creation.

Obviously, you also need to put your business model on this slide. One of our mentors, Chris Savage (CEO of Wistia) said it best:

“Really, an early stage startup is an exercise in finding the business model. The next step is an exercise in scaling up as quickly as possible.”

As a result, you’ll probably have more than a few ideas for business models. Include the most compelling ones, as long as they have significant and realistic revenue potential. You want to show that your company has different paths to success, and that you’ve thought ahead to future revenue streams.

Why you?

This is where you describe your special sauce. Whether it’s a description of proprietary technology, or some other competitive advantage, you want to make sure your audience knows why you’re going to crush it.

How are you going to get users?

You may have a great idea and product in the works, but your customer acquisition (marketing and sales) strategy is one of the most important questions you’ll answer as you build your company.

In short, don’t tell people you’ve got Twitter and Facebook accounts, a lot of friends who would use it, and are going to get written up in TechCrunch, because this is code for “I don’t know anything about entrepreneurial marketing”. See my post here on customer acquisition for ideas.

Competition

Another red alert for investors or other entrepreneurial audiences is “we don’t have any direct competitors”. No one will believe you don’t have any. Almost every “new” business is a variation on an old theme, and these slightly different businesses are usually your direct competitors.

Describe the competitive landscape on this slide. Make it visual if possible, and be very clear about how your company and other industry players are different.

Who are you?

Here’s where you show how much your team kicks butt.

Don’t write full prose bios on here – just the interesting stuff. Names of previous startups, money raised, prestigious companies/schools/awards, etc. You want your audience to see a bunch of impressive words, not sentences to read.

This is also a good place to list advisors you may have.

One of the things an investor will be trying to understand on this slide is which skills your company is missing – whether it’s industry or functional (e.g. marketing, strategy) expertise.

Advisors or mentors with expertise in your industry or with skillsets where you are lacking are major assets, because they strengthen you where you may be weak, and their place on your team shows that you’re self-aware and willing to find and accept help where you need it.

Timeline / Milestones

This is where you show your investors your progress, what you expect to do, and what are your upcoming milestones.

This will give investors an idea of where you expect to be in a few months or years, and this information is valuable to help them understand:

  • …what their investment will return before the next round of funding is raised
  • …value inflection points and other times when investment should be discussed/made
  • …whether you understand how to set realistic goals

What you need, what’s next

Note: This can sometimes be combined with the previous slide.

You need to be able to tell an investor how much money you’re raising, for what uses, and how much they’ll get in return.

Your slide may only have a high level description of uses, but you should have a good idea about specifics (e.g. salaries, types of marketing you’ll spend on) to voice-over or respond to questions. As for what they’ll receive in return, this doesn’t necessarily need to be in writing, because it will be a negotiation, after all. You should be prepared to tell an investor how much equity they’ll receive, and in some cases (angels more than VCs), what kind of return on investment they’ll get. My post on technical aspects of raising money may be helpful here.

(If you want to go brash, I’ve read many VC blog posts suggesting that they’d like to see routing numbers or PayPal accounts on this last page, though I’ve yet to hear a specific successful story using this tactic.)

PRACTICE, KNOW WHAT TO EXPECT, AND BRING BACKUP

As I suggested in my elevator pitch post, you should practice your presentation of this deck in front of as many people as possible, get their feedback, and refine.

When you do this, you’ll begin to get used to 1) where you’re not comfortable and 2) which follow-up questions you’ll typically be asked.

To fix #1, just practice more!

To help out with #2, I recommend building backup slides on the questions you’re frequently asked. This will let investors know that you’re well prepared and that you know your company’s key issues. It will also make sure you’re not left giving a credibility-lowering “ummm…” that could have easily been prevented.

Good luck!

(For advice on making your deck more awesome, see my post on the No Thinking Rule here.)

I’ve Got An Idea For A Startup, Now What?

Many non-technical folks have a big idea, then immediately set off to find engineers and attempt to raise VC funding.

Slow down!

Before that, you should make sure the idea is really worth your time. It’s easy to fall in love with an idea, and you should really try to decide whether your business can accomplish your goals (save the world, pay $100k/year, build an exotic car collection, etc.) before you move forward.

In addition, it’s going to be really hard to raise money without figuring out quite a bit of detail first. Just ask a VC how many Next Big Ideas they see from excited co-founders without backup or any idea how they’re going to execute (hint: the answer is “too many”).

Once you’ve got an idea, your process should go something like this:

Of course, these materials and decisions don’t need to be sharp and finalized before you set off on your entrepreneurial adventure.

However, they’ll help you channel your energies into answering the key questions of your startup, decide whether you should really begin to build this business, and be armed with the information you need to excite your future teammates and investors.

