Nesheim Online

STARTUP MARKETING: (3) Startups concentrate on the brand but management concentrates on the product.

"We build great products!" is what I hear every startup leader tell me. From Apple to Z Corp everyone is doing it. Why? To build a great company, of course. That's the response from management.

Yet the great marketing minds instead concentrate on the brand. It is the brand that distinguishes one car from another, one social networking site from another. Lexus is branded as a luxurious Japanese car. Facebook is branded as social networking. Names that stand for things are brands. Chevrolet has lost its meaning and thus its brand means nothing anymore. Competitors for Facebook are mostly forgotten.

Once Heinz means ketchup, what would you do, make a better-tasting ketchup?

It is not a better product that makes a strong brand. It is market share that tells you the brand is strong.

Does Starbucks make better coffee than McDonald's (Consumer Reports said no). Does Rolex make better watches than a dozen other luxury-watch makers? Perhaps. Perhaps not. But the tangible differences noticed by the consumer are rarely in the product quality. Instead, they are noticed by what is in the brand.

BOTTOM LINE: Startup marketing minds focus on brands. They aim to build a brand that stands for something in the mind of their ideal customer. That will distinguish the brand from competitors. It will give lasting meaning to the brand. It is a strong brand that leads to the winning startup, not better products. When you understand that, you'll be on your way to building an unfair competitive advantage.

I wish you The Best on your Adventure!

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"Marketing is too complicated to be left to management people who have little experience in marketing and who don't understand its principles." wrote Al Ries.

Rated by Advertising Age as one of the Top Ten living legends of marketing, Ries's findings and related implications in the book "War in the Boardroom" are spot on with issues that confront first-time entrepreneurs. This startup marketing series is based on that book. It is highly recommended reading for startup leaders.

MANAGING MORPHING A STARTUP: Lessons from the lastest shifts at startup Foursquare

I've been discussing "morphing" a startup in recent blogs.

Morphing a startup is all about movements and focus.

My blogs on startup morphing are aimed at delivering special tips to founders of today's startups -- because they are under very intense (read that as acute) pressure in this current era of "rapidly scaling startups". Investors (and increasingly experienced startup employees) expect a founder to swiftly move from initial idea into an established new enterprise that moves swiftly upward in users and revenue. If not, they start moving to the exits. Life has become very impatient for slow moving founders.

So I thought I'd pick apart today's story about the latest change at startup Foursquare and list a few tips that might add to your skill set as leader of a new enterprise.

FOURSQUARE STORY OF THE DAY

Here is the story headline from TechCrunch: "Foursquare Outgrows Mobile, Wants to be Your City Guide".

Here are some things to ponder that I noted in the blog:

• Startup Morphing is a continuous process. Note how the company has moved on from its initial catchy "check-in" feature:

"The Foursquare.com site redesign is the third major product development that aspires to move Foursquare beyond the check in; The company recently launched Explore to derive value from all the checkin data it has accumulated over the past three years, then Radar which allowed users to take advantage of that data with minimum effort."

A serial entrepreneur I respect recently remarked to me that Foursquare had shifted from a generic location based service into "a place people go to brag where they have been."

• Startup Morphing is focused on generating user-driven revenue growth. That means the number of unique daily users must remain loyal, continue growing (faster than competitors) with new ones arriving by the hour, and be attractive to advertisers and merchants.

"One million daily unique visitors is a terrible thing to waste."

So the company has been adding more features aimed at keeping existing users clicking on the service, while the new offerings become more and more attractive to hesitant users. "Growth, growth, growth" that 's the mantra chanted by Foursquare founders 24x7.

• Startup Morphing demands that Marketing figure out how to convert user clicks into Revenue. The next trick is to convert a growing number of users into real $$$$$$ in the form of revenue. That's the job of Marketing. 

Now Foursquare Marketing has made a major change in the focus of the business: The new New is focused on leaving "check-in" behind and moving on to being a "city guide service".

