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Learning From Failure: One Startup’s Story of What Went Wrong

cgseo — Mon, 26 Apr 2010 23:05:00 +0000

Devver , maker of developer coding tools and TechStars 2008 graduate, announced last Monday that it would be shutting down after being active for nearly two years. News of a startup closing up shop is never a fun thing to hear about, but fortunately many lessons can be gleaned from the experiences of the entrepreneurs. Today, co-founder Ben Brinckerhoff provided just such lessons with an insightful blog on the Devver journey and why he and co-founder Dan Mayer are choosing to move on. Sponsor An unfortunate truth about startup culture is that a lot of the most valuable lessons are learned when entrepreneurs fail to heed them. Some notice their mistakes early on and can pivot their products and business toward a more successful future, but sometimes they don't realize their mistakes until its too late and there is nothing that can be done. This was the case with Brinckerhoff, Mayer and their startup, Devver, which they say failed to focus enough on one of the most important parts of building a startup: customer development. As Brinckerhoff points out in Monday's blog post, the company assumed they had found their minimum viable product (MVP), and as a result focused more on product development than listening to customers' needs. "You can teach a hacker business, but you can't make him or her get excited about it, which means it may not get the time or attention it deserves." - Ben Brinckerhoff "Our mistake at that point was to go 'heads down' and focus on building the accelerator while minimizing our contact with users and customers (after all, we knew how great it was and time spent talking to customers was time we could be hacking!)," writes Brinckerhoff. "We should have [been] asking, 'Is there an even simpler version of this product that we can deliver sooner to learn more about pricing, market size, and technical challenges?'." Both Brinckerhoff and his co-founder are "technical founders," which means their specialities are on the development side, not the business side. The only other person the pair hired to help out, a fellow software developer, also fits into the technical side of the startup. Brinckerhoff says this may have been one of the hurdles that led to the downfall of the company. "Looking back, it would have been to our advantage to have a third founder who really loved the business aspect of running a startup," writes Brinckerhoff. "Having solely technical founders is non-optimal. You can teach a hacker business, but you can't make him or her get excited about it, which means it may not get the time or attention it deserves." Brinckerhoff also adds that having a split team located in different states contributed to the company's struggles, but it seems to me it was more of a hassle than a reason for failure. Split teams are actually growing in popularity and probability for success, as we discussed earlier in the year with companies like Blank Label and chocri . Devver undoubtedly had issues with its split setup, but its likely that it didn't contribute toward its closing as significantly as the other errors. Regardless of this issue, its clear that the Devver team learned and shared some valuable lessons about the importance of customer development. As Steve Blank noted during his presentation at last week's Startup Lessons Learned conference, startups shouldn't be too eager to product management before customer development. Devver may have jumped the gun a bit in terms of over developing their product, so learn from their mistake and remember to develop your customers before throwing the kitchen sink at them. Discuss

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Learning From Failure: One Startup's Story of What Went Wrong

Steve Blank On How Startups Evolve Into Large Companies

cgseo — Tue, 20 Apr 2010 16:00:00 +0000

Yesterday I spoke with lean startup guru Eric Ries who is hosting the Startup Lessons Learned conference this Friday in San Francisco and at live simulcasts around the world. Ries says he considers entrepreneur turned educator turned public servant Steve Blank to be his mentor in the startup world, and Blank will be among Ries' lineup of speakers at this week's conference. Blank will give a talk he's titling, "Why Accountants Don't Run Startups," (or Customer Development 2.0 on the conference site ) which details the major differences between startups and large companies - a speech whose slides Blank posted to his blog via SlideShare late last week. Sponsor According to Blank, the line he draws between smaller startups and larger companies is based around the business model. Startups, he says, exist in the state where they are searching for a business model, and large companies are the result of finding and executing that business model. The reason he calls out accountants in the title of his talk is that as startups transition into larger companies, their less conventional methodologies become more traditional, and that's when accountants are needed. Early on, startups, in his opinion, should rely on such metrics as customer acquisition cost, viral coefficient, customer lifetime value, and monthly burn rate. These types of measurements become de-emphasized in larger companies which focus on balance sheets, cash flow statements and income statements, Blank says. Parallel ways in which startups transition into larger companies include customer development giving way to product management, and agile development becoming engineering. Early-stage companies, searching for a business model and for customer traction, will test hypotheses, discover their minimum feature sets, and pivot their focus if things don't work out, he says. Product management takes over once a viable model is found. One of the major stepping stones toward becoming a successful larger company, Blank says, is discovering the winning model or process and focusing on making it work over and over. Entrepreneurs begin their startups with a hatred for processes, but learn to love and implement processes as the company grows into a profitable business. Passionate focus transitions to focus on the company's mission, and ultimately to the execution of that mission. Blank wraps up his presentation by drawing the same lines between two types of education, business school and entrepreneurship school. Business school, he says, is far better suited for teaching students to run larger companies, while startups need founders with better entrepreneurial training. These ideas merely scratch the surface at what Blank is likely to dive into during his 45 minutes presentation Friday afternoon, so be sure to check out the event if you're in San Francisco, or find a live simulcast to attend in your area. Photo by Flickr user dux_carvajal . Discuss

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Steve Blank On How Startups Evolve Into Large Companies

Comment Innovation: An Open Door of Startup Opportunity?