A few pieces of advice that I’ve picked up along the way:

  • It’s going to be way harder and take way longer than you think
  • Now that I’ve adjusted your expectations, take that amount of time and effort and triple it
  • Problems that seem like certain doom for your startup will occur constantly

And if those seem ominous and negative, they shouldn’t. Starting a startup is really hard, and you should know what you’re getting into from the beginning, so you can prepare yourself and not freak out. Freaking out doesn’t help anything.

That said, what is likely driving you to entrepreneurship is passion for your idea, and that is one of the most important assets you have. Be sure to communicate that passion to everyone with whom you discuss your business.

One final tip: This is your business, so don’t act on a single person’s advice (mine included). Get as much advice as you can, synthesize the results, and make your own decisions.

Good luck!

How To Create Your Elevator Pitch

CREATING A PITCH IS AN ITERATIVE PROCESS

The Process:

  1. Build your pitch
  2. Say it out loud to others as much as possible
  3. Incorporate input and refine

One of the most important things you will do as a startup founder is build your pitch. You will tell it so many times to so many investors, customers, partners and friends that you just won’t care anymore. However each time, it’s your brand, and you want it to be clear and simple.

A mistake that’s often made by founders is describing the idea “correctly”. In the founder’s head, the pitch describes the business, and if an investor doesn’t understand, it’s because “they just don’t get it, they just need to discuss it more in-depth to really get it.”

Sounds reasonable – but it doesn’t work like that.

Most of the time, you’ll only get one chance with that individual before they make up their mind about you. If your pitch is too complicated, you need to refine it to something clear and easy to understand, so that your listener can decide if it’s something they even want to hear more about.

And what’s the easiest way to get it to that point? Practice, practice, practice, in front of as many people as possible, and incorporate their feedback. (Ask them to be mean!)

THE STRUCTURE OF AN ELEVATOR PITCH

Note that there will be many different circumstances in which you’ll give your pitch. Brief 15-sec introductions in large groups, 90-sec pitches to investors, even ACTUALLY GETTING STUCK IN AN ELEVATOR (happened to one of the Betaspring teams this year).

You want to have the key to your business boiled down to as few words as possible, and have some backup in case people want you to go further. Each bullet below should be very concise, generally not more than one or two sentences.

Your pitch should include:

  • The Problem
  • The Solution
  • Your Differentiator
  • Illustrate size of the opportunity
  • Your progress

…and be prepared for the follow-up questions you’re typically asked.

Note that the first three points make up the barest version of your pitch. You’ll likely give many pitches at this length, for example when a room full of entrepreneurs are quickly introducing themselves. However, it’s very good to add the next few pieces if you have the opportunity, especially if you’re speaking to an investor.

And finally – do not just recite your pitch! If you’re not excited NO ONE will be!

The reality is, you will get tired of delivering your pitch. But whether it’s the 10th or 10,000th pitch, it should be delivered with the same energy every time. Show people that you are genuinely excited by your business!

THE PROBLEM

The most important question a listener will have is “why do I care”? Even if you have an amazing product, it’s pretty clear that before your pitch, the listener is isn’t just sitting there, thinking about how much they need your product – you need to get them in this mindset.

A common way to describe the types of problems that a startup can solve are Vitamins, Advil and Morphine:

  • Vitamins – Your customer doesn’t need this or know they need this yet. (E.g. Foursquare – Still arguable if this is useful, but has a huge audience)
  • Advil – Customer has a mild pain point, your product helps. (E.g. iPod – Couldn’t carry all your CDs)
  • Morphine – Customer has a major point, you solve. (E.g. mobile phone – people needed to communicate outside of home/office)

The takeaway here is – you want your product to be morphine (or at least feel like it). The best effect is for your listener to have a strong emotional reaction and think “I WISH someone would DO something about that!”

Where I may diverge from the norm is that I believe in some cases, you should prepare different pain points for different audiences. As an example, the VC you’re speaking to may not “like, totally hate it when he can’t post his class notes to just his boys on his tumblr”, but will understand how painful it is when he can’t send a powerpoint deck to the LPs invested in his fund.

YOUR SOLUTION

This is where you state your product. It seems like the most straightforward piece of the pitch, but it’s often a mess.

It should take one sentence, maybe two, and it should extremely briefly answer 1) what you are and 2) so what – how does it solve the problem?

