Nesheim Online

TIP OF THE WEEK: If you need to be THE CEO, avoid strong venture capitalists

“How can I be sure my startup won’t be ruined by a crummy CEO brought in by investors?” is a question I get all the time.

It triggers a lot of emotions. Especially in founders burned by past ideas that were sunk by bad leadership and bad investors.

So what to do when in that situation?

Here are my suggestions, they are based on lots of experience with painful meetings, tears, screams, lawsuits and disasters, as well as some amazing winners. I hope these help you make a wise decision:

= Strong VCs got there by facilitating great management teams that built enduring companies. Recent examples include Google financed by Sequoia Capital.

= Not all ideas are ruined by follow-on CEOs. Yahoo succeeded dominating the portal space with a successor to the two founders. So have other startups.

= Ruin is not just the new CEO’s fault. Conflict with the founders is a great concern of investors. It always is. Who is in charge when founders and CEO disagree on a vital strategic decision? Who is right. Sometimes both are, but cannot agree on one course of action. The conflict ruins the startup, both parties are at mutual fault.

= Solo founders are often solo people who cannot build a great management team. Some founders would be happiest in a small business they can run alone. There is nothing wrong with that. Not all quarterbacks are team builders or great coaches.

= The abundant pattern of success lies where founders are supplanted as the startup quickly grows beyond their abilities to manage it. Those are 99% of the sample. Going against the pattern is not impossible, just nearly impossible. The media loves to write about such examples (to provoke you to read the advertisements), so you think that is how the heros of startups should do it. In statistical terms, such cases are insignificant.

So what should you do if you are still keen on going on as THE CEO? Try thinking about these tips:

= Demonstrate a huge winner potential and attract the missing talent on your own. Big surges in first product success attract great people. With a hot starter product, you are on your way to finding the management you will need to succeed in spite of what you are lacking to manage the hot startup.

= Fat profits in a bootstrap give you time to find the right people. This is very hard to do, but can be done. Michael Dell did it. Your timing has to be nearly perfect: riding a fresh wave (first PCs) to fast sales, immediate profits and instant positive cash flow. That is a tall order for a startup.

= Seek naïve investors. They are rare but they are out there. But be careful, they also have money to pay for lawyers if they need to.

= Look at angels for a small seed round, people who know your space. They can do a small seed round and help you while you remain CEO. It has worked in the past in many cases.

= Be content with less and be patient for a long time. Dolby did that, became a world-class brand and eventually went public (the only way to pass on shares to his family without a huge tax burden).

= Don’t do your startup at this time, learn to manage and later do a great startup. Many have done that and succeeded well. It is how Palm became a winner.

BOTTOM LINE: I hope this has helped you think clearly about a very sensitive issue. It is very difficult to expect to be THE CEO forever. It is hard to find investors who will accept your inadequacies as a first-time CEO. Yes, it can be done. But you’ll find your attempts to do so will run against you. You’ll feel like you are swimming alone up the giant Amazon river filled with Parana fish. It is not how to build an unfair competitive advantage.

STARTUP WINNERS HAVE RESILIENCE: (4th in a series) It is imbedded in the culture of the company

During the recent bad business months, I've noted a characteristic that stands out in winning startups: They are resilient.

Resilient:

1 : the capability of a strained body to recover its size and shape after deformation caused especially by compressive stress
2 : an ability to recover from or adjust easily to misfortune or change

RESILIENT CULTURES

How resilient is your company culture?

I've found serial entrepreneurs begin shaping their company culture from the moment the startup is given birth. Great VCs believe it is formed within months of the company's life. The characteristics of the culture determine what people value and how they are motivated. That is why startup cultures are so important.

Here are some characteristics I've found in resilient startup cultures:

• Celebrations. Resilient cultures celebrate, often and with enthusiasm. They acknowledge the rough times and how they recovered. They toast the people who were deeply involved. Awards are handed out, some home-made, a few humorous, a clever email, a wall plaque or two and perhaps a financial award. All hands are gathered, a toast is made and then back to work. Big recoveries are done over food, perhaps a lunch or even a dinner. All are forms of celebrations. All celebrate a resilient event.
  
  
• Everyone is Involved. Management gets the news out fast about the sudden bad surprise. Its not done behind closed board room doors. All hands meet to talk it over and then depart, swinging into action. They know the ship is floundering and they have to right it. All of the company works together to return the business to its planned growth. It is not just top management or a handful of the employees. Co-pany means literally people together breaking bread. That is personal and intimate. It is how resilient cultures behave.
  