"And it just might succeed too, with the wealth of more than a billion checkins from which to draw conclusions about the destination predilections of its ten million users, “[We want to do whatever] we can do with this data to make people more aware of the world around them in real-time and geographically relevant way,” Foursquare Head of Product Alex Rainert said as he gave me a tour of the site earlier."

• Startup Morphing changes the branding of your business (and thus is frought with risk). Foursquare owns the word "check-in" and always will (Search = Google, etc.). But now the company wants to become The Gorilla of "Your city guide". That is definately a move, a big move. And it is into a market that is crawling with solutions (search for "city guide mobile" and you'll get 53 million items). And if you add to the search "recommendations" you run into another crowded space. Yet that is what the Foursquare is going to do next.

Foursquare is making a concerted effort be more than just an app for checkins, as we and every other person who covers this stuff has noted before. The difference here is the mobile-first startup is expanding its horizons way beyond its iOS roots in order to become a location-based city guide and recommendation service, sort of moving towards Yelp while Yelp ironically moves towards Foursquare.

The danger is that these moves create a generic city guide out of the Check-in King, one whose unique appeal ("bragging"?) is lost to a not-so-exciting-city-guide.

But if successful, we might find ourselves observing an new category of "recommendation-based city guide" or something along those lines (web and mobile accessed). The growth they are seeking might be there. I for one am forever amazed how much time I have to take to research a city I am going to visit in order to add a bit more enjoyment to my time there. Perhaps this New Foursquare is my solution.

• Startup Morphing calls for guts, soul-deep courage. . . Or reveals ignorance. Marketing branding is based on end users instantly recalling one simple thing when they think of your name (that's what becomes branded by that single, special thing: Social Networking = Facebook). To loose that indentity with that single thing is death to a brand (what is a Sony?). To keep that identity is central to creating a brand that is recalled by your Ideal End Users.

Thus there is a critical trick to morphing from that initial branding focus: each move has to build onto that focus, that word, and thus retain in the end user's mind the identity that has been earned and that is the reason for millions of clicks/uses on/of the service. That takes guts, real courage.

So I commend Foursquare's leaders. They have made a major move with boldness. That reflects the intensity of their personal drives and ambitions, and their guts and courage. It also resonates the intensity of competition that surrounds them, competition that is moving daily, attempting to encroach on Foursquare's success in its current space (market segment). It is a story unfolding, well worth watching and learning from.

BOTTOM LINE: Startups that move from an entrenched market position into a crowded space have to have leaders wise in strategic planning and skilled in execution of bold moves. That happens to be central to what serial entrepreneurs are very good at ("brilliant"). Studying moves made by new market leaders can teach you how to gain such abilities. When you can do Startup Morphing, you are well on your way to building an unfair competitive advantage.

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!

5 TIPS FROM GORILLAS FOR STARTUPS: What IPO-bound enterprises teach entrepreneurs

QUESTION: What do these companies have in common?

• LinkedIn
• Open Table
• Pandora
• Zynga
• Groupon
• Facebook

ANSWER: They are all Gorillas of their space. They dominate a new market. They own a category. They are Number One in their segment. Some are already public IPOed enterprises, the others will be soon enough. All of them have wonderful lessons for you, the budding entrepreneur.

5 STARTUP TIPS FROM RECENT GORILLAS (FOR ENTREPRENEURS):

1. DO NOT ATTACK THE GORILLA. Attackers of Gorillas are as likely to succeed as a hiker attacking a mother grizzly bear with cubs.
2. INSTEAD FIND AN UNCONTESTED NEW MARKET CATEGORY TO FLANK INTO. The Gorilla will not attack you, it will be having too much fun hiring celebrity chefs for its campus restaurants. It will ignore you.
3. FOCUS EVERYTHING ON THE NEW CATEGORY. Drop all other efforts. Do not diversify. Pour all your resources (people) into the race to become Number One of the new category ASAP.
4. SURPRISE EVERYONE. In deepest secret prepare your launch. Tell no one. Use disguised names like South San Francisco Fork Lift Inc. Prepare. Prepare. Prepare. In secret.
5. WOW! EVERYONE. What you announce when you launch must lift people out of their seats. "Better-faster-cheaper" is death. "WOW!" is life. What you offer to people has got to have WOW!

