I’m going to be presenting at the big and boisterous SXSW conference in Austin, Texas this Saturday. I’ll be talking about Inbound Marketing. More specifically, I’ll be talking about some insider lessons we’ve learned building a marketing machine at HubSpot. We’ll even be sharing some relatively confidential data. The session is at 11:30 a.m. on the Day Stage. Here are the details: Inbound Marketing at SXSW 
In any case, from what I hear, the event is supposed to be lots of fun, but
huge. As an introvert, I’m generally not a big fan of huge events. So, I made a list of people that will also be at SXSW who I’d love to connect to. I figured by having a list, I’ll feel more guilty if I head back to Boston and haven’t talked to at least a few of them. I’m also hoping that a few of them will come across this article and be kind enough to reach out. I made it a bit easier on myself by including some folks that I know pretty well.
If you’re on this list and reading this, please leave me a comment. I’d be very grateful.
People I Want To Connect With At SXSW
1. Lane Becker, GetSatisfaction
Why: I met Lane at a Startup2Startup event in Palo, Alto. He was at my dinner table. Smart guy and I’m intrigued by this overall category (though I’m hoping Lane doesn’t ask me why I’m a customer of UserVoice instead of GetSatisfaction).
2. Chris Brogan, ChrisBrogan.com
Why: I always learn something new from Chris and it’s been a while since we had our list dinner plotting global domination. It’s unfortunate that despite living within driving distance of each other, we don’t meet more often.
3. Dries Buytaert, Acquia
Why: I’ve talked to Dries a couple of times on the phone and Acquia’s a local (Boston area), venture-funded startup. Have met several people on the Acquia team (they’re great). Want to ask Dries how Drupal Gardens is going. I’ve been meaning to play with it, but havn’t yet.
4. David Cohen, TechStars
Why: I’m an investor in the new TechStars Boston cohort for 2010 and will be a mentor again this year. David’s super-smart and a big supporter of early-stage startups. I love startups.
5. Evan Cohen, FourSquare
Why: My most recent project (currently in alpha) is SquareGrader (a free tool for analyzing FourSquare users)
6. Dennis Crowley, FourSquare
Why: As I noted in #6, I’m building a new, free tool for FourSquare. I reached out to Dennis just a couple of days ago and he was gracious enough to respond almost immediately. Would love to help FourSquare win in their market (and I’m an avid user too). HubSpot reaches over a million users a month -- many of them should be FourSquare users. We can help make that happen.
7. Chris Dixon, Hunch
Why: I’ve been reading the blog for a while (Chris has been on fire!), it’s one of the better, more practical ones out there on the topic of startups and funding.
8. Laura Fitton, oneforty
Why: I’m an investor in oneforty and Laura’s great. I’m always happier after having met her. She’s energy-generating. And, she might introduce me to some folks because she’s a rockstar and a networker extraordinaire.
9. Pete Cashmore, Mashable.com
Why: I’m an avid reader of Mashable. Mashable frequently writes about HubSpot or one of our grader.com tools — and I’ve love for them to write even more. And, Pete’s a social media celebrity that at least a couple of the women at HubSpot have a crush on (not naming any names or anything, you know who you are). It’ll raise my street-cred to go back to the office and say I met Pete.
10. Jason Fried, 37signals
Why: Jason was kind enough to let me interview him for my graduate thesis and we’ve stayed in touch ever since. Want to chat with him about how his new book Rework is doing and what I can do to help.
11. Paul Graham, Y Combinator
Why: He’s on my short-list of really, really smart entreprenerus and I’m a major fan of Y Combinator (and many of its portfolio founders). I also understand that the recent Y Combinator conference went well (Rand Fishkin from SEOmoz spoke there) and that the next one is going to be about monetization, lead generation and freemium. I’m going to see if I can finagle an invite to it.
12. Kevin Hale, Wufoo
Why: I just love what he’s done with the company and Kevin’s got talents that I’d give-up 10% of my net worth for. And, he says useful, practical stuff about how to actually grow a startup. If I accepted board positions (I don’t) or they’d invite me (they havn’t), Wufoo’s on the short list of companies I’d actually do it for.
13. Reid Hoffman, LinkedIn
Why: Major, major fan and not just because LinkedIn is so successful. He’s just a super-savvy, strategic thinker (and angel investor). He’s the kind of guy that I’d love to have involved with HubSpot some day. (Yes, I aim high).
14. Beth Kanter, BethKanter.org
Why: I first came across Beth because my wife is passionate about non-profits and was working on a paper for a Harvard class she was taking (the paper was on social media). Beth is just awesome. Smart, well-written and has done more to help non-profits than anyone I know. And, she was kind enough to provide some great feedback on a recent, mostly-failed idea I ran to help Room To Read. She’s speaking at the NewComm forum in California — but unfortunately, my session is at the exact same time as hers.
15. Guy Kawasaki, AllTop
Why: Guy’s written what I think is the best books on startups,
ever. Art Of The Start and Reality Check. He’s also been kind enough to respond to my emails, write a back-cover blurb for my book and all-around supportive of my entrepreneurial efforts. Would love to actually meet him in person.
16. Ross Kimbarovsky, CrowdSpring
Why: CrowdSpring’s an interesting company, and I’m working on a crowdsource-based project for HubSpot this year. Want to hear how his new project is going and see if there are ways I can help. [Disclosure: I’ve also met the founder of CrowdSpring’s main competitor, 99designs, and like him a lot). I wish both companies well.
17. Jason Kincaid, TechCrunch
Why: Jason’s going to be talking about scaling LAMP applications (which I could totally use help with). He also writes for TechCrunch, and it never hurts to know people at TechCrunch (they’ve been kind enough to write about HubSpot and grader.com several times).
18. Marshall Kirkpatrick, ReadWriteWeb
Why: He fundamentally gets all of this new fangled social media stuff. I’m an avid reader of ReadWriteWeb.
19. Scott Kirsner, Innovation Economy
Why: He’s a great guy that I’ve gotten to know pretty well. I try to meet up with Scott every chance I get — will be interesting to see this “other side” of him (i.e. film/movie stuff). I always think of him as being a tech/startup kind of guy. He’s done a lot for the local tech scene here in Boston. I’m also speaking at his Nantucket Conference coming up next month.
20. Andrew McAfee, MIT
Why: He’s smart and witty and is now at MIT (instead of that
other top-tier school in the Boston area). Andy’s a good friend of HubSpot so it’s always fun to catch-up.
21. Dave Mcclure, Founders Found
Why: He’s the hardest working man in show business. I wish I had half his energy or had done a tenth of what he’s done to help startups. It’s humbling, really.
22. Mike McDerment, FreshBooks
Why: All-around great guy and growing a great startup. I learn something from Mike everytime I meet him (which has been several times now).
23. Lori McLeese, Room To Read
Why: I’m a big fan of Room To Read and given my recent failure to generate much money with the Inbound Marketing Charity Challenge, would like to see how I might do better next time.
24. Marc Nathan, Bulldog Financial
Why: I feel like I’ve known Mike for years and am surprised we’ve never crossed paths in person. Hoping to fix that.
25. Charlie O’Donnell, First Round Capital
Why: Charlie and I go way, way back (he may not even remember). We’ve intersected many, many times online — but have never actually met. Now, Charlie’s an investor in Backupify (a company I’m a seed-investor in), so we have even more reasons to meet-up.
26. Jeremiah Owyang, Altimeter Group
Why: One of the more analytical and thoughtful writers on the topic of social media. Minimal hand-waving and such. Would like to hear his thoughts on weighted social graphs.
27. Aaron Patzer, Intuit
Why: Had dinner with Aaron during my last trip to the west coast. Smart guy. Would like to hear how things are going post-deal. I have a suspicion that he’d actually tell me
28. Aviva Rosenstein, Salesforce.com
Why: I’m really impressed with the business they’ve built at salesforce.com. I’m also a customer. I’d love to hear how Aviva is tackling some of the usability challenges in the product. We’re dealing with some of those same issues in my startup.
29. Darren Rowse, ProBlogger
Why: Much of what I know about blogging in the early days, I learned from ProBlogger. He gets this stuff.
30. Chris Sacca, Lowercase Capital
Why: He’s a legend in the tech/investor/startup world. Chris and I are now co-investors in Backupify.
31. Ryan Sarver, Twitter
Why: He’s from the Boston area and I almost met him several times. Now he’s at twitter so a little harder to connect with.
32. David Meerman Scott, WebInk Now
Why: The “Inbound Marketing” book wouldn’t have happened (literally) without him. Great supporter and an all-around fabulous guy. We need more of him.
33. Ramit Sethi, I Will Teach You To Be Rich
Why: Earlier tonight, I did a late night webcast/seminar thing for his members in the earn1k program. Oh, and he’s a NYT Bestselling author. Want to get some inside secrets as to what it takes to break into the list — and what impact it’s had since.
34. Brian Shin, Visible Measures
Why: Brian’s a friend and former classmate. I invested in Visible Measures, and he invested in HubSpot. We go waaay back.
35. Julien Smith, Blah Inc.
Why: He’s partner-in-crime with Chris Brogan on “Trust Agents” and I feel like I should know him.
36. Brian Solis, Future Works
Why: Great guy and recently came out with a new book “Engage”, which I’m reading on my Kindle. Want to show him Book Grader.
37. Jonathan Stark, Jonathan Stark Consulting
Why: Because he knows a thing or two about building iPhone apps. And, I want to do one of those this year.
38. Wayne Sutton, @waynesutton
Why: Wayne’s big in the whole social media thing and was nice enough to be one of the first alpha testers of Square Grader.
39. Gary Swart, oDesk
Why: Awesome entrepreneur that was kind enough to spend some time with me to talk about startups and fund-raising (we were raising our Series C at the time).
40. Gary Vaynerchuk, Vaynermedia
Why: Because he’s a force of nature. And, to congratulate him because he’s #1 in the web marketing books category on Amazon. And, I’m usually #2 or #3.
41. Tim Walker, Hoovers Inc.
Why: Heard him speak at the Inbound Marketing Summit and chatted with him briefly afterwards. Really nice guy — and he knows his stuff.
42. Chris Winfield, 10e20
Why: Have had the chance to spend a bunch of time with him in the last year. Great guy, and was kind enough to donate directly to Room To Read as part of my (mostly failed) experiment, the “Inbound Marketing Charity Challenge”.
—-
Phew! That took some effort. If you’re on the list, please leave me a comment if you’d like to connect (or if you’d like me to stay the heck away, that’s fine too). And, if you’re attending SXSW, and I happen to be on
your list — leave a comment too. I’m planning on carving out some time while at the conference to meet with folks. The best way to (initially) find me is to attend my inbound marketing session at the conference. It’s going to be a busy few days.
Hope to see many of you there.
If you're a startup junkie, you can follow me on twitter
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I’ve been in the software startup business for a long time. One thing I have found interesting is that amongst first-time software entrepreneurs, certain “patterns” of applications kept recurring. Time and time again, entrepreneurs are tempted by one of these application categories. Not that it’s always a bad thing — I just found it curious.
1. Project Management / Time Tracking / Bug Tracking
This is likely because the developer had to work at some point with existing software that just sucked and thought “Hey, I can build something better in a weekend and it will do exactly what I want. It’ll support custom fields, and query-by-example and persistent views and all sorts of neat stuff.”
2. Community / Discussion Forums
The developer was kicking off a new online community for whatever hobby area she was interested in. Poked around looking for something to meet her needs, but there was nothing appealing. “Hey, this is easy — the data model is trivial and I can use this project to learn about this new web framework I’ve been meaning to play with.”
3. Personalized News Aggregation/Filtering
I’m not exactly sure why this one keeps cropping up. I think the reason is that it seems obvious that there’s just much more information out there than any normal person can consume. The entrepreneur arrives at some interesting angle on how to better filter the information. Could be individual voting/learning mechanisms, social features (your friends liked this stuff, so you will too).
4. Content Management (website, blog)
Another one of those seemingly simple apps (“how hard could it be?”) combined with the fact that it’s often harder to learn some existing system and make it do what you want than just hacking together a “minimalist” application (that over time, becomes less and less minimal).
5. Social Voting and Reviews
This ones newer to the scene. These applications allow users to vote/rate/review something (movies, books, wines, whatever).
6. Music/Events Location Application
What the world really needs is a way to figure out when their favorite band is going to be in town. Connect with your friends! Figure out where they’re going! Hook-up!
7. Dating and Match-Making
This one requires no explanation. As is the case with most of these application categories, entrepreneurs often like to “scratch their own itch”.
8. Personal Information Management
I think this one is really common because it’s often one of the early applications developers build to learn something new. “Hey, I can use this new ORM system to track my DVD collection. It’ll take just 50 lines of code!”
9. Social Network For ______
These were happening well before MySpace and Facebook. In this case, the application is not completely trivial — but that’s what makes it a bitt more tempting. The data models can be rich and if one has some UI chops, it’s often a fun application to work on.
10. Photo/video/bookmark/whatever sharing
As humans, we like to share stuff. The appeal of this application is it’s broad appeal (hey, my girlfriend needs a way to share her photos from her recent trip to Brazil).
Don’t get me wrong, I’m not saying that building an application in any of these categories is doomed to failure. I just find it curious that these specific themes tend to occur again and again.
Did I miss any? Which application categories do you think entrepreneurs are lured by? Do you just happen to be working on a fun little project that falls into one of these categories?
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I’m going to start with a story — which includes a confession.
When I started my first company, I didn’t start with a grand mission. The idea behind the business wasn’t transformational. It wasn’t going to change the world. Historians weren’t going to write about it after I was dead. And all of that was OK. Even though there was no grand mission — I was solving a problem and meeting a market need that I cared about. Wait, let me clarify that a bit. I cared in the sense that if I didn’t solve it, I was restless. I couldn’t let it go. I wasn’t satisfied
with the way the problems in that industry were being solved and the solutions that other companies were offering. That’s what drove me for 10+ years with that startup. 
It wasn’t until much later (well after I had sold that first company), that I gave the topic some additional thought. How do you know whether or not you care about the problem you’re working on? Here’s my litmus test:
1. Define the problem you’re solving in reasonably broad terms.
2. Answer yes/no: If the problem was somehow magically “solved” (to your satisfaction), but you weren’t the one that solved it, would you be fine with it?
Let me clarify by shifting back to my story: In the niche market I was working in, the problem I was working on was relatively small. But, if one day, I woke up and learned that somehow the problem was magically solved — even if it was by a competitor, I would have been fine. A little miffed that they had beaten me, but still OK. As long as they really solved it. I could have stopped toiling away the sleepless nights working on that particular problem and I would have found other problems to work on. The concept here is: You care enough about a problem that you don’t necessarily mind if someone else solves it. What really frustrates us entrepreneurs is when competitors win, but they don’t actually solve the problem.
One way to explain this concept better is to look at an extreme example. Lets say the problem you were working on was curing cancer. Of course, you’d be passionate about finding a cure. You’d be working hard. It’s an important problem, and it’s not surprising that you care. Now, imagine if you woke up one day to learn that someone else had created a cure. You’d be
glad that the problem was solved — even though it wasn’t you that solved it. Sure, it would have been great to get the fame and glory, but that surely wouldn’t cause you to wish the other scientists/researchers/doctors ill. Nope. You’d wish them well. Why? Because fundamentally, you care about having the problem solved.
Now, with my current startup, HubSpot, I’m still passionate. But the problem happens to be much, much bigger. This time it’s transformational. This time it’s a mission. I’m working furiously on this startup too. I co-authored a book, “Inbound Marketing” on the topic. I’m doing a fair amount of public speaking (despite the stress it causes me). I believe we’re on the path of truth and justice (we’re helping small businesses grow
and reducing junk mail, spam, and marketing calls that interrupt you at dinner). We’re hoping to be the ones that end up transforming the marketing industry. But, if someone else ends up doing it, and winds up delivering on our mission, well, then, more power to them.
I care enough about the problem that I don’t mind if someone else solves it.
That’s why I truly wish my competitors well.
But, just because I wish them well doesn’t mean I’m going to make it
easy for those competitors. After all, like you, I’m an entrepreneur and as such, I’m fiercely competitive.
Summary: When possible, work on really big problems. They’re more fun, and it’s easier to get excited. But, even if you’re not working on a really big problem, it’s OK, as long as you at least care enough about the problem you are solving that you don’t care who solves it. You just want it solved.
What do you think?
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The following is a guest post from Andy Singleton, the founder of Assemba. Assembla provides online workspaces for distributed software teams, and helps many startups build their products.
Any given innovation is much more likely to fail than to succeed. Innovation as a whole may even be unprofitable for the innovators. Fortunately, we keep doing it, because in economic terms, innovations are durable (they last forever) and non-rivalrous (anybody can use them), so over the long term, society benefits a lot from the successful innovations. As a society, we look for ways to get around the fact that innovation is generally unprofitable. We subsidize innovation. We honor it.
A recent conversation has me wondering anew about the question of whether venture capitalists actually further the process of innovation. They claim to be in the business of innovation, but they also talk constantly, often in the same paragraph, about how much they want to avoid innovation.
In this latest conversation, the VC said "We look for companies with a product and a proven business model." This should should sound familiar to you. I wish I could run a video montage of the pictures in my head of VC's saying how much they want to avoid innovation. Surely you would laugh. If you ask VC's what they look for, they use words like "traction", "proven business model", "reference customers", and "invest in marketing" or “sales and marketing”. This in itself is a big step forward from "We invest in teams that have done it before" (Greylock partner, 90's), or "We look for the second time around" (Sigma partner, 90's). It doesn't take a genius to understand what they are saying. As much as possible, they want to avoid all innovation (stuff that’s not proven). It’s risky and unprofitable.
VC behavior subsequent to making an investment is also revealing. After looking at hundreds of deals, and falling in love with one particular business plan, and persuading other investors and partners that it's great, VC's generally don't support subsequent changes to the business plan. A self-funded entrepreneur is constantly making major course corrections, to the point of driving his colleagues crazy. VC's will deny this, but a VC investment is basically a ballistic missile launch, without course corrections. They are likely to just shut down the funding, or even to continue investing a lot of money in a concept that is clearly not creating the forecast level of excitement.
In my recent conversation, the VC partner went over the top by saying "We want to invest in companies that own code and have protectable IP", and then going on give the example of SpringSource - a service company working with un-owned open source code.
Are these people as idiotic as they sound? Far from it. They are some of the smartest, most observant, and most successful business people you will meet. They have learned the hard way that innovation is more likely to fail than to succeed, and that the best way to make money is to latch on to a product that people already like. Even with this filter, and their cleverness and experience, and funding one in 100 opportunities, they still have a hard time making money in the current environment. Investors that stray from the established formulas of the VC business (2 and 20 on fees, 5 year fund cycles, "growth capital" for sales and marketing) - are often punished with poor returns.
Note the cruel irony here. In the VC business, a business that claims (with heartfelt feeling) to be devoted to furthering innovation, innovation is deadly. It is the least innovative firms that succeed. Successful firms may excel in a number of areas, but innovation isn't one of them.
So if innovation is actually risky and unprofitable, where does this leave us? It rolls the clock back 80 years to Joseph Schumpeter's observation that entrepreneurs are driven by "animal spirits" rather than money. Being a professional economist, he actually said, "Hedonistically, therefore, the conduct which we usually observe in individuals of our type would be irrational." He also claimed that profit maximizing, utilitarian theory is "unsurpassed in its baldness, shallowness, and its radical lack of understanding for everything that moves man and holds together society."
Limited partners are utilitarians, and they don't invest in irrational animal spirits.
I think that this has some bearing on public policy. Do we really want to be offering big tax breaks to VC's - the carried interest deduction - if it isn't going to get us the innovation which they have wrapped around themselves like a flag?
It also might have some bearing on the VC business itself. VC returns in the last decade are negative. VC partners are making less money now. Many limited partners are not going to reinvest on the old model going forward. VC's also have a diminishing reputation in the entrepreneurial community. They have a strong incentive to get rid of an innovative entrepreneur and just wash out his stock - which they often do. Suddenly, the old models aren't working for anyone.
And, maybe innovation is coming. There has been a burst of micro-venture initiatives that invest small amount of money at the earliest stage. That's a dangerous place for an investor (angel investors are incredibly brave) because one of the tenents of the old rigid VC model is that follow-on investors will usually try to squeeze out the early investors. Maybe this indicates that innovation is happening throughout the investor chain. I also recall a conversation with a partner at General Catalyst, one of the more successful new VC firms, about their practice of "home cooking", or creating their own companies. The speaker dismissed the appeal as "zero pre" (translation: our interest is purely economic, in that we get a better deal if we pay a $0 pre-money valuation) but I think something deeper is going on.
Is it possible that, once in a while, the VC business should look to innovation, for real?
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As the market improves, my guess is that many of you will likely be thinking about raising funding for your company. With my latest startup, I’m now a venture-backed startup founder (I’ve raised $33 million in three rounds of capital for my marketing software company). So, I’ve got some direct experience with the process. Several of the companies I’m an angel investor in or otherwise involved with have also been in the fund-raising process. So, along the way, I’ve learned a few things, and I’d like to share them with you.
There’s already lots of great content on the web about raising capital and understanding deal terms. My favorite is the content on Venture Hacks (a must read, if you’re raising capital). But, I figured it wouldn’t hurt to share some of the “lessons learned” from my own experiences. Some of these you’ve probably heard before, but one or two will likely be new to you.
And, a quick note before we jump in: I’m doing a FREE live webinar with my co-founder at HubSpot, Brian Halligan this Wednesday, February 10th at 1 p.m. ET. The title is “Money, Marketing and Management with HubSpot’s Founders”. The idea is to share a bunch of practical tips we’ve learned while building HubSpot (including some insider stuff gleaned from raising $33 million in VC). If you’re intereted in
this article, you’ll probably like the webinar. If you can’t make this specific time, you can still register and we’ll send you an email with a link to the recorded version. Oh, and did I mention, it’s free?
Sign-up for: Money, Marketing and Management (aka “Stuff we learned about startups that you’ll probably find useful”)
Ok, back to our article.
Insights From Raising $33 Million In Venture Capital
1. Get the first round right: The terms of your Series A deal are very important. Not just because of the impact on that first round, but because many of those same terms are likely to carry through to future rounds. It’s tempting to concede on some important terms because you’re thinking “well, that’s just life…and it doesn’t seem like that big of a deal.” Try to resist that temptation. One of the things I’ve learned is that when negotiating the term-sheet for your Series B or Series C round, the “base” terms (the starting point of negotiations) is whatever terms were in your Series A. So, if you agree to some non-favorable terms on the “A” round, you’re not just paying the price for that concession in this round, you’re likely going to continue to pay in future rounds as well. Factor that in.
2. Avoid valuation infatuation: Entrepreneurs often become obsessed with the pre-money valuation on the deal. Though this is certainly an important element of the transaction there are other factors at play that have significant impact on the raw direct economics of the transaction including the employee stock option pool (and who pays for it). If you get close to finalizing a deal, it is imperative that you have a spreadsheet that helps you understand the economics of the deal. You should read Jeff Bussgang’s article on the topic. It is worth your time.
3. Raise more than you need: Regardless of how much capital you raise, chances are, you’re going to have wished you raised a little bit more (or perhaps even a lot more). Within reason, if you have access to capital and the terms are decent, raise more than you think you need. Don’t get hung up on dilution. To help you overcome this fear of too much dilution, build yourself a simple spreadsheet that models the actual financial impact to your person bottom-line based on various outcome scenarios. What you will likely find is that if things go really well and your startup is the spectacular success it deserves to be, the extra dilution is not going to change things all that much. And, if things go really poorly, it won’t matter either (because those extra common shares aren’t going to make you money). You might be thinking “I’ll just raise the additional capital in a future round, at a much higher valuation” — which is somewhat right. But, what you should keep in mind is the transactional cost of the additional round. Raising a venture-round is a very time consuming process and when your bank balance is getting low, you’re going to really want to just keep working on the business instead of shifting focus back to the funding game. In short: If you have the ability to raise a slightly larger round, and the terms are reasoanble, you should probably go ahead and take the extra money.
4. Know what “market” is: It’s possible that you’ll encounter some not so favorable terms during your VC negotiation — terms that are not that common. It’s also possible that your potential investor is just pushing on the edges a little bit to see what they can get away with. You need to know which terms are actually rare/uncommon. Your strongest line of defense against weird, non-favorable terms is a line that goes something like “that’s not market”. This is sophisticated VC-speak for “what you’re asking for isn’t very common in VC deals right now.” This line of defense has two advantages: 1) it works 2) it demonstrates your savviness. To figure out what the common deal terms are now, track down the report that one of the larger law firms that does a lot of startup transactions publishes periodically. The report usually includes (among other things), what percentage of transactions have specific deal terms (like participating preferred).
5. Orchestration is important: Try to keep the interested parties moving along at as close to the same pace as possible. You don’t want to get a term-sheet from one VC and have had the first meeting with others. Orchestration is not easy, but it’s important. The reason is that to really get great VC terms in a round, the single largest contributing factor is
competition. If you can get two or more VCs competing to invest in your company, you’ll get much better terms. As it turns out, this is not easy to do because to really get credible competition going, you’re going to need to have several VCs at the “termsheet” stage of the conversations. If one VC delivers a termsheet to you, but you still haven’t had the second (or third or fourth) meeting with some of the others, it’s going to be tough to get that competing termsheet. Meanwhile, the VC that gave you the first termsheet is going to be “anxious” for you to accept. This anxiousness could manifest as simple “prodding” or as an out-right “exploding termsheet” (i.e. a termsheet with a deadline). So, try to keep your conversations moving forward with several VCs are a similar pace. The good news is that nothing accelerates the process of other VCs more than knowing that you’ve already gotten a termsheet. Once you get that first termsheet, you’re likely to get more as the VCs try to jostle for position.
6. Beware deal fatigue: Even in good times, fund-raising is an arduous process. Be prepared for yet another round of meetings, yet another level of due diligence and yet another round of negotiations. Don’t try to sprint to the finish line and be exhausted when you get there — you may have another lap to go. And, it might be the most important lap. Much like any large negotiation, there are often relatively important deal terms that get finalized in the final stages of the deal. You need to maintain your energy so that you don’t just give-in on some of these seemingly unimportant “details”.
7. Don’t Use Your Uncle Larry As Your Lawyer: As entrepreneurs, it’s not often that we need to engage legal counsel. In fact, if this is your first startup, it’s possible you’ve never actually hired a lawyer before. If you’re raising venture capital — you need a lawyer. And, your uncle Larry who helped you out with that lease agreement last year is not good enough. You need a lawyer that has done many venture financing deals before. This is a high stakes game. VCs are super-smart and they negotiate financing deals all the time. They do this for a living, you don’t. You need someone that has competency in this area. A great lawyer understands the nuances of this game both from the perspective of which deal terms are important, what “market” is (#4 above) and when to stay firm and when to concede. I’ll say this one more time for effect: You need great counsel that has tons of startup financing experience. Don’t be penny wise and pound foolish on this. Oh, and by the way, you might want to know that you’re likely going to pay for the legal fees of the VC as well (it comes out of the funding round). I’m not sure why this is, and I don’t like it one bit, but it’s common practice.
8. Partner personalities matter: Yes, ideally you’ll be raise funding from a top-tier fund that’s a great brand. But, what’s more important is that you fundamentally like the VC partner that is investing in you. This is a long-term relationship and life is short. You might part ways with one or key team members along the way (which is never fun), but your venture investor will almost certainly be with you until the very, very end. If you have the luxury of choice, you should put strong weight on the
person you take money from, not just the firm and not just the deal-terms. I followed my own advice on this in our funding rounds. We had higher offers than the deal(s) we took, but we solved for the best overall deal and the best partner.
9. Switching Partners Is Hard, Do Your Homework: It’s likely that in the early stages of your VC process, you’ll get introduced to a particular partner at a firm. Usually, this is based on what area that partner invests in (i.e. which one you “fit” with). But, in many larger firms, there might be more than one partner that could conceivably do your deal. Or, you might get bucketed wrong (because your startup straddles a couple of areas of intest for the firm). If that’s the case, you need to work hard to figure out who the best partner would be (from your perspective) and try to connect with that partner as early in the process as possible. Once conversations begin in earnest, it’s very, very hard to switch to a different partner within the firm.
So, what do you think? Are you going through the arduous process of raising venture capital now? Or, have you been through the pain before? Any of this stuff ring true? Would love to read your thoughts and experiences in the comment. Oh, and if you have questions you’d like me to address my upcoming webinar (which will spend a fair amount of time on funding), leave them as a comment. I’ll pick a few and address them. Thanks.
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Though it's easy to get caught up in Apple's new tablet announcement, let's not forget the original idea that sparked the whole thing. It's the iRock -- it transformed how people chiseled.
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The following is a guest post by Jason Cohen.
Interviewing developers is easy.
OK, not easy. You have to generate resumes, you have to sift through the deluge of candidates, you have to pound your network continuously, you have to develop a phone-screen, you have to schedule interviews, you have to ask them questions and get them to write code and be fair.
But still, you're a great developer and you've worked with enough other developers that you can tell pretty quickly whether someone else is also a great developer. Do they say the right things? Do they make reasonable mistakes? Do they solve easy problems quickly? Do they give up? You can figure that out.
Not so with marketing folks. What do you ask someone in an interview to determine whether they have the ability to spread the word about your still-v0.9-quality product? How do you determine whether they can not just pull in potential customers but make them truly successful and thrilled with v0.9 while digging up the new features that will actually result in more sales?
For an engineer like me, interviewing marketing people is like interviewing a lawyer: You know there are vast differences in skill level but you don't know how to probe them to determine their skill.
But there's hope. Although you can't ask them to "solve" marketing problems as you would programming questions, there's certainly something you can detect: Do they have the attitude and skillset needed to succeed in a startup environment?
So here's a list of important qualities. Some of these you can ask about directly, others you'll have to intuit from your conversation.
- Social Media doer. Everyone says social media is important, but does the candidate actually do it? Does she have a sizable Twitter following? Does he have experience getting 20,000 fans for a Facebook page? Does she have a quality blog about marketing? Did he devise and execute a blogger outreach campaign that actually worked?
- Frugality. Traditional, big-company mantra is "You have to spend money to make money." It's no longer true. Now it's "You can spend money and you might make money." Of course spending money isn't automatically bad either; what's bad is if you don't measure whether the money is getting a return.
- Customer-lover. A startup lives and dies by its customers. Not some marketer's initial conception of who the customer should be and what the customer should want, or even the developer's conception of which features should be useful, but what actually works in practice. That means the marketing person should be spending as much time as possible talking to customers. If you don't have many customers, it's their job to reach out and start the conversation. It's even their job to find potential customers who didn't buy and talk to them too. Make sure they drive everything from customers, not the other way around.
- Humility. Startup marketing means working with unknowns. The product changes daily, the definition of the perfect customer changes as new data appears, marketing messages are invented and discarded, and just when you think you've got the right combination the world changes around you. Anyone who thinks they have the answers isn't paying attention. Anyone who thinks something that worked five years ago will automatically work again is wrong. So you need someone willing to admit what he doesn't know.
- Domain Knowledge. This isn't a requirement, but it sure helps. If you yourself don't have good domain expertise (i.e. you're your own customer, or you worked in the industry), then this becomes more useful.
- Can distinguish pain from feature. Customers often ask for features, and that's good. But you can't just implement everything they want, how they want it, because they don't have the big picture, they don't have to support everyone else's user-cases, they don't know what's difficult to implement, and they don't know what's idiosyncratic. So the marketer's job is to dig past the surface level "feature request" into the real information: What is the customer really trying to do? What pain is the customer trying to address? That information is critical, and bringing that back to development is one of the most valuable things she can do for the company.
- Willingness to learn detail. It's a huge red flag whenever someone says "Every company is essentially the same -- we're selling widgets." This is a sign the person isn't interested in understanding your market, your customers, or your product. Fatal Fail.
- Devotion to measurement. Few people truly embrace measurement. After all, if you don't measure a marketing campaign or a sales funnel, it's easy to explain away any problems and take credit for any successes. If you're measuring, though, you get credit for the successes but the losses are just on you. But you're a startup, so "failure" is only a failure if you refuse to recognize it and do something about it. Of course most marketing efforts won't be super-successful! That's OK -- what's not OK is to blindly forge ahead instead of identifying which ones to keep and which to cancel.
- A/B tests and similar. A corollary to measurement is a desire for continuous testing like A/B splits for advertisements and web pages. If this people loves "strategy meetings" more than just "trying stuff and seeing what sticks," that's a problem. The goal isn't to be the one who came up with the best idea, it's to find the best idea through any means necessary.
- Respected by developers. Traditionally developers and marketing/sales have an unhealthy mutual disrespect. Perhaps rightly so, often. But there's no room for that nonsense in a startup. If the marketer isn't a culture-match with the developers, it's not going to work. That doesn't mean they need to be able to write code, but for example someone who loves metrics and wants to talk about statistical significance as it applies to advertisement is probably going to fit in with engineers.
- Branding is irrelevant. This often comes in the form of "We didn't know whether the magazine ad / tradeshow resulted in sales, but it was good branding / it got our name out there / people will remember us." Coca-Cola needs people to have a warm-fuzzy when staring at a shelfful of sugar water; you just need sales. "Branding" cannot be measured, so it has no place for you. The only branding you need is a strong culture that leeks into everything from the web site to follow-up emails to tech support. A culture, not a "corporate image." A marketer who ascribes value to branding isn't spending time on what's important to you.
P.S. This article was inspired by this question and these answers from Answers.OnStartups.com -- the Q&A forum associated with this blog. Come check it out! We solve problems like these every day.
What do you think? Are these effective in finding good marketing people? What other attributes or questions can you ask? Please leave a comment and join the conversation.
Oh, and if you're interested in more on this topic, there's a chapter in the wildly popular book "Inbound Marketing" from Dharmesh (host of this blog). Might be worth checking out.
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This article is a bit out of the ordinary. But, it's a Frid
ay so I'm hoping you'll cut me some slack.
For some reason, I like wordsmithing and trying to make phrases smaller (but still have some meaning). So, late at night, I tried to come up with some of my best startup advice and see if I could reduce it down to exactly three words (which is why I call them "triplets"). One thing led to another, and I became obsessed with it. So, then I made 47 before I had to make myself stop. And, to ensure that you didn't take this too seriously, I included a photo of some puppies. You will now find the article irresistible and will share it with the entire world.
In any case, hope you enjoy them. It's likely not the most brilliant startup advice you've ever read -- but it has a decent chance of being the shortest. Oh, and please be sure to add your own in the comments.
Startup Triplets: Startup Advice In Exactly Three Words
1. Watch your cash. [tweet]
2. Pick founders carefully. [tweet]
3. Hire generalists early. [tweet]
4. Hire specialists later. [tweet]
5. Invest in culture. [tweet]
6. Avoid tempting distractions. [tweet]
7. Support customers maniacally. [tweet]
8. Avoid business plans. [tweet]
9. Write a blog. [tweet]
10. Never fudge numbers. [tweet]
11. Encourage diverse thinking. [tweet]
12. Guard your time. [tweet]
13. Defer renting space. [tweet]
14. Get enough sleep. [tweet]
15. Delay raising capital. [tweet]
16. Persist through downturns. [tweet]
17. Decide with data. [tweet]
18. Improve product daily. [tweet]
19. Recognize revenue consistently. [tweet]
20. Start charging early. [tweet]
21. Reward early adopters. [tweet]
22. Sell something today. [tweet]
23. Say “NO” often. [tweet]
24. Accept imperfect data. [tweet]
25. Recruit with zest. [tweet]
26. Nurture your best. [tweet]
27. Treat vendors well. [tweet]
28. Believe in yourself. [tweet]
29. Respect your competitors. [tweet]
30. Try something new. [tweet]
31. Build a brand. [tweet]
32. Focus, focus, focus. [tweet]
33. Iterate more often. [tweet]
34. Use your product. [tweet]
35. Live your vision. [tweet]
36. Encourage rational debate. [tweet]
37. Make decisions swiftly. [tweet]
38. Face harsh realities. [tweet]
39. Don’t break laws. [tweet]
40. Protect your health. [tweet]
41. Celebrate your successes. [tweet]
42. Cancel unnecessary meetings. [tweet]
43. Improve emloyee's resumes. [tweet]
44. Beware big bullies. [tweet]
45. Share the experience. [tweet]
46. Maintain your relationships. [tweet]
47. Keep it fun. [tweet]
Update: Guy Kawasaki (yes, the Guy Kawasaki) was kind enough to post some of his own triplets. Here are some:
48. Sales fixes everything.
49. Ship then test.
50. Do not partner.
You can see his full list here: Guy Kawasaki's Startup Triplets.
Challenge: You're way smarter than I am. Please come up with your own startup triplets and share them. Leave a comment or post it to twitter (with hashtag #StartupTriplets). I think you'll find it fun -- and addicting. I'll take the best ones and pull them together into a future post -- or even a book. You could be famous!
Ready? Go!
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The following is a guest post by Jason Cohen. Jason's got a knack for stirring pots and getting us thinking a bit. And, thinking is a good thing. Even when the thinking makes me awfully uncomfortable and goes against my strongly held beliefs. I couldn't be a stronger advocate of "Release Early, Release Often", so it took a bit of effort to post this article "as is". But, as I hope you'll see, Jason does make some pretty good points. Well worth debating -Dharmesh
[UPDATE: I originally stated that Eric Ries was a proponent of "Release Early," but I was completely wrong.] 
You can't throw a stone in the blogosphere without hitting someone arguing in favor of releasing software as early as possible. The idea is that it's best to push new software onto potential customers before it would be traditionally considered "ready."
Here's the general line of reasoning: In the beginning, you have a theory about who your customers are, what their pain is, what your product needs to do, and how it will be used. But it's just a theory, and it will always be wrong. That's OK! It's life.
Since you're wrong, your v1.0 is really just a foil to get people talking. Therefore:
- Don't add a lot of features, because you don't yet know which features are actually needed.
- Don't fix every bug, because half of this code might not be here in a month.
- Don't pretty up the user interface, because it won't look anything like this in a month.
- Don't obsess over the customer workflow, because it will change completely in a month.
- Don't worry about scaling, because you won't have that many customers for a while.
- Don't worry about architecture/extensibility/documentation because most of your code will be different in a month.
Now in general I agree with this line of reasoning, but I don't like how one-sided this discussion is. Even a casual glance through this discussion of the subject shows that people -- me included! -- are recommending this strategy as a knee-jerk reaction.
So for the sake of thoughtful debate, I'd like to present the case against.
The best ideas aren't built by consensus
Would the iPod have been invented if it were built by iterative customer feedback? I doubt it:
- Do you want a portable music device without a radio? No.
- Do you want a battery-powered device in which you can't change the battery? No.
- Do you want a portable music device without Bluetooth? No.
- Do you want a wheel-based user interface which you don't already understand and which makes certain operations confusing? No.
- Do you want it to take 5 clicks to toggle "shuffle," one of the most-used functions? No.
Apple doesn't ask customers what they want -- they just go invent awesome stuff. People complain, sure, but in the end the success of the iPod and iPhone is undeniable.
In general, disruptive products by definition cannot be built by consensus. In fact, it's well-known that "design by committee" is a sure-fire way to get mediocre design.
Small, incremental changes pulled by customers blind you to bigger, better ideas.
You're misinterpreting the 80/20 rule
The typical 80/20 rule is: 80% of your customers use just 20% of your features.
The "release early" folks take this to mean: Just implement 20% of the features you think you need, because if that's good enough to get 80% of your sales, this is a much simpler, efficient, and therefore profitable way to operate a software company.
But this interpretation is wrong! To spell out the 80/20 rule more accurately: 80% of your customers use just 20% of your features, but each customer uses a different 20%. That implies you need more features, not fewer, otherwise there won't be enough for the various use-cases for your software.
Take Microsoft Excel. Every person I talk to uses a different subset of functionality. Some people are experts at PivotTables whereas others have no idea how they work. Some people can't live without the database connectivity stuff whereas others don't know what a database is. Some people drive key business data using conditional formatting, some people know just enough Visual Basic to save themselves hours of manual labor, and some are experts with the charting system.
The point is that you can't just remove 80% of the features from Excel and expect 80% of the people to still be happy.
Mock-ups are faster than code iterations, without some of the drawbacks
There's a variety of software and techniques for mocking up applications, both web-based and desktop. Mockups can typically be built in a matter of days and put in front of customers for feedback. Iterating with fake screenshots is always faster than actually messing with HTML, CSS, and back-end code.
Once the mockups for v1.0 are set, actually writing v1.0 is fast because you know the goal ahead of time. The complete cycle is faster than if you started coding in the first place, and the code is cleaner because you don't have traces of major false-starts. (Think database migrations, CSS styles, extra AJAX routines, unused dialogs.)
Releasing too early can ruin your reputation
When your first version is sub-par, you'd better hope very few people find out about it.
Back to Apple: The iPod worked on day one, but back in the 90s the Newton didn't. The Newton (the world's first PDA) was hailed as a revolutionary technology (just as the iPod and iPhone would be), but it didn't work well. In particular, the handwriting recognition sucked and there wasn't a lot of apps.
It never recovered from its early reptutation as "doesn't do a lot, and what it does do doesn't work well." Even when that was remedied, it was too late.
The typical counter-argument to this is that "release early" doesn't mean "release with lots of known bugs," but rather "release with fewer features." But we all know the difficulty in separating a "feature request" from a "bug report" -- what a customer sees as a devistating lack of functionality (bug) you say is missing by design (feature).
Ignoring architecture creates waste
Software architecture is something the end-user never sees, and is therefore usually cast aside in the arguments for releasing early and collecting feedback. But incorrect choices in architecture can bite you later on, causing an immense amount of waste, possibly enough to sink the company.
It's true that most companies don't survive, and therefore having a growing user base with a problematic architecture is "a good problem to have." But it's also true that an ounce of prevention is worth a pound of cure.
Take Twitter. Their scalability problems are legendary. Suppose they didn't have billions of dollars in funding to throw expensive people and hardware at the problem? It's not hard to believe that continuing scalability problems would have sunk their ship.
Or take Netscape. The architecture problems with their browser were so severe it required a rewrite, which took so much time and effort the product (and company) died.
Of course this doesn't mean you should dwell on architecture for six months before working on features, but it does mean you shouldn't just ignore future maintenance issues for the sake of releasing a month sooner.
Untrue: "The worst thing you can do is built an unnecessary feature."
This is frequently used as an argument for releasing early. The logic goes: Every feature is effort. Not just in creating it in the first place, but debugging it, testing it, training customers on it, integrating it into all other features, supporting it in the user interface, covering it in the user's manual, and keeping it even as the product's focus changes. Therefore, never add a feature unless it's absolutely necessary.
I agree unneeded features are a major expense, provided you retain them in the product. But having incorrect architecture is also expensive, yet the "release early" folks tell us that expense is OK!
The fact is, you can change or even completely remove features that have become albatrosses around the neck of your tech support and product evolution. The "release early" argument also includes frequent iterateration, morphing the software as evidence suggests. Changing and removing features is simply a part of that, and doesn't imply that releasing early is smart.
In fact, adding features is one of the few ways to test what customers actually want, because:
Customers are notoriously bad at providing feedback
Sometimes users will tell you that they want a time/date-based voting widget they can send by email, when what they really mean is that they need to coordinate schedules.
In my experience customers are terrible at deciding what features they need, which features they use, or how features should be altered. They're much better at describing what's difficult in their life, what frustrates them, or what takes up a lot of their time.
Customers aren't even good at explaining why they did or didn't buy your product. From Jo Owen:
My research showed customers thought they were rational purchasers of video cameras: it was all about price and performance.
But when I interviewed them as they left a store, they were often unclear about how much they had actually paid for the model after splashing out for warranties, batteries and accessories and sorting out a financing plan. They were also very confused about the relative performance of different models.
Of course it's necessary to gather as much feedback as possible from both customers and lost-sales! But it's not clear how accurate the feedback is or how to weigh it against your own vision and goals for the product.
Relying on unreliable information as the primary driver of product decisions is unwise.
What do you think?
In the end, of course it's better to have more feedback than less, better to be more agile than less, and better to have technical debt with a successful product than a failed product. However, it's just not fair to present only one side of the argument!
Do you have more arguments either way? Do you agree we're taking "release early" a little too far? Leave a comment and join the conversation. Or, if you've got a question, you can post it on Answers.OnStartups.com
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I’m going to open this article with a short (and true) story. I officially
kicked off my marketing software company,
HubSpot, about 17 months ago. If you’ve read my blog for any period of time,
you likely know that I’m a big beliver in the “charge early, charge often”
mantra. As it turns out, in order to “charge early”, you have to figure out
what you’re going to charge people. That is, you have to have a
price for your product. Thankfully, both my co-founder (Brian
Halligan) and I had recently graduated from a top 5 MBA program. And, it wasn’t
just any top 5 program — it was MIT. You know, that place where
science and math and uber-geeky analytical stuff happens. So, you’d think that
when it came time to figure out a price for our product, we’d really dig in, do
some heavy-duty analysis, some really hard thinking and come up with a
relatively well thought-out price. That’s not what happened.
When it came to deciding on the price for our software, we basically just
rolled the dice.
I’d love to for the statement above to be an exaggeration. Surely, we spent
some time pondering that oh-so-important factor in our business
sucess. Nope. We didn’t. One of us (I think it was me) suggested “how about
$250/month”, and that’s what we went with. And, that’s where the price remained
for about 2 years.
Things turned out fine for me and HubSpot. But, you still shouldn’t do
this. Don’t just roll the dice when it comes to pricing your product. Give it
some thought, consideration and (gasp!) some analysis. Your first step towards
this path should be to run over, right now, and get the book “Don’t Just Roll The Dice: A usefully short guide to
software pricing” by Neil Davidson. Even if Neil weren’t such a nice guy
(he is) and even if he doesn’t run my favorite conference (he does) and
even if he didn’t build a really successful software company himself (he did),
I’d still implore you to read the book. It’s got the highest value-to-length
ratio I’ve seen in a business book in a long time. Go get it, right now. And,
if you’re still not convinced, Neil’s even been nice enough to give it away for
free in convenient PDF form. Yes, that’s right, you don’t even have to buy the
freakin’ book on Amazon for $9.95 (though
you could).
Just on the off-chance that I caught you at a particularly skeptical time and
you’re still not convinced, here are some of my notes from the book.
Insights On Software Pricing From “Don’t Just Roll The
Dice”
1. Your product is more than just your product. You might
think that your software product is just the bits and bytes that your customers
download (or access online), but you’d be wrong. What customers are actually
paying you for is the entire experience of doing business with you.
Everything from how you market and sell the product, to how you help people use
it and how you maintain it going forward. All of it. Your pricing should be
based on this reality.
2. There’s a difference between perceived and objective value.
It doesn’t matter how much “real” (objective) value you have baked into
your product if your customers don’t perceive that value, they are not going to
pay as much for it. Hopefully, their perceived value is a function, to some
degree, of the objective value. If not, you’re screwing something up.
3. Community matters. The group that your customers belong
to, or want to belong to will impact the price they’re willing to pay.
For example, some people buy hybrid cars not just because of the environmental
benefit or the higher mileage but because they want to be part of that
community. The same reason some people buy a BMW. Determine what kind of
community you can build (or tap into) around your offering. Help people belong
to the community they want to belong to.
4. As it turns out, people do buy drills (not holes).
There’s the reasonably famous adage around “people buy holes, not
drills”. The point is to focus on the benefit to the customer (not the product
itself). I generally agree with that notion. But, it’s useful to keep in mind
that holes can be a commodity, but people still sometimes pay $400 for a drill.
Benefits are important, but the direct benefiit is not the only one that
customers value.
5. The more differentiated you are, the more you control price.
This one should be obvious. If you have a product that’s about the
same as all of your competitors, then you don’t really set your price — the
market does. Of course, nobody thinks of themselves as being identical to their
competition (especially software companies). But, what we often forget is that
it’s difficult — and very risky, to try and create a completely new category and
be totally differentiated. Decide which dimension you’re going to
differentiate on and make sure it’s reasonable given your particular constraints
(like cash).
6. No battle plan survives contact with the enemy. This
quote is not actually in the book, but I think it still fits the theme. When
setting pricing, it’s important to consider what the “market response” is going
to be — particularly if you’re in a well-defined category. Just because it
doesn’t make economic sense for a competitor to get in to a price war with you,
it doesn’t mean they won’t do it. Particularly if they’re big or well-funded.
If you’re thinking about competing on price, keep that in mind. Better yet,
don’t do it at all.
7. Remember to be fair. As humans, we often have a sense of
what we think “fair” pricing is. Even though a particular pricing model is
“theoretically optimal”, it might not be wise in practice. As software
entrepreneurs, we often think we can get away with certain types of price
segmenting simply because it’s enforceable in the software. Just because you
can keep customers from doing certain kinds of things (unless they pay up),
doesn’t necessarily mean it’s the right (optimal) thing to do. In the long
term, it could actually hurt. Try to put yourself in the customer’s shoes and
envision if they think the way you price things is fair. [Note: I’m not
suggesting you be all rainbows and cupcakes and suggest that you price based on
being “nice”. I’m just saying that you might actually make more money by being
empathetic]
8. Pricing complexity has a cost. One of the things you
learn in micro economics (and is discussed in the beginning of the book) is the
concept of supply and demand curves and how you can segment your pricing in
order to capture the maximum value (i.e. optimize revenues). This can be a
wonderful thing. But, it’s critical to remember that this segmentation has a
price — it’s not free revenue. For example, when HubSpot went from a single
price ($250/month) to two prices (still pretty simple), life got a lot
harder. All of a sudden, our marketing, sales and even our operational efforts
got more complicated. The product got more complicated. All of our pretty
charts that we used to talk about the business and measure success got more
complicated. The reality is that when you add a new dimension to your pricing
structure, you’re adding a new dimension of complexity. Oh, and by the way, the
*second* price that you add to your product is the most expensive. After that
(third, fourth, etc.) things get a tad easier because you’ve already built some
of the infrastructure to support multiple prices. And by that point, your brain
is already used to the pain.
Phew! I typed this entire article in one sitting while simultaneously
reading a majority of the book for a second time. If I haven’t convinced you
yet that you should go read it then I think I’m hopelessly inadequate at
conveying the importance of this topic and the usefulness of the book. Or,
maybe you’ve already got it all figured out. If so, may the wind be in your
sails and may you go forth and prosper. For the rest of you, just download the book.
And, on a more selfish note, what are your biggest insights when it
comes to software pricing? What challenges have you dealt with? What questions
do you have about pricing your software? If you’re looking for some great
answers, you can post a question on Answers.OnStartups.com where a bunch
of smart folks like Neil Davidson (the guy that wrote the book) hang out. Hope
to see you there.
If you're a startup junkie, you can follow me on twitter
@dharmesh. Also, if you found this useful, please share it.
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