大狼狗卡住了我的子宫

Wednesday, June 24, 2020

5 Stages Of The Market Lifecycle Gate Startup Success

大狼狗卡住了我的子宫tesla-cybertruckAs a frequent advisor to new entrepreneurs and startups, I often hear your frustration with being treated differently from other startups by investors, on expectations for valuation, traction, and market size. Of course, it could be your level of experience, or the quality of your team, but the difference is often more related to the lifecycle stage of the market you are trying to enter.

大狼狗卡住了我的子宫For example, if your idea is so new and different that it implies real social or technological change is necessary before widespread acceptance, investors will define your market as nascent or unproven, and be very reluctant to fund you, no matter how convincing your projections may be. On the other hand, if the market is super-hot, many will be willing to jump in to make your case.

So rather than being stressed out by the seeming inequities, I recommend that you take a realistic look at where your startup fits in your market lifecycle, and adjust your expectations and arguments accordingly.

I found some good guidance that supports my own view in this regard in a new book, “Startup Myths and Models,” by Rizwan Virk, who has been there and done that. Both of us have found it very useful for you to first position your startup in one of the following market lifecycle stages, and then set your strategy and expectations accordingly:

  1. Emerging technology stage with signs of future potential. The market at this point is largely unknown and untested. This is normally the domain of technologists and idea people, often using the term “disruptive innovation.” Valuations here are always low, and funding generally depends on friends and family, or a few forward-thinking angels.

    For many years, startups featuring all-electric vehicles fell into this stage of the business lifecycle. Everyone knew these had potential, but had not demonstrated success to date due to infrastructure and support requirements, or cost constraints. Finally, Elon Musk and Tesla were able to break through, using their own funding and proven credibility.

    Now the emergence of autonomous and driverless vehicles fits into this nascent future potential category. I don’t recommend an expectation of funding on that one just yet.

  2. Market is recognized as real and growing by investors. Influencers are talking about this opportunity as one of the “next big things,” like the Internet of Things (Iot) or artificial intelligence (AI). Many investors and big companies are putting money into this space or adding it their product line today. Typical valuations range from 3x-5x revenues.

    In the last couple of years, Nest's smart thermostat has put IoT in the “real” category and Amazon's Echo product accelerated the industry forward toward AI as able to deliver real value to consumers. Now is the time to fund your startups touting these capabilities.

  3. Everyone feels behind the curve of a super-hot market. One or more startups here have already proven the market and achieved unicorn status, such as Uber and Airbnb. Investors are rushing to offer ridiculous valuations, even to pre-revenue startups, to keep from missing out. Your challenge is to get there quickly, before market saturation occurs.

    Once Uber made the ride-hailing market hot, a whole host of competitors have jumped in with immediate high valuations, with or without traction, including Ola, Careem, Taxify, and many others you never heard of. Of course, getting money doesn’t assure success.

  4. Market is maturing with consolidation as a key driver. There is still an opportunity to make money, but market leaders have already emerged. Very few new startups are getting funded at this stage, and existing ones are looking for strategic partners and being acquired to achieve continued growth. Valuations are back to 3x-5x revenues.

    Amazon is a great example of continued growth through consolidation in the maturing ecommerce market, having acquired or invested heavily in over 100 companies and startups. If you are an ecommerce startup, this may be your path to fame and fortune.

  5. Focus shifts from growth to profitability as a mature market. Established company process rules and metrics now characterize the leaders in this market stage. Outside investors may no longer are interested in this space, unless your startup brings a new technological innovation that can undermine the base, or attract a new market segment.

Because startup markets change quickly in today’s world, understanding the lifecycle stages will help you avoid frustration, and make more effective decisions on when to start, how much funding to expect, and the ideal way to exit your startup. I recommend it, since it is a lot more fun to enjoy the startup journey, as well as the destination.

Marty Zwilling

*** First published on Inc.com on 06/10/2020 ***


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Monday, June 22, 2020

6 Entrepreneurship Advantages For Seniors In Business

senior-entrepreneurA popular myth that most of you probably believe is that startups are only for the younger generations. In fact, I see more and more evidence that new entrepreneurs are coming from the older age groups (age 45-64), and success rates move up with age. Is it possible that age and experience are more of an advantage in this business than young passion and fearlessness?