When you combine those 5 Tips from Gorillas, you will have the ingredients to aggressively power off the starting line and get your new enterprise into The Race: to become The Gorilla of the new category, the new space, the new market. Meanwhile several of your competitors will be persistently attacking the ever stronger Gorilla with the pool of blood around them growing. You will not be in the red pool. Instead you might even get a few grudgingly complementary remarks from The Gorilla about your and your clever new enterprise.

MAIN POINT: The Prime Objective for your startup is to become The Gorilla of a new category. Watching how other startups get to IPO status reveals what you have to also do.

The Gorilla's go IPO before the rest of the pack who are struggling to survive, let alone catch up. Number One owns at least 30 percent share of the new market. One or two remaining startups will have a chance to become The Chimpanzees. The rest are doomed to remain among the many starving monkeys. You want to aim to become The Gorilla.

BOTTOM LINE: The Prime Objective of the smart entrepreneur (e.g. serial entrepreneurs) is to find an uncontested new market to dominate so the startup can become The Gorilla of a new category. You can learn about that by studying the track records of recent Gorillas who have or will so be IPO public corporations. They have figured out what the startup game is all about. So can you. When you do, you'll be on your way to building the unfair advantage that powers you to become The Gorilla of the new space.

I wish you The Best on your Adventure!

 

ANOTHER WAVE OF $VC POURS INTO FRESH START-UP WAVE: Watch the race to become gorilla of the new space = mobile phone social networking

This fun: watching the race to the top of the mountain of a fresh new market.

The latest blogging buzz is about "mobile phone social networking". Here's a good short story from the Wall Street Journal's Gary Fowler.

THE CONTENDERS:

• There are a LOT OF THEM around the world. The English language buzz is about the American start-ups. But you can bet on dozens of similar ones already operating in countries around the globe. 
• Fowler choose these start-ups to discuss:
  • Color recently raised $41 million from top tier VCs. That's one reason for the WSJ story.
  • GroupMe is in New York City, all the rest are in the San Francisco Bay area. They have raised $11.5 million 
  • Path raised $11.2 million
  • Instagram raised $7.5 million
  • Yobongo raised $1.35 million
• Gorilla's from other spaces have acquired mobile phone social networking start-ups. In 2007, Google purchased ZingKu.

TIMING

• This space is not new. It dates back at least to the mid 2000s. But the new space is not yet dominated by one company. This 2008 article has names that are no longer around who attempted to get started early. That is how each embryonic market operates: the pioneers die and are followed by others who learn from their painful failures. Who will get it right this time? 
• Note the timing of the launch of services mentioned by Fowler: late 2010 to early 2011. All in the same quantum of time. That's a lot of competition all at once. It will take time for consumers to figure them out, try a few and make usage decisions before spreading the word. Watch to see if any one can "go viral" within a year from now and how it happens.

THE PRIME OBJECTIVE: "BE FIRST TO GET IT RIGHT"

Watch this new space to see who will continue to modify on-the-fly their business until it begins to soar. End users then will be flocking to that business instead of the dozens of alternatives. That is difficult to do. But it is how it is done. Daily and weekly tweaks, quick feedback and instant decisions to change, alter, modify are done by the core team. That's where we get the metaphoric statement "Doing a start-up is like riding a bicycle while you are riding it." When all the pieces of the engine start working together, the business begins to soar and accelerate away from competitors.

MARKETING YOUR STORY

• Note how the reporter selected start-ups with money from blue chip investors and contrasted it with a start-up that has raised a fraction of the funds of its competitors.
• The story headlines were reached only after enough competitors had news worth writing about.
• Differences between the start-ups is central to reporters developing their stories. That's what "positioning" is all about, and why focus is so important to new enterprises.
• What makes the start-up compelling is key to the story telling. That's the "WOW!" factor I've been writing about. Boring does not get you into stories.
• Short and sweet. That's what the writers want to hear from you. And it's what VCs look for in your elevator pitch. Prospective employees want to leave with that in their brains.

