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Thursday, November 20, 2008

Follow up on funding and that runway





Runway Thinking: A Practical Guide to Startup Survival
by Phil Morle

Times like this, when funding is scarce and confidence is low, do bring one benefit. They force us to focus.
This year at Pollenizer we have had the privilege to work with 18 different startups (so far) and ‘focus’ has shone through as a single theme. Startup founders do understand the need for surgical focus, but doing it is hard.
The runway - a thinking tool for doing focus
To tackle this, I now begin my time at a new company defining the current end to the runway and what can be achieved as we race towards the end. I begin with this slide.







uploaded with plasq’s Skitch!

I have overlayed a diagram describing the stages of a real take off so ignore all the “V” stuff …
We can over-use the phrase ‘runway’ when we plan our strategies, but I have found it an incredibly useful tool for planning because it is difficult to ignore some common, important milestones for the business.
We need to work through it from right to left because the end of the runway defines the scope.
D - This is the end of the runway and you don’t want to get there. It is a time in the future when you run out of money. If you haven’t taken off, you’re dead.
Money in bank / monthly burn = how long until we are dead.
Let’s say this is 18 months away.
Now work back…
C - This is the point you go for your next round of funding if you need it. Notice that the plane is already in the air. Your startup is making money and/or acquiring users. The stats show that this is the natural vector of the business. Consistent and directed. Not variable or faked by mentions on Techcrunch or an expensive ad campaign. Investors need to see momentum - that the plane is taking off. It might not make it across the Pacific, but it is flying non-the-less.
Let’s say this is 15 months away so we don’t leave it til the last minute and need to spend time planning redundancies and canceling the stationary order.
Now work back…
B - This is the point where you have completed a feature configuration that will fuel your business and one day demonstrate momentum. This milestone is rarely defined. Don’t be tempted to sneak in some brand new features after this date. Refine what you have.
Here’s a growth chart from FriendFeed that looks rather like our runway illustration:

Uploaded with plasq’s Skitch!

I snipped it from an excellent presentation by Brett Taylor, one of the founders of FriendFeed. It shows that even well funded startups with a proven, awesome team take time to work the model.
In a startup its easy to delude oursleves that a brand new feature will be the catalyst for adoption but I have never seen that actually happen.
You need to allow the time between B and C to refine the flow, improve registration, look for fractures in user experience, listen to users, refine viral loops and learn how to monetise. How long do you need to do this? The answer is unlikely to be less than 6 months and is probably more than a year.
Let’s say this is 8 months away. So you have 8 months to plan, design and build the core features.
A - Which brings us to now. What can you build in 8 months and demonstrate it is working a few months later? It is likely that a great many world-changing features (that you love!) will go on the shelf to review another day. Checkout Venturehacks for some ideas on optimising this initial feature set:
venturehacks “Startups need to develop an initial product with the least number of features that can sell to the most people.” http://venturehacks.com/articles/lean-startups#comment-5598
Every feature you choose to add, introduces another dimension of unpredicatability which can make the delivery pipeline almost impossible to control.If this happens, you move past a pont where it will be difficult to prove your business before time runs out.
These limitations are not the conditions for boring products. This is the fertile ground upon which startups build their homes. It is how startups beat established competitors because necessity forces them to focus on offering highly focussed products to users.
The runway provides a powerful metaphor to drive hard decisions.
Update: Silicon Valley VC, John Doerr, thinks your runway needs to be 18 months long. This, and nine other survival tips from him here.
Slainte
Gordon

Wednesday, November 12, 2008

The Roller coaster ride of your life, Starting your own company


Life as an Entrepreneur is an everlasting roller coaster, it oscillates around:


  • resources,
  • time,
  • products/services,
  • people,
  • market,
  • manufacturing/production,
  • competition,
  • suppliers,
  • family,
  • friends,
  • politics,
  • health and emotions,

I would class this list as the tier 1 off building blocks of your business, it is easy to get swamped when all of these are running against you, or even just a couple, you are usually dealing with these challenges alone or just a couple of you, and it is hard to get clarity and the big picture of the business. I do not have an answer to this problem, but I have my own ways of dealing with it, focus and purpose, what is my vision, and how do we get there, you don't eat an elephant in one sitting, you take it in small bites, you have a critical list prepared before you start and when you feel that you are loosing it, you look at the challenges and match it against the critical list, will the business crash and burn if I don't fix this now, tomorrow or next week. They you look at the key objectives you have set and make sure that you are only tackling those. There is a military formula for identifying risk level during an incident:

  1. Did anyone die
  2. Was anyone hurt
  3. Was there anything damaged

The answer dictates the response.