• Stories. People relate and recall the times past when the bad thing happened and the company recovered. "Do you remember when the system crashed, customers went ballistic, and we did two all-nighters and got things running again?" "Man, if you think this is bad, you should have been here when . . ." All are depicted with color and gusto. Over time the stories morph, become larger and more than life. That is how stories progress. As they are collected, they become tales that over time tell the saga of the startup. Stories are part of the culture of resiliency.
  
• Culture Pride. The stories of the early cowboy days of semiconductor startups in Silicon Valley are legendary. So are the gutsy early years of Oracle and Microsoft and Apple. You could see the radiation on the faces of the early Yahoo and Google employees talking about their fresh enterprises. Startup founders in Asia, Europe and rest of the world love to tell strangers about those earliest days of getting up daily to go out and fight the dragons (and some days the dragon won). The stories about resilient behavior of the company will grow into a verbal book that employees then take pride in. Investors brag over lunch, dinner and weekend outings. Wow, what a great startup! is on the lips of the startup and all its stakeholders. They all take great pride in their resiliency.

BOTTOM LINE: Winner startups use resiliency to power their people and grow their competitive advantage. Serial entrepreneurs build it into their cultures. Investors encourage it. The tales of recovering from bad situations becomes a mark of pride for startups. It motives and encourages newcomers. It attracts other resilient people. When resiliency becomes part of your startup culture, you'll have added a powerful element to your competitive advantage. Your competition will complain it is unfair!

I wish you The Best on your Great Adventure!

During the recent bad business months, I've noted a characteristic that stands out in winning startups: They are resilient.

Resilient:

1 : the capability of a strained body to recover its size and shape after deformation caused especially by compressive stress
2 : an ability to recover from or adjust easily to misfortune or change

RESILIENT CULTURES

How resilient is your company culture?

I've found serial entrepreneurs begin shaping their company culture from the moment the startup is given birth. Great VCs believe it is formed within months of the company's life. The characteristics of the culture determine what people value and how they are motivated. That is why startup cultures are so important.

Here are some characteristics I've found in resilient startup cultures:

• Celebrations. Resilient cultures celebrate, often and with enthusiasm. They acknowledge the rough times and how they recovered. They toast the people who were deeply involved. Awards are handed out, some home-made, a few humorous, a clever email, a wall plaque or two and perhaps a financial award. All hands are gathered, a toast is made and then back to work. Big recoveries are done over food, perhaps a lunch or even a dinner. All are forms of celebrations. All celebrate a resilient event.
  
  
• Everyone is Involved. Management gets the news out fast about the sudden bad surprise. Its not done behind closed board room doors. All hands meet to talk it over and then depart, swinging into action. They know the ship is floundering and they have to right it. All of the company works together to return the business to its planned growth. It is not just top management or a handful of the employees. Co-pany means literally people together breaking bread. That is personal and intimate. It is how resilient cultures behave.
  
• Stories. People relate and recall the times past when the bad thing happened and the company recovered. "Do you remember when the system crashed, customers went ballistic, and we did two all-nighters and got things running again?" "Man, if you think this is bad, you should have been here when . . ." All are depicted with color and gusto. Over time the stories morph, become larger and more than life. That is how stories progress. As they are collected, they become tales that over time tell the saga of the startup. Stories are part of the culture of resiliency.
  
• Culture Pride. The stories of the early cowboy days of semiconductor startups in Silicon Valley are legendary. So are the gutsy early years of Oracle and Microsoft and Apple. You could see the radiation on the faces of the early Yahoo and Google employees talking about their fresh enterprises. Startup founders in Asia, Europe and rest of the world love to tell strangers about those earliest days of getting up daily to go out and fight the dragons (and some days the dragon won). The stories about resilient behavior of the company will grow into a verbal book that employees then take pride in. Investors brag over lunch, dinner and weekend outings. Wow, what a great startup! is on the lips of the startup and all its stakeholders. They all take great pride in their resiliency.

BOTTOM LINE: Winner startups use resiliency to power their people and grow their competitive advantage. Serial entrepreneurs build it into their cultures. Investors encourage it. The tales of recovering from bad situations becomes a mark of pride for startups. It motives and encourages newcomers. It attracts other resilient people. When resiliency becomes part of your startup culture, you'll have added a powerful element to your competitive advantage. Your competition will complain it is unfair!

