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Thursday, July 28, 2011

Communicating With Your Investors

Some Thoughts on Communicating With Your Investors

By Rob Go of NextView Ventures

Given that small institutional seed rounds are becoming more and more common, I thought I’d share a few of my thoughts on how to best communicate with investors. After raising this sort of round, it’s usually the first time an entrepreneur has to think about putting some structure of investor updates and communications. These aren’t set in stone, but some practices that I think make sense and have been effective.

1. Do investor due diligence. Before thinking about investor communication, I go back to the importance of doing due diligence on your potential investor to understand what their expectations are and what their behavior is typically like. My partner Dave blogged more about that topic here. The worst thing is to be misaligned after the investment about what you think is appropriate for the company and what your investor might think makes sense.

2. Establish a board, or a board-like governance structure. This seems intimidating, but has many benefits. First, getting investors to commit to board involvement is a great way to make sure your VC is committed to your seed round (that is, if you have a large VC in your round). Second, if you are planning to raise VC money in the future, it’s helpful to have established the cadence of regular board interactions early, and I think it’s actually good discipline to do this and get regular feedback from your board members. Plus, it helps you work out the kinks of running a board so it’s not such a shock to the system come the series A. I typically prefer small boards of just 3 people. Larger ones can work too if everyone collaborates well together. The nice thing about small boards is that you can also invite your strategic angel investors to come periodically to contribute as well without things getting too unwieldy. Just make sure they do their homework beforehand and can contribute!

3. Some of our portfolio companies have informal boards. It’s more of a regular investor “stand up” meeting that is pretty efficient. But the expectation is that the major investors are present and engaged, and for the most part, this has been true. Sometimes, our co-investors have sent 2 partners to these meetings, so it’s nice to know that it’s being taken seriously. Of our 13 portfolio companies, 10 had/have formal boards during the seed stage, and the rest had a more informal structure.

4. Make investor communications short, but frequent. I like the cadence of a 1-2 hour board meeting every 4-6 weeks. In the meantime, a weekly or bi-weekly update I think is helpful to keep investors caught up (I prefer this in email form because it’s more efficient for everyone). The goal of this level of communication is not to get the approval from your investors on your performance. The goal is to make sure that your investors are armed with the information they need to help you.

5. Pre-wire and focus. The goal of your 2-hour board meeting should be to spend as little time as possible on general updates and non-critical governance issues. Regular business updates should already be absorbed by your investors through your written updates. What you do want to spend time on is the 1-3 most critical strategic issues that you are facing and need practical help on. I’m an advocate for a quick chat with board members a few days before the meeting to say “ok, you get where the business is right? Can we agree to focus 50%+ of our time on issue A and B?”. This is a good way to introduce tough conversations too, so that you don’t get an unthoughtful gut reaction, but a constructive discussion about challenging issues like fundraising, missed targets, disfunction in the exec team, etc.

6. Give assignments and follow up. I’m always surprised when investors need to ask “how can we help?”. Remember, we all tell our LP’s that we are immensely helpful to our portfolio companies, so make us follow through on that! The best way to make sure that investors follow through on what they say they will do is to get them to say what they will do publicly and follow up publicly. A follow up can be an email that says “as next steps, thanks in advance to investor A helping with X, investor B helping with Y, and thanks to investor C for already doing Z!”.


Wednesday, July 20, 2011

A Gold Key to Success for the company founder

I read a book by Randy Komisar "The Monk and the Riddle" a must read for anyone wanting to start thre own company, the essence of the book for me was that your start up is not your retirement policy, it is your life, it is something you can do for the rest of your life, it is your passion...see the article below by a Charlie O'Donnell , Charlie is a Principal at First Round Capital in NYC ..this is a interesting a so true spin on Customer development

live in the problem not in the solution how customer develop

I'm not a lean startup zealot, but there are obviously lots of aspects of it that can lead to a ton of insights about your business. Talking to customers is, of course, a good thing. I'd never argue against it.

I have seen, however, the customer development process wind up looking like a street corner salesman selling watches out of the inside of his coat. "Don't what this?" "What about this?" "I've got more in the car of my truck if you want them in blue."

What's lacking is an innate understanding of the customers problems before they go through the ideation phase. I find that some of the most sound entrepreneurial efforts are one where the founder has lived the problem uniquely in some way. Either they actually were the customer (and by customer I mean someone who pays for this kind of service) or they've literally spent years thinking about it--as an enthusiast or insider. I didn't come from the recruiting industry when I started Path 101, but I had been obsessed with career discovery as a mentor and educator for eight years before I thought of an idea I wanted to pursue.

That's different than, "hasn't this happened to you?" kind of approaches. Just because you had to wait on a line once doesn't mean you know nearly as much as the person in charge of people flow and traffic at Madison Square Garden. Similarly just because you've been to a conference doesn't mean you know nearly enough to provide the industry with a game changing piece of software to run them all. Its possible, but unlikely.