Common Issues include:

Forgetting to describe what your product actually doesYou illustrate the problem and what needs to be solved, but don’t actually say how your product solves it

  • Example: “Today, we are connected by social networks, but not in the XYZ space. We make XYZ more social by adding augmented reality.”
    • Any listener would want to know: “How?”
    • And since augmented reality is relatively nascent, you may have to explain this from scratch – using jargon doesn’t usually help
  • Better: “We provide an immersive social check-in experience for bars and restaurants. Leave a message or picture at a bar that only your friends can see using our app, and treat the wall of the bar like a Facebook Wall.”
    • This includes a brief description, an example, and to clarify, an analogy to a successful product almost everyone will know
    • This product may work in a much wider range of places, but this is the initial target market, and people can quickly relate

Getting into the detailsThough most venture investors are intelligent, they may not know anything about your product or market. You should describe your product so that anyone can understand – a customer, a referrer, a non-technical investor, etc.

  • Example: “We perform XYZ analysis on ABC servers using the 123 algorithm, originally described by JKL. Our servers are optimized to run this algorithm more quickly than any other current provider of this software, given our use of multithreading and load-balancing.”
  • Better: “We provide the world’s most powerful software to analyze the servers used by large companies like XYZ and ABC, created in partnership with the lead researcher on Google’s proprietary server analysis system.”

Saying “we’re going to…”It doesn’t matter if you haven’t finished building it yet, tell people what your business is, get them interested. Of course, be honest about progress, but capture your audience’s imagination first, then discuss milestones and progress.

YOUR DIFFERENTIATOR

Even if people feel the pain of the problem, and understand that you’re building the solution, there are always competitors. Listeners will want to know why they should use your product, and investors will want to know why you can do well despite those competitors.

You can do this in one sentence, e.g. “no other company has feature XYZ, or works as quickly”, but it’s going to be very dependent on your company’s “special sauce”.

ILLUSTRATE HOW LARGE THE OPPORTUNITY IS

This is more for the investors you may be pitching.

Give them a qualitative or quantitative reason why they should believe the market is huge. Make sure you keep it very simple, and don’t use numbers if you can describe it in a more digestible way. E.g. “There are more [our market] than [other, related, obviously huge market]”.

For example, knowing that there are 100 million diabetics in the world is not a helpful stat to show someone how much your product-for-diabetics is worth. Knowing that diabetics in the US spend more than $3B on the treatment your product is rendering obsolete is much more useful.

Keep this section short and sweet, and use numbers that i) are believable, ii) you can back up, and iii) very clearly illustrate the size of YOUR opportunity.

YOUR PROGRESS

If you’ve even got an alpha version of your product duct-taped together, it’s still farther than most people who’ve had the same idea, and you should make an investor aware of this.

Be careful, however, of making promises around specific future milestones. If you’re a technology company, be careful about promising a feature launch in X weeks, because you may find one last issue you want to fix, and don’t want to overpromise and underdeliver as your first impression.

HAVE THE KEY QUESTIONS IN YOUR BACK POCKET

As you practice your pitch, you’ll find that there are always a few common follow-up questions.

Typical examples include:

  • How will you scale?
  • How will you acquire customers?
  • Why will people pay you for that?

There are a huge number of questions you’ll have to answer eventually, but there will always be a few that most people ask first about your specific business. Make sure you have these prepared clearly and concisely, so you don’t end up with an “umm…” that could hurt your credibility and easily be prevented.

With these pieces in place, you’re on your way to solid pitch. To make it perfect, don’t forget to constantly SHARE and REFINE!

Should I Apply To An Incubator / Startup Accelerator?

I spent a summer at the Betaspring startup accelerator / incubator in Providence, RI, and it was basically the Best Summer Job Ever. More importantly, it immersed my team (Catapulter.com) in the entrepreneurial community and got us smart on startups incredibly quickly.

In short, an incubator or startup accelerator is a program where, upon acceptance, you join a class of other startups in a common office space and receive mentorship, legal advice, and if you’re lucky, a little bit of cash to get you started.

The main difference between an incubator and accelerator is that an accelerator is usually more time-sensitive, sort of like a “startup bootcamp” for a few months to help you figure out whether your company has legs or if you should “fail fast” and move onto the next opportunity.

(An accelerator is basically a type of incubator, so I’ll use the term incubator throughout this post.)

Please note: one of your founders must be technical. We were accepted to Betaspring in large part because my business partner and I had two great developers as co-founders. It would be very difficult to get into an incubator as a business-only team – because while you’re thinking about your business and creating your strategy, you should also be actually building it. Incubators aren’t pouring all their resources into you just to get some PowerPoint decks. (My post on why you can’t just outsource a tech business.)

