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IS A STARTUP INCUBATOR ACCELERATOR FOR YOU? Some lessons from serial entrepreneurs

The latest startup fad is about "accelerators".

The last generation was dubbed "incubators". The lessons about them, from serial entrepreneurs, is worth thinking about before you choose to go that route for your first enterprise.

The current rush to try using a startup accelerator is well documented.Try reading about it in this Wall Street Journal report: "Start-Ups Crowd Accelerators".

So is an accelerator right for you?

Here are some things to ponder that serial entrepreneurs have learned about startup accelerators:

• They sound great to first-time entrepreneurs. What could be better? Great people instantly welcome you, offer free advice and quick access to real cash. Compared with going it alone, living on your savings for months before getting real money from angels or venture capitalists, that is very attractive. Yet there are some sobering realities to ponder before leaping into an accelerator.
• Their money is expensive. For $12,000 you would be charged 5% to 10% of your startup. That could be worth $2 million of you sell out later for, say $20 million. If you had kept that yourself, it would have gone to you, or you could have used it to attract needed employees.
• The great helpers are busy doing other things. Helpers in accelerators are mostly people wishing they could join the next Facebook. Or they are in the business of selling services such as legal and accounting help. Few have the deep experience the first-timers is eagerly seeking. If you are willing to settle for that level of basic business assistance, then you'll find it at the accelerator. It can be helpful, but it is not from the amazingly talented people pool that you might be expecting to pick from.
• The cash is a drop in the bucket. Your startup can not do much with $10 to $20 thousand of cash. Good technical people are able to find good jobs paying good salaries. Ditto with marketing and business development people. They are looking for full salaries that will use up your accelerator cash in one month.
• You still have the heavy lifting to do. After your initial idea gets scrubbed, worked over, and modified, you still have the hard work to do yourself. It is up to you to execute your first idea and begin the process of transforming it into something very valuable to end users and customers. Your accelerator advisors will be busy with a dozen or so other startups. It is up to you to find the missing people, recruit them (with no money for salaries), and get them working for you. Same goes for developing the product/service, preparing the marketing and so on.
• Other solutions can be free. Advisors and mentors are available who do not work in an accelerator. They include experienced people from the venture community: serial entrepreneurs, lawyers, angel investors, accountants, human resource recruiters, and venture capitalists. I've seen such people welcomed by first-timer entrepreneurs and seen them receive outstanding advice (and they get an offer to return for more) at no cost (stock or cash). Why? Because each knows what it is like to be a first-timer, is willing to contribute advice (as they sought in the beginning) and want to not miss a great idea for a great startup.
• Other solutions can be more useful. Try considering some of these and compare them with an accelerator:
  • Early contact with angel investors often opens a link between first-timer and a very experienced business person. That can lead to a small seed round of financing, with more to follow.
  • Starting with an "advisory meeting" with a great venture capitalist can cement a relationship that leads to a business plan that wealthy private business people finance (often in large public corporations that the venture capitalist financed years earlier).
  • Classes in entreprenership can be found in nearly every school. Taught by experienced people, they cover the basics in depth of what you need to be successful. The cost of the courses are very low and rich in content. Some are online and self-paced.
  • And you can simply spend three months doing "informational interviews" with CEOs and core team members of startups. You'll be amazed at how much you learn listening to them over a cup of coffee or lunch. A few have written books.
  • The nice thing about all of these is that you have not spent any cash or given away any shares.

BOTTOM LINE: "What is my alternative?" is the first question a serial entrepreneur asks him or herself when thinking about doing the next startup. Accelerators have their place in the startup world, but are not the be-all for everyone. To move from idea to clever plan that has a chance to contruct an unfair competitive advantage you'll need a lot more help than can come from an accelerator. Serial entreprenurs know that. So try contacting a few and give your alternatives consideration as you plan your next step.

I wish you The Best on your Adventure!

