Nesheim Online

STARTUP TALENT SHORTAGE: Number 1 reason startups fail to execute their business plans well

"What should I most focus my efforts on when executing the plan for my startup? is a great question, one I frequently receive.

Its importance jumped out at me this morning when I read the following note from Mercy Ships, a Christian sponsored non-profit organization that brings free medical services to the poor around the world, notable from ships docking along the coasts of Africa.

As a non-profit organization Mercy Ships is constantly seeking talented seafarers to meet the demand for qualified crew in our ship. Our recruiters attend job fairs and recruitment venues looking for Deck and Engineer Officers, Able Sea-farers and Ratings, but the reality is there is a worldwide shortage of qualified ships workers, and shipping companies who can pay big salaries are also looking for them as well.

In the article entitled The Next Agenda: The War to Develop Talent, Jeff Schwartz offers a description of the current shortage of qualified workers (talent) in the business world. He says: “The concern is not about the availability of workers; it is, rather, about the shortage of critical skills, experiences and specialized capabilities of leaders, managers, creators and producers required in changing industries.” For Schwartz the real issue is not a lack of workers, but a lack of workers with the necessary skills to succeed in a changing market place.

So you are not alone! Unfortunately.

The point for founders of startups is simple: Line up, recruit, entice your best people before you begin your startup. They will form your Core Team. They will do the bulk of the recruiting, so be sure they are able and experienced at finding, attracting and retaining the finest talent. You will need every sharp brain you can find if you are to deliver on your business plan.

You will be competing intensely with vast numbers of hiring organizations. We live in a global economy. Recruiting startup talent now routinely crosses borders to find talented people with passports, mobile phones, laptops, each confortable flying to whatever job sounds interesting. We live in the era of the most mobile labor force in history, even for startups.

Knowing how to find and keep the top, the best, people is a skill set eagerly sought in founders of startups financed by the best venture capital firms. They see you and your core team as a recruiting machine, able to at least double the number of great people each year added to your new enterprise, year after year. So if you are not yet at that level, start working on it. Get social, get in contact, get going, right now. Investors will pound on you about your recruiting abilities during your presentations.

Assemble a group of people to support your recruiting efforts. Find recruiters, contact them, get them thinking about your startup even before you have begun. Locate contract human resources experts who work with startups during the earliest stages. Add angels who have been there before, who know how challenging your first two years will be when you are seeking to add critical skilled talent to your startup. And start talking to other startup people, especially other founder CEOs. Listen to their stories and learn how to recruit to win.

BOTTOM LINE: People are what you need to build your startup. Top skills, great talent. So you have to build an organization of amazing people who can recruit and win against the world's most intense competition for talented people. When you respect the importance of this mandate, you'll add a key element to building your unfair advantage.

I wish you The Best on your Adventure!

STARTUP STALLED BUT GETS $41 MILLION: Learn from Foursquare's situation

When a startup becomes the news of the day in the popular press, you know something that stands out is going on.

It it good news or bad news for the CEO?

SITUATION

"Can Foursquare Check-In to Adulthood?"

"Foursquare Gets $41 Million Investment, Time to Grow"

Those are headlines from Bloomberg Business Week.

"Foursquare Finding Its Way" from the Wall Street Journal.

"Foursquare's Newe $41M Round Helps It Delay Tricky Questions About Its Valuation" chimes in Techcrunch.

THE STARTUP

Here is a 120 person startup, launched in 2009, nearly four years old, with $71 million of capital (4 rounds, including the recent $41 million round), who is recording just $2 million of revenue from ads.

Launched with rave reviews for its location based "check-in" feature, the novelty has worn off.

Now the company is pivoting, morphing, changing, to move into a business model that pushes its search feature which had been minimized to date. With only 10 people selling ads, founder Dennis Crowley plans on hiring many more with the new funding (Groupon has thousands.).

LESSONS FOR STARTUP FOUNDER CEOS

1. Tell your own story. Or your competition will tell it for you. Foursquare was pro-active, did a lot to diminish the negative rumors flying about.
2. Spin your story to the positive. Why? "To buy time to settle the valuation." That sounds more glass half full than "Startup survives, barely." or some other awful blogger's spin.
3. Listen to wise advice. The $41 million round was a sophisticated package, engineered to give the startup time to prove it can significantly boost revenue. Founders are wise to listen and not object when experienced board members (typically VCs) make bold business and financing suggestions.
4. Plan the details of the change before announcing it. Reporters are skilled at digging and will find out if you are winging it. Much more credible to a doubting blogger is your response to sharply penetrating questions about how the new business model is going to operate.
5. Bold is best. Tweaks of business models do not get attention.
6. Free PR generates priceless Buzz. Dennis sat in the hot seat, responded to interviews and generated huge attention (free broadcasting) on Foursquare. That makes life a lot easier for the new Sales Department personnel to sell ads.
7. Act sooner. Hanging on, hoping things will get better is dangerous. In the case of Foursquare, the bloom is now off the rose, the glory is now gone. The quest has begun. It's a slog from here on. Street-smart serial entrepreneurs run scared and make bold changes quicker than first-timers.

I certainly wish Foursquare people my very best. It's a story that could become an amazing success. So far there is no Gorilla in the location based business. The opportunity to be "first-to-get-it-right" still exists. But there is a huge Gorilla in search -- Google. That adds new risk to the new business model (search via Foursquare). Time will tell how it all turns out for Foursquare. Might be a great acquisition. Or might get a formula right that kicks ads into high gear that powers the company to IPO.

All this is about "Execution", that prized skill in startup leaders so sought after by world-class venture capitalists. It is central to why VCs say yes or no to financing your next round.