I wish you The Best on your Great Adventure!

STARTUP WINNERS HAVE RESILIENCE: (3rd in a series) Great startup people are resilient, it's in their genes

During the recent bad business months, I've noted a characteristic that stands out in winning startups: They are resilient.

Resilient:

1 : the capability of a strained body to recover its size and shape after deformation caused especially by compressive stress
2 : an ability to recover from or adjust easily to misfortune or change

RESILIENT PEOPLE

How resilient are you?

I've found startup winners to be led by people who are naturally resilient. I'll label them RPs. Check these characteristics to see how much resiliency is in your genes:

• Behavior: RPs bounce back in bad times. Resilient people do not remain in the emotional dumps. They hit bottom (yes, they too are human), acknowledge the situation, and then with intense determination head up and out of the dark pit as fast as possible. That calls for realism and action. These people don't need to be told to get off their pity pot and get their butts in motion. They act. And they act realistically. They grab the fire hose, put the fire out and repair the damage. They bounce back.
• Practicality: RPs make the most of what they have. Lacking a lot of resources (all startups do), RPs use what they have to get the job done. You won't find them moaning about the missing equipment, lack of cash or inferior employees. RPs work with what they have and don't complain about it. They recover and go on, using what is available to respond and move forward.
• Innovation: RPs are constantly creative. They invent clever things in the midst of even the darkest days. They continue during the brightest. They never stop. You won't find them moaning about the lack of cash to spend on R&D or marketing. They don't put innovation on hold during slow business days. Instead, they see every day as a chance to create something clever that will boost the chances of success for their new enterprise.
• Attitude: RPs see the glass as half full. They think positively. They are confident something good can happen in the darkest night. They treat employees with a daily taste of positive thinking. RPs are optimists. Sure, they often overshoot the mark with their expectations, but this attitude is catching and encourages the gloomy to think less about the glass half empty. And RPs stimulate creative thinking that leads to discovery of new paths out of the gloom.
• Character: RPs behave consistently. You can count on them to be trustworthy. They will not let you down, personally or professionally.They remain true to themselves. I find they have a strong spiritual foundation. Some are religious, others use a practical philosophy or follow the teaching of a revered person in the world. RPs are not light thinkers. They will openly talk to you about the meaning of life and more. This spiritual side of them is one of the marks that leads them to lead people through the tough times.
• Recruiting: RPs are constantly on the lookout for other RPs. They are in continuous recruiting mode. Their radar is probing every gathering they attend, groups they spend time with and resumes that are sent to them. They know how valuable one more RP is to their fledgling startup.

Some of the world's most respected leaders are RPs. Take a Wikipedia look at what happened to Abraham Lincoln before he became President. Then review what happened to him during his time in office. He was an RP through it all. That's the highest standard of personal resiliency that I know of in not-too-ancient history. Living corporate RPs include Andy Grove of Intel, John Morgridge of Cisco, and Steve Jobs of Apple, all of whom faced life-threatening health attacks at the peak of their careers. They started life with severe personal challenges. Next week, I'll blog about one of the most amazing RPs, and entrepreneur of long ago who started life as a cripple in poverty and responded with resiliency so well that through his startup he changed business methods forever and became a hugely wealthy man. You are using today several of the techniques he pioneered.

BOTTOM LINE: Resilient people, RPs, think and act in different ways than the crowd. They are not just wildly positive. They are stern realists. Their behavior reflects a solid personal character that can be counted on. It is grounded on years of thinking and experiencing hard knocks and victories in life. When you populate your startup with RPs, you'll have added powerful assets to the construction of your company's unfair advantage.

I wish you The Best on your Great Adventure!

STARTUP WINNERS HAVE RESILIENCE: (2nd in a series) Great startups measure it to grow it

During the recent bad business months, I've noted a characteristic that stands out in winning startups: They are resilient.

Resilient:

1 : the capability of a strained body to recover its size and shape after deformation caused especially by compressive stress
2 : an ability to recover from or adjust easily to misfortune or change

MEASURING RESILIENCY

How resilient is your startup? Your people? Your company culture?

To answer that, you measure it. Even if you are not a numbers person, you will be unconsciously measuring using psychological means.

