Nesheim Online Blog

STORYTELLERS GET STARTUP MONEY: What to say and why

“What do I need to get money for my startup idea?”

“Why am I not getting some of that unicorn money?”

“What presentation gets angels and VCs reaching for their checkbooks?”

Those are all good questions, asked often. 

My response may surprise you, it is very simple: You have to be a great storyteller to get your startup money.

Sure, you need a good idea to begin with. And a plan to make money. Plus an able team to launch the business.

But without a great story, your efforts will be in vain.

I know that telling a story sounds simple, too simple. Yet in reality, telling a story that captivates listeners is quite a challenge.

Serial entrepreneurs agree. I’ve worked with them for days, weeks and months crafting their stories. All with a singular goal: Get the money.

Investors also agree about the importance of storytelling. For instance, just the other day Mark Suster of Upfront Ventures blogged on this issue. His message: “I’m talking about making your company memorable by describing it with a narrative that people will later remember.”

ACTION FOR YOU

Here are tips for crafting your story, things serial entrepreneurs use with success.

• Present a story rather than a plan. Stories excite, plans are boring. Think of being a kid when your mom says "How about a fun, exciting story?"
• Use emotions to color your story. Facts are important, so are numbers. But for you geeks, be sure to add emotions. Put your soul into the presentation, let your passion energize your story.
• Focus your message on what is WOW! about your startup. What is exciting about your idea? What makes it a game changer? That is the thing investors are looking for in your story.
• Ask “What is going to be memorable about what I am saying?” Aim to leave an indelible impression on the viewer. The single standout that makes you remarkable. It's very crowded, you have to work creatively to stand out and be remembered.
• Engage the viewer to build rapport. Believe it or not, investors are human. Grab their attention and keep it, from the first moment of contact. Mini stories, episodes, about you as a person, your struggles in life, goof-ups, stumbles, all make you a human.
• Be creative and bold, wisely. Use your imagination, apply those good wits in your head as you craft your story. Avoid the ridiculous, present what is remarkable, believable. Be confident, be bold, like a great storyteller.
• Have fun! Enjoy your time with your viewer. That makes the difference between a business presentation and a remarkable story told.

BOTTOM LINE: Thinking like a storyteller will boost your chances of getting the money. People like stories. Great ones engage the viewer, bring listeners into a rapport with the teller. Focus on delivering what is amazing about your idea -- That WOW! about your idea that is remarkable and worth investing in. And aim for delivering a takeaway that leaves a unique, recallable impression in the mind of the viewer. Then you’ll stand out from the crowd. You’ll be well on your way to building an unfair advantage.

I wish you The Best on your Adventure!

JOHN

CAN YOUR STARTUP “PROVE IT can succeed”? To get your seed money learn how serial entrepreneurs demonstrate future success.

“Do I have to have customers to get seed financing?”

“How many users are required to get our first investor money?”

Great questions, often asked lately.

Let’s begin with what’s in the news these days. Blogs, tales told at lunch, angels and VC panels sound like “When you’ve got a million paying customers, send me an email.” That is pretty discouraging to first time entrepreneurs lacking million dollar savings.

Good news: Nothing could be farther from the truth.

Real life – as well as startup life -- is filled with a wide range of possibilities. So let’s examine several, then you will be able to decide for yourself what to do to get your first financing.

TIPS FROM SERIAL ENTREPRENEURS AND THEIR VENTURE INVESTORS

• Your track record: Who you are counts for a lot.Yes, people known to the investor have an advantage. They will be favored, even if they lost all the investors’ money in a prior startup, yet emerged respected, wiser, and ready for the next (better) startup.
• And people who are “startup famous” indeed have an advantage. Meaning they have lead or participated in the early stage of a startup that got headline news for a while – and crashed in a burst of world-wide publicity. You don’t have to be a founder of such a startup, simply being there early increases your attraction to investors.
• Prior startup experience counts, even if the enterprise was not famous, even if it died. Startup experience counts for a lot, even if you were there for a short time. It’s much better than just large corporate experience, even if it was at Google recently.
• Intrinsic knowledge of the space your startup is in adds value. This is tricky. Investors want something radically different, not something better. So knowing the taxi and limo business helps, but you’ll also need to have a game-changing bplan to get your seed money (Uber).
• Are you a first timer? How can you demonstrate that you have what it takes?
• As an encouragement, many of today’s startups that turned into giants were founded by people who “didn't know better” (Facebook, Pinterest). They just started and figured out how to get it right.
• Also, in your prior life you can point to projects and events you have started from zero that concluded well. In college years, in your personal life, there can be many to point to.
• Leading groups of people you recruited is powerful. Startup angels and VCs will look you in the eye as you talk to see how you might form and direct a group of the first employees.
• Proof of concept can be done without launching a service on the Internet. And it can be a demonstration that one key, critical aspect (e.g. the artificial intelligence coding works) of the technology.
• Working prototypes can be used to test a sample of end users and get their (hopefully enthusiastic) responses. Such “surveys” count for a lot when investors are looking for “evidence” that your idea is more than just an idea.
• Customer references can come in the form of early, carefully selected users of your service or product. Whether they are alpha or beta users is less important than what they’ll say to investors who call on them.