BOTTOM LINE: When your startup stalls, its revenue is mediocre, time has come to change its business model. That calls for courage and wisdom. Founders that know how to get advice, be creative and act boldly will emulate the skills of serial entrepreneurs who know how to execute a plan for a startup. When you can do that, the money people and talented employees will be pounding on your door, surrounding your car before you leave the parking lot. It is a very powerful part of building an unfair advantage.

I wish you The Best on your Adventure!

DISECTION OF A NOT-SO SECRET START-UP: Stanford success or folly?

Stealth start-up Clinkle got good press recently.

The reporter focused on the unusually deep Stanford roots of the new enterprise. While that is interesting, I found a lot more.

In this blog, I have focused on what can be useful to people like you who are keen to learn what happens in real start-ups, especially those whose founding core team is heavily composed of students.

So let's take the story apart and see what it reveals:

• Leader's family's immigrant history typical. Lucas Duplan, "son of Croatian parents" fits the pattern seen often before in Silicon Valley start-ups: Immigrants and their children have unusually high drive and desire to excel. One VC's survey revealed 62 percent of their portfolio's founder CEOs were immigrants ("green cards"). Good news: This is one aspect of an unfair advantage that others cannot easily duplicate.
• Leader thinks big and bold. Lucas has the mindset sought after by VCs. He starts with a big idea. He is bold in forming his plan and raising seed financing. That's outstanding good news to the ears of winning venture capitalists. Bad news: Lucas could be dreaming about more than he can handle.
• Idea from personal frustration and emotions. Lucas was bothered that he could not use his smartphone like money. Personal needs often trigger the spark that grows into a hot start-up idea. Smartbook began as a college lark. Cisco grow out of frustrations of Stanford University people trying to cope with data storms on campus IT networks between a quagmire of different computers, operating systems and interspersed networks.
• Market category clear. It is the e-wallet market segment, already named, already emerging. Good news: It is clear. Bad news: It is already there, no opportunity for Clinkle to create and name it.
• Crowded market. Though new, the e-wallet market is already filled with different companies seeking the magic thing that gets millions of consumers going wild about using their smartphones to purchase things. Good news: A lot of people anticipate this could be a huge market. Bad news: Lots of competitors with a head start.
• Chance to be "First-to-get-it-right". So far, in the U.S. there is no Gorilla dominating the new market segment. Many are trying, small and large. Africa is the most advanced in the world at using phones to pay for things, but so far none of those competitors is headed for the U.S. That leaves the door open for Clinkle to be first to get it right. Good news: No danger of being "first mover" and thus getting pioneering arrows in Clinkle's back.
• Secret sauce. Clinkle has something hidden that is central to the specialness of their offering. While buried so far, we do know "Clinkle aims to let people pay at retailers using a smartphone without stores needing a major tech upgrade." So we'll have to wait to see what the secret is all about. I am willing to bet this will launch as a flanking strategy, into uncontested territory where Clinkle could quickly establish itself as the leader. Good news: Some very smart, IT savvy Stanford faculty liked the secret sauce enough to invest in the seed round. Bad news: Could be a dud, an idea that does not attract the millions needed for this kind of consumer enterprise to succeed. A great deal hinges in this secret whatever-it-is.
• Execution risk is high. "Execution of a start-up's business plan is everything" is a truism ingrained in the venture world. Doing well what you think you have to do is very demanding for start-ups. This new enterprise is run by students and recent graduates. It has nearly zero experienced managers and IT professionals. Good news: Youth that does not know better can do amazingly creative things, quickly. Bad news: Mistakes in execution, in a crowded market can lead to fatality.
• High early burn rate. With about 30 employees, Clinkle is burning a lot of cash already. The company has announced it will double the number shortly and move to new quarters in San Francisco. Veteran venture investors are reluctant about feeding fledgling start-ups with too much early cash, it is too often wasted. Good news: Bold thinking with confidence is evident. Bad news: Sounds like it could be either an amazing success or an amazing high profile dud.
• 2 years old. Sounds like progress has been made. Certainly in fund raising (read the article for who invested). And hopefully in building a working prototype and gaining a sharp focus on marketing the new product. Good news: Progress in several aspects builds momentum and grows reputations as successful. Bad news: No signals yet about first launch date.
• Rolling thunder launch. Plans are to start selling via college students ("like Facebook"). There are merits in that, one being that peer group is already hooked on using smartphones for as much as possible. The bad news: As an infrastructure play, starting tiny can simply open the door to giants eager to cover the U.S. with some sort of copy of Clinkle. Clinkle's business success depends on some sort of widespread network and related infrastructure coming together at the right places in the right time. That is daunting to any new enterprise. The secret sauce is probably about a solution to that issue. Good news: This issue is a big barrier to competitors. Bad news: There are a lot of un-controllables that have to happen, well, for Clikle's success.
• Enthusiastic culture. From photos and words, it is clear that Clinkle's company culture is full of energy and is very enthusiastic. This may be one of the central elements of the company's unfair advantage. Employees (with stock options) like that can do amazing, very creative things. Clinkle can just look out the window to see the giants who rode to success on their special company culture. That is only good news and is very valuable, too often overlooked by first-time entrepreneurs.
• Buzz has begun. Good news: The press is picking up "the story" about Clinkle. Bad news: The stealth start-up is no longer in a very stealth mode, perhaps talking publicly prematurely.

BOTTOM LINE: This exciting start-up has a lot going for it, the envy of many other new enterprises. It's success is not yet assured. But it is an excellent case study for you. Review the elements and issues noted above, then apply them to your own business plan. That can boost your chances of success as you craft your unfair advantage.

I wish you The Best on your Adventure!