Investor updates
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Keeping your investors in the loop about how things are going is one of the most important tasks for a start-up CEO. You want not only avoid surprises but also engage them as much as possible so they can provide timely advice and input into strategic decisions. Here is what I usually recommend as best practices:
- Send out a short investor update every 4-6 weeks – an email with a few bullet points and metrics is usually enough. If the situation is critical (e.g. you are running out of money and working hard to close a financing round), more frequent updates are better.
- The email should cover key milestones you accomplished since the last update, what’s on the horizon for the next few weeks and key metrics (not more than 4-5).
- Most importantly you should include a little section on how your investors can help you. Be very specific in your requests, e.g. “I need a strong introduction into company x” or “Who knows a great graphic designer that can help out short-term with some projects?”
- One of my companies recently started to post these emails on an investor blog which I really like as an idea as it facilitates follow-on discussions through comments.
Independent if you stick with emails or use an investor blog, keep regular investor updates high on your to do list – as one VC recently said to me: the failure of a start-up to keep their investors informed is usually a reliable sign that there is more trouble down the road.
Pivoting
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It is not uncommon for start-ups to pivot their product and / or business model a few times and the right pivot at the right time can determine success or failure of an early-stage company. The Startup Genome project found that “startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all”. So how do you approach a pivot? Here are a few tips from pivots I have experienced in the past:
- When to pivot? Deciding for or against a pivot is a tough decision – have you given the current product enough time? Does the current business model just not work or does it simply need more optimization? If you are deep down in the trenches of a start-up, these are tough questions to answer so try to get as much outside input as possible from mentors and fellow entrepreneurs to rationalize the decision.
- If you pivot, stay calm and have a plan! Pivots are emotionally draining as you have to give up something you worked for very hard and the first gut reaction is to come up with a new direction asap. But I can only recommend to create and stick to a good pivot plan: give yourself and your team a defined period of time for reaching a decision about the new direction and follow a systematic approach to get to that decision (brainstorming, early validation, etc.). You only have so many pivot opportunities, so you better maximize your chances that your pivot is going in the right direction.
- How far should the pivot go? Some start-ups have raised so much money that they can take a green field approach when it comes to the pivot direction – the new doesn’t have to have anything to do with the old and the only assets you are building on are your existing team and the cash you have in the bank. But most start-ups have way less runway so they need to think about a new direction that is closer to what they have been working on in the past or otherwise the learning curve will be too steep for the runway left. So think about your assets beyond the team and the cash left: is there a piece of the market you understand better than anybody else? Are there elements of your products that could be applied to other (more interesting) verticals?
I have seen a lot of successful and a few unsuccessful pivots. I hope you remember these tips when you have to go through one.
Related articles
- The Startup Genome Report – infographic (socialwayne.com)
- What VCs Can Learn from Startup Genome Project (gigaom.com)
- The pivot (empwaynek.wordpress.com)
Announcing GrowLab, a new start-up accelerator for Vancouver
With the growing success of YCombinator and Techstars in the past couple of years, accelerators have become a crucial piece of developing a vibrant start-up ecosystem – a crucial piece that was unfortunately missing in Vancouver after Bootup Labs stopped taking in new companies in fall last year. So I am extremely excited that we announced today a new accelerator in Vancouver: GrowLab is a “startup boot camp” for entrepreneurs whose companies will receive up to $25,000 in seed funding, four months of mentorship, free office space and the opportunity to pitch investors at the end of the program for follow-on funding. The program is accepting applications from entrepreneurs globally and will be based in Vancouver for the first three months, with the fourth month in San Francisco.
Why Google became so successful – reviewing Steven Levy’s “In The Plex”
Image via CrunchBase
I just finished reading “In The Plex”, Steven Levy‘s book on Google, and can highly recommend it to anybody who wants to better understand Google’s success. While many things are not completely new if you have followed the company for a while, the systematic recount of Google’s history and the decisions they have taken along the way offers some really unique insight.
If I had to condense Google’s success to a few factors, I would chose the following 4:
- Google’s culture: Google developed a very specific culture from the beginning on that even phrased a specific term for it: “Googly” stands for smarts, analytics, unique approaches, open communications,… and everything and everybody were measured against being “googly” enough – from the people that the company hired, to the way the office was designed to how the company communicated internally. This persistence to live a company’s culture every day and in every aspect that makes it powerful – and both founders were not only good in creating a unique culture but preserving it as the company scaled
- Obsession with data: everybody has probably heard about Google’s obsession with data but the company has taken it further than most people can imagine. Example: Google relied heavily on academic metrics in the recruitment process, to a point that the company was asking candidates with more than a decade of work experience for their college admission test score and GPA’s
- Pushing the boundaries: building and running your own data centres is probably not the first thing a company would think of given the large supply of cheap data centres around the world but with the rapid growth of the number of computers Google operated the company was continuously chasing for additional efficiencies that existing data centre providers could not or were not willing to provide. So it decided to build its own data centres by applying existing ideas that no one had yet put into practice, e.g. completely new ways to approach cooling. Google ultimately found ways to make it work and hence built data centres that were more efficient than the companies who’s main focus were data centres. Google’s history is full of such examples of pushing the boundaries of what seemed to be impossible at the outset and proved possible after Google tackled it.
- Acquisition strategy: Google is probably one of the best companies when it comes to acquisitions by combining acquisition discipline (by doing a very good job thinking through how a potential acquisition can (or cannot) help the company achieve its goals) with a smart way of integration the acquired company into Google (or even leaving it as a stand-alone unit if this turns out to be the better set-up as in the case of YouTube). This smart M&A strategy is how some of the most successful Google products were born: AdSense (Applied Semantics), Android or Google Analytics (Urchin). And I hope the same thing will happen with my portfolio company Sparkbuy that got acquired by Google yesterday.
So I can only recommend you reading this book – you can get it here or here.
Related articles
- Keen On… Steven Levy: If You Want to Get Inside Google, Get ‘In The Plex’ (TCTV) + Book Giveaway (techcrunch.com)
- Review: In The Plex, by Steven Levy (mattcutts.com)
- Levy’s “In the Plex” Puts Google Under the Microscope (searchenginejournal.com)
Social is the first layer you need to build, not the last
As social has become integral part of how web product are built these days, every new start-up pitch contains some social angle. While this is great to see, a few approaches seem to treat social as an afterthought and not the foundation of the business. A social commerce site will mostly likely not be successful if you first build a straightforward e-commerce store and then put social features on it. In the same way, it is extremely hard to build a community around an existing content site (independent of how good the content actually is) – users usually come to the site to look for information and not to hang out and share their experiences with other members of the community. So if you truly want to leverage social for your product, you need think about it as the first layer you have to build, not the last.
Related articles
- Three Phases In The Evolution Of Social Commerce (businessinsider.com)
- Here’s The Truth About What Really Drives Social Commerce (businessinsider.com)