Finally, there is a vital soul central issue you need to understand:

• Intuition of venture investors is your ace card to play as a first timer. I’ve found the world-class angels, VCs and marketing winners make decisions based on how their intuition reacts to what you say and show during your meetings with them. They are the bold venturers who backed the startups that became great, many lead by first timers with little more than an idea in their head. Sure, you will be in a stronger position if your startup has advanced beyond simply an idea, yet do not be daunted just because you are a first timer with little more than an idea. These great investors got great by seeing what greatness might come out of a strange idea, often presented by people like you. How you prepare for and tell your story is critical to getting money from such investors. I've got lots of tips about doing that in my blogs.

BOTTOM LINE: First time entrepreneurs can boost their unfair advantage by doing some simple things before contacting venture investors. And while startup experience does help, some of the most amazing giants have grown from the seed idea of a first time entrepreneur. That might be you.

I wish you The Best on your Adventure!

JOHN

TIPS FROM SERIAL ENTREPRENEURS FOR FIRST TIME STARTUP FOUNDERS: Learn from others avoid their stumbles

Today I'll share with you some excellent questions I received recently from a very bright and budding entrepreneur.

 

They address issues central to the plans of first time entrepreneurs. My responses are based on the experiences of serial entrepreneurs and venture investors I've worked with.

 

The timing of he questions is just right, as I have just finished my annual checkin with angels and venture partners who focus on early stage financings of startups.

 

Read, ponder and act. Get started on the right foot.

 

FIRST TIMER:

Solo Founder

- Will this make getting VC funding much harder? I've read that this is a red flag for many VC's.

- How important are co-founders from a funding perspective?

- Is it practical to attract the 2nd, 3rd, 4th, etc person after seeded?

 VETERAN: Solo founders with experience usually get funded without a core team - yet most have formed the handful that constitute a fine group to start the new enterprise. First timers should take time to form a core team, avoid grabbing strangers to fill out the group. Spend the time to get to know people well before you need them. Yes, that will slow you down, but without it you'll be at a great disadvantage.

 

FIRST TIMER:

Seed Funding

- I'm under the impression that software based start-ups should have everything working before soliciting.

- Is a simple prototype sufficient? Or do you believe it's worth finishing most of the product? (It would take me much longer to do so.. especially without a co-founder)

 VETERAN: Experienced and respected serial entrepreneurs do not need a working product, though that will help negotiate more favorable terms for the founding core team. First timers should strive for at least proof of concept. But remember that if you have the next idea for an Uber-class startup, you may be funded without a working example -- if your potential venture investors think boldly enough.

 

FIRST TIMER:

Attracting a Co-Founder

- I'm always looking for people better than me... not worse.

- I don't mind having co-founders from the get go... I just want to make sure they're really good.

- I'm looking for a technical co-founder and it seems to me the best ones are happily employed and compensated and the not so great ones are the ones available.

- Do you have any recommendations on attracting the best? Know of any great folks that might be interested?

VETERAN: Avoid strangers. And relatives. Invest time to get to know others. Qualify them over lunch and talks discussing what great ideas need to be started. When you mutually agree on an idea, it will be a mutual one that all of you will shape and transform. There is no shortage of either great people or early stage money. But there is a shortage of great ideas worth investing your time or money in. Find people and investors at entrepreneurial events in your area. Alumni meetings are excellent as well. Every city has some organized events, as do schools in your area. And contact founders of existing startups. Visit, chat, find. It works.