BOTTOM LINE: Watch this new race to learn from the contenders. It's going to be exciting. Google in the space and you'll get over 5 million responses. It is going to be huge. The eventual gorilla is going to do amazing things. Learn and apply that to your start-up. It is a great way to learn how to build an unfair competitive advantage.

I wish you The Best with your Adventure!

WHY IS DOING START-UP MARKETING COMMUNICATIONS SO DIFFICULT? An insider's look and some tips

As we ate the Spring rolls last night in Mountain View, the core team was ebullient. Their first game was on track to launch in March, and the office and apartment space we toured fit their budget. When the spicy Vietnamese fish soup arrived, our talk turned to plans for communicating to the world the arrival of their company and the launch of its first game.  By the time the desert treats were consumed, we knew a lot more work remained to be done to prepare the stories about the company and the launch of the first game. I told them "This kind of work always makes my head hurt, it is not easy." They agreed.

Marketing communications is the work required to prepare the start-up's message and its delivery to the ideal customer and other stakeholders.

Marcom, as it is dubbed, requires a lot of work to prepare the message and to plan its targeted delivery. It calls for boldness, courage and creativity as well as skill executing the marcom plan. Together that makes it very difficult to do well, especially for first-timers.

Naive founders expect to simply launch a product, tell their Facebook friends and watch it "go viral" immediately. In the real world the likely hood of that happening is close to zero.

Serial entrepreneurs plan their marketing communications months in advance and use it to gain the upper hand in the competitive race they are in. That's how they became serial entrepreneurs (instead of serial start-up terminators).

Here are some tips about what is so hard and what to do about it when working on your start-up's marcom plan:

• You have two messages to craft: one about the company, the other about the product that will be launched. They are different.
• Your company must be focused on winning a new market category (words). Search is taken (Google) as is social networking (Facebook). The wars are still  raging for who will win dominance of new markets such as location-based services (Foursquare is in the lead) and digital retail product coupons (GroupOn is running fast). Each new market gets a new name. Yours must also. 
• Your message must be unique. No other company must be able to use it.
• The message has to be short. One short sentence, a few words, is all that is allowed. If you are using a lot of sentences to explain your positioning, you have not yet completed your work. Short is hard. But is powerful. You must do it.
• New words and new metaphors are most likely. These are words that were crafted to label new market categories: motel (motor + hotel); rental car; micro-processor; desktop publishing; smart phone; social networking. Those are not just "cool" names, nor are they simply clever. They are what worked to tell people that a new category had arrived. Your start-up must fit into such a new category. You may have to invent a name to label it.
• Marcom is psychological. It triggers emotions. The message must fit an empty slot in the brain of the end user. 

All of that requires hard work to craft. And then you have to have a plan to execute, to deliver your message.

• List the top 12 bloggers you want to hear your message. You need to get them to write about your launch and the company.
• What traditional media such as newspapers (Wall Street Journal) and magazines (Wired) do you want to carry your story?
• Which trade shows should you attend? Which booth should your start-up be in (e.g join a strategic partner's booth).
• What events should you join or create? These can be on-line or on the ground.
• Which Facebook groups should know about your start-up and its first product?
• How will you use your professional contacts (e.g. Linked-in) and personal ties (e.g. Facebook)?
• What is the calendar for your messaging? What months will you do what things to promote your message?
• What is your $ cash budget for marcom? Will you use a PR firm? Who and what's the cost? What will the travel costs be? And so on.

Yes, this is a lot of work. But it is central to winning via Marketing. Without a great marcom plan, you will launch your first product into the wind and wait and wait and wait and wait for people to notice. With a great marcom plan, you will start your engine and propel your message to the ideal customer and end user, bloggers and the media. You will be in charge, in control. Going viral is about hard work, not luck.

And a final tip: Test your marcom messaging by challenging each other to write the headlines to the blogs and stories you want writers and reporters to use when first talking about your start-up.