SPONTANEOUS STARTUPS (PART 2): Learn from a real $300 million example

Spontaneous Startups just happen. Often very well.

Today I'll share an amazing example of a real new enterprise that spontaneously rose from nothing to sales of over $300 million (and climbing).

EXAMPLE

The startup is Wayfair.

Its on-line service sells "everything for the home."

Why don't you know about them? That's part of their story and it's a clever one, filled with excitement, risk and extraordinary success.

I highly recommend you read the well written story (just click on the Wayfair link above) in which the two founders, Niraj Shah and Steve Conine, tell how they moved from startup idea to startup idea until one day they found a very special idea for their new enterprise would become Mayfair. It simply "occurred to them".

As you dissect this amazing saga (it took years and a lot of hard work), keep the following characteristics in mind, they'll help you glean extra value from your thinking, they will generate things to apply to your own startup:

• Stalled with several startups, bailed (wisely) one after the other, until they got The Big Idea.
• Took no venture capital until success was very clear, years after starting.
• Stayed focused, did not get distracted during early formation years.
• Looked and looked and looked for a better idea than the one they had at the moment.
• Techies made the move to marketing savvy as a natural consequence of their processing of ideas.
• Settled on a very simple idea, yet one with huge potential.
• Bold vision: "determined to think big -- really big."
• Flanking Strategy: moved into uncontested territory, a new market not yet dominated by a Gorilla.
• Profitable from Month One.
• Quick to follow successful step after successful step (and to not repeat failures).
• Creative with cash flow management.
• Learned how to do the (retail merchandise) business by doing it.
• Avoided attacking Gorillas.
• Figured out what customers were frustrated with, solved that problem.

I'll leave the rest of the story thinking up to you. Read, think and repeat several times how you analyse this Wayfair story. Each reading offers to you the chance to glean a fine harvest of stimulating ideas for how to do a Spontaneous Startup.

BOTTOM LINE: Wayfair is a find example of how to do a Spontaneous Startup. You can do the same. Study the process the founders went through. That is where the low hanging fruit is waiting for you. When you "get it", you'll know the secrets that made serial entrepreneurs serial winners. And you'll be able to use your idea to build an unfair competitive advantage.

I wish you The Best on your Adventure!

SPONTANEOUS STARTUPS: They just happen (and often do, well)

Spontaneous Startups are a special class of new enterprise.

They are the ones that just happen.

One or two people. No business plan, no MBA, no VC money, no whatever else, just that sudden "Hey, why don't we do XYZ?!" And they go do it. Often very well.

I've recently realized there are a lot of amazing entrepreneurs out there who "didn't have a clue" about what they were getting into. Something triggered in their brain one day and presto! Out came a clever idea that became a clever new enteprise.

They are so fresh and different from the classical venture capital backed startup to IPO model that I had to pause and dwell upon them. Like a breath of fresh Spring air, I found them stimulating and inspiring.

My research has revealed so many of these Spontaneous Startups that I decided today to reflect on them for you and supply a real example to think about.

SPONTANEOUS STARTUP IS

Here is what makes a Spontaneous Startup so special:

• Sudden. There is no gradual effort leading up to the formation of The Idea for the new enterprise. It springs up with a loud "Surprise!"
• Wherever. The Idea can occur anywhere. On a plane, in a classroom or shower, watching television, during a sporting event, even on the job as you work.
• Instantly compelling. The Idea is immediately appealing to the founders who sense it is will also be appealing to many paying customers.
• Personal Product/Service. Sports clothing, baby seats, racing bicycle parts, casual digital games and other ideas resonate naturally with the founders.
• Mostly consumer. Industrial startups can be born as Spontaneous Startups, but most are ideas about selling something to ordinary people (or they are about supplying a product/service free to end users and making money via the classical Internet advertising business model).
• Clever. Something is triggered that jumps out as at least novel, or very new, if not extraordinary.
• No Special Education. While founders of this kind of startup range from high school dropouts to PhDs, the founders appear to include relatively high portion of people with no college education.
• Venture Capital Missing. Founders got started with their own savings, typically in the form of going without salary. They begin work in their homes and rented apartments. Cash is precious.
• Quick Time to Launch First Product. Months rather than years are consumed to get from start to first sales.
• Quick to Profit, Mostly. Most are profitable after a few months of first sales. Exceptions are in Internet centric businesses (e.g. mobile photo sharing: Instagram) which race to be first to get the gorilla share of end users in the new market category.
• Hyper Growth, Mostly. The first product/service catches on and spreads like wildfire, with sales following with the same remarkable growth. Exceptions like Linkedin do seem to require decades to get established before the hyper growth occurs, and thus have to get additional funding from wealthy angels.
• Friends Do It. The founders and early core of employees are friends. They may have worked together, but more are simply social friends, often very close friends.

 EXAMPLE OF A REAL SPONTANEOUS STARTUP

I have a real Spontaneous Startup for you to think about. It was born in Norway and is thriving. It is Onepiece.

Here is their story, from the startup's spontaneous beginning.

Early one Sunday morning in 2007, Henrik, Knut and Thomas, three Norwegians in their twenties, fantasized about the ultimate chill-out wear that would be perfect for a lazy day at home.

They all agreed on the merits of the sweatsuit for recovering from a night on the town. "But without the tight waistband and the pressure to go jogging," Thomas said. Knut had been staring at a light bulb when, eureka, it all became clear:
"Why not sew together a hooded sweatshirt and a pair of sweatpants? Let's make it so big that no one in their right mind would think of working out."
"If we can skip the waistband, I'm all for it," said Thomas. "But how are we going to get into it?"
"No sweat," replied Henrik, "we'll just put in a big zipper."

And with that the OnePiece Jump In was born. The three friends dropped everything and invested all their savings to realize an idea they believed was unique and brilliant. They made the loose-fitting, all-in-one hooded sweatsuits in soft, thick cotton fleece in a wide variety of colours and patterns.

For two years they sold the OnePiece to friends and marketed it to high-school seniors in Norway. Then, in autumn 2009, some bloggers wrote about how much they loved the OnePiece, which triggered other bloggers to rant about how much they hated it. Fuelled by massive debate in social media, the OnePiece Jump in became a huge trend in Scandinavia in 2010, and is now catching on in England and other European countries.

"We were as surprised as anyone when people started wearing the OnePiece at clubs and it became a fashion and lifestyle statement," says Thomas, who has left university to devote all his time and energy to the OnePiece. "I think that the versatility of our jumpsuit and the fact that it is extremely comfortable are the main reasons for its success."

Even as the OnePiece wave hits country after country, gaining a foothold, Knut, Thomas and Henrik are busy developing new ideas and concepts. To be sure, the OnePiece won't be their last innovative fashion item.

BOTTOM LINE: The class of new enterprise known as Spontaneous Startup is large and filled with exciting fresh business ideas. This kind of startup is able to be created by nearly anyone. The specialness of a Spontaneous Startup opens doors for many budding entrepreneurs looking for a way to do a real startup. The ones that succeed seem to be intuitively able to build unfair competitive advantages (which says a lot about the intuitive brains of the founders of this class of startup). Think about a Spontaneous Startup for your own new enterprise. It may be just what you are looking for.

I wish you The Best on your Adventure!

STARTUPS 2012: How should a founder get prepared?

One thing is clear from the 2012 Consumer Electronics Show: millions of people are eagerly seeking to find and ride one of the next big waves. The competitors include the Giant Global Corporations as well as Startup Founders. Mobs are forming, milling about, seeking the fresh waves to surf.

My bet is the Startup Founders will spot the next set of waves before the Giants Corporations do.

Somewhere in the confusion and scrambling about smart televisions, content management, pads and phones is the seminal energy that will start the fresh waves lifting. From hundreds of miles away you can feel the CES energy radiating, pulsing around the globe.

BE PREPARED

So what should the wanna-be startup founder do right now?

Simple: as the Boy Scouts motto says "Be prepared".

Here is what serial entrepreneurs do at this early stage in the phase we are in:

• Start with a bold idea. The key word is "bold". Your initial idea is going to change rapidly. But it always has to be bold so it has enough power, reach and attraction to stand out from the intensity of what everyone else is talking about.
• Secure your Buddy. You have to have at least one more close friend to help work through all the changes your initial idea is going to go through. In the biography of Steve Jobs, that person was Steve Wozniak. Google was two friends. Solo is for pilots, not entrepreneurs.
• Pick a wave to ride. Look, think, decide. Go for it. The early waves will change as they form shape. Your job is to continue to change your initial idea so it begins to ride the forming wave. Be careful to not get ahead of the wave (it will overtake and crush the too-early surfers). Be careful to not be too hesitant (you'll be behind the half dozen front runners and find it hard to overtake them).
• Change, changed, change. You are working with head knowledge at this point in the process. It's quick to alter, even abandon the inital idea. I've watched entrepreneurs abandon one, two, three ideas on their way to the one that launched the startup. That takes guts. And smarts.
• Build your resources network. You are going to need workers and money and lawyers and related services. Contact them, even if you do not yet have a company started. You will learn a ton of great things from short meetings with them, phone/Skype chats. Talk, don't email. Get personal. Get smarter from those smart people. Every question asked of you demands an answer. Soon you will find yourself working on solutions for issues about your fast changing idea. And it cost you nothing but a bit of time.
• Start documenting your Executive Summary. One page. Everything about your idea that you know up to this point. This document is living, it will morph week after week as you make change after change. Writing forces you to make decisions, guess at unknown numbers, be confronted with problems that must be resolved. This is a discipline (based on an old Greek word that means "dis-is-no-fun").
• Plan the construction of your first product/service. On paper. With numbers. And dates. And resources required. Sketch it. Use the resulting costs to start your first cash flow requirements. Add that to your Executive Summary. Keep it simple. The engineers can later dive into the details of how to do their magic.
• Look for the "WOW!" in your idea. You have to have WOW! to stand out from the crowd. It has to be hyper-compelling to end users. This is central to your success. Without it, step aside and just watch.

That will keep you very active, focus your thinking, force you into making important decisions.

BOTTOM LINE: The next waves are forming as you read this. Your job is to prepare to ride one to the beach and win big. Serial entrepreneurs use the above process of continuous change to get their minds ready for creation of the company. This is a matter of months, not days, but time will fly and so should you. Your objective is to get ready with an idea that will attract the resources required to form the company and build an unfair competitive advantage as you ride a fresh wave that lifts you higher and higher as it grows global momentum. That's how serial entrepreneurs do it. You can do the same.

I wish you The Best on your Adventure!

NEXT GENERATION STARTUPS: Use combinations to rise to the higher level

"We were thinking about using data on restaurants and parking to help diners have a more enjoyable dining experience. What do you think about that idea?"

This question opened a session with a first-time startup team yesterday evening (from my Cornell University class). From then on it was an intense workshop addressing the question "What can you make from this initial idea that can move it forward so it becomes a great idea for a great business?"

Most startups begin that way (vague, weak first idea) and the founders have the determination and intuition that drives them to start changing the first idea so it becomes something much more compelling ("cool") to a vast majority of end users and customers ("scaleable").

But that is not easy. Yet serial entrepreneurs can do it swiftly and very effectively.

So let's get you to understand the process the veterans use to lift their first idea up to "the next level".

DIALOGUE:

• "We are going to use data to help diners know how long the wait time is before getting a table and help them find a parking space. We see our expertise being in allocation of scarcity."
• Q: You must focus on either helping a restaurant or a the dining person. Which do you want:
  • A: Let's focus on helping the restaurants.
• Q: What is The Big Problem you are going to solve for restaurants?
  • A: Diners not frustrated.
• Q: Isn't that a non-problem for restaurants that are constantly selling all the seats every dining time?
  • A: Yes, well, then we have to help the other restaurants, the not-full places.
• Q: How could you help the underperforming restaurants fill more seats?
  • We could use their customer data to email and advertise to their Ideal Customers.
• Q: How about using operations research technology to analyse the patterns of booking reservations (like hotels do), predict the outcome (unless action is taken), and send out email alerts (to smart phones, PCs, pads) that a bargin (e.g. for next Tuesday Lunch is a 2:1 free desert)or other discount/coupon)?
  • A: Cool, and we could help them find the place on a map!
• Q: What could you do for people visiting a resort area and looking at the last minute for a place for dinner?
  • A: We could use location based technology to alert their quiries of Google Maps about local restaurants are nearby. Instant find, instant (automated) booking, walk in to your seats!
• Q: What could you do for a hockey game fan?
  • A: Well we could reserve a parking space, give Best Driving directions, and maybe suggest near-by restaurants!
• Q: Anything else for the sports fan?
  • A: We could offer near-by lodging and maybe discounts booked through us!

And so on the discussion went.

Notice how the movement went to using existing technologies to build a more focused, more compelling service.

The end result was a combination of Google + FourSquare + Open Table + Groupon. It was very different than the initial idea.

BOTTOM LINE: Serial entrepreneurs move swiftly from initial idea ("dream", "vision") to focus, add value, increase complexity and emerge with a loud "WOW!" idea for the new enterprise. Combinations of existing business models, technologies and marketing methods transform a weak first idea into a more powerful one. As more work is done (in secret), the idea grows more and more powerful. The serial entrepreneur does not stop until he has a plan that he is confident can be executed to deliver a powerful unfair competitive advantage. When you can do that with an idea, you'll have advanced into the halls of those few who can become serial entrepreneurs. It is worth the hard work and brain straining.

I wish you The Best on your Adventure!

DAY ONE STARTUP FOCUS SURPRISES: What should be done and how?

Did you recently launch your first product/service and get surprised at who is using it?

Are you finding the users/customers widely spread, far flung from whom you expected?

Are you wondering in which direction to now move your startup?

Those questions are asked daily by entrepreneurs who have proudly launched their first product/service. Anything can happen after First Launch, including a lot of unexpected end users, customers, blogger comments and strategic partner reactions. The surprises lead to doubt and pondering by the CEO founder. The above questions pop up. Deep emotions are stirred in the souls of the Core Team members.

The related issues are important and need immediate responses. Like the newborn child, the fresh startup that is beginning to struggle needs swift attention before it becomes ill.

TIPS FOR RESPONSE TO FOCUS SURPRISES

Today I'll make some suggestions from my experiences with serial entrepreneurs, those intrepid souls who continue to figure out what to do to a fledgling enterprise so it grows with good health, very fast.

I'll begin with an edited email that I received today from a first time entrepreneur and then I'll show you the tips I sent.

ENTREPRENEUR'S EMAIL INQUIRY

We built the product and just went live a couple of days back! Please check us out when you get a chance at [NEW COMPANY ("NEWCO") WEBSITE] -as planned we are doing this pilot in New York. What do you think of the product? Btw, we also have one transaction in already.

I wanted to email you and see if I could interest you once again in advising me. This time it would be about how to maneuver NEWCO to success. This is very exciting milestone- seems like we traveled a long way from the idea we had 3 months back - but we understand that the first iteration of the product is only an artificial milestone! Now comes the part when how artful we are in discovering and validating our core customers will make all the difference.

I need some advice and guidance at this point. As you can see right away from the initial few services offered, NEWCO does not have one strong identity - people are offering all kinds of things from organic flour to management consulting advice on our service platform. We originally thought of this as a place where people can [proprietary service of NEWCO] and I think we are convinced we have people who will want to use the site. But who will be our core buyers - whom should we focus on? It's getting tricky. This might seem like a basic question, or perhaps we should have already known the answer to this by now? If you have any pointers/thoughts/suggestions that'd be really helpful!

STARTUP COACH REPLY

Hi Kim,

Always pleased to view a fresh entrepreneur in action, especially one from Cornell.

My advice for you today is to “Think about what you want people to think about first when they recall the name of your business.”

That will help you Focus.

It will lead you to the Marcom Messaging that will brand your company over time.

What do you want your company to stand for?

Then compare that to related new enterprises. There are a lot more these days working on a business model similar to yours. That will help you with your Competitive Positioning.

 Hope that is helpful.

JOHN

BOTTOM LINE: Get ready to alter your expectations as soon as you launch your first product/service. Surprises are most likely to happen quickly. Dissipation of focus is the enemy. Chasing every rabbit is unproductive, and leads to dwindling of scarce resources. Instead, serial entrepreneurs stand back while collecting the latest pattern of end users, customers, blogger comments, and strategic partner input. Then they analyse the findings and choose a focus for the new enterprise, one often very different than first planned during pre-launch days. The fresh input is then crafted into a revised (often very different) marketing communications message that is compared with competitors and modified further. The end result is a Positioning Plan that becomes a powerful element in constructing an unfair advantage based on delivering a product/service so compelling to end users that they shout "WOW!" and start Tweeting immediately. Serial entrepreneurs know this is very hard work that kicks up powerful internal emotions, but it is vital to do this swift response very well. When you can do that, it can lead you to become one of the great veterans of real startups.

I wish you The Best on your Adventure!

SECRECY IS THE STARTUP FOUNDER'S FRIEND: How to get well known without revealing critical startup secrets

"How do we get money, attract employees, and do deals with strategic partners without the whole world (and all the competitors) knowing what we are going to do with our vital secrets?"

That's a question I am frequently asked. It is a very important question, so let's look at what serial entrepreneurs do about that issue:

1. Investigate before you open your mouth or send emails. I have had sad founders tell me they presented to VCs who had already invested in their competitors. Others said they gave away vital secrets when interviewing employee candidates (who were comparing direct competitors during job searches). The First Rule is: BEWARE! Start by assuming the worst could happen and you'll be avoiding critical communicating mistakes.
2. Build your unfair advantage before you start communicating. Are you afraid to tell someone what you are about to do? Then you do not have a strong competitive advantage. You just have an idea for a new enterprise. When you have built an unfair advantage, you can publish your bplan in the Internet and still be confident of launching successfully.
3. Learn to strip tease: Start by taking off just one glove, and asking for order (for the seed $, a commitment to join your startup, to do a deal, etc.). Keep removing clothing until either you get what you want, or get uncomfortable and decide to stop and depart. This is especially important when speaking with potential venture investors. They see a lot of similar startups like yours. They are notoriously leaky with proprietary information. It's the nature of the VC business. They talk a lot.
4. Go into action with confidence. You have something "cool" (in MBA language, something of "high intrinsic value added"). Go for what you want, what you need next, with a positive attitude. Think with courage and conviction: to VCs tell them "If I like you, I might let you invest in my startup." Don't stand there like the guy with the cardboard sign and tin cup at the roadside.
5. Prepare a great Elevator Pitch. Get your 30 second speech ready.  It is designed to get the other person to say "Tell me more." Then in 3 minutes you can take breaths between sentences and tell the person more. That is designed to get you the hour meeting in their office. It all starts with a very intriguing Elevator Pitch. Small is powerful.