Here are some ways to think about measuring resiliency of your startup:

• "How did your startup bounce after the last blow hit it?" Recall that toy clown that you blow up, punch, it falls down and then pops up again, time after time. It has a weight in its base that keeps it returning upright. Resiliency is like that. Pow! Bad thing happens in your startup. Down it falls. Then, after a short pause, it rights itself and returns to its working position. How often does that happen to your startup?
  
• "How did your company celebrate its last resilient response?" Pick a bad day in your company. Did you grit your teeth, grind through the bad event and recover. Period. Nothing more? Well that's not how the great startups do it. They start by acknowledging the bad situation. Everyone knows. Then they act to get through it, together. And when back on track, they gather to celebrate. Yes, celebrate. Everyone gets noted as contributing to the recovery. Those that gave up but recovered feel relieved and see how those that remained strong through it all behaved. They learned a lesson. The strong people get reinforced to do it again (they know it's going to happen again). Then the cake is brought out and the open expression of real feelings begins. It is remedial. It is powerful. Celebrate resilient responses.
  
• "Who did your company acknowledge as resilient?" People are resilient. They grow stronger when acknowledged by the company culture. Leaders like you begin the response. It spreads through the other employees, management and board of directors. People like being recognized for going through hell and back with their wits and character intact. Personal acknowledgment of resiliency boosts morale, big time.
  
• "What is the trend line for resiliency in your startup?" Can you look back and see a positive slope to the curve? Are your people getting used to recovering? Are they doing it more quickly? Is there a more spontaneous acknowledgment of resilient people? Have the celebrations of recovery become more frequent and fun-filled? A positive slope in resiliency is a sign of a maturing startup that is getting stronger day after day, blow after blow, recovery after recovery.

BOTTOM LINE: Serial entrepreneurs intuitively measure resiliency in their new enterprises. They know it is so very important to the success of their startup that they pay close attention to it. "Amazing people!" is what outsiders respond when recalling such companies. Try testing your startup. Begin to measure resiliency today. It can be part of what you use to build an unfair competitive advantage.

I wish you The Best on your Great Adventure!

STARTUP WINNERS HAVE RESILIENCE: Great founders have it and use it to win

During the recent bad business months, I've noted a characteristic that stands out in winning startups: They are resilient.

Resilient:

1 : the capability of a strained body to recover its size and shape after deformation caused especially by compressive stress
2 : an ability to recover from or adjust easily to misfortune or change

COMPANIES -- STARTUPS -- GIANT VICTORS

As I thought about the new enterprises that standout standout in my recall, I realized their company cultures were deeply rooted with resiliency.

Here are a couple of examples of new enterprises I've chose for you to learn from. I've remained close to them over the years and think their examples of resiliency can inspire your startup:

• Steve Jobs is nearly a god to some startup people because of what he has done with Apple. But at the beginning, he was learning -- just like you -- in the steaming cauldron of intense competition and scalding surprises. "First to get it right" with a commercial success in personal computers, Apple quickly attracted IBM who soon announced it was going into the same business. Jobs and Steve Wozniak as co-founders responded with an outstanding product, the Apple II along with obtaining cooperation with desktop publishing strategic partners (spreadsheets, word processors and graphics), an amazingly clever blitz of public relations, and thus survived. Their special form of response attracted a dedicated few buyers (3% market share)and entrenched a special form of resiliency forever in the culture of the company. I think it is easy to understand how resiliency was in great part responsible for Apple's amazing comeback and breakout during the recent decade (iTunes, iPod, iPhone).
  
• John Morgridge, Pierre Lamond and Don Valentine teamed to guide Cisco from a clunky IT solution in the basement of Stanford University to the world's most valued corporation. Along the way, the first CEO Morgridge called for emergency technical help from Lamond, then a venture capitalist with Sequoia Capital. Lamond inspired the technical team to swiftly resolve the serious router crashes, resulting in a stream of hot selling products. Along the way to IPO, Morgridge has a rode a rugged roller coaster. Founders had to be fired, vast numbers of employees had to be hired, and aggressive competitors had to be held off. Valentine kept fueling the rocket-like startup with venture capital through the good and bad daysl. Today Cisco employs 65,000 people worldwide who generated $36 billion of sales in 2009. Resiliency marked the trail of this remarkably successful new enterprise. It is how they expect to respond to challenging times. It marks them as a winner.