BOTTOM LINE: Plan on spending lots of hard, long hours preparing your company and product message. Crafting the details of words and dates and spending takes lot of time. Put your emotions into it. Expect to be discouraged along the trail to completion. Keep at it until your friends rave at your message. Continue until you are confident the media will say "Wow!" to your company and product. That is what this is all about: figuring out what to say to people so they can't wait to pass it on to friends. That's how you go viral. Marcom plans are critical to building an unfair advantage. You can do it. I'm sure of that.

I wish you The Best on your Adventure!

STRATEGIC PARTNER VENTURE CAPITAL FOR STARTUPS: Case example of what works

"How do you get venture money from strategic partners?"

"Is it wise to raise start-up money from large corporations?"

Those are questions I frequently get. They are increasingly important because the business models of more and more start-ups are linked closely to large public corporations.

This week I spotted a good example of a start-up whose financing includes strategic partners. 

Violin Memory completed a financing round of $35 million, announced on February 6, 2011. That is part of $110 million raised since its founding in 2005. Let's look at the lessons from the deal.

• This round is a mid-stage financing, not seed or early financing. Announced as the second round, this suggests the first was large at $65 million. That is a very large sum of money for an early stage start-up to raise.
• The earlier round is actually a series of financings. You can follow the trail in historical blogs. Large amounts of capital are raised that way for start-ups. It is not easy to do. The company probably did a classical seed round followed by a much larger A round. That is common.
• Two related public technology corporations participated. It is rare for more than two to join a deal. One is more likely. Participating corporations benefit in multiple ways from the success of the start-up and thus participate. They do not do it to make a lot of money on their cash investment, they are not like VCs.
• Venture investors participated. Violin Memory did not disclose the names of other participants in the recent round, at this time. The most common deal structure is to have the lead investor be a large venture capital firm with a large amount of capital avaliable. That VC will set the terms of the price per share for the round. Corporations do not see themselves as the best to set the valuation of any start-up deal.
• This round was done after products were launched and selling to customers. That is when the start-up is less risky to investors. The start-up also gains psychological momentum by receiving the support of strategic partners willing to announce support for the new enterprise. It is rare for large corporations to participate in seed and pre product launch rounds of venture capital financing.
• Financing with strategic partners blocks me-too competitors. A start-up following Violin Memory is now unlikely to get either financial or closer technical support and cooperation. This is a powerful blocking tactic.

There are a couple of other observations for you to think about.

• This may be a sign of start-up weakness. Sometimes large rounds of cash are difficult to raise (high valuation sought by VCs or founders; strong competition; recent disappointment with fresh sales). Then VCs are known to bring in large public corporations to finish the round of financing. And you may find a lot more VCs added to the round, often each taking small amounts of the deal. Those are signs -- to some observers -- that the start-up is struggling.
• Large corporations slow down the time to closing the round. Public corporations hold board meetings every three months. They rarely call for a special meeting of the board to approve a (tiny) financing. CEOs have to be prepared for a long closing calendar if corporations are part of the deal.

So give this some thought as you make your plans to raise capital. When you plot the sequence from seed to IPO, put in a place for strategic partners to join one of the mid-stage rounds.

BOTTOM LINE: Strategic partner financing can help you build an unfair competitive advantage. They bring credibility to a struggling new enterprise. They add techology cooperation. Their public announcements encourage customers of the start-up. The cost of capital is the same as that of VCs. But they do slow down closing on a financing. And many see their participation as a sign of weakness. Put strategic partner financing into your alternative plans. It can add power to your start-up as it grows its unfair advantage.

I wish you The Best on your Adventure!

SMART STARTUP REVENUE MODELS LEAVE COMPETITORS IN THE DUST: Tips from serial entrepreneurs

How does a startup founder add more power to propel faster growth than competing enterprises?

One source that may surprise you is to build a smart revenue model.

It will open your mind to see opportunities to add fresh sources of revenue, move strategic focus to uncontested markets and alter tactics for execution of operations.

Serial entrepreneurs have learned to employ smart revenue models with great effectiveness. Today I have some tips to share with you from their schools of hard knocks.

