After reading Mark Suster’s blog post where he mentioned the book eBoys: The First Inside Account of Venture Capitalists at Work, I new I had to read it right away. Well, I just finished the book and I highly recommend it for anyone interested in learning about the go-go Internet dot com days of the late 1990s, venture capitalists, or entrepreneurs looking to raise venture capital. The book details the formation of Benchmark Capital, started in 1995, and chronicles their inner working, investments, successes, and failures in the late 1990s. Here are a few of my takeaways:
- Benchmark pioneered the concept of having equal partners (no junior or non-general partners), no associates, and limiting themselves to eight boards instead of the usual 12, so as to have more time for entrepreneurs
- Benchmark made the single best VC investment of all time by investing $6 million into eBay, at a $40 million valuation, which was the only money eBay raised, and resulted in a 100,000% return on investment (eBay is worth $30 billion today)
- Benchmark had the opportunity to invest in Priceline.com at an $80 million valuation, but deemed it to expensive (Priceline.com then IPO’d and shot to a value of $20 billion, before crashing many years ago and has now risen to a value of $8.6 billion today)
Again, if you’re interested in venture capital or are an entrepreneur raising money from venture capitalists, I’d recommend reading the book.
We employ many of the strategies from the book Mastering the Rockefeller Habits including the One Page Strategic Plan (OPSP). For this year, and going forward, we decided to simplify and develop our own one page plan, as a hybrid between the Rockefeller Habits approach and the Patrick Lencioni organizational clarity approach. Here are some of the challenges we had with the Rockefeller Habits one:
- Too much stuff on one page front and back
- Terminology wasn’t clear (what’s the difference between a key thrust, rock, objective, initiative, and actions)
- Jargon for our own goal categories (most people didn’t remember that A/R – DSO stood for accounts receivables – days sales outstanding, which translates to how many days, on average, does it take for us to get paid)
We’re still working on what this simplified document will contain, and when we’ll roll it out, but my guess is that we’ll be ready within the next two weeks.
At the time of this writing, Pardot ranks on the first page of natural search results for our industry term marketing automation. I’ve been asked for recommendations and best practices on how to rank well with search engines (search engine optimization or SEO). Here’s my advice:
- Write for humans and not computers (computers, known as bots, crawl websites indexing the content for the search engines and people sometimes try to cheat)
- Make the most important search term the first words in the title of the homepage
- Keep the title and largest heading (h1) present and consistent on the all pages other than the homepage
- Publish two new blog posts per week on the site, in addition to constantly adding other content
- Include a sitemap that links to all the relevant pages
- Ensure the pages are well-formed and standards compliant so as to demonstrate to search engines that you care about the quality of your HTML
- Publish a separate, industry-specific blog that is company agnostic on a domain that incorporates the most important search term (see ours at marketingautomation.net) and link back to your site
- Participate professionally in Twitter, Facebook, LinkedIn, etc with links to your site and others in the industry, on a daily basis
- Use a content management system that is search engine friendly (good HTML and human-friendly URLs with keywords)
- Ask partners and resellers to link back to your site with the appropriate keywords
At the end of the day, the most important thing is to publish new, high quality content on a weekly, if not daily, basis. Good luck!
Today I had the opportunity to grab lunch with Howie Rhee, the Managing Director of the Center for Entrepreneurship and Innovation at Duke University and talk about what the university is doing to encourage entrepreneurship. Stepping foot on Duke’s campus a dozen years ago as a student, I wanted to get involved with entrepreneurship programs, only to find that the university lacked them. That’s right, there was almost nothing related to entrepreneurship on campus. Thankfully, that has changed. Here are the top six entrepreneurship programs at Duke, according to Howie:
- Duke Start-Up Challenge – annual business plan competition with $25,000 grand prize to the winner
- Entrepreneurship and Venture Capital Club – I would argue these should be two separate clubs but it is successful as-is, and is one of the strongest clubs on campus making it a winner
- Duke Entrepreneurship Education Series – weekly guest speaker every Thursday of the school year
- Entrepreneurship Week at Duke University – one full week annually filled completely with entrepreneurship events
- Duke Global Entrepreneurship Network (DukeGEN) – LinkedIn group for Duke alumni with 1,700 members
- DUHatch Student Business Incubator – on campus incubator for student-run businesses
I must say I’m impressed with the progress and I look forward to seeing even more encouragement of entrepreneurship.