BOTTOM LINE: Plan your communications carefully, assuming what you say will spread around the planet quickly. Be wise in whom you speak to, be crafty in what you tell them. Keep as much secret as you can before launching your first product. And most of all, before you communicate, build your unfair advantage. It is central to how serial entrepreneurs become successive winners. So can you!

I wish you The Best on your Adventure!

STARTUP VALUATIONS CONTINUE HOT: What should you expect for your new enterprise in this market for money?

If you have what is hot, you are hot, at least in today's money market for venture capital.

When a founder understands the numbers VCs are seeking, better deals can be negotiated.

HOT RACE

The VCs are in an intense race: they desperately seek the next Billion Dollar Valuation Startup. To miss the next Google, Facebook, or GroupOn is death to them. One miss of the next Gorilla will drop the ROI on a venture portfolio to bank deposit rates. Such a mistake will slide their fund down into the ranks of The Other VCs, to be forgotten by all but a few. When they try to raise fresh cash to invest, the institutions with the big money "will pass" on investing via their new venture fund. Thus the race is one of desperation for VCs.

Entrepreneurs can take advantage of that, negotiating more favorable terms (price, liquidation preferences, stock option pool, etc.), getting deals done swifter with the venture partners of choice.

But there is danger in all of this, the danger of over-reaching, of "too much greed". Critical observers are frequently objecting to the high valuations of private rounds of "the hot startup deals". Their concern is valid, namely that the basic business may not be able in the future to generate the revenue and profit that supports billion dollar valuations today. For instance, take a look at today's blog from TechCrunch on this issue.

DEALMAKING

So how aggressive should a founder be in when cutting a deal this market?

I suggest this market for hot VC money is looking for deals that can get a return on capital of 100 times each dollar invested. Those numbers correspond to data I've been looking at in recent private and IPO deals. Take a look at the high ROI multiple for LinkedIn VC rounds (as compared with my long term Standard ROI earned by VCs over decades of deals):

Then look at how those multiples translated to ROI measured as percent per year. Here you can see the VCs got ROIs all around 100% p.a. (interest equivalent of 100 percent per year in the bank).

 

In other words, today's VCs are seeking tiny startups that can become giants of tomorrow as measured by ultra high ROI ambitions. Their return on investment target is the equivalent of 100% per year interest rate. The corresponding multiple per year will decline as the IPO date arrives because the risk reduces over time as the company grows larger, generates profit and turns cash flow positive, but the price per share for each deal will be set to earn a very high percent per year ROI.

Yes, that sounds terribly high. But it is what happens during such feeding frenzies.

As I've blogged before, the startups that get early money have convinced investors that the business is "scalable" (huge market, open, growing, no dominant Gorilla blocking the way), has "traction" (showing rapid adoption by end users and customers) and has "WOW!" in its offering (highly compelling to end users). Lacking one of those will put your finance raising efforts far behind other startups.

BOTTOM LINE: Entrepreneurs can take advantage of the current flurry of VCs eager to finance the next great Gorilla. The numbers needed in your plan must convince the people with the money that your deal will generate for at least early investors the equivalent of a very high return on investment, in the order of a 100% interest rate. Those thin air, high altitude numbers are the result of a fresh wave that is heading toward the beach. VCs are determined to ride it to riches beyond measure. It's up to you to get them to pick your startup to ride. Serial entrepreneurs know how to do that. It's part of what made them skilled at building unfair advantages.

I wish you The Best on your Adventure!

STARTUP DUD: Find a new use for the engine/technology

"What do you do when you launch your app and end up with 100 users?" That's the central discussion point of my talk this morning with a budding, bright entrepreneur.

What should be done next seems obvious at first to many observers: Stop.

• But if you've put in two years of no-for-pay work with two other guys, giving up is not easy.
• So when should you stop?
• What should you do with what you've built?
• What can be done to succeed in spite of the dud on launch?

Yes, even the best, the world-class pros launch products that are duds. Dead on arrival. Go nowhere. Get slammed by the bloggers. Get Twitted to death, mercilessly.