If you don't have unique insight into the nature or the problem, customer development is going to be random and unproductive. Its like being a doctor where you don't know why the patient is sick, but they feel better after you give them a Tylenol. It may appear like you've solved the problem, but it was just dumb luck that you addressed a symptom. That won't do much in terms of informing you as to a long term course of treatment or what happens when your Tylenol doesn't solve the problem as well as you thought it did.

I think a lot of companies suffer this when they're in new entrepreneurial ecosystems or ones outside of major cities where innovation is happening in the biggest industries. The startups tend to be really consumery spins on things they've seen on Techcrunch--as opposed to more organic solutions to problems they've experienced uniquely.

The first time I ever met Chantel Waterbury from Chloe & Isabel, she told me in detail about the issues in the direct sales jewelry business--a huge market but one that suffers from inferior product quality and poor branding. People don't exactly associate "fashion forward" with "tupperware for jewelry". To have enough insight into how to solve that, you need to be more than just someone who likes jewelry. You need direct experience to understand how to get high quality and stylish fashion jewelry made at a reasonable price. She launched fashion jewelry for major brands and was the top seller of CutCo knives on the West Coast--paid her way through college doing it. Sure, she'll pay attention to her customers, but she's starting from a position of experience that at least puts her in the right ballpark day one. That's what makes customer discovery a place to hone your idea with relevant feedback and not a random spin of the Wheel of Startups.

http://www.thisisgoingtobebig.com/ Blog of Charlie O'Donnell

Wednesday, July 13, 2011

Are your customers killing your business

3 Signs You’re Trying Too Hard to Please the Customer

Somewhere between the tragic Casey Anthony verdict and the final Space Shuttle launch, you may have heard about the slow train wreck that is Rupert Murdoch’s now-defunct News of the World.
If not, then here’s all you need to know: People working for the British tabloid are alleged to have hacked the voice mail accounts of numerous public figures, including members of the royal family and a murder victim. By shutting down the newspaper, it’s thought that its owners will be able to derail an official investigation.
I mention Murdoch’s problem for two reasons: First, I worked for Dow Jones & Co., which News Corp. now owns, after graduating from journalism school. And second, because I think I have a unique understanding of what happened, if the allegations against the newspaper prove to be true. I wrote my thesis on journalism errors, and I’ve made a few big mistakes myself, so I know what the now unemployed reporters at the News must be going through. I feel for them.
The News of the World’s sin isn’t “losing its way” as it claimed in its farewell edition last week. It was a much more common one in the corporate world: It was trying too hard.
Simply put, the reporters wanted so badly to give their readers what they thought they wanted, that they allegedly went too far to deliver it. In a hyper-competitive environment, that’s an easy thing to do–in every industry.
Three Signs A Business Has Gone Overboard
In an effort to provide the best possible service, companies often go too far to please. Here’s how:
1. They talk too much. Answering the phone, “Good morning, how may I bring a smile to your face today?” or signing off with, “Have a magical day!” aren’t just annoying to some customers. They often smack of insincerity. One well-known luxury hotel chain used to require its employees to use words like, “certainly” instead of “yes” and “my pleasure” instead of “OK” when interacting with guests. That drove some of its customers nuts, who often thought they were trapped in some kind of 19th-century costume drama.
2. They hover. This frequently happens on the sales floor with inexperienced salespeople. Instead of letting a customer browse, associates attach themselves to the “prospect” and follow that person around the floor. More experienced salespeople will give the customer a little room. But customers still know they’re being followed, and it can make them uncomfortable. The only thing worse than that are employees who openly fight over who gets credit for the sale. That’s not service; it’s stalking.
3. They wanna be your friend. A little hyperbole, particularly used in advertising, is perfectly acceptable for most shoppers. But with the growth of social media, companies are trying to present themselves as more than just customer-friendly and transparent. They also want to be your buddy. Check the Facebook or Twitter accounts of your favorite businesses, and you’d think you’ve found your long-lost friend. Nothing can be further from the truth.
Sure, all these things can irritate consumers. But they’re not as much of a turn-off as a company that isn’t trying at all.

No one knows how the hacking scandal will end. But I’d hate to see news organizations owned by News Corp. try less hard, if doing so means the product is boring and predictable.
Then again, I’m something of a contrarian, if not a heretic. I don’t think journalism is a religion. In the 21st century, it’s become just another form of entertainment for most consumers — including me.

By Christopher Elliott Who is a consumer advocate, syndicated columnist and curator of the On Your Side wiki. He’s the author of the upcoming book Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals, which critics have called it “eye-opening” and “inspiring.” You can follow Elliott on Twitter, Facebook or his personal blog, Elliott.org or email him directly.