Let’s start with some basics and begin to drill down to what is important to investors (and experienced startup employees).

• Financial forecasts are valuable. You may have heard that venture investors ignore forecasts of financial statements of startups. My experience is that VCs expect you to know all the details about a financial forecast of our new enterprise, starting with revenue and how it is derived. Investors are more interested in what is behind the numbers than the numbers themselves. For instance, what is the average selling price of your first product, and how will it change over time (supersedes $ of Revenue in importance).
• Power rises from information generated by the components of the revenue forecast and their sub-components. I’ve seen VCs stall a founder’s presentation by peppering her with a barrage of questions about the revenue components. What composes the mix of products/services that determine your average selling price? How is each product of the family (product lines) priced and why? If you are unable to respond instantly, the questioning becomes unmerciful and often terminates the unfinished presentation.
• Modifications over multiple years of time reflect an unfolding story about competitive behavior. What sequence of sub-products will be introduced over the first years and why? How do you expect the competition to react to those introductions (e.g. price discount war, or copying the products)? How will your startup react to their reaction? Serial entrepreneurs have learned the best story tellers get the money. So learn to tell your story with color using your financial forecast over years of growth.

Now let’s turn to some modeling tips and see how to boost power beginning with a simple forecast of revenue and expand it from there.

Model Building Tips

• Use an Excel spreadsheet to build your revenue model. Obvious.
• Use one sheet for the Revenue model. It will feed your Income Statement on a different sheet.
• Start with revenue by year in columns. Begin with 5 years. Start revenue the first year of launch, hopefully not later than Year 2 (life science excepted).
• Use rows for input and output. Units are input.Price per unit is input. Price times units equals Revenue as output. Simple.
• Never put formulas into cells. If your price per unit is to decline each year by X%, then use a separate row for X. Then it is easy to make changes to X and begin sensitivity analysis to learn more about your business. “What happens if the price declines by 10% per year? What will happen if we hit a price war that crushes prices by 40% or more?” Show all inputs separately, each in one row.
• Color inputs with one loud color. It keeps you from going crazy as your model grows in complexity (it will).

Revenue Model Tips

• Forecast $ of Revenue using one simple set of units times one ASP (Average Selling Price) for 5 years. Guess if you have to.
• Return and divide units into specific products/services and add an ASP for each. Average now has more meaning. The model reveals more about product plans each year over the march to IPO. This will cause you to pause and develop a product marketing plan.
• If you are relying on advertising revenue, you must now break up Customers into segments. Use frequency of users to get started. What percentage will be most frequent users? That will be important to advertisers. How many clicks will be done daily, weekly, monthly by Frequent Users, how much by Other Users? I think you can see how this is modeled. One byproduct will be your list of visitors and the click rates and volumes each month. You will certainly be asked about that by VCs anytime during your presentation.
• Now add a mix of advertisers. For instance, you will need to know how much the automobile ads pay per click compared with beauty products or mortgage refinancers. You’ll need to forecast the mix of those classes of customers (who send you cash) so your ASP per click has meaning. This will get your brain working overtime.
• Now you can see a mini revenue model for each of your products. This will reveal which products are generating the most revenue and trigger thoughts about what to modify with marketing in the face of competition in order to gain market share. Each product needs its own market segment forecast (Total Available Market, Served Available Market and Share of Market: TAM, SAM, SOM).
• Return and alter the ASPs over time. They typically decline but some may be expected to increase (e.g. if you began with a deeply discounted initial price to do a Beta Launch). This gets you thinking about the traditional pricing behavior in your industry (e.g. semiconductors rapidly reduce in price per year) and in your new market (e.g. advertising paid per click jumps up and down depending on the advertising market [cars pay more than lipstick]).
• Now you have a lot more information and are growing smarter and more competitive. You know how your business economics respond to small shifts in each input. You are already smarter than the VCs and sharp potential employees. And you are most likely smarter than your competitors who are too lazy or arrogant or naïve to go to all this hard, time-consuming work.
• Let’s dive deeper and build more smart power.
• Return and add seasonality to the first two years of products launched. You will need to create a 24 month model by year. That’s easy.  Do not do a quarterly forecast because tht will slow down your work, become very messy, and besides, people want the monthly numbers anyway, especially investors.
• Then add seasonality. Consider the effects on your business of big holidays and four seasons of weather. How will the monthly forecasts be modified: units sold, ASP (pre and post holiday)? This is especially important for ecommerce web businesses selling consumers retail products. This is often a head-snapper for fast thinking entrepreneurs doing their first startup.
• By now you have a ton of insight to your business. You are getting very smart. So is your model.
• Return and divide into countries of the world. Asia is too big for one forecast group. Use Japan, China and so on. Europe might be singular. Other regions can be collections of countries (e.g. South America, Africa).  North America can work (Canada plus U.S.).
• Now you can see how much thinking you are going to be doing. Country forecasts reveal where you’ll need to be doing business each year and what you’ll need for employees there. It also will have deep implications for how you incorporate your startup. If you are going to get a lot of revenue from a lot of big countries, then you should consider incorporating the parent organization outside the United States (e.g. Cayman Ilands) and operating subsidiaries in each country (e.g. U.S., England, Japan). It will also get you thinking about time, for instance, it takes many months to plan and complete the construction of a corporation to do business from within China.