For a touching example, so you get the picture, look at a story about the film Conan the Barbarian (dud). It was sent to me by a serial entrepreneur I greatly respect (Thanks KT). Read and think a moment about how the lead writer went through the post-launch-blues. Download Conan Writer Describes His Emotions to a Boxoffice Failure.

1. So the first lesson is: Expect less than a spectacular win. Remember, startups are statistically going bankrupt (i.e. over 60% of venture backed new enterprises go out of business). Good news: you are not alone. There are a lot of others you can learn from out there, they'll help you step on fewer startup landmines. Start talking to them.
2. Next: Start thinking about what you could do different (VERY different) with what you have built. Here is a metaphor I often use with techies: "Okay, let's admit the idea is a dud. So what do you have to work with? Technology you say? Well,think about it as an engine. Then start looking for what vehicle you could put that engine into: passenger sedan, SUV, light truck, spare generator, green machine, and so on." Here is where you have to have guts, think boldly, take whacks on the sides of your heads, brain storm, do out of the box. Often the Second Time Around produces something Great.
3. After this, test each New Idea for how much "WOW!" it has (compelling reason for the end user to use/buy). This is classical startup work fron here on. I'll not dwell on it here.

My point for the day is simple: Even the Hollywood greats launch duds. So do serial entrepreneurs. You can use such events to make a decision about what to do next.

Sometimes it's best to close shop and find a job (e.g. wife expecting second child, parents aging needing closer attention, have less than 6 months rent in the bank).

More likely it is time to intensely search for something very different, something to apply what you have built, something to solve a Really Big Problem (that others have overlooked - see my August 22 blog on Flanking).

All of this is part of being lost in The Wilderness of Undistinguished Startups. Your Core Team now has to have the courage to know you are lost and screw up the guts to think boldly to find a way out.

BOTTOM LINE: Launching a dud is common. When it hits you, get through the emotional process of accepting reality and depression and recovery. Then you can start to get creative and figure out what to do with what you have built. That's how serial entrepreneurs think and behave. It's part of their DNA, what they use to build unfair advantages.

I wish you The Best on your Adventure!

STARTUP IDEA: Move into uncontested new space (Flanking)

"The market is flooded, a gorilla already exits, what should we do instead?" is a question I often am asked.

Let's pick that conumdrum apart to generate a simple answer and get you out of The Wilderness of Undistinguished Startups.

Start with a quick read of today's blog from TechCrunch about Vidyard.

Note the following:

• Market for videos dominated by YouTube
• Alternatives to YouTube are expensive
• New uncontested (no Gorilla yet) market is open: "an affordable way for businesses to host videos that can be viewed either on a landing page or via an embeddable player."
• New market has huge potential (number of businesses)
• Business model (monetization) is simple and proven: "To monetize, Vidyard is using a freemium model"
• Vidyard focuses on a single weakness in the Gorilla: "Basically, Vidyard is offering a service that’s very similar to YouTube, but without that link to a third-party portal." Yes, there are other features, but this is the weakness that is difficult for the Gorilla to quickly overcome, thus giving the startup an opening.
• Technology team can deliver what marketing team wants (Vidyard hopes).

I don't know enough yet about the experience of the Core Team, but the above is enough to make my point for the day: When the market is flooded, when a Gorilla dominates, then find an overlooked (often related market) and put everything you have into pursuing it. That's what world-class marketing minds call The Flanking Strategy. It avoids the Gorilla, appeals to a large market, and gives the startup a great chance of becomming its Gorilla.

BOTTOM LINE: Look for large overlooked markets when you face a Gorilla dominating a major market. Focus all you have on something the Gorilla cannot respond to quickly, something customers are begging for, and then go for it. Serial entrepreneurs do it. So can you. It's how most great startups become great, building their unfair advantages.

I wish you The Best on your Adventure!