Based on my own years of experience in big businesses, as well as startups, this is no surprise to me. I’ve long had my own views about why this is happening, and they were supported by what I found in a new book, “Ageless Startup,” written by a fellow successful entrepreneur and senior, Rick Terrien. We summarize the advantages of older entrepreneurs along the following lines:

  1. Think life-changing, not lifestyle entrepreneurship. Being an entrepreneur is indeed a lifestyle, implying for the young an ability to follow your own dream, and control your own destiny. More importantly, I believe that it should mean making a better life for others, through more jobs, technology innovation, or improving the environment.

    Over time, those of us who have grown up in business have a better idea of what really counts and what really is life-changing, both from a personal perspective as well as a business perspective. We are more prepared to focus on life-changing entrepreneurship.

  2. Find and see the opportunities hidden in plain sight. As an angel investor, I often hear from young entrepreneurs who have invented a shiny solution, without really focusing first on the need or the opportunity. Time and experience in business teaches you to listen for potential customers, and carefully evaluate the real business potential.

    For example, most professional services and consulting startups today are led by more experienced professionals who worked in business for many years before they decided to strike out on their own with their own brand of solution to a commonly seen requirement.

  3. Time to think about and develop your purpose and “why.” People are living longer today, and find they are only getting started after 30 years of experience. They are seriously looking for opportunities to grow personally and professionally, and leave their mark on the world. They can more clearly see what is important to them and to others.

    Paul Tasner, a celebrated Purpose Prize winner, started his new business at the age of 66. In a recent TED Talk, he summed up this perspective by saying, “I am doing the most rewarding and meaningful work of my life right now.” Making money is not his passion.

  4. You can look back so than you can lead going forward. Being able to look backward in your experience is an advantage in avoiding common mistakes, as well as recognizing a recurring but unsatisfied need in the marketplace. It takes time to build networks, know-how, and the leadership skills to chart a successful path and mobilize others around you.

    You don’t need permission from anyone, and you are less dependent on coaching and mentoring from the rare skilled and available people that most smart young founders depend upon. You also know when to say no, and don’t try to solve every problem.

  5. Use your ability to bootstrap and set a sustainable base. You as a second career entrepreneur are more likely to bootstrap, meaning able to pay strict attention to sustainable cash flow and utilizing your own capital at the outset, thus avoiding the pressures of finding and managing external funding.

    You recognize that new businesses are a journey with continuous challenges, so you need to focus on building a sustainable foundation early, with true-to-you values, and an achievable set of goals. Solutions will become obvious, and you can execute effectively.

  6. Play to the fastest growing customer segment you know. Globally, the population aged 65 and over is growing faster than all other age groups. According to projections, by 2050, one in six people in the world will be over age 65 (16%), up from one in 11 in 2019 (9%). Nothing gives you insight into customer needs like being in the segment with them.

Terrien and I both believe that now is the renaissance age for entrepreneurship, and it’s just beginning. Conventional models are falling by the wayside. It’s time now to start thinking about how you will make a smooth transition from working in a business to working on your business.

You are allowed to start small and go slowly, but it pays to start smart. Don’t hesitate to capitalize on your growing advantages.

Marty Zwilling

*** First published on Inc.com on 06/08/2020 ***


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Sunday, June 21, 2020

5 Strategies For Balancing Revenue Versus User Growth

scales_balanceSome analysts argue that revenue drives growth, while others say user growth drives revenue. Both have worked. Google reached $1B in revenue within five years of incorporation, and now has a market capitalization of over $1 trillion. Twitter showed no focus on revenue in the first five years, but was able to parlay 500M users into a $35B public company, and now growing revenue.

Every startup dreams of achieving that milestone, when they can focus more on scaling the business and enjoying their earnings, rather than fighting for another investment infusion. Most are still confused about the right priority. Should they focus on increasing revenues and profitability, or entice more and more users with “free” services, to increase their valuation.

