The Ultimate Start-Up Guide

Hard Won Advice from Venture Capitalists

Many of us love to read stories of the beginnings of Apple or Facebook. We imagine what those early days were like and what it would be like to be a part of a small startup that skyrockets to success.

But, of course, statistically most startups fail. Studies show 90% fail in the first two years.

That’s sobering.

 

Why do so many startups fail?

What can the successful ones teach us?

Is there a blueprint for startup success?

 

Tom Hogan and Carol Broadbent founded Crowded Ocean, Silicon Valley’s top marketing firm for startups. They have years of experience working with some of the Valley’s most successful firms. Their new book, The Ultimate Start-Up Guide: Marketing Lessons, War Stories, and Hard-Won Advice from Leading Venture Capitalists and Angel Investors, is packed with the wisdom of their experience working with numerous startups. I recently spoke with them about what makes a successful venture.

 

“Start-ups fail because of lack of execution.” -Charles Beeler

 

Why Start-Ups Fail

Everyone reads about how many startups fail. What are a few of the reasons?

Dog design. According to a recent study of 101 failed startups, 42% cited ‘no market need’ as the reason they failed. In other words, they created their product ‘because they could,’ not because of any perceived market need.

ultimatestartupguidenew2Running out of money.  Obvious but it happens more often than you’d think. Because of parsimony (giving away as little of the company as possible) or optimism (I’ve never missed a deadline in my life), first-time CEOs work from budgets and schedules that assume that everything will go right. It usually doesn’t—and so the founders fold shop.

‘Camel Design.’  If a camel is a horse designed by a committee, a camel product is one where the founders listened to too many people, didn’t trust their initial instincts, and built a product that is a little of everything and compelling to no one.

A single, dictatorial founder. It’s one thing to have a strong vision. It’s another to refuse to tolerate questions or input about that vision, especially when that input comes not just from employees but from the market. One way to track how much of a martinet you’re being is by tracking employee retention:  this may be your first rodeo as CEO, but most startup employees are on their third or fourth.

Underestimating the competition.  Sometimes it’s hubris; other times it’s just not enough time. Either way, most startups don’t respect—or keep an eye on—the competition the way they should.  Give the competition their due:  The analysts who cover your market—and who have probably had nice things to say about the competition—don’t want to look like they’re stupid. Same for the prospects who either own or are considering the competition. So keep your derisive comments to yourself.

 

“Data driven marketing is…one of the best investments an early-stage start-up can make.” -Moe Kermani

 

Translate Failure into Success

How can past failures translate to a positive experience?

It all starts with humility and honesty. Virtually every team has one or more scars from failed past ventures. The key is to admit it to other key team members and then use the lessons learned to avoid making the same mistake a second time. The other element is pattern recognition:  If you can use your past failures to recognize a mistake in its early stages (say, a bad hire), you can take corrective action before the mistake takes root and does damage.

 

“Less is more. If you think you have focus, focus some more.” -Jishnu Bhattacharjee

 

Why Diversity is Important

I love this. Many people think diversity is for more mature businesses, yet you argue otherwise. Why is diversity important for startups? 

Diversity of multiple types is healthy and invigorating for startups, not only to build a strong culture but to build better businesses. All the survey data shows that diverse teams make better decisions and improve profitability. So, just like startups benefit by being able to start fresh at the whiteboard to design a better product or service, we believe startups should try to build in diversity from their founding. We encourage startup founders to focus not only on gender and ethnic diversity, but also to consider hiring staff who bring both big-company and small-company backgrounds and to consider embracing the oddballs and misfits who represent “disruptive” thinkers. When tech titans like Apple, Google, and Salesforce have heads of HR and cross-functional teams chartered to lead diversity initiatives, you know diversity is a big deal, not just because it’s the right thing to do but because it translates into better businesses.

 

“You never really know what the market really is until you go to market.” -Pete Sonsini

 

What is post-launch depression? How do you guard against it? 

45 Entrepreneurs Share Advice: Been There, Run That

It’s not possible to list all of Kay Koplovitz’s achievements, but here are a few highlights:

  • She is the Founder of USA Network.
  • She created the business model for cable networks.
  • She launched the Sci-Fi Channel in 1992.
  • She is the co-founder and chairman of Springboard Enterprises.
  • She was appointed by Bill Clinton to the bipartisan National Women’s Business Council.
  • She has served on numerous corporate boards ranging from Nabisco to Oracle.

So, after reading her recent book, Been There, Run That, I jumped at the opportunity to ask her some questions about her unbelievable career. Been There, Run That includes writing from 45 entrepreneurs who share wisdom on building and launching new ventures.

 

“Creating open teamwork is the best way to encourage innovation.” -Kay Koplovitz

 

Trailblazing through Innovation

Kay, I want to start by saying that I think of you as a business leader.  Your track record and results speak loudly.  But, I am reminded that you’re the first woman to found and serve as president of a cable network, and that makes you an inspiration to many women.  What unique challenges did you face as a woman?

More important than becoming the first women to head a television network, I created the business model for cable program networks, which is based on two revenue streams: advertising and licensing. It reversed the TV model of paying television stations to carry network programs. We collected a fee from the cable systems and also sold advertising. This is the reason so many cable program networks have been successful.

In many ways, you were trailblazing a path, opening up doors for women behind you.  Were you cognizant of that at the time?

Absolutely, and I believe I was a leader for men in the industry as well, as I preceded most of them. Throughout my career, I tried to provide opportunities for women to move up the management ladder. I co-founded Women in Cable, now Women in Cable and Telecommunications, to provide management training and the opportunity to learn to be great general managers. Today, WICT is one of the best training organizations in the industry.

After USA Networks, you turned to venture capital and found that over 95% of venture capitalists were men.  What have you done about this?

I co-founded Springboard Enterprises, a non-profit accelerator for women-led companies in technology and life sciences, in 2000. We are seeking to level the playing field for women-led businesses that need to raise venture capital. As of yearend 2014, we have brought 562 companies to market, 83% of which raise capital and 80% are in business today. Collectively they have raised over $6.6 billion, and 35% have had liquidity events, including 11 IPO’s. Readers can gain great insight from the advice of these wonderful entrepreneurs who contributed to Been There, Run That.

My two partners and I also are launching a for-profit Springboard Fund to invest in companies completing the accelerator program. We have many great companies: Constant Contact, iRobot, Zipcar, Minute Clinic, Viacord, and many more.

What’s the best way to encourage innovation throughout a large organization?

Creating open teamwork is the best way to encourage innovation. Give people permission to experiment by offering them both responsibility and authority to break rules for creative destruction and innovation.

 

“Invest in creating the right culture and you won’t be disappointed in the results.” -Kay Koplovitz