Funding Today’s Business or Tomorrow’s Idea

One of the amazing characteristics of an entrepreneur is seeing potential all around. Every problem is a new opportunity. Every challenge is a new learning experience.

As part of seeing new opportunities, entrepreneurs most often pitch investors to fund tomorrow’s idea. Tomorrow’s idea is a new product, a new direction, or some other aspect that is unproven. Most investors, save for angels and the occasional micro VC, pass on funding tomorrow’s idea.

Instead, investors want to fund today’s business that is working well with the belief that it can work even better tomorrow. With more time, talent, and money, the business that is good can become great.

Entrepreneurs would do well to work towards a viable business today. While this is the more practical route, it’s the route that most successful entrepreneurs take.

What else? What are some more thoughts on funding today’s business or tomorrow’s idea?

Co-Founder Complement: Go-To-Market + Product Experts

Earlier this week I was talking to one of the top SaaS entrepreneurs in town about his experience from a simple start at the Atlanta Tech Village five years ago to raising $75 million last year. We got into a discussion about team, stream, and not a meme and I realized my previous definition of the team element was incorrect. Before, I characterized it as a heroic sales person and a heroic product person.

The heroic sales person brings in deals with lots of passion and vision, yet has an incomplete product. The heroic product person builds the product on the fly while delighting customers all the while. My phrasing it as the heroic sales person was wrong.

What’s the right way to describe this person? They’re the amazing go-to-market leader. Acquiring customers happens through a variety of channels. What matters, especially early on, is finding one channel that works. The go-to-market leader could be great at selling directly, generating demand through road shows, or generating quality leads through search marketing. In the end, the result is  a steady flow of people that want to buy the product.

Pair the amazing go-to-market person with the amazing product person and you have the most successful founding team combination. The ultimate co-founder complement is combining someone who can attract customers with someone who can delight them.

What else? What are some more thoughts on the best co-founder combination being a go-to-market person and a product person?

Here to Serve Entrepreneurs

Early on in life I was lucky to find my true passion: being an entrepreneur. Everywhere I looked there were opportunities to create new products and solutions; most of my ideas failed but a few succeeded. As I developed my passion for entrepreneurship, I also realized my passion for helping other entrepreneurs.

In college I started an entrepreneurship house course called Internet Startups and Entrepreneurship with an amazing faculty sponsor. Over the course of three semesters I had the chance to teach — really, learn with my peers — some of the things I’d already been working on for years.

At Pardot, we started an accelerator for idea stage startups called Shotput Ventures where we hosted the entrepreneurs for a weekly dinner, speaker, and idea sharing. It was a labor of love and a great learning experience. After Shotput, we incubated a number of startups in the Pardot office to help the next generation of entrepreneurs. Some of those startups included Clickscape, Rigor, and SalesLoft.

After selling Pardot, we dreamed big and built the Atlanta Tech Village. At 103,000 square feet and over 1,000 people, it’s one of the five largest tech entrepreneurship centers in the United States. There, we helped launch Calendly and Terminus.

Now, with the launch of Atlanta Ventures, we’re serving SaaS entrepreneurs through community, content, and capital:

  • Community – Regular events and programs for SaaS entrepreneurs ranging from idea stage meetups to curated SaaS forums to exclusive scaling SaaS dinners
  • Content – Fresh stories and lessons learned from some of the fastest growing SaaS companies in the country
  • Capital – Investments from $100,000 to $2 million in idea, seed, and growth stage SaaS startups

We’re here to serve entrepreneurs; it’s what we do. Nothing less, nothing more.

Please reach out and let us know how Atlanta Ventures can help.

Build A Startup Around the Ideal First Customer

We started Pardot in 2007 building a marketing automation platform around the ideal first customer: Hannon Hill. Hannon Hill, my first company, was a small, fast-growing content management software company focused on colleges and universities. As marketing automation was a new concept, there wasn’t an existing set of expected modules. First, we built form capture and CRM integration followed by lead tracking, automation rules, and email marketing. Every new feature evolved directly from feedback and ideation with Hannon Hill.

In hindsight, there were a number of benefits of building the business around an engaged, and ideal, first customer:

  • Quality Feedback – One of the hardest things about a new company is getting quality feedback from customers regarding all aspects of the relationship: product, service, support, etc. Having one ideal customer from the beginning that meets the desired profile is hugely valuable.
  • Informed Iterations – Customer usage is oxygen for new products. Too often entrepreneurs build new products in a vacuum and come up for a beta customer when it’s too late. Product iteration speed is critical, yet a customer is required to go with it.
  • Demonstrated Usage – With SaaS software, it’s easy to know if people are using the product with tools like FullStory and simple tracking of items like number of sign ins. Being able to sit next to a person using the product and watching it live, face-to-face makes for an even stronger process.
  • Marketing Stories – As the product gets used by the ideal first customer, more marketing stories emerge as well. These stories about how the customer benefit are then incorporated into the website, emails, sales collateral, webinars, and more. The better the stories, the better the message reaches the market.

