Top Start Up Tips from Mark Cuban

Well this Mark Cuban has seen it, done it and got the t-shirt..

12 Rulles for Start-Ups

Anyone who has started a business has his or her own rules and guidelines, so I thought I would add to the memo with my own. My “rules” below aren’t just for those founding the companies, but for those who are considering going to work for them, as well.

1. Don’t start a company unless it’s an obsession and something you love.

2. If you have an exit strategy, it’s not an obsession.

3. Hire people who you think will love working there.

4. Sales Cure All. Know how your company will make money and how you will actually make sales.

5. Know your core competencies and focus on being great at them. Pay up for people in your core competencies. Get the best. Outside the core competencies, hire people that fit your culture but aren’t as expensive to pay.

6. An espresso machine? Are you kidding me? Coffee is for closers. Sodas are free. Lunch is a chance to get out of the office and talk. There are 24 hours in a day, and if people like their jobs, they will find ways to use as much of it as possible to do their jobs.

7. No offices. Open offices keep everyone in tune with what is going on and keep the energy up. If an employee is about privacy, show him or her how to use the lock on the bathroom. There is nothing private in a startup. This is also a good way to keep from hiring executives who cannot operate successfully in a startup. My biggest fear was always hiring someone who wanted to build an empire. If the person demands to fly first class or to bring over a personal secretary, run away. If an exec won’t go on sales calls, run away. They are empire builders and will pollute your company.

8. As far as technology, go with what you know. That is always the most inexpensive way. If you know Apple, use it. If you know Vista, ask yourself why, then use it. It’s a startup so there are just a few employees. Let people use what they know.

Never Listen to Your Customers

A great quote from technology luminary Alan Kay that every entrepreneur needs to remember: “The best way to predict the future is to invent it.”

I’m working with a company that at one point had a product that was not only best in its class, but also technically far ahead of its competition. It created a better way of offering its service, and customers loved it and paid for it.

Then it made a fatal mistake. It asked its customers what features they wanted to see in the product, and they delivered on those features. Unfortunately for this company, its competitors didn’t ask customers what they wanted. Instead, they had a vision of ways that business could be done differently and, as a result, better. Customers didn’t really see the value or need until they saw the new product. When they tried it, they loved it.

So what did “my” company do when it saw what its competitor had done? It repeated its mistake and once again asked its customers what they wanted in the product. Of course the customer responded with the features that they now loved from the other product.

The company didn’t improve its competitive positioning. It put itself in a revolving door of trying to respond to customer requests. To make matters worse, resources and brainpower that could be applied to “inventing the future” were instead being used to catch up with features that locked the company into the past.

Entrepreneurs need to be reminded that it’s not the job of their customers to know what they don’t. In other words, your customers have a tough enough time doing their jobs. They don’t spend time trying to reinvent their industries or how their jobs are performed. Sure, every now and then you come across an exception. But you can’t bet the company on your finding that person among your customers.
Instead, part of every entrepreneur’s job is to invent the future. I also call it “kicking your own ass.” Someone is out there looking to put you out of business. Someone is out there who thinks they have a better idea than you have. A better solution than you have. A better or more efficient product than you have. If there is someone out there who can “kick your ass” by doing it better, it’s part of your job as the owner of the company to stay ahead of them and “kick your own ass” before someone else does.

Your customers can tell you the things that are broken and how they want to be made happy. Listen to them. Make them happy. But don’t rely on them to create the future road map for your product or service. That’s your job.

Source: http://www.entrepreneur.com

Four Reasons Index Ventures Invested In Grey Area

Earlier this week Grey Area announced a whopping 1.9 million euro series A round from Index Ventures, London Venture Partners and Initial Capital. This is one of the largest single rounds into the Finnish gaming companies in the recent years for sure. What makes this all the better for the whole country and Northern Europe for that matter, is that the financing came from overseas from globally respected investors. Ben Holmes from Index Ventures outlined four reasons why they invested in Grey Area. I think this is a good read for all entrepreneurs to keep in mind if they are looking for venture capital.

The four reasons Ben outlined in the Index Ventures blog post are also shown below:

* Exploding market – The iPhone and Android ecosystems have transformed and democratised mobile gaming. I have written in the past about how fragmentation and the operator channel made the whole mobile app business a nightmare. This is no longer the case, entrepreneurs can access vast audiences by being creative around marketing rather than using the traditional brute force approaches.