Some characteristics of the Entrepreneur

Have a look at these statements below, there are 10, if you can't say yes to more than 7 of them, then I would say , find another career, if you still want to take this adventure, then work on filling the gaps. There is one last thing I would say, if deep down you find you are struggling and lost your passion for your enterprise, then look at moving on to another one that will reignite that passion. The most successful and sought after Entrepreneurs are serial ones. They have the scars and hard earned wisdom.

Entrepreneurs are careful about money.
Entrepreneurs are competitive by nature.
Entrepreneurs believe in the old adage, "the early bird gets the worm."
Entrepreneurs have a "head for business."
Entrepreneurs are usually loners rather than joiners.
Entrepreneurs are usually honorable people who do business based on a handshake or a promise.



Entrepreneurs are Risk takers - this is a very important characteristic of an entrepreneur. If you're not willing to take any risk, then you will not succeed as a businessperson. In the everyday course of the business, you will encounter a lot of problems and challenges which you need to decide the soonest.Some risks are worth taking after careful evaluation especially if it's for the good of the business. If you're not a risk taker, then you're not an effective entrepreneur and you're bound to fail in your business undertaking.

Entrepreneurs are Smart - being smart is another characteristic of an entrepreneur. You have to be clever, keen, and witty in all your business dealings. You have to show mental alertness and intelligence so that you can win the respect and trust of customers and other clients.

Entrepreneurs are A leader - leadership is a characteristic that is hard to find among individuals. Not many individuals have the nerve to take the lead. To become a good entrepreneur, you must be a leader. Some say that this is a born characteristic but if you don't possess it, you can also learn to become a leader.You're quite lucky if you're a born leader because you only have to develop your other qualities and use them when you choose to become an entrepreneur. As a leader, you should be able to guide, influence, and direct people. This way, you can handle all your business activities with ease and fewer worries.

Entrepreneurs are Inner passion for business - another important characteristic is having the right passion for business. You have to maintain your enthusiasm and interest in the business. As long as you have the right drive and passion, you can run the business for a long time. 5. Honest and trustworthy - some say that eighty percent of an entrepreneur's time is dedicated to pooling and attracting customers. This may be true because without the customers, the business will not exist. You have to be honest and trustworthy so that you can develop good will.




I conclusion starting your own company can be the blast off your life, it can also be a nightmare, it is not for all, but if you are up for it, then go for it 100%.

Regards
Gordon

Monday, November 10, 2008

Some insight from a former Dragon's Den inmate


Doug Richard (Former Dragon)

Cleantech, Chutzpah and Capital



Entrepreneur, Library House Founder and former ‘Dragon’, Doug Richard discusses the Cleantech and mobile sectors, the pull of Cambridge and ‘FutureFest’.

As Founder and Chairman of venture and innovation research specialist Library House, Doug Richard is at the fulcrum of technology innovation. Richard, who is also the chairman and Chief Executive of mobile social networking specialist Trutap, and was a member of the BBC’s ‘Dragons’ Den’, has a clear vision of the future. And the Cleantech industry is at the heart of it.
Library House has developed its own Cleantech taxonomy, defining “clean energy” to include diverse products, technologies and processes, which through improvements in the clean energy supply chain from energy source to point of consumption, result in a reduction in CO2 emissions.
Despite the challenging economic marketplace, Richard sees the Cleantech industry being a key driver of technology adoption.
“Although you can’t talk about any trend in the marketplace without talking about the elephant in the room that is the global economic downturn, there is a case for some insulation from the downturn for technology-driven companies, because corporations are still actively purchasing technology and the federal markets are still fairly solid. What are the drivers of this technology adoption? The rising price of oil and the clean industries.”
Richard adds that it is not only Cleantech but “dirty energy” too that is driving innovation and opportunity.
“New North Sea oilfields are opening up now, and technology that can extract oil is a technology play that people would not have done ten years ago because the marginal economic costs were too high. Cleantech is absolutely the largest beneficiary of an economic crisis that is predicated on two core issues: the rupture in the flow of capital from credit and a core rising price of key commodities, primarily oil."
“Cleantech benefits because more change can be affected more disruptively by alternatives to oil than by cheaper oil, whether they’re bad ideas like biofuels or good ideas like total renewables. Cleantech is much more complex than most people realised, yet it stands to benefit enormously from the marketplace. You need it to be trendy, you need it to be real, you need it to be profound, and it’s got to have an unimaginable upside dimension. Cleantech has got it all, and a lot of money is going to circle around it.”