What you get from an incubator:

  1. An ecosystem of entrepreneurs
  2. Mentorship across industries and disciplines
  3. Experienced leaders to guide your business
  4. A head start on fundraising

An Ecosystem of Entrepreneurs

One of the most important pieces of advice I’ve ever been given is:

“In entrepreneurship, if you don’t know, ask.”

And unlike other business communities I’ve been in, entrepreneurs truly feel a duty to help other entrepreneurs.

When you join an incubator, the first thing you notice is that you’re surrounded by a number of other startups who are at the same time both very similar to, and very different than you.

Most will be in a similar, early stage of development (give or take a year), be extremely bright and possess the entrepreneurial spark. However, as you get to know each member of the teams around you, you’ll realize that they come from very different places, and can provide an immense amount of advice.

At Betaspring, most of the teams were composed of super-talented coders or experienced entrepreneurs. As my role shifted from writing a business plan to hiring contractors, engineering project management and digging into the logic of our routing algorithms, there was always someone who had been there before to help me out.

In addition, while one of our co-founders was a telecom routing/algorithm animal, he hadn’t spent as much time developing for the web. Any time he had a question on web-ifying his work, folks who had already worked through the problems he was facing were only a thin, not-very-sound-proof wall away.

Finally, when the going gets tough (which it does, constantly), you have dozens of people to vent to, who understand, and can help you get through it.

Mentorship

Though you’re already surrounded by folks with experience, incubators go one step further, and bring in even more 1) successful entrepreneurs and 2) experts in the fields entrepreneurs need to know about.

While I thought being around other Betaspring startups was awesome already, our mentors really turned it up. From investors to marketing experts to CEOs across industries, we had the opportunity to learn from them in group sessions, and then speak informally as they hung around the office to chat with teams.

After the initial meetings, teams met regularly with their favorite mentors. We still keep in touch with many of our favorite mentors, and as our business moves forward, I know we’ll reach out to more.

If they’re doing it right, the leaders of an incubator pick out a brilliant cross section of the entrepreneurial community, and it is an absolute gold mine of knowledge, mentorship and friendship. (Fortunately, we learned this from experience.)

Guidance

And the leaders of the incubator…face it, there are occasionally nice things about having a boss!

Besides the fact that they are often experienced, successful entrepreneurs and investors, the partners of an incubator keep you on track and push you. When you’re making all the decisions for the first time, sometimes you’d like a little guidance, you’d like validation when you’re doing the right thing, and you need a kick in the butt when you’re being an idiot.

Our partners did all of those things. Engineering-heavy teams tend to spend too much time on the product, and business-heavy teams tend to spend too much time planning strategically. It’s always great to get an outside opinion, especially from folks who personally chose you because they like your team and your business, who are up-to-date on what you’re working on and your vision, and who have a vested interest (their brand and money) in you.

Raising Money

Once you’ve gone through a few months at an incubator you’ll know whether your business is worth pursuing or not. If you’ve decided to move forward, you have a leg up on your less-experienced, less-well-connected peers.

  1. You get the stamp of approval of having been guided by a selective and value-adding accelerator program
  2. The mentors and experts you’ve spoken to all summer know your business well and may be potential angels, or know angels who may be interested
  3. There are multiple opportunities for Open Houses and Demo Days to directly pitch to investors, a large number of whom are excited to screen so much potential in one room at one time
  4. Your mentors, peers and partners will help you plan your future fundraising, figure out who to approach, and push you to execute

The Downside

The biggest downside my team noticed is that, because there is such a variety of experience, in some cases you’ll find yourself listening to a mentor speak on a topic you already know inside and out (maybe even better than them!). But because startups are all so unique, there was almost always an interesting angle or anecdote to learn from. If not, you had just learned about your mentor and his/her business, and had a starting point for future conversation on something completely different.

You may also consider it a downside that you do sort of have a boss, in the partners of the incubator, and that’s just what many people are starting their own business to avoid. As I mentioned above, I felt that this was outweighed by the benefits and guidance they provided. It’s always good to have other strong voices and different opinions in the room, and at the end of the day, you’re still the owner and leader of your company.

SO, SHOULD YOU?

Obviously, this is a personal decision.

If you’ve already sold a few companies, you may feel that an incubator / accelerator is not for you. At the same time, the constant mentorship, connection-making across industries, and co-working with like-minded entrepreneurs who are willing to stop and give you a hand, make it pretty tough to believe you won’t learn anything.

If you’re new to entrepreneurship, I highly recommend it.

Personally, though I’d had some entrepreneurial experience in the past, my summer at Betaspring was like adding rocket boosters to my entrepreneurial career. Really immensely huge rocket boosters.

Where to find an incubator


View U.S. Seed Stage Tech Accelerators in a larger map

A few interesting resources: