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The Why and How Of Updating Your Angel Investors

Posted by Dharmesh Shah on Mon, May 20, 2013


There’s a massive amount available on the interwebs on how to improve the odds for success in new ventures. But almost nothing concrete is available on the care and feeding of your investors. You can do all of the Lean Startup experimentation you want, but we’re here to tell you that one of the the easiest and most underrated skills that a startup CEO needs is knowing how to keep your investors updated, excited and engaged.good news bad news small

The reason is:  The CEO is the investor's  user interface into the business.  It's how investors see what's going on, and in some minimal ways, interact with the business.

We polled several early stage investors (including ourselves) that have 30+ investments each under their belts, and asked them their advice for entrepreneurs on how best to communicate with them and update them on the business. Here are the results.

1) Write your investors consistently. probably every 1-2 months (if you're early stage), and every 2-3 months if you're a bit further along. If you have a regular advisory board or board of directors meetings, that's a good time to send out an update. This is preferable to phone calls, both for you and for them. If you’re smart, you’ll send this letter out, in more or less similar form, not only to your investors but also to mentors, advisors and staff. And if you do ever follow up with calls, they’ll be up to speed and more productive.

2) Keep it short. 2 pages, max. Your investors want to know what’s going on, but they don’t need to hear every detail.

3) Use a template. We like the TechStars one. Katie Rae and Reed Sturtevant of TechStars Boston teach their companies to communicate with mentors in a way such that each letter builds on the previous one. Typically, the letter gives both highlights and low-lights since the previous communication, sets some short term goals, and then reviews the progress—or lack thereof—on the goals set earlier. Just knowing that you will be producing a report card helps focus you on the important stuff and ensures that things don’t get forgotten. Check out the investor update template for a sample.

4) Remind them what you're doing (now).  I know this is going to sound strange, but often your investors are not doing as good a job as they could keeping up with all your activities, news, tweets and pivots.  Always include a one sentence description of what you're doing (now) just as a friendly reminder.  A side benefit to this is that it forces you to write (and read) your one sentence description.  This is one of the hardest tasks in startup-land.

5) Tell them the one or two strategic problems you are wrestling with. Got a few hard decisions? You’d be surprised how quickly an investor will respond. And odds are pretty good that they’ve seen this movie before and can help you come to a better decision. If it’s personnel-related, though, you may wish to be more circumspect.

6) Keep it honest, but don’t tell your secrets. Would you be comfortable if this email ended up in public, or in the hands of your competitors? If not, consider editing it down.

7) Always have 1-3 direct asks. Looking for some specific introductions? Ask. Need to source some key personnel? Ask. Want them to share some important news on their social media networks?  Don’t be proud, don’t be shy, just ask. 90% of the time, the investor will probably not be able to help, but in the 10% of the time they can help, it's often pure gold.

8) Cast a wide net, but bcc. The more people you can keep up on your company, the more likely it is someone will be able to help you out, and the more you can leverage your network. But respect your investors’ privacy, and make sure you are not revealing any confidences in the letter. (I still screw this up—when in doubt, leave it out.) One idea would be to setup a simple mailing list so you're not trying to type in email addresses manually every time.

9) ARCHIVE all correspondence in a shared folder. Your investors will be grateful that they don’t have to be organized. This tip is so simple, yet almost no one does this. Your investors have more on their plate than just you. Make it easy on them by putting everything they need to see into one folder which they can reference. Send each letter by email (don’t make them have to hit links or print out attachments,) but include a link to the shared folder with the full archive. Inside, have all of your historic correspondence, and perhaps even your latest pitch deck, any financials you want them to see, etc. You might consider having two separate folders—one complete one, for the inner circle, and one that’s been redacted down for the broader crowd.

Startups fail for lots of reasons— but one of the most common one is that they run out of money. Informed investors are generally happier investors—and at a minimum more capable of helping. And, if you're out raising another round sometime, chances are, your angel investors are the one's that can help make intros. It's easier for them to do that if they hear from you more often than once every 12-18 months when you need some paperwork signed.

Remember, this exercise is as much for you as it is for them.  

This entire process should take you less than an hour or two a month and it's worth it. Besides, if you do it right, you'll actually find that it helps you to write these updates -- and it's not a complete waste of time.  

This article was a collaboration between Ty Danco and Dharmesh Shah. Ty is CEO/co-founder of BuysideFX and an angel investor/mentor (you should be reading his blog). Dharmesh is founder/CTO of HubSpot, runs and is an angel investor in over 40 companies (you can follow him on twitter @dharmesh).

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The Pitch Deck We Used To Raise $500,000 For Our Startup

Posted by Dharmesh Shah on Wed, May 08, 2013


buffer-seed-round-deck.003One of the big no-no’s we’ve learnt about early on in Silicon Valley is to publicly share the pitchdeck you’ve used to raise money. At least, not before you’ve been acquired or failed or in any other way been removed from stage. That’s a real shame, we thought. Sharing the actual slidedeck we used (and one, that’s not 10 years old) is by far one of the most useful things for others to learn from. In fact, both Joel and I have privately shared the deck with fledging founders to help them with their fundraising. On top of that, our case study is hopefully uniquely insightful for lots of people. Here is why:

  • Half a million is not a crazy amount: It’s therefore hopefully an example that helps the widest range of founders trying to raise money.
  • Both Joel and myself are first-timers: We couldn’t just throw big names onto a slideshow and ride with it. We had to test and change the flow and deck a lot.

Ratio thinking

One of the most important elements, that we had to learn during our fundraising process was the concept of “Ratio thinking”. Jim Rohn, the famous motivational speaker, probably explained it best:
“If you do something often enough, you’ll get a ratio of results. Anyone can create this ratio.”
It sounded simple enough as a concept to us, but man, this was one of the toughest things to learn. Here is how Joel described it in a recent article on ratio thinking:
“The law of averages really comes into play with raising investment. Overall, we probably attempted to get in contact with somewhere around 200 investors. Of those, we perhaps had meetings with about 50. In the end, we closed a $450k seed round from 18 investors. Perhaps the most important part of our success in closing that round was that Leo and I would sit down in coffee shops together and encourage each other to keep pushing forward, to send that next email asking for an intro or a meeting. In many ways, the law of averages is the perfect argument that persistence is a crucial trait of a founder.”
I believe that this is in fact one of the most valuable things to know up front. It requires a huge volume of work and meetings.

How to read this deck: It builds up to one key slide – Traction

If you go through the deck, you will quickly realize that the one key slide was the traction slide. We quickly realized that as first time founders, this was probably our only way to raise any money: By focusing everything on the traction slide. Here is how Joel describes this in his article on raising money as a first-time founder:
“So my advice for first time founders who want to raise funding is almost always to put that thought aside until you have good traction. Instead, focus completely on traction. Focus on product/market fit. When you have good traction, it becomes much easier to raise funding.”

Avoid confusion: Our second most important slide – competition

Another thing we quickly realized when raising money was this. Although investors were very interested in talking to us, especially because of our early traction, talks then stalled. Why? The social media space seems very crowded. From the outside, it looks like there are dozens and dozens of apps all doing the same thing. On the inside, you however quickly realize that there really aren’t that many options.

The question was almost always timed at the exact moment in each meeting: “So, aren’t there lots of other apps doing the same?” And we explained to them about the TweetDecks and Seesmics and that Buffer is different and so forth. That never worked. So after lots of meetings, we realized that the competition question (in our case) created the most friction and eventually left people too confused and not interested any more. We took some time aside and made this slide as easy to understand as possible and explain Buffers positioning without creating all the friction: buffer-seed-round-deck.011 

The slidedeck

Without any further explanation, here it is:

A note on transparency

With Buffer, our goal is to take our ideas of transparency for our company to a whole new level. That’s why it was very important for us to make this slide deck public. This slide deck is far from perfect. As previously mentioned, it probably falls into the average category. But it was what at the end of the day helped us raise the funds to turn Buffer into the company it is today. So it’s hopefully a real-world case study that clearly shows what is important and what might not be so helpful for investors to know about. We want to continue publishing our ideas and thoughts about topics that get rarely talked about. Joel and I will be around to answer any further questions you might have on our fundraising process. Please post anything you have in mind in the comments below.

This is a guest post by Leo Widrich (@leowid), co-founder of Buffer.  Note: I'm an angel investor in Buffer and my company HubSpot has a little bit of overlap in functionality in our Social Inbox product.

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3 Biggest Mistakes When Choosing a Cofounder

Posted by Dharmesh Shah on Thu, Apr 18, 2013


After spending a significant portion of the last couple of years talking and collaborating with countless entrepreneurs (through FounderDating) a few clear themes have emerged around partnering with cofounders. We’ve noticed some valuable best practices…as well as some very common mistakes. In the hopes that we can save more entrepreneurs some time and heartache, here are three of the biggest mistakes:woman troubled

1. Need

I actually don’t like to spend a lot of time convincing people they need a cofounder. There are enough people out there that either came to that conclusion right away, or felt the pain of not having one and realized it pretty quickly. Sooner or later, people will usually figure it out. For their sake, I hope that it’s sooner rather than later. But let me briefly to explain why the right cofounder is important (emphasis on “right”).

You don’t know what you don’t know

That’s always true, but in the case of starting a company or even a side project, you should assume that the body of knowledge you’re missing is vast. There is no way to make up for it all, but if your cofounder has complimentary skill sets, it will help shrink the missing body of knowledge. Chances are that it’s not only your role or the areas you know well that are tough to do and tougher to learn. It’s not a coincidence that, according to the Startup Genome Project, balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.

Your emotional partner

Beyond skill sets, starting a business is a test of your emotional will. Do you have any friends that are single parents? It’s not merely twice as hard, it’s exponentially harder than raising a child with a partner. Your cofounder is your partner – through every decision, every idea, each and every up and down of the emotional roller coaster. Only a cofounder will feel the high and lows like you do. Advisors and friends are great, but they aren’t nearly as emotionally invested as you are.

2. Approach

How do you approach someone about potentially being a cofounder? So many people start by thinking about an idea. I get that. It incites passion, you get excited, feel like there is something tangible to work on. But then you start thinking about a cofounder and pitching or hard selling someone on a specific idea. That [almost] never works. Chances are so good that your idea will change - either somewhat or completely - that Vegas wouldn’t even lay odds on it. So, let’s say you hard sell someone on the idea, they fall in love with it … and then the idea changes. Then what are you left with? Fall in love with the person, not the idea.

Even worse is pitching someone as though you’re offering a job that centers around your idea. The people you want to be your cofounder don’t just want to work on an idea, they want to be a part of something bigger. FounderDating ManagingDirector for Vegas and CTO/Cofounder of Wedgies, Jimmy Jacobson, sums it up perfectly:

“When I get someone pitching me an idea, I hear ‘I need someone to build my idea. I can't pay you in cash, so have some equity.’ That's not attractive to me. I have a LinkedIn account full of spam from recruiters, developer groups I belong to get spammed by people like this as well. This is why FounderDating exists. I don't want to work on a wine app. I want to work with awesome people, and if the idea we pick is a wine app, so be it.”

An idea is just that, AN idea. When the dust settles, it’s not likely to be THE idea, so don’t lead with it.

3. Timing

Which brings me to the final and probably most common mistake: When should you start thinking about a potential cofounder? The quick answer is ‘always.’ Huh? Yep, unless you’re in the throes of starting a new company full-time, you should always have a side project, something you’re curious about. It doesn’t have to be the next big thing. But it is the best way to start working with people you think could be cofounder material and figure out if a partnership might be feasible.

All too often I hear people say, “I’m not ready for a cofounder. I want to have the idea first.” At least 6-12 months before you quit your current full-time gig and “take the leap”, you should start talking to potential cofounders and working on side projects together. This gives you time to work with multiple people, and to walk away from relationships that aren’t clicking. It also affords the opportunity to learn so much about yourself - styles you like and don’t like, attributes you value and those you can do without.

When you wait until you’ve settled on an idea and even have a little bit of money committed (often conditional upon having a cofounder) you feel, well, more desperate. You’re much more likely to leap into the arms of the first person that agrees to work with you. Waiting until the end leads to bad decisions and relationships that really don’t work because, like it or not, you feel desperate. Searching for the right cofounder is a process and it’s vitally important, so start early.

Finding your partner should not be the last thing you do, it should be the first thing you do.

As an entrepreneur I’ve learned a lot from my own mistakes, but in this case you can learn a lot from the mistakes we’ve seen others make. Find the right cofounder is game changing – make sure you approach it like you would a partner and make it an early priority.

This was a guest post by Jessica Alter.  Jessica is the Cofounder & CEO of FounderDating, the premier online network for entrepreneurs to connect, share and help one and other. Previously, Jessica led Business Development and was GM of Platforms at Bebo (Acquired by AOL). She is also a mentor at 500 Startups and Extreme Startups. 

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Clear Eyes, Full Heart: Beating The Series A Crunch

Posted by Dharmesh Shah on Tue, Apr 09, 2013

The following is a guest post by Alan Wells, co-founder & product designer at Glyder. [Disclosure: I'm an angel investor in the company. -Dharmesh]

It has been widely reported that at there will be least 1,000 orphan startups this year - companies that raised a seed round last year and will fail to raise follow on financing.  The popular opinion in the tech press is that most of these 1,000 orphan companies will die due to lack of capital. As a founder, it's hard not to let this influence your thinking - with all the talk of failing fast, acqui-hires, and overnight success stories, it's easy to believe that your only options are to find a soft landing or shut down and try again with something else. And compared to sticking it out, walking away is most certainly the easier path (although it might make you a punk).

But I believe that in those 1,000 orphan startups, there are great companies - companies that can still put a dent in the universe, companies that can break through if the founders stick to it. Ben Horowitz says that all great CEOs have one thing in common: they don't quit, and at Startup School last year, this theme played out over and over again. Almost every founder that spoke went through a trough of sorrow that lasted 18-24 months before things really started to click for their companies.hang in there

Maybe it’s coincidental that the trough of sorrow is usually just a bit longer than the runway you have after an average-sized seed round, but I’m beginning to believe that great companies are often the product of these trying circumstances. Unfortunately people don’t like to talk about what’s not going right with their companies, and there’s not much discussion going on around what founders are doing to successfully navigate these waters.

I’m the founder of a startup that recently decided to double down and do our best to beat the series A crunch, and in the interest of focusing on the road instead of the wall, I wanted to share some of the things I’m learning as we find a way forward.

Acknowledging Your Reality

Founders are optimistic people, so it's easy for us to believe that if we just add this one thing to our product, hit that one key metric, or sign that one partnership deal, investors will come banging on our door begging to give us money. However, if you know things aren't going well or you are already having trouble raising your next round, what your startup needs more than anything is a lucid founder that can realistically assess the situation and identify a path forward.

Doing an honest appraisal of the things that were and weren’t working in our business was an important moment for our decision to press forward. Inside the head of a founder, things can seem great one minute and terrible the next, so getting outside perspective can be valuable as a check to your instincts and emotions. Meeting with advisors and existing investors also helped us get some third party perspective about trends in the market and issues we’re facing.

Understanding Why You're Not Fundable

As a startup founder, you're working in a four dimensional problem space: team, product, market, and timing. Hopes and dreams are often enough to raise money at the seed stage, but in my experience, you need more than that for your next round: you need to convince investors that you're the right team building the right product for the right market at the right time.

If you've been fundraising for three months and haven't gotten a check yet, something is probably wrong in one or more of these areas. Understanding what's wrong is critical to figuring out your path forward, and investors that pass can be the best source for understanding what the missing pieces are.

Until recently, I don’t think I quite appreciated the complexity of getting all this right at the same time, especially when you throw in the added complexity of trying to match up with the various investment theses and historical biases of top tier firms. As Ben Horowitz said, “this is not checkers; this is mutherfuckin’ chess.” Getting useful information isn't always easy - most investors seem to be worried about offending founders and prefer high level statements like "not enough traction" over candid feedback about the holes they see in your business.

I want to thank a few folks that were candid and helpful to us in this way - Ashu Garg (Foundation Capital), Thomas Korte (AngelPad) and James Currier were among the the people that gave us really insightful, critical feedback.

The Founding Team Gut Check

With some honest datapoints on the investor perspective of your business, you have the information you and your co-founders need to have a gut check conversation about the state of your business. You'll likely find your product, market, team or timing are in conflict with what investors see as likely to be a homerun, and you need to decide how to respond to that mismatch.

In our case the problem seems to be mainly around market - we're targeting very small businesses, a fragmented market where there is no historical precedent for big winners being built within the timeline that venture investors need for their 10x returns. We're well aware of the historical challenges in serving this market, but we believe that due to a number of new trends, big winners will emerge in this space in the next 3-5 years. Very few investors agree with us.

Our focus on very small business is one of the founding principles of our company, and we believe deeply in the potential that lies in serving this market. Our conviction in serving this market increased when we launched Glyder and started seeing the positive user response to the product. Because of this conviction, we decided that we would rather continue focusing on this market than switch to a different target market, even if that means we're not fundable in the short term.

Having an open and candid conversation with our team about the challenges to our company was a great chance to gauge everyone's commitment to the business. Building our business without more capital will be difficult, but when everyone voiced renewed desire to keep going forward, it helped me as the CEO get excited about figuring out how to do it.

Moving Forward & Changing Tactics

Paul Graham likes to tell founders that "the surest route to success is to be the cockroaches of the corporate world." The analogy works particularly well for orphan startups, because without additional capital, you must be resilient, resourceful and self-sufficient as quickly as possible. Here are some of the changes we’ve made as we continue building our business.

Incentivizing Existing Investors to Stay Involved and Excited 

Before we started trying to raise a new round, we gave our existing investors the opportunity to put more money into the company on fairly favorable terms. The cap on this new note was lower than the cap that we had previously raised money on - although our business was much further along, the funding environment had changed as well, and we wanted to make the decision to put additional capital in easy for our existing investors.

We also went back and amended the documents for all investors who had put money in on the higher cap and gave them the lower cap instead. This is unusual, not legally required, and meant that we were giving up additional dilution.

Why would we voluntarily increase dilution? Our investor group includes friends & family, angels, and the great team at 500 Startups. Our relationships with most of them started long before this company, and we hope they will extend far into the future. These relationships motivate us to keep building the business - they trusted us with their hard earned dollars, and although they all know the risks of betting on our startup, we want to show them results. When it comes to a decision like the one we made with the cap change, the cost in dilution was well worth the goodwill it generated among our investors. It also demonstrated our commitment to acting with integrity even when things aren't going according to plan.

Re-evaluating the Product Roadmap

As we heard the skepticism from potential investors while trying to raise more capital, product priorities were the first thing to change for us. We no longer have the luxury to focus on user growth over monetization, so our entire product roadmap shifted to focus on revenue. Our app, once offered for free (to maximize signups) is now a paid download. We don't have the luxury of supporting users that aren't willing to pay for what we make.

Lowering Burn Rate 

In addition to shifting product priorities to revenue, we also made dramatic reductions in burn rate so we could reach profitability faster. This meant letting several team members go - by far the hardest decision in this entire process - and asking remaining team members to take a pay cut (we softened the blow with this by giving additional equity). The changes in product and burn rate have put us on a path to reach cash flow positive before we run out of capital.

Preparing For Battle

In addition to the tactical changes in our business, the process we’ve gone through in the past three months has mentally and emotionally prepared our team for the road ahead. We know who we are and what we’re working toward, we’re aware of and very comfortable with the contrarian stance we’re taking, and we believe the long term opportunity is well worth the short term sacrifices we are making. As they say on Friday Night Lights, “clear eyes, full hearts, can't lose.”

I think Andrew Chen had it right when he said, "there’s always another move." If you’re the founder of a startup staring headfirst at the Series A Crunch and you can find the will to keep going, your job is to find that next move and make it happen. I hope to see more discussion on how companies are sticking with it and navigating the trough of sorrow. If you're in the midst of this process and need someone to bounce ideas off, drop me a note at @alanwells.

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How To Survive a Ground-Up Rewrite Without Losing Your Sanity

Posted by Dharmesh Shah on Mon, Apr 08, 2013


aka: Screw you Joel Spolsky, We're Rewriting It From Scratch!

This is a guest post by Dan Milstein (@danmil), co-founder of Hut 8 Labs.

Disclosure: Joel Spolsky is a friend and I'm an investor in his company, Stack Exchange (which powers the awesome Stack Overflow) -Dharmesh

So, you know Joel Spolsky's essay Things You Should Never Do, Part I? In which he urgently recommends that, no matter what, please god listen to me, don't rewrite your product from scratch? And lists a bunch of dramatic failures when companies have tried to do so?

First off, he's totally right. Developers tend to spectacularly underestimate the effort involved in such a rewrite (more on that below), and spectacularly overestimate the value generated (more on that below, as well).

But sometimes, on certain rare occasions, you're going to be justified in rewriting a major part of your product (you'll notice I've shifted to saying you're merely rewriting a part, instead of the whole product. Please do that. If you really are committed to just rewriting the entire thing from scratch, I don't know what to tell you).

If you're considering launching a major rewrite, or find yourself as the tech lead on such a project in flight, or are merely toiling in the trenches of such a project, hoping against hope that it will someday end... this post is for you.jump rewrite

Hello, My Name is Dan, and I've Done Some Rewrites

A few years back, I joined a rapidly growing startup named HubSpot, where I ended up working for a good solid while (which was a marvelous experience, btw -- you should all have Yoav Shapira as a boss at some point). In my first year there, I was one of the tech leads on a small team that rewrote the Marketing Analytics system (one of the key features of the HubSpot product), totally from scratch. We rewrote the back end (moving from storing raw hit data in SQLServer to processing hits with Hadoop and storing aggregate reports in MySQL); we rewrote the front end (moving from C#/ASP.Net to Java/Tomcat); we got into the guts of a dozen applications which had come to rely on that store of every-hit-ever, and found a way to make them work with the data that was now available. (Note: HubSpot is now primarily powered by MySQL/Hadoop/HBase. Check out the HubSpot dev blog).

It took a loooong time. Much, much longer than we expected.

But it generated a ton of value for HubSpot. Very Important People were, ultimately, very happy about that project. After it wrapped up, 'Analytics 2.0', as it was known, somehow went from 'that project that was dragging on forever', to 'that major rewrite that worked out really well'.

Then, after the Analytics Rewrite wrapped up, in my role as 5 Whys Facilitator, I led the post-mortem on another ambitious rewrite which hadn't fared quite so well. I'll call it The Unhappy Rewrite.

From all that, some fairly clear lessons emerged.

First, I'm going to talk about why these projects are so tricky. Then I'll pass on some of those hard-won lessons on how to survive.

Prepare Yourself For This Project To Never Fucking End

The first, absolutely critical thing to understand about launching a major rewrite is that it's going to take insanely longer than you expect. Even when you try to discount for the usual developer optimism. Here's why:

  • Migrating the data sucks beyond all belief

I'm assuming your existing system has a bunch of valuable data locked up in it (if it doesn't, congrats, but I just never, ever run into this situation). You think, we're going to set up a new db structure (or move it all to some NoSQL store, or whatever), and we'll, I dunno, write some scripts to copy the data over, no problem.

Problem 1: there's this endless series of weird crap encoded in the data in surprising ways. E.g. "The use_conf field is 1 if we should use the auto-generated configs... but only if the spec_version field is greater than 3. Oh, and for a few months, there was this bug, and use_conf was left blank. It's almost always safe to assume it should be 1 when it's blank. Except for customers who bought the Express product, then we should treat it as 2". You have to migrate all your data over, checksum the living hell out of it, display it back to your users, and then figure out why it's not what they expect. You end up poring over commit histories, email exchanges with developers who have long since left the company, and line after line of cryptic legacy code. (In prep for writing this, when I mentioned this problem to developers, every single time they cut me off to eagerly explain some specific, awful experience they've had on this front -- it's really that bad)

Problem 2: But, wait, it gets worse: because you have a lot of data, it often takes days to migrate it all. So, as you struggle to figure out each of the above weird, persnickety issues with converting the data over, you end up waiting for days to see if your fixes work. And then to find the next issue and start over again. I have vivid, painful memories of watching my friend Stephen (a prototypical Smart Young Engineer), who was a tech lead on the Unhappy Rewrite, working, like, hour 70 of an 80 hour week, babysitting a slow-moving data export/import as it failed over and over and over again. I really can't communicate how long this takes.

  • It's brutally hard to reduce scope

With a greenfield (non-rewrite) project, there is always (always) a severe reduction in scope as you get closer to launch. You start off, expecting to do A, B, C & D, but when you launch, you do part of A. But, often, people are thrilled. (And, crucially, they forget that they had once considered all the other imagined features as absolutely necessary)

With a rewrite, that fails. People are really unhappy if you tell them: hey, we rewrote your favorite part of the product, the code is a lot cleaner now, but we took away half the functionality.

You'll end up spending this awful series of months implementing all these odd edge cases that you didn't realize even existed. And backfilling support for features that you've been told no one uses any more, but you find out at the last minute some Important Person or Customer does. And, and, and...

  • There turn out to be these other system that use "your" data

You always think: oh, yeah, there are these four screens, I see how to serve those from the new system. But then it turns out that a half-dozen cron jobs read data directly from "your" db. And there's an initialization step for new customers where something is stored in that db and read back later. And some other screen makes a side call to obtain a count of your data. Etc, etc. Basically, you try turning off the old system briefly, and a flurry of bug reports show up on your desk, for features written a long time ago, by people who have left the company, but which customers still depend on. This takes forever all over again to fix.

Okay, I'm Sufficiently Scared Now, What Should I Do?

You you have to totally own the business value.

First off, before you start, you must define the business value of this rewrite. I mean, you should always understand the big picture value of what you do (see: Rands Test). But with rewrites, it's often the tech lead, or the developers in general, who are pushing for the rewrite -- and then it's absolutely critical that you understand the value. Because you're going to discover unexpected problems, and have to make compromises, and the whole thing is going to drag on forever. And if, at the end of all that, the Important People who sign your checks don't see much value, it's not going to be a happy day for you.

One thing: be very, very careful if the primary business value is some (possibly disguised) version of "The new system will be much easier for developers to work on." I'm not saying that's not a nice bit of value, but if that's your only or main value... you're going to be trying to explain to your CEO in six months why nothing seems to have gotten done in development in the last half year.

The key to fixing the "developers will cry less" thing is to identify, specifically, what the current, crappy system is holding you back from doing. E.g. are you not able to pass a security audit? Does the website routinely fall over in a way that customers notice? Is there some sexy new feature you just can't add because the system is too hard to work with? Identifying that kind of specific problem both means you're talking about something observable by the rest of the business, and also that you're in a position to make smart tradeoffs when things blow up (as they will).

As an example, for our big Analytics rewrite, the developers involved sat down with Dan Dunn, the (truly excellent) product guy on our team, and worked out a list of business-visible wins we hoped to achieve. In rough priority order, those were:

  • Cut cost of storing each hit by an order of magnitude

  • Create new reports that weren't possible in the old system

  • Serve all reports faster

  • Serve near-real-time (instead of cached daily) reports

And you should know: that first one loomed really, really large. HubSpot was growing very quickly, and storing all that hit data as individual rows in SQLServer had all sorts of extra costs. The experts on Windows ops were constantly trying to get new SQLServer clusters set up ahead of demand (which was risky and complex and ended up touching a lot of the rest of the codebase). Sales people were told to not sell to prospects with really high traffic, because if they installed our tracking code, it might knock over those key databases (and that restriction injected friction into the sales process). Etc, etc.

Solving the "no more hits in SQLServer" problem is the Hard kind for a rewrite -- you only get the value when every single trace of the old system is gone. The other ones, lower down the list, those you'd see some value as individual reports were moved over. That's a crucial distinction to understand. If at all possible, you want to make sure that you're not only solving that kind of Hard Problem -- find some wins on the way.

For the Unhappy Rewrite, the biz value wasn't perfectly clear. And, thus, as often happens in that case, everyone assumed that, in the bright, shiny world of the New System, all their own personal pet peeves would be addressed. The new system would be faster! It would scale better! The front end would be beautiful and clever and new! It would bring our customers coffee in bed and read them the paper.

As the developers involved slogged through all the unexpected issues which arose, and had to keep pushing out their release date, they gradually realized how disappointed everyone was going to be when they saw the actual results (because all the awesome, dreamed-of stuff had gotten thrown overboard to try to get the damn thing out the door). This a crappy, crappy place to be -- stressed because people are hounding you to get something long-overdue finished, and equally stressed because you know that thing is a mess.

Okay, so how do you avoid getting trapped in this particular hell?

Worship at the Altar of Incrementalism

Over my career, I've come to place a really strong value on figuring out how to break big changes into small, safe, value-generating pieces. It's a sort of meta-design -- designing the process of gradual, safe change.

Kent Beck calls this Succession, and describes it as:

"Design changes are usually most efficiently implemented as a series of safe steps. Succession is the art of taking a single conceptual change, breaking it into safe steps, and then finding an order for those steps that optimizes safety, feedback, and efficiency."

I love that he calls it an "art" -- that feels exactly right to me. It doesn't happen by accident. You have to consciously work at it, talk out alternatives with your team, get some sort of product owner or manager involved to make sure the early value you're surfacing matters to customers. It's a creative act.

And now, let me say, in an angry Old Testament prophet voice: Beware the false incrementalism!

False incrementalism is breaking a large change up into a set of small steps, but where none of those steps generate any value on their own. E.g. you first write an entire new back end (but don't hook it up to anything), and then write an entire new front end (but don't launch it, because the back end doesn't have the legacy data yet), and then migrate all the legacy data. It's only after all of those steps are finished that you have anything of any value at all.

Fortunately, there's a very simple test to determine if you're falling prey to the False Incrementalism: if after each increment, an Important Person were to ask your team to drop the project right at that moment, would the business have seen some value? That is the gold standard.

Going back to my running example: our existing analytics system supported a few thousand customers, and served something like a half dozen key reports. We made an early decision to: a) rewrite all the existing reports before writing new ones, and b) rewrite each report completely, push it through to production, migrate any existing data for that report, and switch all our customers over. And only then move on to the next report.

Here's how that completely saved us: 3 months into a rewrite which we had estimated would take 3-5 months, we had completely converted a single report. Because we had focused on getting all the way through to production, and on migrating all the old data, we had been forced to face up to how complex the overall process was going to be. We sat down, and produced a new estimate: it would take more like 8 months to finish everything up, and get fully off SQLServer.

At this point, Dan Dunn, who is a Truly Excellent Product Guy because he is unafraid to face a hard tradeoff, said, "I'd like to shift our priorities -- I want to build the Sexy New Reports now, and not wait until we're fully off SQLServer." We said, "Even if it makes the overall rewrite take longer, and we won't get off SQLServer this year, and we'll have to build that one new cluster we were hoping to avoid having to set up?" And he said "Yes." And we said, "Okay, then."

That's the kind of choice you want to offer the rest of your larger team. An economic tradeoff where they can chose between options of what they see when. You really, really don't want to say: we don't have anything yet, we're not sure when we will, your only choices are to keep waiting, or to cancel this project and kiss your sunk costs goodbye.

Side note: Dan made 100% the right call (see: Excellent). The Sexy New Reports were a huge, runaway hit. Getting them out sooner than later made a big economic impact on the business. Which was good, because the project dragged on past the one year mark before we could finally kill off SQLServer and fully retire the old system.

For you product dev flow geeks out there, one interesting piece of value we generated early was simply a better understanding of how long the project was going to take. I believe that is what Beck means by "feedback". It's real value to the business. If we hadn't pushed a single report all the way through, we would likely have had, 3-4 months in, a whole bunch of data (for all reports) in some partially built new system, and no better understanding of the full challenge of cutting even one report over. You can see the value the feedback gave us--it let Dan make a much better economic choice. I will make my once-per-blog-post pitch that you should go read Donald Reinertsen's Principles of Product Development Flow to learn more about how reducing uncertainty generates value for a business.

For the Unhappy Rewrite, they didn't work out a careful plan for this kind of incremental delivery. Some Totally Awesome Things would happen/be possible when they finished. But they kept on not finishing, and not finishing, and then discovering more ways that the various pieces they were building didn't quite fit together. In the Post-Mortem, someone summarized it as: "We somehow turned this into a Waterfall project, without ever meaning to."

But, I Have to Cut Over All at Once, Because the Data is Always Changing

One of the reasons people bail on incrementalism is that they realize that, to make it work, there's going to be an extended period where every update to a piece of data has to go to both systems (old and new). And that's going to be a major pain in the ass to engineer. People will think (and even say out loud), "We can't do that, it'll add a month to the project to insert a dual-write layer. It wil slow us down too much."

Here's what I'm going to say: always insert that dual-write layer. Always. It's a minor, generally somewhat fixed cost that buys you an incredible amount of insurance. It allows you, as we did above, to gradually switch over from one system to another. It allows you to back out at any time if you discover major problems with the way the data was migrated (which you will, over and over again). It means your migration of data can take a week, and that's not a problem, because you don't have to freeze writes to both systems during that time. And, as a bonus, it surfaces a bunch of those weird situations where "other" systems are writing directly to your old database.

Again, I'll quote Kent Beck, writing about how they do this at Facebook:

"We frequently migrate large amounts of data from one data store to another, to improve performance or reliability. These migrations are an example of succession, because there is no safe way to wave a wand and migrate the data in an instant. The succession we use is:

Convert data fetching and mutating to a DataType, an abstraction that hides where the data is stored.

Modify the DataType to begin writing the data to the new store as well as the old store.

Bulk migrate existing data.

Modify the DataType to read from both stores, checking that the same data is fetched and logging any differences.

When the results match closely enough, return data from the new store and eliminate the old store.

You could theoretically do this faster as a single step, but it would never work. There is just too much hidden coupling in our system. Something would go wrong with one of the steps, leading to a potentially disastrous situation of lost or corrupted data."

Abandoning the Project Should Always Be on the Table

If a 3-month rewrite is economically rational, but a 13-month one is a giant loss, you'll generate a lot value by realizing which of those two you're actually facing. Unfortunately, the longer you solider on, the harder it is for people to avoid the Fallacy of Sunk Costs. The solution: if you have any uncertainty about how long it's going to take, sequence your work to reduce that uncertainty right away, and give people some "finished" thing that will let them walk away. One month in, you can still say: we've decided to only rewrite the front end. Or: we're just going to insert an API layer for now. Or, even: this turned out to be a bad idea, we're walking away. Six months in, with no end in sight, that's incredibly hard to do (even if it's still the right choice, economically).

Some Specific Tactics

Shrink Ray FTW

This is an excellent idea, courtesy of Kellan Elliot-McCrea, CTO of Etsy. He describes it as follows:

"We have a pattern we call shrink ray. It's a graph of how much the old system is still in place. Most of these run as cron jobs that grep the codebase for a key signature. Sometimes usage is from wire monitoring of a component. Sometimes there are leaderboards. There is always a party when it goes to zero. A big party.

Gives a good sense of progress and scope, especially as the project is rolling, and a good historical record of how long this shit takes. '''

I've just started using Shrink Ray on a rewrite I'm tackling right now, and I will say: it's fairly awesome. Not only does it give you the wins above, but, it also forces you to have an early discussion about what you are shrinking, and who in the business cares. If you make the right graph, Important People will be excited to see it moving down. This is crazy valuable.

Engineer The Living Hell Out Of Your Migration Scripts

It's very easy to think of the code that moves data from the old system to the new as a collection of one-off scripts. You write them quickly, don't comment them too carefully, don't write unit tests, etc. All of which are generally valid tradeoffs for code which you're only going to run once.

But, see above, you're going to run your migrations over and over to get them right. Plus, you're converting and summing up and copying over data, so you really, really want some unit tests to find any errors you can early on (because "data" is, to a first approximation, "a bunch of opaque numbers which don't mean anything to you, but which people will be super pissed off about if they're wrong"). And this thing is going to happen, where someone will accidentally hit ctrl-c, and kill your 36 hour migration at hour 34. Thus, taking the extra time to make the entire process strongly idempotent will pay off over and over (by strongly idempotent, I mean, e.g. you can restart after a failed partial run and it will pick up most of the existing work).

Basically, treat your migration code as a first class citizen. It will save you a lot of time in the long run.

If Your Data Doesn't Look Weird, You're Not Looking Hard Enough

What's best is if you can get yourself to think about the problem of building confidence in your data as a real, exciting engineering challenge. Put one of your very best devs to work attacking both the old and the new data, writing tools to analyze it all, discover interesting invariants and checksums.

A good rule of thumb for migrating and checksumming data: until you've found a half-dozen bizarre inconsistencies in the old data, you're not done. For the Analytics Rewrite, we created a page on our internal wiki called "Data Infelicities". It got to be really, really long.

With Great Incrementalism Comes Great Power

I want to wrap up by flipping this all around -- if you learn to approach your rewrites with this kind of ferocious, incremental discipline, you can tackle incredibly hard problems without fear. Which is a tremendous capability to offer your business. You can gradually rewrite that unbelievably horky system that the whole company depends on. You can move huge chunks of data to new data stores. You can pick up messy, half-functional open source projects and gradually build new products around them.

It's a great feeling.


What's your take?  Care to share any lessons learned from an epic rewrite?

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Measuring What Matters: How To Pick A Good Metric

Posted by Dharmesh Shah on Fri, Mar 29, 2013


Ben Yoskovitz is the co-author of Lean Analytics, a new book on how to use analytics successfully in your business. Ben is currently VP Product at GoInstant, which was acquired by Salesforce in 2012. He blogs regularly at Instigator Blog and can be followed @byosko.

We all know metrics are important. They help report progress and guide our decision making. Used properly, metrics can provide key insights into our businesses that make the difference between success and failure. But as our capacity to track everything increases, and the tools to do so become easier and more prevalent, the question remains: what is a worthwhile metric to track?

Before you can really figure that out it's important to understand the basics of metrics. There are in fact good numbers and bad numbers. There are numbers that don't help and numbers that might save the day.

First, here's how we define analytics: Analytics is the measurement of movement towards your business goals.

The two key concepts are "movement" and "business goals". Analytics isn't about reporting for the sake of reporting, it's about tracking progress. And not just aimless progress, but progress towards something you're trying to accomplish. If you don't know where you're going, metrics aren't going to be particularly helpful.

With that definition in mind, here's how we define a "good metric".

A good metric is:

  • Comparative

  • Understandable

  • A ratio or rate

  • Behavior changing

A good metric is comparative. Being able to compare a metric across time periods, groups of users, or competitors helps you understand which way things are moving. For example, "Increased conversion by 10% from last week" is more meaningful than "We're at 2% conversion." Using comparative metrics speaks clearly to our definition of "movement towards business goals".

A good metric is understandable. Take the numbers you're tracking now--the ones you think are the most important--and show those to outsiders. If they don't instantly understand your business and what you're trying to do, then the numbers you're tracking are probably too complex. And internally, if people can't remember the numbers you're focused on and discuss them effectively, it becomes much harder to turn a change in the data into a change in the culture. Try fitting your key metrics on a single TV screen (and don’t cheat with a super small font either!)

A good metric is a ratio or a rate. Ratios and rates are inherently comparative. For example, if you compare a daily metric to the same metric over a month, you'll see whether you're looking at a sudden spike or a long-term trend. Ratios and rates (unlike absolute numbers) give you a more realistic "health check" for your business and as a result they're easier to act on. This speaks to our definition above about "business goals"--ratios and rates help you understand if you're heading towards those goals or away from them.

A good metric changes the way you behave. This is by far the most important criterion for a metric: what will you do differently based on changes in the number? If you don't know, it's a bad metric. This doesn't mean you don't track it--we generally suggest that you track everything but only focus on one thing at a time because you never know when a metric you're tracking becomes useful. But when looking at the key numbers you're focused on today, ask yourself if you really know what you'd do if those numbers go up, down or stay the same. If you don't, put those metrics aside and look for better ones to track right now.

Now that we've defined a "good" metric let's look at five things you should keep in mind when choosing the right metrics to track:

  • Qualitative versus quantitative metrics

  • Vanity versus actionable metrics

  • Exploratory versus reporting metrics

  • Leading versus lagging metrics

  • Correlated versus causal metrics

1. Qualitative versus Quantitative metrics

Quantitative data is easy to understand. It's the numbers we track and measure--for example, sports scores and movie ratings. As soon as something is ranked, counted, or put on a scale, it's quantified. Quantitative data is nice and scientific, and (assuming you do the math right) you can aggregate it, extrapolate it, and put it into a spreadsheet. Quantitative data doesn't lie, although it can certainly be misinterpreted. It's also not enough for starting a business. To start something, to genuinely find a problem worth solving, you need qualitative input.

Qualitative data is messy, subjective, and imprecise. It's the stuff of interviews and debates. It's hard to quantify. You can't measure qualitative data easily. If quantitative data answers "what" and "how much," qualitative data answers "why." Quantitative data abhors emotion; qualitative data marinates in it.

When you first get started with an idea, assuming you're following the core principles around Lean Startup, you'll be looking for qualitative data through problem interviews. You're speaking to people--specifically, to people you think are potential customers in the right target market. You're exploring. You're getting out of the building.

Collecting good qualitative data takes preparation. You need to ask specific questions without leading potential customers or skewing their answers. You have to avoid letting your enthusiasm and reality distortion rub off on your interview subjects. Unprepared interviews yield misleading or meaningless results. We cover how to interview people in Lean Analytics, but there have been many others that have done so as well. Ash Maurya’s book Running Lean provides a great, prescriptive approach to interviewing. I also recommend Laura Klein’s writing on the subject.

Sidebar: In writing Lean Analytics, we proposed the idea of scoring problem interviews. The basic concept is to take the qualitative data you collect during interviews and codify it enough to give you (hopefully!) new insight into the results. The goal of scoring problem interviews is to reduce your own bias and ensure a healthy dose of intellectual honesty in your efforts. Not everyone agrees with the approach, but I hope you'll take a look and try it out for yourself.

2. Vanity versus Actionable metrics

I won't spent a lot of time on vanity metrics, because I think most people reading OnStartups understand these. As mentioned above, if you have a piece of data that can't be acted upon (you don't know how movement in the metric will change your behavior) then it's a vanity metric and you should ignore it.

It is important to note that actionable metrics don't automatically hold the answers. They're not magic. They give you an indication that something fundamental and important is going on, and identify areas where you should focus, but they don't provide the answers. For example, if "percent of active users" drops, what do you do? Well, it's a good indication that something is wrong, but you'll have to dig further into your business to figure it out. Actionable metrics are often the starting point for this type of exploration and problem solving.

3. Exploratory versus Reporting metrics

Reporting metrics are straightforward--they report on what's going on in your startup. We think of these as "accounting metrics", for example, "How many widgets did we sell today?" Or, "Did the green or the red widget sell more?" Reporting metrics can be the results of experiments (and therefore actionable), but they don't necessarily lead to those "eureka!" moments that can change your business forever.

Exploratory metrics are those you go looking for. You're sifting through data looking for threads of information that are worth pursuing. You're exploring in order to generate ideas to experiment on. This fits what Steve Blank says a startup should spend its time doing: searching for a scalable, repeatable business model.

A great example of using exploratory metrics is from Mike Greenfield, co-founder of Circle of Moms. Originally, Circle of Moms was Circle of Friends (think: Google Circles inside Facebook). Circle of Friends grew very quickly in 2007-2008 to 10 million users, thanks in part to Facebook's open platform. But there was a problem--user engagement was terrible. Circle of Friends had great virality and tons of users, but not enough people were really using the product.

So Mike went digging.

And what Mike found was incredible. It turns out that moms, by every imaginable metric, were insanely engaged compared to everyone else. Their messages were longer, they invited more people, they attached more photos, and so on. So Mike and his team pivoted from Circle of Friends to Circle of Moms. They essentially abandoned millions of users to focus on a group of users that were actually engaged and getting value from their product. From the outside looking in this might have been surprising or confusing. You might find yourself at a decision point like Mike and worry about what investors will think, or other external influencers. But if you find a key insight in your data that’s incredibly compelling, you owe it to yourself to act on it, even if it looks crazy from the outside. For Mike and Circle of Moms, it was the right decision. The company grew their user base back up to 4 million users and eventually sold to Sugar Inc.

4. Leading versus Lagging metrics

Leading and lagging metrics are both useful, but they serve different purposes. Most startups start by measuring lagging metrics (or "lagging indicators") because they don't have enough data to do anything else. And that's OK. But it's important to recognize that a lagging metric is reporting the past; by the time you know what the number is, whatever you’re tracking has already happened. A great example of this is churn. Churn tells you what percentage of customers (or users) abandon your service over time. But once a customer has churned out they're not likely to come back. Measuring churn is important, and if it's too high, you'll absolutely want to address the issue and try to fix your leaky bucket, but it lags behind reality.

A leading metric on the other hand tries to predict the future. It gives you an indication of what is likely to happen, and as a result you can address a leading metric more quickly to try and change outcomes going forward. For example, customer complaints is often a leading indicator of churn. If customer complaints are going up, you can expect that customers will abandon and churn will also go up. But instead of responding to something that's already happened, you can dive into customer complaints immediately, figure out what's going on, resolve the issues and hopefully minimize the future impact in churn.

Ultimately, you need to decide whether the thing you're tracking helps you make better decisions sooner. Remember: a real metric has to be actionable. Lagging and leading metrics can both be actionable, but leading indicators show you what will happen, reducing your cycle time and making you leaner.

5. Correlated versus Causal metrics

A correlation is a seeming relationship between two metrics that change together, but are often changing as a result of something else. Take ice cream consumption and drowning. If you plotted these over a year, you'd see that they're correlated--they both go up and down at the same time. The more ice cream that's consumed, the more people drown. But no one would suggest that we reduce ice cream consumption as a way of preventing drowning deaths. That's because the numbers are correlated, and not causal. One isn't affecting the other. The factor that affects them both is actually the time of year--when it's summer, people eat more ice cream and they also drown more.

Finding a correlation between two metrics is a good thing. Correlations can help you predict what will happen. But finding the cause of something means you can change it. Usually, causations aren't simple one-to-one relationships--there’s lots of factors at play, but even a degree of causality is valuable.

You prove causality by finding a correlation, then running experiments where you control the other variables and measure the difference. It's hard to do, but causality is really an analytics superpower--it gives you the power to hack the future.

So what metrics are you tracking?

We’ve covered some fundamentals about analytics and picking good metrics. It's not the whole story (to learn more see our presentations and workshops on Lean Analytics), but I'd encourage you to take a look at what you're tracking and see if the numbers you care the most about meet the criteria defined in this post. Are the metrics ratios/rates? Are they actionable? Are you looking at leading or lagging metrics? Have you identified any correlations? Could you experiment your way to discovering causality?

And remember: analytics is about measuring progress towards goals. It's not about endless reports. It's not about numbers that go constantly "up and to the right" to impress the press, investors or anyone else. Good analytics is about speeding up and making better decisions, and developing key insights that become cornerstones of your startup.

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Getting Crunched, Mashed Or Beaten Is Not A Launch Strategy

Posted by Dharmesh Shah on Tue, Mar 19, 2013


This is a guest post by Alex Turnbull.  Alex is a serial SaaS entrepreneur and the CEO of Groove, a customer support software platform for startups and small businesses.  Alex was previously a co-founder of Bantam Live, acquired by Constant Contact in 2011.

It’s here!

After many, many months of long hours, take-out and cheap beer, launch day is finally here.

Your eyes are sore from not having looked up from your computer in what seems like ages, and every part of your body is screaming at you to get some sleep, but you’re too hopped up on coffee and adrenaline to listen.pot of gold

This is it. This is what we’ve been working our asses off for. To reveal ourselves to the world in all of our disruptive glory. Silicon Valley will kneel before us.

It’s like the slow, painstaking ride to the top of the first drop on a roller coaster; you just know it’s going to be absolutely exhilarating, but first you have to trudge all the way to the peak of a steep climb. Tired of waiting but itching with anticipation, you finally reach the top, and then…


Not a damn thing.

Scoble isn’t billing you as the next Instagram. You’re not showing up on Techmeme with a dozen stories about your launch. And the traffic. That sweet, traction-building traffic that you’ve been awaiting — the traffic that was going to prove that people were interested. That they wanted you. It never comes.

Who’s to blame for all of this?

That’s easy. TechCrunch. Those bastards.

If only they had read your press release, they would’ve seen that your story needs to be told! Your product is unique and compelling, dammit! How could they do this to you? How could they crush your dreams of a successful launch by totally ignoring your pitch?

Of course, you’re a startup. Bouncing back is in your DNA, and you get right back to work. But the experience is discouraging, and I've seen this story play out way too many times with friends and founders I’ve spoken to. And know that I’m speaking from experience: I've absolutely made this mistake before, too.

Here’s the reality: pitching TechCrunch is not a launch strategy.

It seems obvious, but it takes more than one hand for me to count the number of times a founder has told me that they expect their launch traction to come from getting picked up by TC (or Mashable, or VentureBeat, or AllThingsD, or any one of a number of similar outlets).

What every single hopeful founder with a similar plan doesn't realize (or doesn't take seriously enough) is that there are hundreds of other founders doing the exact same thing, and hitting the exact same “Tips” email account with their pitches.

Don’t get me wrong, here. Press is good, startup bloggers tell important stories and press outreach should be a part of your launch strategy. But it’s not enough.

So what’s a startup to do?

Let’s get this out of the way: a lot of folks will tell you that the first thing you should be focused on is building a great product that improves people’s lives. And they’re absolutely right. Nobody wants to hear about a crappy product, and more importantly, nobody wants to share your crappy product with their friends.

But let’s assume you've got something amazing. How do you get the world to notice?

First of all, shift your thinking. F*ck the world. It’s “tell everyone” approaches like this that lead to launch strategies like the one above. You don’t need the world to notice. You need highly qualified potential users to notice, and there’s a huge difference.

At Groove, we spent twelve months in beta, rigorously testing and iterating our HelpDesk and LiveChat apps to get them ready to launch.

But here’s something else we did, that you can do, too: we spent that time rabidly collecting email addresses of potential users. We asked our most engaged beta users to share our website (and lead collection portal) with their networks, we blogged about topics that were interesting to a customer support audience, and we wrote content for external outlets that brought value to readers, and loads of inbound leads to us.

When launch day came, we were ready: press release, pitch list, product video, blog post, email blast, the works. Here’s how it played out:

We pitched our press list.

The good people at TheNextWeb covered our beta launch a year ago, so they were interested in how far we've come. They wrote a great piece about us, and the inbound traffic got us about a few hundred signups. It was awesome.

Like everyone else, we also wanted to get Crunched. Or Mashed. Or Beaten.


But what hurt even more, is that like almost everyone else, we didn't get covered by any of them.

I have no doubt that a barrage of press coverage would've gotten us even more new users, but we knew that the odds were against us, so we planned for it.

Taking our carefully nurtured list of email addresses, we sent out an announcement about our launch, with clear calls to action to sign up and get in on the fun.

The result?

Double the signups, at nearly four times the conversion rate of visitors coming from the TNW piece.

Note that we didn't email this list cold: we had spent months giving away content for free, nurturing the relationships, before asking for anything. I can’t stress the importance of this enough.

We also sent an email out to beta users, announcing the launch and asking them to share Groove with friends who might find it useful. That email netted us another 120 users, at a conversion rate nearly double that of the TNW traffic.

It shouldn't be surprising that the most valuable traffic we got came from qualified leads we had already nurtured. But the problem is that most startups won’t make the effort to build that audience until after launch. I know, because as I've mentioned, I've made that mistake, too.

Look, I know that as an early-stage team, the chances that you have a full-time content person are nonexistent. But the chances that someone on your team has a modicum of writing chops are pretty damn good, and getting them to invest a couple of hours a week in this exercise can pay off in spades when the time comes.

At a loss for what to write about? Every startup should know how their customers think, and knowing what’s interesting to them is a major part of that, and it’s absolutely okay to ask them what they’d like to read about from you. Email them, survey them, chat with them. They'll appreciate it. Trust me.

In the meantime, here are a few ideas:

  • Write about your startup experiences - be honest and transparent (check out Balsamiq-founder Peldi’s blog, where he captures this masterfully)
  • Stir the pot. Share your thoughts on controversial topics with your audience.
  • Offer best practices for your space.
  • You’re probably an expert in whatever it is that you do — share your knowledge.
  • Everyone likes a success story. Or one about failure. Tell yours.
  • Show off case studies and interviews with your customers. This clues your audience in to what others using your product are doing well, and makes the featured customers feel good about themselves (and their relationship with your company).

Summary: Getting Crunched is not a launch strategy, and you shouldn't bet on it to make your startup blow up. Reach out to the press, but diversify your launch plan to reach qualified leads that you've already been nurturing. Invest in content. Profit. The end.

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Our PR Stinks: Here's What Your Startup Can Learn From It

Posted by Dharmesh Shah on Thu, Dec 20, 2012


We were convinced from the very beginning that strong PR would be the answer to our market entry prayers. This is the story of how our reality turned into something of the opposite effect.

The Familiar Doubt

Many friends, fellow founders and business professionals told us along the way that creating a B2B interactive business platform would be a difficult project. (Hey, we knew that.)

People later told us that the most difficult aspect would be market entry. (Again, no surprise there.) The consensus among those critical of our venture was consistent, and usually along the lines of, “Don’t you want to do something more glamorous than a B2B platform? Maybe something B2C?”describe the image

(Actually, we believe our concept is glamorous and quite frankly, exactly what we believe the B2B market calls for.)

Any way you thought about it, the task at hand was going to be tough. The start was the most challenging, with an idea and an empty platform. But we were not the first facing this issue; surely there would be ways to maneuver our way into our key markets?

We knew some companies who successfully bought profiles or created fake ones, but decided that if we really believed in our concept, we would need real people behind genuine profiles and articles. And that we would need press coverage.

How did we solve the first problem of filling the platform?

We first talked face-to-face with various professionals we knew to get them interested and excited enough to participate on the platform, even though the it was new. It was hard, but we did it. Twice. Once on the German site, and again, when we went international with the English platform.

We were ready to move onto the next stage.


How do you go about growing something like a self-publishing platform for B2B professionals? How do you create public awareness? Would press coverage do the trick? High-profile technology publications, with all of their reach, would be a nice start…wouldn’t they?

Indeed, we tried various forms of press outreach. After making a bad choice with a PR company for the German market, we chose the PR Company for our international venture with care. After months of consideration, research and negotiation, we made a deal with high hopes that we would see the benefits of this lucrative investment. While it would be wrong to say we gained nothing from this several month contract, it would be an exaggeration to say that it was worth the time, energy and money to do it again.

Maybe we chose the wrong firm or worked with people not experienced enough with an international, startup market. Regardless of the reason, we only barely inched along.

Eventually, we were forced to go out on our own to create brand awareness and ignite public interest.

The Big Guys

This time, we aimed for the big guys and landed one on our own. Coverage on GigaOM inspired positive feedback surrounding our concept and functionality. But as it turns out, getting highly coveted coverage is not enough. What happens is this: you get a spike of traffic, a couple of hundred or even thousands of visits for a day, but only a fraction of the traffic persists.

PR can work if you manage to stay continually on the radar of journalists. We did not succeed in getting enough “coverable” news out over and over again and thus faced the problem of limited exposure.

After personal and fired efforts, what did we learn?

Our PR still stank.

Without a celebrity investor or seven-figure financial round each month, we were forced to do what startups do best: build something from nothing, by using what we had.

Looking back, this hardship turned out to be a great thing for our business development. Without being able to rely on press coverage, we were forced to learn and engage in a marketing strategy - to find other ways to generate traffic and convert our target audience.

Essentially, our lukewarm PR made us better entrepreneurs.

How, exactly, did we manage to grow?

As a social publishing and content marketing platform we decided to do exactly what we had been advising our target group to do: run a content-based, social media campaign. The steps were as follows:

1. Research our target group: This involved getting to know the habits and motivations of our target group within each social media and online channel. It also required us to understand the conversations that were talking place about issues relevant to our service and knowing what our industry influencers were saying. Specific to our success, were analyzing Twitter and LinkedIn.

2. Connect with influencers: Connecting with influencers allowed us to learn the language of our industry and lay the foundation for future interaction. When we later began to produce content, we could guest post on these influencers’ blogs/websites and involve them in a series of interviews. In both cases, we found ways to expose ourselves to their followers.

3. Create content of utility: We knew that content had to be informative and engaging. Yet, the content that really made a difference for us was that which offered our platform and social media communities a sense of utility. If our content could be used to better understand the industry or tackle a common problem, it was more likely to be shared and discussed.

4. Publish content: This was when we had the opportunity to do what we had been advising our target group to do the whole time: publish on exploreB2B. Not only did we publish articles on our platform, we guest posted on active and relevant sites and blogs.

5. Distribute content: Publishing content was only one step of the battle. Distributing the totality of our content through our social communities served to create leads to our platform and, in turn, grow these subsidiary networks.

6. Continue to grow online communities: This was one of the largest factors in our spike in traffic and referrals. Once we grew our Twitter accounts and initiated daily interaction in LinkedIn groups, whole communities of like-minded people were exposed to – and became familiar with – our brand name. Growing our Twitter account from miniscule numbers to five-figure followers became a powerful increase in our visibility. Even though we are B2B, this kind of “social branding” played a large role in our growth.

Through a campaign of trial and error, we learned that social media and content marketing success is not immediate – and that it is not the result of one magical post. The persistence of our actions and the combination of the different measures resulted in a social media following, trust in our content, visibility, and stable platform growth.

What were our end results with PR?

1. A spike in traffic during April 2012.

Yes, that’s it. And it was smaller than our current (steady) growth rates.

What were our end results with content marketing?

1. Brand awareness.

2. Connection to key, industry influencers.

3. Large and active social media followings on more than one network.

4. Trust in our useful and engaging content.

5. An increase in weekly visits by a factor of ten.

6. An increase in registrations by a factor of ten.

In the few months we have spent content marketing, we have achieved something that gives much more value to our company than traffic spikes created by media coverage. We have an ongoing dialogue with our users, a network base that constantly returns to our site, and consistently grow our traffic.

Results from our content marketing campaign far outweigh any benefits we gained from being covered in the press.

We have survived by making ourselves the leaders of our own movement, utilizing the platform we created, employing the marketing strategy we recommend and connecting to thought leaders in our field.


Weekly traffic of exploreB2B from March 2012 to November 2012

Though our content marketing results were not instant, we were able to use this time to build trust and establish a reputation in “social business.”

With positive user feedback and a steady increase in their own article production, we now sense real stability in our social media and platform interactions.

At this point in time, our PR still sucks.

But, maybe that is just the point. It is due to the fact that our PR was not successful that we attained something that has proven more valuable in the end: steady, self-achieved, and sustainable growth.

The Fate of Your Brand

My advice for startup growth is to not rely on press to determine your market reputation. Instead, formulate a connection to your target group members by telling your own stories and sharing knowledge that defines your industry leadership. This provides a foundation for your own means of security and growth.

Using methods such as social media and content marketing, figure out where you can reach your target group and pursue them in helpful and entertaining ways. It’s not the tech journalists, bloggers and authors covering your competitors who protect and ensure the bottom line of your company.

In the end, it comes down to the people who trust you and find value in your ideas to decide the fate of your brand.

This was a guest post by Susanna Gebauer.  She is one of the founders of the social publishing and content marketing platform, exploreB2B. You can also find Susanna on Twitter.

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How To Help Startup Ecosystems: Be An Early Adopter

Posted by Dharmesh Shah on Tue, Nov 27, 2012


The following is a guest post by Sravish Sridhar. Sravish is the Founder and CEO of Kinvey, a Backend as a Service platform that makes it easy for developers to setup and operate backends for mobile, tablet and web apps. He is a believer in mentor-backed entrepreneurship and you can follow Sravish on Twitter - @sravishsridhar.

I just finished reading Brad Feld’s new book, Startup Communities: Building an Entrepreneurial Ecosystem in your City. In it, Brad states that sustainable entrepreneurial communities must have:

  • Active entrepreneurs who will be the leaders to drive the community forward,
  • A long-term view and commitment to build the community,
  • A continual set of activities that engage the entire entrepreneurial stack, and
  • An inherent view of inclusiveness that ensures that anyone is welcome to participate -- not just entrepreneurs.describe the image

On a similar theme, Mark Suster, in a guest post in TechCrunch, adds that a successful startup community must also have a strong pool of tech founders, capital, well-attended events, great local universities, vocal champions, vibrant local press, etc.

Despite embodying all the traits that Brad and Mark have outlined, I’ve repeatedly seen Boston, my current hometown, suffer from the burden of constantly justifying itself to the world as a thriving startup community. I’ve concluded that there is one more essential ingredient Boston needs to be a successful startup community – Boston needs early adopter DNA, especially to try early-stage, Boston-built, startup products.

If we could successfully mutate the startup gene of the Boston startup community to introduce early adopter DNA, we would create a huge advantage for startups that are built here. Their launches will be “buzzier,” their products will get traction faster, and most importantly, the companies will enjoy informed feedback from key members of its own community. Feedback and buzz from early adoption is an invaluable asset for any startup, and we can give them that.

For Boston (or any startup community) to have early adopter DNA, it needs its startup leaders and the extended community that supports the ecosystem to do three things –

1. Be Curious: We need to collectively spend more time seeking out new startups and learning about their products. Follow key Boston startup community leaders on Twitter like Dharmesh ShahMatt LauzonKatie RaeJennifer LumDavid CancelFred DestinRich MinerAntonio RodriguezRob GoDavid SkokJeff Bussgang, etc.  Read Scott Kirsner in the Boston Globe, BostInnoXconomy and the Boston Business Journal.  Learn, learn and learn!

I could go on and on. In Cambridge alone, there are hundreds of startups in a one-mile radius. And Boston has hundreds more. Ask yourself, how many of their products have you used?

2. Be Adventurous: When you read or hear about a new Boston startup, don’t hesitate - sign up and try its product. There are startups in Boston that cater to your every need -
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3. Be TalkativeTrying a startup’s product is only the beginning. To truly become a vibrant entrepreneurial scene, we also need to support fellow startups with word of mouth. Tell your friends about your favorite local products, tweet and share your experience on Facebook. Better yet, blog about it.

Help your following become Curious and Adventurous. And don’t forget to share your product feedback with the startups behind the product. I can assure you that every startup wants to hear about your experience with their product, it’s how we will improve.

If we seek out innovation, are willing to kick the tires of early stage products, and be vocal about our experiences, Boston will become a stronger startup community. The ripples from this early adopter DNA being put into practice will encourage more people from the broader community to do the same, and I assure you, we will all be stronger for it.

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How To Hire Hackers: A Realistic Guide For Startups

Posted by Dharmesh Shah on Thu, Nov 15, 2012


The following is a guest post by Iris Shoor. She's a co-founder at Takipi, a new startup looking to change the way developers work in the cloud. Previously, she was co-founder at VisualTao, a B2B startup acquired by Autodesk.

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Call them hackers, ‘ninjas’, or ‘rock stars’ if you’d like. Other than being very talented developers, they all share one thing in common -- it’s unbelievably hard to bring them on-board your company. And as if competing with other companies for the same talent was not enough, being a startup just adds more challenges to the equation. Your startup may be the next Google/Facebook/Instagram, but until then - how can you convince the best developers out there to join a company where the CEO’s office is an IKEA desk? Here’s one answer -- recruit like a startup, in a creative and agile way, doing things the way big companies can’t. During the last 5 years I’ve interviewed over 250 candidates and recruited dozens of great engineers. The first interviews took place in our tiny office’s kitchen, and we still managed to convince some of the best candidates to join. There aren’t any magic tricks involved, but here are some tips and methods which helped us get ninjas, rock stars and other highly talented people on-board.

You’re a startup -- have the founders make the first contact.

We lose many potential candidates even before the starting line - we fail to bring them over for a first interview. Some are already talking with too many companies, or decide after a brief visit to your web-site that your startup just isn’t their thing. That’s the point where you can make a difference. Our co-founders (including myself) are in charge of sending the first e-mail to potential candidates. We’ve kept this habit even as we’ve grown. At first, I was worried some candidates may think we have too much free time on our hands (sadly, we don’t). I soon found out that when candidates receive a personal and flattering e-mail (important when it comes to star developers) from a co-founder, it sends a message that this startup is all about its employees. Here are some helpful points for writing the first email:
  • Link to your online profile (personal blog, an interview with you, a YouTube video) when introducing yourself. Once there’s a face behind the email you’re more likely to get a positive response.
  • Add a personal touch. Have other employees who went to the same college? Mention it. Grew up in the same town? Write it down. It might sound irrelevant, but it creates the first hook, enough to have them come over for a meeting.

Interviewing: It’s not just about the role, it’s also about who they will have lunch with.

While we tend to tell candidates everything about the role, the managers and the company, there’s one part that’s usually missing - who will they work with? One of the most common answers I get when asking people why they've chosen one job over the other is knowing other employees there. Let candidates know who'll be sitting next to their (IKEA) desk and sharing their 9GAG jokes.
  • When candidates come for an interview we try to have them meet at least one future co-worker. A candidate asks a good tech question during the interview? Refer him to the engineer working on it instead of answering yourself. Found out the candidate has something in common with one of the employees (skydiving, growing up in Ohio, have a thing for ASCII art)? Introduce them. It’s not something we plan ahead, but given the opportunity, having the candidate stay at the office after the interview chatting with other employees, is considered a success.
  • Don’t interview too early or too late during the day, when the office is empty. If the only time your future star can come in for an interview is 8:00am, make sure some people come early. You want to paint a full picture of what it will be like working at your startup.
[You don’t need a fancy office to make good impression - the small details do the job. Our entrance door has code on it and these are our meeting room custom coasters ]


Interviewing: Choose carefully which opportunity to pitch.

There truly are great things about joining a startup - new technological challenges, opportunities for moving up the ladder more quickly, learning about the business side of things, stock options and more. Don’t sell them all at once. Pitching becoming a manager to an engineer who just wants to experiment with new technologies? Bzzzz -- wrong move -- which might send her elsewhere.
  • Look back - When we first started interviewing we used to ask candidates what they’re looking for. Instead of sharing their true motivations, they answered with what they thought was the ‘right’ answer -- “I just want to work on interesting stuff”. After a while we discovered the magic trick; instead of asking what they’re looking for now, we began asking how they've made previous job decisions. When asked about past decisions, people tend to share what really matters to them.
  • Don’t pitch, give examples - You can’t really promise someone that he or she will become a manager in the future, or only work on interesting stuff. Instead, I tell candidates what talented people who've joined the company a year ago are doing now. This could be how an engineer with no previous management experience is already heading a small team, or how a developer straight out of college is doing such a great job we’ve put her in charge of some very key algorithms.

Signing: How to make candidates sign an employment agreement more quickly.

You've reached the homestretch. The candidate you really liked said yes, and now all is left is to sign the employment agreement. This can turn into a very risky period. The current employer is likely to come with a counter offer and so can other companies.
  • Important: Avoid having your future star waste time on legal issues. To help with this we've decided to have the exact same employment agreement for everyone in the company. Other than the terms themselves, everything is the same - from the number of vacation days down to the small letters. It’s a super friendly agreement and we never change it. Once I tell candidates that everyone -- the CEO, the engineers and myself have all signed the exact same contract, and therefore we can’t change it, it usually takes them only a day or two to sign it. There’s much less need to re-read every part.
  • Scott Weiss from A16Z shares a great tip about the pre-signing period with the ‘Welcome basket’.


How to hear ‘No” and how to say ‘No’

  • Hearing No - Stay in touch with good candidates who chose a different company over yours. When a candidate I really like accepts a different offer over ours I always get the feeling I was dumped. True, I can’t honestly say I don’t understand how can someone pick a great job at Google over a small and unknown startup, but it still hurts. While the easiest thing to do after hearing a ‘No’ is, well, nothing, I try to make one last effort to stay in the picture. There are two main reasons for it : 1). Startups grow quickly. You might have a good candidate who decided a 10 employee company is not for him/her but a year or two later as your company grows it will become much more attractive. 2). Receiving a negative answer usually means you've reached second place. Sometimes, the first choice doesn't turn out to be the dream job they were hoping for. Some candidates don’t feel comfortable getting back in touch after they gave you a negative answer. By making the first move you’re saying that everything is fine and we’re still interested in you. Yes, it’s very much like dating. How to keep yourself in the picture? I like to send FB friend requests to candidates, and that’s something that you can do only as a startup (it can get pretty awkward when done by someone from a large company). Facebook is a great platform to share how well your startup is doing over the years. I also like sending an email once every 4-6 months, sharing how we’re doing and asking how’s everything going. I found out that most people find it friendly (and somehow flattering) rather than annoying.
  • Saying No - giving a smart negative answer will help you reach other great engineers in the future. I often ask myself how I would have liked to receive a “No”. My answer is that I would like to hear the truth. Instead of using the default answer of “we've decided to continue the process with someone else”, I write the (sometime hard) truth- “You didn't pass the technical test’, ‘you don’t seem like a startup kind of guy’, ‘it seems like you’re more interested in managing and that’s something we can’t offer right now’. I also make sure to write some of the things I liked about the candidate. True, there are some cases you can’t write the real reason, but in most cases you can. I was terrified when I sent the first 100% sincere email, but I soon found out that candidates embrace this, and usually agree with the reason. Now comes the interesting part - instead of feeling rejected, most people rightly feel they interviewed for the wrong role. Once you don’t ‘break-up’ with them, you can ask them to recommend friends or co-workers they think could fit the position. Yep, it sounds crazy, but it’s true. Even if you don’t get a new lead, rest assured you’ll have a past candidate saying good things about your company, and that’s something great in itself.

How about you? Any lessons you've learned while trying to hire great developers for your team? Would love to hear your thoughts in the comments.

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