* The right monetization model – We have seen with existing investments in Stardoll, Moshi Monsters and Playfish as well as other companies such as Gameforge and Zygna that free-to-play with in-game purchase is probably the most lucrative business model in gaming currently. In-game purchases were rolled out by Apple last year and now a few of the “Top Grossing” titles in the iPhone appstore charts are free-to-play games. I would predict that over the next year that the majority of mobile gaming revenues will shift to free-to-play games.

* Positive early traction. One of the challenges with finding investments in this sector is that there are literally hundreds / thousands of developers writing for iPhone and Android. Those with substantial traction and monetisation tend to be valued stratospherically. Finding something which was early but was already showing its potential was what we were looking for. Shadow Cities fitted this criteria precisely. The early beta data from Finland showed very promising metrics around both engagement and monetisation. The app fairly quickly became the Top Grossing game in Finland soon after launch. Now just the rest of the world to conquer …

* Great team – Just four people when we first met, but already achieved a lot in a short timeframe and on a shoestring budget. If you want to see how effective entrepreneurs will be once they have money, see how much they can achieve without financing – that is always the best pointer.

From: http://www.arcticstartup.com/2011/02/25/four-reasons-index-ventures-invested-in-grey-area

Can a start-up raise too much money?

Some wise words from a VC guys and a games industry guy on money, money, money….read on…

“Together with Nic Brisbourne of The Equity Kicker / DFJ Esprit, I am writing a series of 50 questions you should ask when raising venture capital. We expect the series to run for a year, after which we will collate the answers into a book. We view this as a collaboration, so please comment to help make this series even more useful.

Can there really be such a thing as a startup raising too much money?

Of course there can. The history of investment is littered with example of companies that raised too much capital, were feted by the press, government and investors and then imploded before their products had made a dent on the market.

From the games industry, the most recent example is RealTime Worlds, which raised $104 million and closed a few weeks after it launched its magnum opus, APB. During the dot com boom, there were many examples, but perhaps the most egregious was Boo.com, which raised $135 million, spent it all within 18 months and went bust without having really launched a product at all.
Why is having too much money bad?

Having too much money is bad because it stops a startup from fulfilling its primary function: to iterate its way to product/market fit.

In a previous post, I explained what product/market fit means, and why it is so important to a startup. I hope it will quickly become apparent why too much money is detrimental to the process.

Finding product/market fit is about iterating. It is about changing the product, the business model or even, in its most radical form, the entire target market, in response to feedback from customers.

I’m not for a moment suggesting that a startup CEO needs to respond to every crazy idea of every customer. He or she needs to use face-to-face conversations with customers, detailed analytics, feedback from the sales and marketing teams and every tool in the workshop to understand where the perfect confluence of product, market and team occurs.

He or she then needs to reshape the company to deliver on that confluence. That can be a very scary process.

ngMoco CEO Neil Young pivoted away from paid-for games on the AppStore because he believed that he could not achieve meaningful scale as a games business given the rapid downward trend in pricepoints. He abandoned a business model that was currently profitable for his company based on his belief (and copious evidence) that transitioning to a business model that was free with microtransactions satisfied the market need much better – and would be much more profitable. Eighteen months later, he sold ngMoco for $400 million to DeNA of Japan.

The concept of pivoting may be overused in 2011 (see this New Yorker cartoon), but it is a useful one. It is a phrase that allows startup entrepreneurs to say not “we failed” but “we tried, and learned, and are trying again.”
Change is scary, and money makes it unnecessary

Companies with lots of money don’t need to pivot. They can tell themselves that the problem is with the sales team, or with customers not understanding the product, or with usability issues.

They tinker under the hood instead of understanding the market. They spend money on a sales force to pitch, instead of forcing the CEO into the marketplace to hear from his prospects why they are not buying. They execute, execute, execute.

Against a business model that does not work.

Raising money is a great thing. Having lots of it is a wonderful comfort. But for a startup trying to find its place in the market, it can be disastrous.”

Start-up Advice from Mark Suster

Some wise words on start ups courtesy of Mark Suster (sucessful entrepreneur you know!)…

“I usually tell people that everything I learned about being an entrepreneur I learned by F’ing up at my first company.  I think the sign of a good entrepreneur is the ability to spot your mistakes, correct quickly and not repeat the mistakes. I made plenty of mistakes.”

Below are some of the lessons I learned along the way.  If there’s a link on a title below I’ve written the post, if not I plan to.  The summary of each posting will be here but the full article requires you to follow the links.