A reader of this blog sent me an email asking for advice about his startup. After hearing the pitch on the phone I told him that I didn’t think it was a large enough market to be worth his time. He then sent me an email with some stats about the market and a statement like:
2 million potential customers * $100/year * 1% = $2 million/year business
I quickly replied back saying that I don’t like doing the top down approach for how big a company can be but rather doing a bottom up approach is the way to go. What’s a bottom up approach look like? I’d recommend doing something simple like:
- A typical customer will pay us $1,000/year
- We’ll hire five sales reps
- Each rep will sell 10 per month
- We’ll lose a certain percentage of customers per year (churn)
- We’ll up-sell a certain percentage of customers
- With this math we’ll add approximately $600,000 in annual recurring revenue per year assuming churn and up-sell equal out
Here’s a good review of market sizing on DocStoc titled A Startup’s Guide to Market Sizing.
Today I had the chance to help a friend that is working with a startup from Tennessee that is trying to raise money. The team behind the startup has a fair amount of technology services experience and is building their first enterprise software company. Of course, even with experience, their pitch left several areas for improvement. Here are some ideas when pitching your startup:
- Find out how long you have to pitch and make the presentation for half the alloted time so that you can make it a conversation and have sufficient time for questions
- Follow Guy Kawasaki’s 10/20/30 Rule of PowerPoint
- Determine in advance if the audience is more the visionary type or more of a spreadsheet jockey type, and tailor the presentation appropriately
- Pick a theme (e.g. recurring revenue, market size, gross margins, etc) and focus on it throughout the presentation so that the investors have a takeaway
- Remember that the goal of the pitch isn’t to get the investors to write a check on the spot, rather, it is to get another meeting
Pitching your startup should be fun and a great chance to get feedback from a variety of people. Use these techniques to improve the experience and increase your chance of success.
Thinking more about the X-Factor post from a few days ago, I realized there are a few more examples worth citing. As a quick recap, the general idea is that an X-Factor is a competitive advantage that is 7 – 10x better than the industry. Let’s look at some additional examples:
- When Google introduced Gmail they offered 1GB of storage space, which was much more 10x the space of Yahoo! Mail or Hotmail
- America Online, back in the 1990s, distributed over one billion (yes, billion) free trials on CD-ROMs, which is more than 10x their competitors
- Salesforce.com, one of the pioneers of SaaS, reduced the cost of enterprise CRM software by more than 10x (NetSuite did the same for ERP software)
I encourage entrepreneurs to look at products they use on a regular basis and ask themselves what X-Factors got the product to where it is today.
What are some more X-Factor examples?
A year ago I received an interesting piece of advice: every entrepreneur should publish an industry specific book under their name. Of course, not everyone enjoys writing a 100+ page book, and thus hiring a ghost writer is a good alternative. Whether you like the idea of not, let’s look at some benefits of an entrepreneur publishing an industry specific book:
- Positions the company and entrepreneur as a thought leader
- Provides a great sales tool to hand out at tradeshows, send to prospects, etc
- Enables the content to be turned into a series of white papers
- Works as a training tool for employees and partners
I recommend that entrepreneurs and startups consider writing an industry specific book and self publishing it.
Yesterday, the EO program was actually a two part workshop with the first part on developing a vision with a core while the second part was on the X-Factor for entrepreneurs. The main premise behind a vision with a core: sustained corporate growth and excellence need a platform with which to measure all decisions against. Here’s what John DeHart, the presenter of the workshop, had to say were the three parts for a vision:
- Core purpose – Why we do what we do
- Core values – How we do what we do
- Painted picture – Where we are going
I enjoyed the workshop and would encourage entrepreneurs to read the Jim Collins books Good to Great and Built to Last to get a deeper understanding of the material.
Today I had the opportunity to participate in the X-Factor workshop put on by the Entrepreneurs’ Organization. The workshop facilitator, Barrett Ersek, is a serial entrepreneur based in Philadelphia and is passionate about finding break through bottlenecks in industries to produce a 7 – 10x competitive advantage over competitors, hence the name X-Factor. Here are a few stream of consciousness takeaways from the event:
- “Business is innovation and marketing” – Peter Drucker
- Outback Steakhouse’s X-Factor was transforming manager tenure from 13 months to seven years by shortening hours and significantly increasing pay over time
- Blockbuster Video’s X-Factor was guaranteeing in-stock new releases and funding it through revenue sharing with the movie studios
- Hyundai’s X-Factor was taking back cars if a buyer lost his or her job, resulting in them being the only car company that increased sales in Q4 2008
- Amazon.com Kindle’s X-Factor was reducing distribution friction, book costs, and increasing profit margins
- The word impossible contains the exact letters for “I’m possible”
I enjoyed the workshop and would recommend going through it.