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?
"Can Foursquare Check-In to Adulthood?"
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.
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
- 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.
- 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.
- 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.
- 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.
- Bold is best. Tweaks of business models do not get attention.
- 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.
- 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!