For now it’s mostly an outline for me to follow (in no particular order).  I’ve now started so be sure to look for links.  If you want me to do one sooner rather than later leave a comment.  If the topics seem interesting to you please sign up for my RSS feed or email newsletter on the home page.

Disclaimer: I ran two SaaS software companies.  My experiences come from this.  I can’t say they’re applicable to all businesses but I think many of the lessons will be applicable to most tech firms.

1 – Should you start a company or go work for someone else? – In this post I talk about whether it’s time to “earn” or to “learn” – a guide on thinking about when to start a company.

2 In the Beginning (most common early mistakes) – Many founders make mistakes in the first 12 months of business that cost them dearly as they build their companies.  These mistakes revolve around intellectual property, founding team members, initial product that is built and market validation.

You also need to consider founder scenarios, ownership, prenuptials and stock options.

Learning to work with lawyers.  Start early, build relationships, make them a part of your business.

3 Do you still need a business plan to start a company?  Conventional wisdom amongst uber-startup CEOs and VCs is that you don’t need a business plan.  Just launch and iterate.  They’re wrong.  While you shouldn’t write a Word document, a good financial model is a must.  This post tells you why.

4 Choose your investors carefully.  There are many bad investors out there – I call them VC Seagulls.  Read here to see some of the signs to be careful about.

5 Hiring at a Startup or Looking for a Cofounder? Know thy Weaknesses –  Before you build out your senior (or even junior) team you need to inventory your strengths / weaknesses.  Be honest with yourself.  And don’t hire 5 clones.  Plug your weaknesses.

6. Don’t Drink Your Own Kool Aid – There is a hype curve in any company.  Press, journalists, analysts, friends and family can reinforce the sense that you’re “killing it.”  As Public Enemy says .. Don’t Believe the Hype.  The only way to build a sustainable customer is to listen to customers, partners, suppliers and employees.  This post talks about how the Kool Aid effect happens.

7 Save Your Spin for Someone Who Cares – How should you best use your PR with VCs or business development partners?  This post covers the topic of why PR is so important but so often misplayed.

8. Good Judgment Comes from Experience, but Experience Comes from Bad Judgment – You can read lots of books or blogs about being an entrepreneur but the truth is you’ll really only learn when you get out there and do it.  The earlier you make your mistakes the quicker you can get on to building a great company.

9. Beware Rocket Fuel

10. Naked in the Mirror – Most companies have growing pains and moments of intense self doubt.  It is compounded because you read your competitors press releases yet you still stand naken in the mirror every morning.  This post talks about this issue and how to get over it.

11. Punch above your weightclass – Startup founders are often tempted to bring in the heavyweights early.  This is very frequent in sales because it seems like the easiest solution when you’re not hitting your numbers.  I argue that you should always hire people who aspire to be one level above their last job (e.g. one “weight class” higher).

12. Turn your Organization Inside-Out – Many companies are too insular.  You need to get all of your input from the outside and have that inform your company and product direction.

13. JFDI – What separates entrepreneurs from those the offer tons of advice but sit on the sidelines?  Entrepreneurs guide themselves by the Nike slogan, “Just Do It.”  They know that they need to move the ball forward everyday and make decisions with incomplete information.  They know that at best 70% of their decisions are going to be wrong and they find ways to correct their direction.  They JFDI.  This post explains.

14. MVP

15. Elephant, Deer and Rabbits – Many companies make the mistakes that I made in trying to serve multiple customer segments early in your company’s existence.  In this post I argue that most companies should be Deer Hunters but at a minimum narrow your range and hunt in one segment.

16. Embrace Losing – I hate losing.  I really hate losing.  But you need to embrace losing if you want to learn.  Channel your negative energy.  Revisit why you lost.  Ask for real and honest feedback.  Don’t be defensive about it – try to really understand it.  But also look beyond it to the hidden reasons you lost.  And channel the lessons to your next competition.

17. You’re Most Vulnerable Just After You Win a Deal – Competitors have nothing to lose.  Internal enemies at your client play their cards more openly.  Thing can get ugly.  Never celebrate until the ink on the contract is dry and the check is in the bank.

18. Crossing the Chasm

19. When you’re a Hammer Everything Looks like a Nail

20. Flipping Burgers – In some companies the CEO does not have the complete grasp of every function of his/her company.  They essentially outsource the thinking on technology, sales, customer service, whatever.  This is always a warning sign to me.  This post covers the lessons I learned the hard way, from trying to run a burger chain without first flipping burgers.