Traditionally, it was simple. A business only achieved critical mass by becoming cash-flow positive. Revenue growth (top line) then had to be converted into profit growth (bottom line), before a business was deemed to be self-sustaining and worthy of public investment.

It’s only been in the last decade or two, that social media companies, like Facebook and Twitter, have achieved market valuations in billions of dollars (unicorn status), while clearly sacrificing revenue to gain users. In my view, the pendulum is swinging back, with investors looking more for the traditional indications of business integrity, stability, and growth:

  1. Some element of organic growth is a good thing. The purest form of capitalism has always meant charging a fair price and making a fair profit. Re-investing profits to grow the business is organic growth. The concept of free goods and services to get you hooked, financed by deep pockets, or advertising, seems marginally ethical to many.
  1. Long-term stability requires revenue growth and profit. Most modern investors still look for a business model that embodies a gross margin over 50%, and a net margin in the 20% range. A healthy business, ready to scale, has been doing this for a year or more, with an existing customer set generating a non-trivial and growing revenue stream.
  1. High customer loyalty and high team passion. Startup productivity is embodied in key ratios, including low cost of customer acquisition, high retention, and high revenue per employee. High customer churn and lackluster team members are still indicators of a high-risk investment opportunity, to be avoided by both public and private investors.
  1. Growing appreciation for the value of the solution provided. These days, you need customer evangelists who see the value and will pull in their friends through viral actions to keep the business growing. Too many of the high user growth startups have been fads, and numbers can go down as fast as they go up, as per Friendster and MySpace.
  1. Understanding competitive early mover requirements. First movers in a new space need users more than revenue to maintain market share, so investment pitches need to highlight this priority in requests for funding resources. More complex and defensible businesses should highlight their organic drive to profitability and brand leadership.

Unfortunately, the Internet and heavily funded startups have nurtured a customer expectation of free web services and free smartphone apps. In these domains, it is now difficult to monetize at all until you have a large critical mass of users. In these cases, growth scaling is important, both before and after revenue flow begins. The business plan must reflect both growth phases.

Thus even after a startup has achieved a critical mass of users, the expectation of long-term revenue growth and profitability does not go away. Twitter is facing this challenge right now, as the large majority of public investors expect a near-term financial return on their investment, every quarter of every year.

So a higher focus on user growth may be necessary early, but is never sufficient. If you are in it for the long run, don’t forget the basic business principle that if you lose money on every customer, you can’t make it up in volume.

Martin Zwilling


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Saturday, June 20, 2020

7 Startup Leadership Keys To Ramp Up Team Commitment

highly-engaged-teamEntrepreneurs need to be effective team leaders, since no one can transform an idea into a product and a business without some help. Unfortunately many founders I work with as a mentor are experts on the technical side, but have no insight into leading a team. But fortunately, team building is a skill that can be learned and practiced, for those willing to put in some effort.

The only real alternative is to find a co-founder who can build and lead the team, while you focus on the product. Otherwise, in my experience, the startup will fail. The importance and the specifics of practical team leadership were re-confirmed to me a while back in the classic book, “Unlocked,” by Robert S. Murray, who is a recognized expert in the field of business leadership.

I recommend his checklist as a starting point for developing team connections and building engaged team members as a key step in becoming an effective team leader, even if your team is spread all over the country:

  1. Consciously reduce time spent on outside activities. You won’t be viewed as the team leader if you spend most of your time on activities that are not relevant to your team. Being visible and engaged on a random part-time basis, due to other jobs, won’t do it. If your team has trouble finding you, you won’t make productive connections.
  1. Be compulsive about scheduling time for your team. Even busy entrepreneurs need to schedule regular and predictable times which will be devoted only to working and interacting with the team. Possibly an hour in the morning and an hour in the afternoon may be enough, if you make it happen consistently.
  1. Maintain a weekly “huddle meeting” with the entire team. This can even be done remotely via Zoom, but it’s important that every team member attends. You need to listen as each summarizes their accomplishments for the last week, and their plan for the week ahead. Leadership is making sure they have resources and understand the strategy.
  1. Have monthly reviews with each team member. Team members need and crave feedback, much more frequently and informally than the annual performance review. I recommend scheduled monthly 30-minute informal checkpoints, as well as quarterly updates on objectives and performance. Ask what you can do for them in every review.
  1. Practice leadership by walking around (LBWA). I personally have found this to be one of the most effective ways to find out what is going on, as well as an opportunity to provide feedback on strategy and direction. Go for walks every day and stop at people’s desks. Ask them what is going on, both in the team and outside of work. Listen.
  1. Recognize team members for individual efforts. Communicate individual results as well as team results to everyone. Most leaders don’t say “thank you” enough. Recognition in front of peers is often more motivating that monetary awards. This is the time to talk about wins with customers and what is coming on the horizon, and the team role in each.
  1. Be real and authentic in every interaction. If you are not, your team will see right through it and you will be worse off than if you stayed locked up in your office. Make sure you’re treating all team members as you would want to be treated. Be genuinely interested in learning something new every day from your team, and they will follow you.

The value of startup teams with the founder as an effective leader is many times the value of many strong individuals working independently. It’s not only your connection with the team, but their connection with each other that is critical. Only a dedicated leader can spot those special powers in each member and then build a well-oiled team which can win the startup war for you.

The result is not only more productivity, but also a startup where everyone loves to contribute, and the whole team feels the energy and satisfaction of accomplishing your dream. Now your product leadership becomes business leadership, which can actually change the world.

Marty Zwilling


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Friday, June 19, 2020

5 Ways To Validate Your Technology As Market Driven

electric-driverless-shuttleTechnical entrepreneurs love their technology, and often are driven to launch a startup on the assumption that everyone will buy any solution which highlights this technology. Instead, they need to validate a customer problem and real market need first. Don’t create solutions looking for a problem, since investors ignore these, and customers other than early adopters will be hard to find.

Exciting new technologies these days range from the niche social media software platforms I see almost every month, to new transportation models, like consumer space travel and driverless autos. These founders all seem to be pushing their technology, rather than highlighting their solution to a painful need. Customers buy solutions, not technology.

In fact, outside of those few early adopters, technology by itself has negative value to the majority of potential customers. Most people are wary of change, and know that new technologies take time to learn and stabilize, so customers prefer solutions based on tried and tested proven technologies. Smart entrepreneurs build market-driven solutions, per the following principles:

  1. Size the opportunity and customer interest first. Your passion isn’t enough to create a market. If there is a growing opportunity, an accredited market research group like Forrester or Gartner will already have data to quantify your excitement, and help make your case. Prototype your solution for customers, and discount friends and family.
  1. Look for customer willingness and ability to pay. Just because users support your free trial doesn’t mean they will pay for the solution. Nice to have does not motivate a revenue stream. Technologies that cure world hunger may find that that hungry people don’t have money, and government agencies as customers are a very long sales cycle.
  1. Limit the features and complexity. Technologists tend to add more features, just because they can. More features usually means more complexity in operation and support. The best solutions, from a customer perspective, are able to mask the technology with a very simple and usable interface that focuses on their problem only.
  1. Take a hard look at alternatives and competitors. New technology does not necessarily make better solutions. If you claim no competition, investors may perceive that you have no market, or you haven’t looked. Neither is positive. Customers may be perfectly happy with existing alternatives and competitors.

  1. Work in a familiar domain, on a problem you have experienced. The most successful entrepreneurs tackle problems that have caused them personal pain, in an area they know well. Every business domain looks simpler to outsiders who have no insights into the complexities that increase your risk.

None of these principles is meant to imply that technology is not important in building new solutions. In fact, some technology leaps are so great that they enable a whole new class of products, or a whole new market. These are called disruptive technologies or the next big thing, in the sense that existing markets or economies of scale are disrupted by the scope of change.

Examples of solutions from disruptive technologies include the appearance of personal computers, smartphones, the Internet, and the first social media platforms. Even for these, which did indeed change the world, the aforementioned principles still apply, in conjunction with a couple of additional considerations:

  • Time frames for acceptance are longer and the risk is higher. Based on history, the acceptance period for major technology changes is much longer than innovative evolutionary changes – sometimes taking 20 year or more for pervasive acceptance. Investors thus tend to shy away from these startups, meaning you need deeper pockets.
  • Disruptive technologies require customer education to create a new market. Customers tend to think linearly, so existing customer feedback is unlikely to lead to, appreciate, or pay quickly for the new solutions from world-changing technology. This means more time and money for viral marketing, product iterations, and promotions.