Richard says it is important to understand that there are elements to the food chain in clean technology.
“You have Discovery, Distribution, Production, Generation and Consumption and all of these elements of the food chain have innovation opportunities. We can innovate in how little we consume, how we distribute, what we discover and how we produce. People tend to think only of Production, whereas the largest waste in fuel is in Distribution i.e. getting the fuel from point A to point B. So any innovation in that area would have an incommensurate impact in the cost of energy.”
When it comes to investor exits for VC backed startups, Richard suggests that can be a complex area.
“The challenge to understanding exits in Cleantech is to understand that the term is a rubric and applies across many sectors. The timescales for exits change for different areas of the food chain. Solar power or wind farms are profoundly different from, say, an engineering additive to a fuel tank or a new long-lasting light bulb.
“If you’re a true technology based company and you’ve come up with a new widget or a new process, then the exits are pretty much the same as for new technology start-ups, which means an average lifespan of five to seven years, and a return multiple of 25% compounded growth rate per year. If your exit is caught up in production economics, then no-one knows what the exit periods are. But if you come up with a better light bulb, you can exit in 24 hours. A good widget still has a lot of merit.”
Another key research area for Library House is the Mediatech sector, comprising the intersection between Media and Technology, which is where Richard’s own investment interest primarily lies. He has high hopes for Trutap, which is creating the first mobile social network.
“If somebody were to reinvent Facebook to take advantage of everything you can do on a phone, then that’s Trutap. We’re off to a fast start, in 190 countries in our first seven months. Do I have a firstmover advantage? Actually, it’s a first-mover disadvantage. The challenge in the mobile business is that it’s a complicated and messy industry with lots of very large incumbent companies with entrenched interests. And you’re negotiating with a lot of very big players as a small company. They say you always know who the pioneer is. He’s the guy with the arrows in his back, while it’s the settlers who make the money. It’s not necessarily good to be first. But we happen to be very early, so we’re in that position. It takes chutzpah and capital, probably in that order.”
Richard’s other vision, which will see fruition in June next year is the creation of a future technology conference and festival called FutureFest being held in Cambridge.
Richard wants FutureFest (www.futurefest.com) to become “the Davos of innovation”, featuring both a conference, with 50 speakers and 500 attendees, plus a festival based on four themes: Earth, Life, Communication and Machines.
“It’s picked up a lot of momentum recently, and I expect our audience will draw heavily from both the technology community and also from those who have a responsibility to guide very large entities into the future. There’s a whole community of people who care deeply about what’s coming next.”

Cambridge is a natural city to host the Festival, says Richard, because it is one of the few technology “clusters” in Europe, and one of only two in the UK (the other being London).
“At any given time, by Library House counting, there are easily a thousand companies in the Cambridge cluster. That’s a lot for a city of 100,000 people in five square miles. Cambridge defies all normal statistics because it is a very small place doing a very large job. For a while, Cambridge was taking 10% of all VC funding in Europe.
“A cluster is a place where people will choose to relocate to because it improves the odds of success. In terms of true self-standing clusters with all the ingredients, Cambridge is next to none.”


By Gillamor Stevens
"Gillamor Stephens is a leading Executive Search company serving the European Technology, Online and CleanTech (TOC) marketplace through focused practice areas. In addition we have arguably the most dynamic and successful Venture Capital practice in Europe.A distinguished client base has been built up over the last ten years by delivering uncompromising quality of service through personal attention. We are relentless in our commitment to excellence in all aspects of the recruitment process, truly partnering with our clients. The result is exceptional talent sourcing giving our client definitive competitive advantage.The resulting knowledge base and expertise is without equal in our sector and our clients and candidates benefit accordingly. Our innovative range of recruitment solutions allows us to work flexibly with our key clients over extended periods and geographies. We have genuine international capability through our Mosaic alliance partners.The Gillamor Stephens ethos can be summarised in three words: Knowledge, Commitment, Results."


Comment: Not sure on the Cambridge Cluster, there are a few better areas in the UK I believe.