Starting a startup? Start with an ideal first customer that fits the long term vision and make that customer successful and happy as quickly as possible.

What else? What are some more thoughts around building a startup around an ideal first customer?

Seeing is Believing for Entrepreneurial Success

Growing up in Tallahassee, Florida I never met a single software entrepreneur. Not once. I’d read Inc. magazine religiously and dream of being a full-time, successful tech entrepreneur, but my ambitions were limited to simply being successful. After selling Pardot, dozens of people asked if I expected that level of success. My answer was always the same: I wanted to build a great company, with great people, and whatever happens is fine. There was no goal. There was no desired financial outcome.

Over the years, I’ve come to understand and believe in the power of seeing someone else achieve something, and believing it too is possible. Of course, this happens all the time in sports (look at the rise of women Russian tennis players). When you meet someone successful in person, or see them at a local event, you realize that they aren’t that different from anyone else. Just by seeing a successful person, you believe even more that you can do it as well.

The old adage “seeing is believing” is true, especially for entrepreneur ambitions. When you drive down the road and see that big logo of a startup on the side of a building, it becomes more attainable. When you walk down the hall at the Atlanta Tech Village and see multiple entrepreneurs with millions of recurring revenue, it becomes more attainable.

Seeing is believing. Connect with successful entrepreneurs and the impossible becomes that much more achievable.

Bootstrap or Raise Capital?

One of the most popular questions I get from entrepreneurs is “do I bootstrap or raise capital?”

Just yesterday, I was talking to an entrepreneur and that question came up. Their SaaS business is making progress with a handful of paying customers. Existing customers are asking for new features. Market conditions are growing more dynamic. Yet, product/market fit isn’t there. Authentic demand isn’t clear either. The product leans nice-to-have right now with the potential to be a must-have. Remember: team, stream, and a not a meme.

My recommendation: don’t raise money. Continue to bootstrap the business. Work towards product/market fit and then a repeatable customer acquisition process (see The Four Stages of a B2B Startup).

Do raise money when the business is working. When customers love the product and it’s clear there’s a big opportunity, investors will invest on better terms and at better valuations. Too many entrepreneurs raise money before the startup’s fundamentals are sound and that results in heartache.

Sell investors on facts, not dreams. Raise money on your own terms. If the startup isn’t ready, keep bootstrapping and grinding it out.

What else? What are some more thoughts on bootstrapping or raising capital?

Startup Success: Team, Stream, and Not a Meme

Over the years I’ve spent many hours trying to figure out why some startups are successful, and most are not. The goal: distill startup success down into as simple a framework as possible. Of course, startup success is hard and messy, but it’s helpful to have a high-level context for the over-arching components of success.

Alright, let’s get to it. The three components of startup success:

  • Team
  • Stream
  • Not a Meme

Team represents the group of people working together to achieve the mission. Some of the most important attributes are resourcefulness, grit, and determination. Startups are an environment of limited resources, repeated failure, and long odds. Most people don’t thrive in a startup. The best teams figure out what needs to be done and makes it happen.

Stream represents movement and speed whereby disruption is happening, and it’s clear that a new, better way is possible. The best streams are large, major shifts where entire industries are transformed. The more disruption, the more opportunity for startup success. Examples include the shift from offline advertising dollars to online, the shift from telephone lines to voice over the Internet, and the shift from field sales to inside sales.

‘Not a meme’ represents things that are must haves, not nice-to-haves. Memes are funny or witty quips that represent a cultural phenomenon. As an example, Chuck Norris has a number of memes around things he can do that no one else can. One of my favorites: Chuck Norris gets Chick-fil-A on Sundays.

Most startups build nice-to-have products and fail. Nice-to-have can be a product that isn’t valuable, a product that’s useful but in an over crowded market, or something that’s too far ahead of its time.

Let’s take AirWatch, an Atlanta success story that VMWare acquired for $1.5 billion. The original team was comprised of the Manhattan Associates (NASDAQ:MANH) founder and another executive that had worked together before. The stream was the rise of the smartphone and people bringing their own devices to work (major transformations). The ‘not a meme’ was companies needing to enforce security rules and policies across thousands of employees’ smart phones. All three components — team, stream, and ‘not a meme’ — were combined with a massive market.

The next time you evaluate a startup idea for yourself, or meet with an entrepreneur, ask these three questions:

  • Why is this team going to win in this market?
  • What fast moving stream is shaking things up and causing disruption?
  • How is the product ‘not a meme’ such that it’s a must-have for customers?

Answer the team, stream, and ‘not a meme’ questions correctly to predict startup success.