21. Crocodile Sales

22. The End of the Mexican Road

23. Beg for Forgiveness

24Lies, Damn Lies and Statistics

25. Cutting into Muscle

26. Rolling out the Red Carpet on the Way Out the Door – Many companies wait until their star performers quite before offering up serious incentives to stay.  There are only 4-5 great people who make a difference in any startup.  Know who yours are and roll out the red carpet while they’re still inside the castle.

27. Boards & Board Meetings

28. Advisory Boards – Many first-time entrepreneurs form advisory boards and grant 0.25-0.5% equity to each adviser.  Should you?  This post talks about why equity for advisers should only come if they write a check and if you do set up an advisory board what the best way to run it is.  Also a quick note on how VCs view advisory boards (summary answer is – we’re cynical).

29. The Burning Platform – There are 3 steps you need to solve to effectively sell your products. 1) Why buy anything? 2) Why buy mine? and 3) Why buy now? The first two are easy – it’s the third that drives faster sales conversions. This post covers the three questions of sales.

30. Avoiding Death by a Thousand Cuts

31. Easy Money vs. Pure Strategy

32. Missionaries vs. Mercenaries

33. The Fallacy of Channels

34. Demo booths

35. International Licensing

36. Founders taking money off of the table.  Controversial topic but in many scenarios this aligns the incentives of founders and VCs allowing both parties to “swing for the fences.”

37. Do you need an MBA to work in a start-up? Many careers require MBAs (investment banking, strategy consulting and private equity to name a few), but my opinion is that if you want to follow a start-up career an MBA isn’t necessary and considering the cost and debt you’d incur could actually make you more risk averse and a less likely entrepreneurs.  The post talks about the “5 C’s” of an MBA.

38. Give in graciously

39. Swim with the Sharks without Being Eaten Alive

40. How to (re) approach people at conferences – Many people swarm a panelist after he/she finishes speaking.  Other people turn up at conferences and just “wing it.”  In this post I talk about how to maximize your attendances at conferences or trade events and meet the right people.

41. How to present at big meetings without going down a rat hole.  Big meetings are hard to manage.  Unless you have a sponsor to help you manage the process and know how to deal with detail merchants, naysayers and silent partners you’ll find yourself in big trouble.

42. The Yo-Yo Life of a Tech Entrepreneur: We all find ourselves in the habit of working late, traveling too much and eating like crap.  In your twenties it’s manageable.  In your thirties it starts to catch up with you.  When you hit 40 life changes.  You need to get serious about finding a way to bring health & fitness into your life as an entrepreneur.  This is MY story.

#MIDEM MidemNet Wrap-up: Day One

Stuart Dredge has been typing his little hands off….

The first day of MidemNet is done, following a mix of panels, speeches and startling industry moustaches. Here’s a rundown of what we, the official Midem Blog and our event partner Digital Music News have been publishing. What did we learn from day one?

The silver linings of cloud music
The cloud music session was sparky, as Sony Music, mSpot, simfy and Catch Media debated the challenges and opportunities of the cloud. Catch boss Harry Maloney picked a fight with mSpot’s Daren Tsui over licensing (or the lack of it in mSpot’s case), while simfy’s Christophe Lange stressed the importance of user engagement in building a successful cloud offering. Meanwhile, Sony’s Thomas Hesse had a request for Apple. “If you’re an iTunes user now, wouldn’t it be nice if you could stream or re-download all the music you’d bought on that to all your devices. Wouldn’t that be fabulous? And we’d wholeheartedly endorse that…”
Liveblog – http://tinyurl.com/6j8cgqp

Vivendi boss expects Spotify US launch
Vivendi CEO Jean-Bernard Levy called for more anti-piracy legislation, had warm words for ISPs, and held UMG up as a model for cost-cutting effiency in his keynote. And Spotify? “We expect Spotify to be able to find agreements with all its partners that it could launch as early as possible in the United States, but there are other streaming and subscription services available to American consumers. At the end of the day, the market is very complicated…”
Liveblog – http://tinyurl.com/68r563p

OK Go going HTML5, while Imogen Heap gets crowdsourced
This morning’s artist panel saw OK Go’s Damian Kulash and solo artist Imogen Heap talking about their social media success. Heap is planning to write songs with the help of fans, who’ll provide the audio samples, lyrics and video. Meanwhile, OK Go is working on an HTML5 music video with Mozilla, the company behind the web browser Firefox.
Liveblog – http://tinyurl.com/6xqufhz