Some Game and Social Networking Smart Model Tips

• Game and SNW startups have a lot of revenue complexity from the get-go because they are so creative. Some sell virtual goods paid for by cash. Others sell virtual goods payable by points earned. Affinity clubs earn points exchangeable for points that are exchangeable or for other virtual goods that are exchangeable. See how complex things are getting? All of it impacts $Revenue for the startup. How such things are linked to real Revenue recorded by accountants is important, it is central to your learning by building a smart revenue model. The more you dive into the details, the more you will be driven to address complex issues that can either hinder or improve your competitiveness and revenue generation abilities.
• What drives gamers and SNWers to your business so your Revenue rises? “We’ll go viral!” does not cut it anymore. There is too much competition out there already. You have to have a game plan that is creative and clever, attractive and compelling to end users so you generate the traffic (mix, demographics, volume) sought by advertisers. As mentioned above, the more you can drill down with an advertising model, the more you will learn about your business.
• Games come and go like movies. Start forecasting the rate of rise and fall for each game over time. This will trigger ideas about comparable games by competitors that you can use as benchmarks. Then you can do some sensitivity analysis: Should we plan on a few large winners or a mix of good but not great games to go IPO? How many medium successes do you need? What happens if you have one large winner?

I have seen great serial entrepreneurs present to VCs without showing a single number. But when asked all the questions related to a revenue forecast, they had the numbers ready to verbalize. They were that familiar with their financial forecasts, particularly the Revenue forecast. I was always amazed by their fluency and fluidity with the numbers. As for me, I need to see the model on the screen to explain it. But they got their money. They did their (hard) homework. It’s one aspect of how they became serial entrepreneurs. VCs open doors for them, seek them out, every day.

BOTTOM LINE:  You add huge power to your startup when you build a smart revenue model. As you add to it, you think about deeper and deeper details. Your story begins to become colorful. It adds knowledge that directs strategy and tactics. It guides incorporation and tax planning. Most of all, it gives you intimate understanding of how your startup will behave. Like a parent who understands her child intimately, you will be able to anticipate how your enterprise will behave when it is birthed and grows. Yes, it takes time and work (both four letter words). But the investment will be worth it. Serial entrepreneurs know its impact. When you can build a smart revenue model, you will be well ahead of your competition. It will be a key element in the power of your unfair advantage.

I wish you The Best on your Adventure!

 

STARTUPS EXPLOIT BATTLES OF GIANTS: Look for openings to exploit before others do

Today's mega-bold launch of Google TV confirms a new chapter in the battle we all knew was underway between two giants. Both Apple and Google will do well, regardless of what the bloggers rant and rave about. Consumers will benefit from the increasing competition and the markets that pop up will be large and fast to grow, spawing great new enterprises.