So the more you emphasize the technology of your offering, the more you need to be prepared for increased costs, reduced investor interest, slow customer acceptance, and a longer wait for any return. On the other hand, the longer-term impact and return of disruptive technologies is likely to be huge, if they survive the early challenges.

My recommendation for first-time entrepreneurs, and the rest of us who don’t have deep pockets, is to focus on customer problems that are causing pain today, and customers who are willing and able to spend real money on a solution.

You will more likely get the investor resources you need, the guidance from existing experts, the opportunity to hone your business skills, and the confidence from success. Then when you sell your first company for several hundred million, you will be ready to tackle that favorite disruptive technology leading to the next big solution to change the world.

Martin Zwilling


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Wednesday, June 17, 2020

5 Reasons Two Founders As A Team Are Better Than One

Bill-Gates-Steve-BallmerIt seems like every entrepreneur I meet these days is quick to proclaim themselves a visionary, expecting that will give more credibility to their startup idea, and improve their odds with investors. In reality, I’m one of the majority of investors who believe that startup success is more about the execution than the idea. Thus, unless the visionary highlights a cofounder who can take the vision and execute, I assume the worst.

It’s true that gifted visionaries bring many good things to an organization, including big picture ideas, seeing around corners, and a hunter mentality. Yet they also come with a set of shortcomings. These were outlined well, with some good recommendations for overcoming them, in the classic book, “Rocket Fuel,” by Gino Wickman and Mark C. Winters, both with a wealth of experience in this domain.

My bottom-line recommendation and theirs is that every visionary entrepreneur needs to be matched with a cofounder or key team member who has the required execution attributes. Let’s take a hard look at the key potential weaknesses of a visionary, and the value of an execution-oriented partner, which the authors call an integrator:

  1. Staying focused and following through. Visionaries tend to get bored easily. To spice things up, they start creating new ideas and direction, which gets everyone excited. This may cause a wonderful 90-day spike in performance, but in the end often sabotages their original vision. Many projects get started but few are completed, and momentum is lost.

    To compensate, every visionary entrepreneur needs to find a partner who gets great satisfaction from results, and loves the discipline of making things happen on a day-to-day basis. This person is the glue that can hold the people, processes, systems, priorities, and strategy of a developing startup together.

  2. Too many ideas and an unrealistic optimism. Most true visionary entrepreneurs have unusual energy, creativity, enthusiasm, and a propensity for taking risks. This can be disruptive, as they love to break the mold. They often show little empathy for the negative impact this can have on capacity, resources, people, and profitability.

    Again, the solution is a partner who is the voice of reason, who filters all of the visionary’s ideas, and helps eliminate hurdles, stumbling blocks, and barriers for the whole leadership team. Titles for this role in a startup are not fixed, but usually show up as president, COO, or chief architect.

  3. Cause organizational whiplash. Due to founder visibility, the team is so tuned in to the visionary and current direction that every turn to the right to pursue a new idea turns the whole team to the right. The organization can’t keep up the pace of change, and soon loses motivation, productivity, and all sense of where they are headed.

    Every organization needs a steady counter-force that is focused on directional clarity, and great at making sure people are communicating within the organization. Good integrators are fanatical about problem resolution and making decisions. When the team is at odds or confused, they need this steady force to keep them on track with the business plan.

  4. Don’t manage details and hold people accountable. Visionaries typically don’t like running the day-to-day of the business on a long-term basis, and aren’t good at following through. Even communicating the vision itself can be quite a challenge, since it’s so crystal clear in their head that they can’t imagine having to repeat or clarify for others.

    Balance here comes again from the operational expert, who is very good at leading, managing, and holding people accountable. They enjoy being accountable for profit and loss, and for the execution of the business plan. When a major initiative is undertaken, they will anticipate the ripple of implications across the organization.