Saul Klein gives Index Ventures’ view on music
Index Ventures has invested in firms including Last.fm, Songkick, SoundCloud, Sonos, DoubleTwist and RjDj. He talked about the company’s “Jekyll and Hyde attitude towards dealing with content owners”, praised startup culture in Europe (particularly London), and said music services shouldn’t get hung up on going global too quickly. “Look at Spotify in Sweden. It is the number one source of income for the labels, not just digital, but physical as well… Pick your market, win big and then go back and say ‘hey, what are you going to do for me now?’. Don’t obsess about this regional, global, intergalactic rights. Focus on a market, kill it, then go to another one!”
Liveblog – http://tinyurl.com/6hqpeow

Sony takes Music Unlimited more global (and to iPhone/Android)
Sony launched its Omnifone-powered Music Unlimited service last month in the UK and Ireland, but today it went live in France, Germany, Spain and Italy too. Sony Network Entertainment boss Tim Schaaff promised a US launch this quarter, and promised that it won’t be restricted to Sony devices, with plans to launch apps for iPhone and Android. The firm is certainly ambitious. “Our studies show that about 85-90% of the consumers aren’t really involved in the digital music revolution at all. That customer base is a customer base that Sony communicates to every day.”
Liveblog – http://tinyurl.com/6eaeh4f

Vodafone has 100k paying music subscribers
The Foursquare / Vodafone session was a big disappointment today: why no questions for Foursquare co-founder Naveen Selvadurai about, er, music? The audience were left to draw their own conclusions about how artists and labels can use the social location service. However, co-interviewee Lee Epting from Vodafone at least dished out some stats: “We are targeting one million paid subscribers for music in this calendar year, and in the UK we’re already in excess of 100,000…”
Story – http://tinyurl.com/6y5nc8p

Mark Mulligan thinks music services need more SPARC
What? Social, Participative, Accessible, Relevant and Connected. The Forrester analyst outlined the keys for success for new music services in his speech this morning. Also included: the claim that “YouTube is music’s killer app”; the fact that ownership matters much less to 12-15 year-old ‘digital natives; and that user experience is key. “Content is no longer king. Its throne has been taken by experience. Yet how many music services really focus on experience?”
Liveblog – http://tinyurl.com/657wqkg

Metric’s manager called for less doom’n’gloom
Crystal Math Management’s co-founder Mathieu Drouin predicted an industry shakeout this year, and criticised the woes around music sales. “We have to stop reading press about how bad the music business is. It’s a disruption that is not healthy for us… We have to just turn that noise down, because it really is misleading… Mindshare of the press is coming from people running multi-national corporations.”
Liveblog – http://tinyurl.com/6e8qr7o

Music Ubiquity talks are… ubiquitous
The five-minute talks in between sessions this year focused on music ubiquity, with Terry McBride, Gerd Leonhard and Ted Cohen among the speakers. McBride warned of the dangers of the ‘black cloud’ for artists, while Leonhard offered some examples of social commerce from outside the music industry. Meanwhile, Cohen warned the industry about dragging its heels (again). “What do music fans want? They want interoperability… We need to get to complete ubiquity. We need to start looking at the pie, not the platform.”
McBride – http://tinyurl.com/6abwr9h
Leonhard – http://tinyurl.com/6fr4txv
Cohen – http://tinyurl.com/67je2yv

ON DIGITAL MUSIC NEWS…
Tommy Boy’s Tom Silverman reckons Midem was 60% labels, 30% publishers and 10% other companies ten years ago. “Now, it’s 10 percent publishers, 5 percent labels, and 85 percent ‘other’.” Meanwhile, DMN has also picked up on the meme of Midem so far: Ted Cohen’s moustache.moustache. More seriously, it reflects the view of many audience members for the Licensing Crash Test session: “the licensing process in Europe – and worldwide – remains insanely complicated, and full of endless negotiations, demands, MFNs, and lurking litigants.  Just like before.  Just like ten years ago.”
Silverman – http://tinyurl.com/6zecp9s
Tache – http://tinyurl.com/6erdxos
Licensing – http://tinyurl.com/5rvtdep

50 questions: What does an LP look for in a venture capital fund manager? – Games Brief

Few entrepreneurs take the time to realise that VCs are often under the same pressure as startups: they have to find capital, satisfy their investors and keep up with a changing market.

In this week’s 50 questions post, Nic Brisbourne explains what Limited Partners, the source of funds for many venture capital firms, look for before they will invest in a VC team.

Read the full answer at The Equity Kicker.

50 questions: What does an LP look for in a venture capital fund manager? – Games Brief.