Your startup could exploit this fray.

Great startups want lots of fog, dust clouds blinding people, confusion and buzzing everywhere. In that disarray lie many amazing opportunities for great startups. It is where you want to be.

Waiting for confirmation of the new spaces will be too late.  Investors are already looking for fresh ideas in this battleground. Yours could be one of them.

For example, we've seen amazing startups emerge from the dust clouds of giants battling to be microprocessor gorilla (spawned an entire paradigm shift: the personal computer). Giants doing operating system battles spawned Lynux and many related new enterprises. The list of similar phenomena is very long.

Such battles generate opportunities so large that the new space quickly divides into splinters, each of which grows rapidly into large market segments. You want to be leader of one of them. That propels you to gorilla domination.

Think of the amazing applications and casual games and services businesses that exploded after the arrival of the iPhone. Today's battle will spawn even greater startups.

Today's new wave is about the television sets that can connect wirelessly with the Internet ("smart TVs, Internet TVs, connected TVs, whatever you want to name them).

It is about the battle for a better user television experience and what can be better than the current expensive couch potato cable experience.

It includes all the implications for fresh business models with vast streams of revenue shared between strategic partners.

The service ideas are in themselves mind boggling. So are the hardware opportunities (and all the internal components). And on and on.

Most of all, this is about "first to get it right" for one of the many new categories in a giant paradigm shift. Your company could be one of them.

BOTTOM LINE: When giants go to battle, smart startups are attracted to the fray and find many opportunities to exploit. Your job is to spot a new category and quickly get started on entering it. That swift moving gives you a chance to be first to get it right. Meanwhile the giants will continue their battle. Your opportunity will continue. If you figure out how to convert your idea into a competitive advantage that competitors consider unfair, you'll become the gorilla of the new category. I'm cheering for you.

I wish you The Best on your Adventure!

STARTUP STRATEGIC LESSON: Learn from iPad war and Google Africa

Today is a good day for a classical startup marketing lesson: What can be learned from the "media tablet" war, plus What can be learned from Google in Africa - yes, I said Africa. (Read more in today's Wall Street Journal and Investor's Business Daily).

Here we go.

The media tablet gorilla has been crowned: no surprise, it is Apple's iPad. Gorillas are never dethroned.

But the war for the 2 unoccupied slots as chimpanzees is just starting. Watch Google (Android OS) and HP (Palm OS). They have yet to announce but are most favored  to swamp the pioneers (Archos of France and and JooJoo of Fusion Garage [Singapore]). The chimps will end each up with half the percent share of market of the iPad. The pioneers and followers will constitute the starving monkeys. The basic strategy used by Google and HP will be Offensive (attacking a single weakness in the iPad). For more, read, study and memorize Marketing Warfare by Ries and Trout.

That is a market you don't want to enter as a startup. 

Instead you must move into an uncontested territory. That's a Flanking strategic move. For startups that is the most successful of the basic four strategies.

Here is an example of a giant using Flanking with good results so far: Google in Africa. Aimed at the rapidly rising mobile phone user market (with limited Internet access because that is very expensive per megabyte), Google is spreading map access and related services delivered over Android phones (as well as over PCs). Already 51 countries are mapped and real estate services are early users. This is a move done without loud publicity -- stealth and a sudden launch are central to the Flanking strategy. Time will tell how successful Google is (against IBM, Microsoft, Cisco, HP and China's recent telecom equipment arrivals). It will be fun to watch.

BOTTOM LINE: Startups that win avoid attacking gorillas. Other giants can do that and settle for second place, making a fine profit in the process. Instead, startups that win find an uncontested market, secretly focus on it, prepare and launch suddenly, and focus all resources on becoming the gorilla of the new space.

Test your strategic choice against those criteria. Pick wisely and you'll win. If not, you'll either end up dead or as a starving monkey. Have guts to change if your choice so far is unwise. Picking the right startup strategy is central to your building the unfair advantage it takes to win in this highly intensive competitive global market we live in. You can do it. Others have preceded you to big  wins.

I wish you The Best on your Adventure!