 

FIRST TIMER:

Capital

- When the time is right, would you be able to refer me to some good venture investors in my city who specialize in seed stage funding?

VETERAN: First plan your campaign to raise capital. It is a campaign.That means lots of time and effort. Treat it as seriously and thoroughly as the launch of your first product. Research angels and investors, find people who know your market and industry. Look where they have invested. After that, then feel free to seek introductions from people you know.

 

BOTTOM LINE: Apply the wisdom of experienced entrepreneurs and you'll get ahead, start off on the right foot. Remember that it is not hard to get started, but it is very hard to succeed. Avoiding the painful lessons of prior founders will help you a lot. That will become part of your unfair advantage. That will attract angels and VCs to you.

 

I wish you The Best on your Adventure!

JOHN

IS THERE SEED STARTUP MONEY OUT THERE? Part 2: Look in special places

"Is there startup money out there?" I responded to in my recent blog. 

Today I'll focus on "Look in special places" for your seed money.

• Fresh is first - look for it. There are a lot of fresh, brand-new venture firms out there looking for seed round deals. Focus on them, hold off on the giant VC firms until you have found a dozen of these eager new faces. Each is attempting to be different, to stand out from the crowd. Look for what each focuses on to find the right one for your startup.
  
  EXAMPLE: Xfund focuses on seed investments in startups founded by students, current and recent graduates. HQ in Boston with office Nr 2 in Silicon Valley.
  
  
• Crowdfunding syndicates soar - rise with them. This is a hot funding wave you might find works for your deal. An angel announces a deal in your company, gathers several well-to-do investors within a limited liability corporation and the LLC invests as a single investor in your startup. Fewer headaches for you with lots of angels investing separately.
  
  EXAMPLE: Take a look at what angel Gil Penchina is doing with syndicates. AngelList explains more  for you on its site. There are many more syndicates available - you can see many on the daily list at EquityNet.
  
  
• Catch the wave and ask to ride. Watch daily announcements of Seed and Series A financings. One way is via the free daily email from Crunchbase. That filters fresh deals by round, something difficult for you and I to easily find and filter. You can see what is hot, in what city and who got the money from whom. Most importantly, you'll see names of angels and venture investors, people you can reach out to.
  
  If you want to know more about a deal, email the founder CEO. That's a private club you belong to as a budding startup founder. Most often you'll get a response to a question or two. You might receive an invite to phone or Skype.
  
  
• Be Prepared - live by it. Can you do your elevator pitch? Right now? You never know when "that person" shows up, the potential investor you need right now. So don't get surprised, get your elevator pitch polished, stick it into your brain and practice it on friends, in the shower, and staring at the mirror.
  
  For tips on great elevator pitches, do a site search on this blog site (upper right) using "elevator pitch". There you'll learn from the best of the best, the serial entrepreneurs.

BOTTOM LINE: There is a lot of seed and A round capital out there looking for your startup. You can find it. It takes a bunch of effort, there is no shortcut. Serial entrepreneurs know how critical it is to find the right investors for the early stages of their fledgling enterprise. Its a key element they use to build an unfair competitive advantage. You can do the same. Get started, right now!

I wish you The Best on your Adventure!

JOHN

FAST STARTUPS: Are they smart and modern or foolish and ancient?

"John, tell me more about doing fast startups, you know, the ones I read about that get going in someone's kitchen, are wildly successful, worth billions overnight."

That's a very frequent request I have been hearing over recent years. From my Cornell University students and budding entrepreneurs. 

It happens near the top of each boom-to-bust wave. Personal Computers. Dot-Com(Bomb). It's ancient history. Returned in a fresh form. Sounds new -- but isn't.

So what about doing a fast, "modern", startup?

Here is my response.

• It is easy to start a startup. It is very hard to succeed. You and I can get started in ten minutes. However, it is extremely hard to survive, let alone thrive.
• Getting cash is easy. Getting enough is very hard. Contests, incubators, checks (small) from angel investors seem easy. But how much in total will you need to succeed over five years?
• Contests to win small amouts of cash ruin your secret. Why tell the world about your great idea before launching your first product? It's dog eat dog in the real world, why let someone else in on your super idea?
•  You can't do much with $25,000 from winning a startup competion. How many engineers can you hire? How close to launching your product or service will you be?
• Great startup investors put money into founders who are well prepared. They don't give the keys to one of their Ferraris to a teenager. "Give me a million dollars and let's see what happens" is not how they invest. Serial entrepreneurs come to venture investors ready with all the details in their heads for a complete plan on how they will succeed in the short and long run. That's how they became successful, serial entrepreneurs.
• Great, famous, startup icons did it the hard way. They took time, lots of it, to think before starting. Yes, even the ones you thought got started easily and quickly, and then succeeded wildly.
• Bloggers and the media are deceptive. You read and hear about stories of success that are made up by people. They only talk about the rare exceptions. They leave out all the hard stuff because entrepreneurs don't want that broadcast over Twitter. It's hard to get the hard stuff revealed.

BOTTOM LINE: Real entrepreneurs prepare will for a hard slog over years of unknown events. They are determined to succeed in the face of incredible opposition. They are realists. Have done their homework. Thought through masses of details. Closed ranks with a handful of outstanding people. And know they will have to change, morph, pivot, re-invent the first idea many times on the path to victory. That's how they succeed.

So if you are eager to get going, think I (and serial entrepreneurs and veteran venture investors) strongly recommend you through what I have suggested.

Then go talk with real entrepreneurs. They will (very privately) tell you about the hard stuff. What you hear will bring you into the real world of startups. All the rest is fantasy.

I wish you The Best on your Adventure!

JOHN

WHY WOULD A GIANT LIKE DISNEY PAY $500 MILLION FOR YOUR STARTUP? Learn from Disney's acquisition of Maker Studios

HEADLINES TODAY in Ad Age:

"For $500 Million, Disney Gets a YouTube Network and Another Shot Online".

The story sorts through the strategic reasoning for Disney to buy Maker Studios and for the founders to cash in with Disney.

Disney you know about. Maker Studios is one of the largest, most watched YouTube channels.

Sounds great, doesn't it? Wow! $500 million paid by revered Disney for your startup!

How would you do that? Let's quickly sort through the "Why?" so you can apply that to your startup plans.

• BOOMING NEW MARKET: The new name for the category is "short-form online video".
• PROVED VIEWER AUDIENCE: Maker Studios has around 25 million viewers. Disney online around 1% of that.
• NO GORILLA YET: Maker Studios is neck and neck in the race to become the Number One, dominating leader of the new category. With around 25 million viewers, Maker Studios stands out, but music video service Vevo has 10 million more. And lots of competitors are eagerly in pursuit.
• SAGGING MARKET: Disney's Ideal Customers (kids) are increasingly watching entertainment on parents' iPads rather than tvs.
• FAILED ATTEMPTS TO COMPETE: Disney's attempts to use YouTube are a flop, leading to recent layoffs of 700 employees. "Disney has had a hard time finding the success online that it has historically enjoyed in film and television."
• FAILED ATTEMPTS TO ATTAIN PROFITABILITY: "At the same time upstarts like Maker Studios have attracted the young audience Disney craves, while struggling with tough online-ad economics."
• BUSINESS MODEL FROZEN AND DEPENDANT: Maker Studios pays YouTube 45% of its advertising revenue. The company hopes giant Disney can negotiate better terms.
• HOPE: Can the combination figure out the recipe and deliver Grandma's secret sauce? The killer app? That something that crushes the competition?

FIRST-TO-GET-IT-RIGHT STILL OPEN OPPORTUNITY:

Some combination of "what it takes" remains unknown. That amazing "WOW!" is not yet obvious. Will entertainment expert Disney plus online technology creative Maker Studios figure it out? That is the prime question? Stay tuned, it will be exciting! Your lesson here: Quite obviously, your startup is worth more before a gorilla exists.

WHAT SECRET SAUCE DOES MAKER STUDIOS HAVE?

To get to 25 million viewers in a fresh category, the startup must have something with WOW! in it. The leaders have proved themselves as a harmonious team that executes well. That is worth a great deal (if Disney can keep them on the job).

The specialness is more than technology. Take a look at the channels offered by Maker Studios. They include real actors, real characters. They are delivered in creative ways that appeal to targeted market segments (Ideal Customers). Your startup has to have that in order to attract the attention of a giant potential buyer.

All of the above points to the success to date of the ability of the founders to build an unfair competitive advantage. In its current status, I find the articulation of the WOW! of Maker Studios to be rather weak. Perhaps clever Disney people can figure that out in brainstorming sessions with Maker Studios. Your lesson here: You are worth a lot more to a buyer when you can point to and quicky articulate that special combination that spells unfair advantage.

WILL DISNEY RUIN THE STARTUP?

Giants have a knack for messing up an acquired business (recall what happened to MySpace). Disney avoided that dread result after acquiring Pixar. Their track record is not filled with many acquistion failures (no one is perfect). This deal could also be successful in that manner.

BOTTOM LINE: When a giant needs a startup, it might be your opportunity to sell your business to them. When you need a giant, it might be time to sell. The resulting combination must deliver something that individually the participants could not. Consider the fundamental need (of each party), the size of the potential (together), and the people doing both the buying and selling (how will your startup work after acquistion).

Then test your startup's condition (or plan) to see if you could attract a giant (pick one) and convince it to write a very large check for your tiny new enterprise. When you can figure that out, you'll demonstrate that you (like serial entrepreneurs) know how to build an unfair advantage, put a high monetary value on it, and find the ideal buyer for it. Your predecessors did that successfully, you can too!

I wish you The Best on your Adventure!

STARTUP TIME TO SUCCESS: Rap Genius tells the tale

"How long will my startup idea take to get to traction, wild success or even just get going?"

That's a frequent and important question for every first time entrepreneur.

I recently found a useful example in the history of Rap Genius who rose from an exchange of ideas between college friends to a $15 million venture capital financing.

Here is the shortcut story in the Wall Street Journal about the co-founders' march from idea to blue-chip VC deal. I'll summarize below.

RAP GENIUS

1. 2009 Not-A-Business Starting Point. Two college friends, Tom Lehman and Mahbod Moghadam shared their curiosity about the meaning of a lyric in Cam'ron's rap song, "Family Ties."
2. Leads to starting a blog. The two friends used it to explain the lyrics of Cameron's next album.
3. Third friend added to blog team. Ilan Zechory joined the team.
4. Friends make founders. All three knew each other as Yale classmates, sharing similar values.
5. Expanded coverage. Began commenting on other singers and poets.
6. Standout feature emerged. It let users annotate texts. Contributors could highlight a line or word, and type in an explanation. When other users clicked on the highlighted portion, the explanation would pop up in a box.
7. 2010 Discovered bigger potential. After opening song comments to the wider public, participation grew beyond founders' expectations.
8. Mid-2011 growth surge. One million unique hits per month.
9. Added compelling features. Now users were reading and rating other people's annotations and adding comments of their own.
10. Saw larger potential. From Supreme Court cases to the Bible to shareholder letters, said Lehman.
11. Decided to make a go of it as a business.
12. 2011 started cascade of seed money. Y-Combinator $170,000, later celebratory investors actors Ashton Kucher and rapper Nas. Led to $1.8 million seed round total. (also see BONUS below).
13. 3 Years to big VC Money. Founded in August, 2009, the big $15 million VC deal arrived October, 2012 from the hot VC firm, Andreessen Horowitz. Read carefully the VC's comments in the linked item (Hint: look at number 6. above and then read the link.).
14. Growth rockets. 2012 traffic doubles to 4.9 million unique visitors per month, with 25 employees.
15. No revenue yet. As of August 2013 the business model consists of "may eventually consider targeted ads and corporate partnerships.
16. 2013 further expansion planned. Founders thinking about the art world and other things.
17. 4 years and counting . . .

I've discussed this kind of startup before with you. Rap Genius is an outstanding example of what I consider to be a "spontaneous startup." They have special characteristics, including consuming a long time and lots of experimentation and trials, seeking to find that "WOW!" in what they have stumbled onto. If this is your idea of doing a startup, dig into this story and those blogs. "Experience is cheapest second hand."

BONUS

And for an intimate look at money raising and startup valuations, read the blog about the inside story of their financings, "How Rap Genius Raised $1.8M in Seed Funding Without Knowing What We Were Doing."

BOTTOM LINE:

Non-deliberate starting points may lead to an eventual startup business. Do not expect overnight success, rather, a long number of years of seeking to be "first to get it right." That patience and deliberate effort can lead you to discover the magic that gets many people excited about what you are offering. When you can move down that path and discover your WOW!, being First to Get it Right, then you'll be well on your way to building your unfair competitive advantage.

I wish you The Best on your Adventure!

MANAGING A STARTUP (3): Uncertainty and Wealth of a startup contrasted with a large corporation

Compare managing in a startup to that in a large corporation to boost your chances of launching a successful startup.

===============================================================================

Let's look at the twins, Uncertainty and Wealth. Then we'll examine the so-what for you the startup leader.

UNCERTAINTY

Startups are very risky, very likely to close the doors in a few short years. They have lottery odds of getting to a successful initial public offering. They must grow at nearly explosive rates of expansion in order to reach a much higher level where the risk is much lower.

In contrast, large corporations are high in certainty, expected to continue existing indefinitely. They grow very slowly, with three percent a year growth considered a fine year.

WEALTH

With the startup's high risk comes the potential for huge financial wealth as a personal reward. The dollar amount is so high that it is staggering to comprehend. In less than a decade, a founder CEO can become a billionaire and the first twenty employees very rich.

Large corporations grow very slowly. The executives make a lot of money by incrementally increasing the size of an already huge business. Employees have to climb a ladder to a very narrow top. Along the way, most make most of their money via wages and cash bonuses. Few ambitious employees achieve rank of the top executives. Most settle for earning less than a million dollars a year, typically in the hundreds of thousands of dollars as a middle level manager, perhaps of a large group of people responsible for a family of products.

SO WHAT?

Because of the staggeringly high risks and immense demands for rocket propelled growth, serial entrepreneurs have learned to be very careful who they hire. Accordingly, here are some of the things they look for in potential employees for their startups:

• NOT people seeking to get rich. They are self-centered, whereas a startup is very team and family operated. Wealth measuring is part of the large corporate culture. It is a byproduct to startup founders.
• IS a person eager to make the startup a success rather than themselves. They work hard to help make the new enterprise an amazing business. That other-mindset keeps everyone focused on building that first product/service idea into a world-class winner.
• NOT risk reducing people. That is how large corporations continue existing decade after decade. Those giants get into big trouble by making a bad strategic move. They are the proverbial bulls in a china shop. Thus the focus is on risk reduction. It is central to all MBA education. It works great for world-class corporations. But not for startups.
• IS a person undaunted by high risk. They see high risk and yet are willing to accept even the consequences of failure of the new enterprise. They are willing to put all their money on one bold move. They don't hedge their bets. They are creative, flexible and outstanding at learning to do new things every hour in chaotic circumstances.

BOTTOM LINE

It is not easy to switch from thinking like a large corporate person and into the mind-set of the startup entrepreneur. But it is required. Central to that change is an understanding of the twins Uncertainty and Wealth. People seem to fall naturally into one of two pools of talent. One is right for startups. It's your job to find then and leave the others working at the large corporations where they will do fine work. Learning to recruit the breed of person for a successful startup is what serial entrepreneurs do best. It is central to how they build great startups and construct unfair competitive advantages.

I wish you The Best on your Adventure!

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

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

It it good news or bad news for the CEO?

SITUATION

"Can Foursquare Check-In to Adulthood?"

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

Those are headlines from Bloomberg Business Week.

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

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

THE STARTUP

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

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

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

LESSONS FOR STARTUP FOUNDER CEOS

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

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

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

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

I wish you The Best on your Adventure!

DISECTION OF A SUCCESSFUL START-UP: A 17 year old’s adventure from idea to success.

Headline: WSJ LINK “At 17, App Builder Rockets To Riches From Yahoo Deal”

Nick D’Aloisio sold Yahoo his technology and company Summly for “undisclosed millions” as reported by the Wall Street Journal on March 25, 2013. Some say $30 million.

It is a special story of a kid with an idea that turns into riches. In it are classical “How To” lessons for you and your start-up ambitions. Here we go:

• Serial entrepreneur. Nick “previously created several apps, including Facemood, . . . and a service that helps people discover new music.” Start-up experience is valuable, for founding a successful start-up it is priceless.
• No pedigree. Nick was not born into greatness. No famous or super-rich parents. No entrepreneurial family-trail. No fabulous university degree. No Silicon Valley location. Just an idea and determination to make it succeed.
• Talented founder. Clearly Nick is the center of attention, for good reasons, primarily for his invention and also his entrepreneurial savvy. The founding CEO of a start-up is what investors focus on. Venture investing is a people business.
• Tiny burn rate. Nick lives at home, works at home. It does not take huge financing to do a great start-up.
• Bold seed funding. SRI International, the revered Silicon Valley R&D firm got involved with Nick’s technology (related to artificial intelligence) and has some ownership. More high profile investors got involved. Zynga’s CEO Mark Pincus, Horizon Ventures (the investment firm owned by Li Ka-shing of Hong Kong). Then came actor Ashton Kutcher, Stephen Fry, and Wendi Murdoch “who collectively gave him a total of $1.5 million in funding.” Start with high quality investors to lead you to more of the same.
• Clear use of funds. The $1.5 million came after he his initial app began getting attention. The fresh funds were for getting code written and patents applied for. Very simple, very clear, very focused. Not overly ambitious plans.
• Focus. Nick put his further education on hold, without abandoning plans for a future university education (perhaps he could buy one as his next move?). Serial entrepreneurs realize doing a start-up is best without significant distractions.
• Fresh category. The new market Nick focused on is “news-reading technology.” That is a new name for a new space, a new market. It is a unique name. People are following it as it develops meaning and commercial endeavors. Selecting (or inventing) new category increases chances of big success.
• No Gorilla. The new market is not yet dominated by a strong market leader. It has no Gorilla yet. Summly had a clear playing field ahead of it. Serial entrepreneurs know it is not wise to attack a market leader. Instead it's best to flank into uncontested territory where there is a good chance to become the Gorilla of the new market category.
• User savvy. Nick’s app attracted users, quickly. Knowing what triggers positive responses from your Ideal End User is critical to success.  That is one reason youth often “gets it right” with youthful technorati (like kids hooked on mobile phones). Nick clearly got it right.
• Strategic partners. In addition to SRI, Nick connected with News Corp. “which signed a deal . . . so that its content could easily be integrated with the [Summly] app.” Wendi Murdoch, an investor, is wife of Rupert Murdoch, the CEO and Chairman of News Corp.. One move leverages another, adding power to the market positioning as leader of the new category.
• First-to-get-it-right. Not "first market mover."  First is death for start-ups. Pioneers get arrows in their backs. Nick had many predecessors trying to get news reading summary products. All were trying to figure out how to attract large numbers of end users. Nick followed them and became "First-to-get-it-right.” Serial entrepreneurs know first is to be avoided, and that first to figure out what sensationalizes end users becomes the big winner.
• Morphed and renamed. First name was Trimit, launched in 2011 as a service for summarizing news. In late 2012 it was re-launched as Summly, reflecting the morphed focus of the refined app. Start, modify, change, shift, alter, focus, launch. So don’t sweat the first name of your start-up, you will change it.
• Clever name. Choice of the new name for the app reflected elements of brand marketing with names, a move that boosts competitive power: (1) alliteration (sum-lee, as in goo-gill, face-book) and, (2) suggestive, bringing meaning and value to users of the product. Clever names add significant value to a new enterprise, especially its branding potential.
• Buzz boomed. Nick “became a minor tech celebrity, and his efforts garnered numerous print-media articles and TV appearances.” Nothing beats a start-up worth writing about, blogging about, Tweeting about. In fact, Nick says Horizon Ventures “contacted me out of the blue” after Trimit began to receive accolades. PR tsunamis are the dream of marketing-minded entrepreneurs, exactly what they spend creative juices to make happen.
• Buyer enthused. Yahoo sees a clear fit for the technology. They see a broader application to more of what the company offers to its end users. The focus is on applying news-reading technology. In fact, the Summly service will be shut down. A large vision for the acquisition made it go down easier, quicker and with a higher price tag for the selling start-up.
• Wise sale. Nick said “a number of companies approached us” about a possible acquisition. Big corporations have staffs looking for start-ups that might be suitable for purchase. Buyer Yahoo has made six since its latest CEO has come aboard. Nick chose with criteria important to the future success of the technology he had created. And he sold, rather than strive to build a large company from this idea. Serial entrepreneurs know when it is a great time to cash in their chips.
• Quick success. From 2011 to March 25, 2013 is very fast for any start-up to succeed. It is rare. Even more rare is the large financial value for such a new enterprise. The chances of repeating this time-to-wealth are historically very slim.

BOTTOM LINE: Dissecting a successful start-up like Nick's Summly reveals a lot of the right things going on. When you can see them in new enterprises (or see them missing), you'll be well on your way to building your unfair advantage.

I wish you The Best on your Adventure!