I use these ancient startups (founded in 1976 and 1984 respectively) because they had to fight their way through dark times before the crazy Internet boom-to-bust distorted the history of entrepreneurship. Today we find the easy money days are over. Now the better lessons learned are from those that did it "the old-fashioned way." One outstanding characteristic of those startups is resiliency in their cultures.

BOTTOM LINE: Resiliency can be a root of your startup tree and it can help grow the enterprise into a mighty, enduring business. Resiliency is a prize, true gold of the soul. It is priceless. Lacking it, your competitors will give up. Obtaining it, you'll use it to fuel your soul when the days are dark (and they will be -- perhaps they are today for you --). You will find you can and will emerge victorious when you have this as part of your character. Resiliency is a mark of great people. It can be one of your most important elements of building an unfair competitive advantage.

I  wish you The Best on your Great Adventure!

TIP OF THE WEEK: Try before you buy (people).

Spoke this week with a founder on his second startup. What struck me most listening to him was his passion to find only the best people for his new enterprise. He has learned the hard way, and is determined to apply the lessons of the past to this next endeavor.

I've found those to be the marks of the great ones.

They do not compromise on the quality of people.

Either the candidates are A people or they are not hired.

As I wrote in a recent blog, the revered VC Sequoia Capital believes the quality of the pedigree of the people in a startup is set in the first 90 days of its life. I agree. So do a lot of other winners.

One way to be sure is to give candidates a task to perform for you. Either as temps or as contractors before you make an offer of full time employment. Try before you buy lets the person see if they fit your culture and if they are able to deliver results at your high standard.

So my tip this week is twofold, yet short and simple: Never compromise on people and try before you buy.

And if you make a mistake, send the person packing immediately. Later means you just suffer longer.

BOTTOM LINE: Startups are all about people. The best hire the best. They do not compromise. Aim for the gold and you'll have the right people joining you. It will be the strongest element of your unfair advantage.

START WINNERS MOVE FROM GIANT TO TINY TO WIN: Learn and apply “Funneling “to focus precious, scarce power in your new enterprise.

Yesterday I listened to entrepreneurs from several teams talk about their initial ideas for startups. Each one of the five teams was describing solutions for a small problem. Several were merely improvements for existing products. Those starting points never win for startups. They lead to mediocre results, at  best.

Instead, you should be looking to SOLVE THE GIANT PROBLEM and work your brain to find how to DO SOMETHING NOT DONE BEFORE. The capital letters help you get the intensity with which I am trying to communicate with you.

Why? Take a look at these reasons:

·         Starting thinking about solving a giant problem leaves you room for a lot of competitors. You then have a chance to pick out a single slice to focus on and dominate. Competitors can pick other slices to work on, easing the competitive stress.

·         Giant means  a lot more. You have more potential sales and wealth production. You get more media attention. More talented people want to join you. Investors are more eager to finance you.

·         Not done before is sizzling. You get more attention from flying the first airplane than making one that flies faster. Bloggers want “news” (new is what they want, not better).  Bored techies want fresh, different, challenging. Marketing whizzes what to work on something different. Investors want to put tons of cash into “Wow! Did you see that?” (“I never saw that before!”) startups.

·         Tiny is laser power. Focusing your giant thinking produces energy that is thusly tightly concentrated, aimed at a very small target. That increases the heat on the target. It is intense power used by winning startups. Then you become 50 Marines against 700 terrorists and emerge from the battle without a casualty, victorious. Hot laser bores through tempered steel (and your competition) in split seconds.

So what do you do next? Simple: Move (funnel) from giant to tiny.

·         Funneling Example: Help people use personal computers to do sophisticated mathematical and numerical analysis, affordably, quickly (GIANT PROBLEM, 1970s). Solution = invent a “digital spreadsheet” (Visicalc, 1-2-3).  Focus = Concentrate selling the first spreadsheet to Wall Street stock analysts (TINY).

o   The process for moving from GIANT to TINY is called “Funneling”. Picture a funnel, large at the top, narrow at the bottom. You start at the large top and begin to move smaller and smaller as you divide your giant market into segments, then divide the segments into smaller segments. Finally you arrive at the segment containing your “Ideal Customers”. That is your first bowling pin. In my spreadsheet example, the follow-on bowling pins were the finance staffs at larger corporations, and market research staffers.