  5. Tends to hire helpers and not develop talent. Idea people are so bright that they don’t see the need to leverage the capabilities of others, or hire people smarter than they are in any given domain. They are usually too self-centered to see the need for developing skills and leadership in the other members of the team, or building a succession plan.

Here also the solution usually is a partner with prior experience, who has learned how and when to hire real help, and implement metrics and processes to measure results. They enjoy the coaching and development role, and are able to match work assignments to people’s strengths, promoting both people and company growth.

Of course, many will argue that the visionary entrepreneurs can simply fix their shortcomings, and thus save resources by satisfying both roles. But in my experience, very few entrepreneurs have the bandwidth to make this work, and the adapted entrepreneur ends up doing both jobs poorly.

I’m a proponent of capitalizing on your strengths, rather than focusing on fixing your weaknesses. If your strength is being a visionary, use that vision to attract a complementary partner, and make it a win-win opportunity for both of you.

Marty Zwilling


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Monday, June 15, 2020

7 Positive Ways To Highlight Your Competitive Clout

businessman-competitive-cloutMost entrepreneurs spend far too much time thinking negatively about competitors, and can’t resist making derogatory statements to their own team, to investors, and even to customers. This approach only makes these important constituents question your integrity, intelligence, and your understanding of business basics. Pointing out flaws in others does not give you strength.

As an investor, I always listen carefully to what an entrepreneur says, and does not say, about competition. Every business area has competition and every customer has alternatives, so a smart entrepreneur needs to acknowledge these as a positive in defining a big market, and position the features of a new solution in this context. Here are seven key ways to do this:

  1. Frame the competition as manageable. Investors want to see evidence of specific competitors who make the market, and your sustainable competitive advantage to hold your own. They don’t want to hear of no competitors, or a long list implying a crowded space. Use three generic categories, and relate your position to a key player in each.
  1. Highlight your positives to frame competitor shortcomings. Talk about competitors with positive statements about the advantages of your own product. For example, “While Product X has worked well in the server market, my product also provides Cloud support, to drastically reduce IT costs and maintenance.”
  1. Emphasize intellectual property and dynamic product line. Patents and trade secrets are more powerful advantages than missing competitive features, which might be quickly filled in as you gain traction. Be careful with the first-mover claim, since big competitors have deeper pockets and can accelerate to quickly eliminate this one.
  1. Demonstrate expertise on the range of competitors. You don’t need to talk about every competitor, but you better know every one, just in case someone challenges you. Do your research thoroughly on the Internet, with industry experts, and advisors. Build your credibility by presenting balanced competitor leadership and team histories.
  1. Become a thought leader on industry evolution. Make it evident that you have learned and evaluated competition from a higher perspective – meaning the evolution of industry technology and trends. Show that you have thought about indirect competitors and alternative solutions, like airplane technology versus a better train.
  1. Develop a timeline showing continuous innovation. Make your competitive position a long-term advantage by presenting a timeline of technology evolution, rather than a comparison at time of first rollout. Investors don’t like an apparent “one-trick pony,” or a momentary advantage that can be quickly overcome by smart competitors.
  1. Position your solution in the world market. Every market and every opportunity these days is global, so successful strategies and positioning are done with that in mind. Your rollout needs to be focused and targeted locally in the near-term, but competition needs to be addressed in a much broader long-term way.

Don’t forget that the primary objectives of every competitive positioning are to demonstrate your business acumen and integrity, as well as the strengths of your solution. Any overly negative comments you make about competitors doesn’t help you on either of these objectives, and will kill your momentum with investors and potential customers.

Spot comparisons are also less and less valuable these days, as the market tends to change quickly, and competitors can pivot and recover just as quickly. Remember that smart competitors are likely working on new features with resources greater than yours, and timeframes to delivery that may be shorter than yours.

In addition, thinking positively about competitors is what your customers will do, and what every smart investor or potential business partner does. You have to get on the same wavelength to optimize your solution, maximize your credibility, and minimize the competitive risk. The alternative of being an entrepreneur full of negativity is no fun for either side.

Martin Zwilling


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