·         Not Done Before Example:  Netbooks and smart phones are examples of new categories of products. They did not exist before they arrived. They were not improvements of existing products. They were so new that they created a fresh class of products. That becomes a “new wave”. It is has enormous wealth creation energy. You want your startup to be fueled by that energy. You surf it to victory in a new class of products.

o   With good strategic timing, you can be “first to get it right” as Apple did with the iPod (RIO was the first, and died). Netflx did it with movie rental distribution (and expanded to streaming videos), Cisco did it with routers (and expanded to become a global IT networking gorilla) and so on goes the cascade of winning startups that funneled to gorilla-class victory.

BOTTOM LINE: You win if you start with giant thinking. Sure, a small idea can be a starting point and can cascade you into giant thinking: one team talked about a light enhancement device for fashion items, then realized the market was huge, gigantic for other additional applications. Now their job is to funnel and focus. That is how to add amazing power to your startup idea. It is how to execute your business plan to victory. It is what powers construction of an unfair competitive advantage. I wish you The Best on your adventure!

FOCUS YOUR STARTUP ON ONE MARKET SEGMENT: That starts your sales momentum

I talked this week with entrepreneurs seeking to get into the largest markets they could dream of. Large is good -- that leaves lots of room for competitors -- but "Everyone on the Internet needs it" is too large: you cannot succeed, it is too vague and too large to work with.

My suggestions to focus are simple: each is intended to assist the large-thinker to focus on one target market segment, without loosing grasp of the amazing potential of the much larger large market. So try these on your startup:

• Move from "everyone" to "someONE": If you believe everyone on the Internet will watch a movie on your streaming video service, think about what individual would be most likely to use it. Move away from the general to the specific. Shift from group to person. People make spending decisions, not groups. Your objective should be to figure out who that ideal person is for what you intend to offer.
• Divide and line up bowling pins: Slice your pie into market segments. Chose one to focus on and two to follow. Line them up like bowling pins. First one knocks over the second two. That is how you build momentum. Divide using geography, gender, income, need and so on. Devote most time to figuring out the first bowling pin.
• Grow sales by adding market segments: As you conquer the first pin/segment, add the next to your market size forecast. Then figure out the adoption rate of the additional segments. That leads you to your $ sales forecast. Each is focused, each adds revenue and momentum builds.

You are not abandoning "the big market" this way. It is how real startups win. Focus first leads to expansions and takeoff.

BOTTOM LINE: Yes, start big (huge is better), then quickly narrow down and focus. Pick and line up your bowling pins. Then execute your plan. The momentum will follow. You'll leave your unfocused competitors in the dust. It will be part of your unfair advantage. I wish you The Best in your adventure!

STARTUP CLARITY AND FOCUS: Avoid confusion that leads to frustrated founders.

Recent discussions with a series of startup founders dwelt on their struggles to get potential investors and employees, as well as bloggers, excited. I was impressed at how earnest and energetic they were, as well as the height of their frustrations. Central to their lamentations was their inability to clarify what “it” was that they were planning on creating and selling. That is not uncommon to inventive minds trying to do something never done before. It sure can be frustrating. I know, I’ve been there often. If you are among these sorry souls, you have my sympathies.

Today I’ll share with you my suggestions to the frustrated founders so you can give the tips a try on your new enterprise.

·         Test how clear (or confusing) you are. The idea for “it” – your great thing – may be clear to you. But more often it is not clear to the person you are talking to. Give your audience credit, they are not stupid. But you’ve been working on this idea for a long time. It is clear to you it will be a big winner. However, the first-time recipient of your presentation is most likely to need further clarification. So be prepared to elaborate further, patiently. Try it out on critical friends you trust and adjust your story accordingly.

·         Try to invent a new category name for your “it”.  This is how we got “motel”, “microprocessor”, “social networking”, and “blogging”. These are new names, did not exist before the related startups arrived, and they describe a new thing or service. They announce the arrival of “the next great thing”. The more you can do to become part of the new space the better.

·         Aim at owning a new category. Best of all is when your startup’s name becomes the new category.  Here is what I mean: Intel means microprocessor. Cisco means router. Even if they do a lot more these days. Back when they were new enterprises, they became the category leader and went on to dominate the new space. Google and Xerox are now very clear in what those names mean to people around the globe. That should be your goal.

·         Branding follows owning a new category. It takes around a decade to brand a brand. Startups begin to get there by focusing on standing for something that is clear and leaves an impression when the chosen name (company or product/service) is mentioned. That is one reason clarity along with focus is so important to startups. Yes, you will have to defend your position over time, but eventually it will become branded for what you want to stand for.

·         Focus on something. Startups that try to be this plus that plus that and that are lost. They do not stand for something. That leaves the listener confused. Investors see scarce resources dissipated and the company losing power. Bloggers find it boring to write about the startup. Recruiting employees is tough. Think about being the best in the world at doing something. The key operative word is “best”. That is singular. One. That is focus. Amazon began focusing on offering the largest selection of books for sale on-line (“Never be disappointed looking for a book”.) Google only did search at the beginning (not also portal or social networking).  Netflix focused on offering convenient access to the widest choice of movies. History is filled with examples of startup winners who focused and became the gorilla of the next great thing. That is what you should do to win.s

BOTTOM LINE: Clarity and focus are gold, pure gold, to startups. They can be difficult to find but are well worth the hard work. Global greats figured that out. So can you. It is not magic. It does not take huge resources. Just creative thinking about how to further shape your idea into one that is crystal clear and very focused. That is central to building an unfair advantage for your new enterprise. I wish you The Best on your adventure!

WEAK STARTUP IDEA? Convert it to strength with the "Spider Web Strategy"

I've been listening to and reading about very weak startup ideas over the past week. Several first-timer founders expressed acknowledgment of their feeble beginnings. I know, I've been there, often.

So what do you do when in such a situation, when you have a weak idea?

I'll use an example to give you some practical suggestions that worked for some recent entrepreneurs. Study this article about successful startups known as "discount luxury e-tailers". They sell expensive, world-class brand gowns at very low prices, on-line. Then try to apply the related suggestions to your startup:

• Learn from startup winners. You need to understand what a startup gorilla looks like if you are trying to become a successful startup. Who is your hero startup? Why? (Example: Gilt Groupe, HauteLook, Rue La La, and Vente-privee.com)
• Sell pain medicine, not vitamins. Look for a pain being suffered by the end user and deliver what solves the pain. (Example: "designer goods online at discounted prices"). Quicker, better, cheaper is selling vitamins. Boring. Too competitive. No future. Easy copied.
• Add more value, more stickiness. Low prices are not the only allure of these discount etailers. They bring more to customers and thereby increase retention of buyers. (Example: Sites are open only to those who have received an e-mail inviting them to join from another member).
• Bring exclusivity to boost retention and buzz. Member-only access is compelling , people want to become a member. And it propels sending invitations to friends, thereby creating PR buzz at nil cost to your startup. (Example: this buzz also attracts designer brand marketers to the discount luxury etailer sites as suppliers and thereby strategic partners).
• Exploit sense of urgency. In our example, the etailers put designer goods on sale the same time every day for 24 hours a day.  And no buyer knows how many items of each size and color are available. That makes such shopping an urgent and competitive daily activity for many members.
• Bring compelling value to suppliers. Designers can use the sites to get rid of stock quickly and discretely. This spares them the disgrace of seeing their heavily discounted products lingering on sale racks in full public view.
• Deliver solutions to pain of suppliers. These etailers shield themselves from search engines, so they do not pop up in response to online searches for brands they offer. That encourages grand firms like Cartier to sell their wares through them.
• Build special social responses.Ben Fischman, the boss of Rue La La, which started in 2008 and expects to have $130 million of revenues this year, thinks the "theatrical environment" of his site keeps customers hooked.
• Exploit technology, particularly the latest, hottest. Rue La La recently launched iPhone applications.
• Expand the product line. Being careful to not confuse the market (that confuses people, slows sales and dilutes your brand), look for related items to add for sale to your growing customer base. (Example: etailers have added wine, spa services, travel packages and even yachts and apartments). This is tricky to do right, beware.

The numbers are impressive in this example.  Gilt already has 1.4 million members after launch in 2007 and expects revenue in 2010 around $400 million. The French startup, Vente-privee.com has 8 million, growing 42 percent a year. And so on it goes (and grows).

BOTTOM LINE: As you can see, the initial idea has been expanded far, far more in ways noted above. Users and suppliers are drawn into relationships with the etailers that become stickier and stickier. As the spider spins her web, the buzz of the early arrivals attracts more and more participants. Soon the web is sagging under the weight of the rapidly growing number of buyers and sellers. Looking at this situation from a distance, I'd say the founders of these startups understand how to begin with a feeble idea and convert it to an amazing business that is propelled by an unfair advantage. Now it's time for you to try.