cgseo — Thu, 15 Apr 2010 17:00:00 +0000

Back when I was in graduate school getting my masters in journalism and mass communication, I worked on various "lab projects" which were challenges faced by media organizations that they wanted to tackle but didn't have the means or the resources to do so. So basically, the students at my school were a think tank for the local media. One of the first issues we were tasked with investigating was finding a new way to allow comments for online news stories to be more efficient and less offensive. Sponsor The problem faced by most online news sites is that the anonymous nature of the Internet makes it very easy for vulgarity and off-putting comments to be posted, and for some sites, these types of comments pervade their site. Many of today's popular sites with comments have integrated systems to where readers can vote down bad comments while promoting good comments, which helps the bad stuff to be filtered out. Others have tried blocking fowl language with asterisks or by deleting the comment automatically, but this has only lead users to find unique ways of spelling their beloved curse words. Some startups, like Disqus , have made it much easier to manage comments, and identity tools like OpenID and Facebook Connect have helped to lower the amount of anonymous commenters on the web, but anonymity is a fundamental cornerstone of Internet culture. Or is it? In a recent New York Times article about how many news sites are starting to remove anonymous commenting, Arianna Huffington of The Huffington Post said she thinks that anonymity is losing its once exalted position atop the foundation of the Web. "Anonymity is just the way things are done. It's an accepted part of the Internet, but there's no question that people hide behind anonymity to make vile or controversial comments," says Huffington. "I feel that this is almost like an education process. As the rules of the road are changing and the Internet is growing up, the trend is away from anonymity." Fred Wilson of Union Square Ventures says there is plenty of room for innovation within comment boards. Wilson uses Disqus on his blog and has some suggestions for features they could include to make the commenting experience better, but he believes one of the ways to innovate in the space is to introduce game mechanics into commenting. "Game mechanics will reward the kind of behavior the community wants and will punish the kind of behavior the community does not want," writes Wilson on his blog. "The anonymous commenter who has valuable information but can't publish in their own name will be rewarded. The anonymous commenter who leaves a hostile name calling piece of crap will be punished. And the comment thread and community will be better off for it." Entrepreneurs that strive to create a truly innovative product usually first start with a problem that needs solving, and comment systems are certainly a problem that needs solving. Therefore by some transitive property, innovation in the commenting space seems to be an open door of opportunity for startups to walk through and offer a solution. Are there other companies like Disqus that may be looking to disrupt the traditional comment system, or do you have an idea for making the process more user friendly? Let us know your thoughts on the state of comments and how you would change them in our very own comments section below! Disclosure: The New York Times is a syndication partner of ReadWriteWeb. Discuss

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Comment Innovation: An Open Door of Startup Opportunity?

Get Quick Impressions of Your Latest Product Iteration with Concept Feedback

cgseo — Mon, 12 Apr 2010 21:00:00 +0000

For most startups in the early-stages of development, much of the building process includes repetitions of prototyping, testing, receiving feedback and iterating the product several times over. The toughest part of this process isn't building or making changes, it's getting that valuable feedback on where your product could be improved. Concept Feedback , a simply named online service, wants to help your startup with constructive criticism from its quickly growing community of over 5,000 designers, developers, marketers and entrepreneurs. Sponsor The process at Concept Feedback is pretty simple: users can upload their concept work for the community to view, other members comment and provide their opinions and feedback for the concept, then the original user can upgrade their product, and even resubmit for further feedback. Companies can choose to post a "premium concept" which will be more visible on the Concept Feedback homepage and for which they can offer cash rewards for the most constructive comment or piece of advice. Most of the items are site are full web or logo design mockups, but there were a few rough wire-framed sites scattered through the concepts. Other, less popular entries, include films, posters, business cards and a whole lot more. For a small startup team looking to get some fresh sets of eyeballs on their latest project, Concept Feedback could be an excellent resource to do so. With most of the feedback based around design and aesthetics, startups may still need to look elsewhere for direct usage and feature feedback for their product. The truth is, with this type of feedback, you want people taking a deep dive and playing around with your product for some time before providing their opinion; Concept Feedback seems geared at providing mostly visual feedback, so usability and functionality reviews are much less common. There are several ways of gathering feedback from actual users of your site; one such service we mentioned in January allows companies to automate phone surveys and displays the results as charts and graphs. But if your goal is to show off the latest design iteration of your site, Concept Feedback is a great place to unveil it and receive some educated opinions to make it look its best before launch day. Discuss

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Get Quick Impressions of Your Latest Product Iteration with Concept Feedback

How to Create a Killer Explainer Video for Your Startup

cgseo — Thu, 08 Apr 2010 21:00:00 +0000

One of my favorite blogs to peruse now and then for amazing advice on web design is Webdesigner Depot which produces excellent in depth guides for various design related issues. Monday they produced an excellent in depth post that provides a step-by-step breakdown of best practices for creating a screen-cast for a Web page , a feature many startups like to include on their homepage to familiarize new visitors with their product. Sponsor This article focuses on the creation of live screen capture videos of someone demoing the website, but I think a lot of this same methodology can go into creating any sort of introductory video a company uses to explain their site. The first step, as with any project, is to plan, and the first questions you need to ask yourself before you even start to storyboard include "What do we want to accomplish with this video?" and "How detailed do we want to get?" Once you figure out the content, length, tone, and medium of your video, then move on to storyboarding. Storyboarding is an important step in creative processes such as these because it is much easier to visualize the end product before putting any real technical effort in. Filmmakers don't just storyboard as a way to outline their plot, they use it to do early edits to the film before wasting any time shooting stuff that will never make it past the cutting room. By getting a storyboard of your production down, you may realize it's too long, too boring or not informative enough; you can determine these flaws by showing the storyboard to anyone unfamiliar with your product and then use their feedback to make alterations. "The more detail in your storyboards, the easier the editing stage will be," writes Stu Green, author of the post on Webdesigner Depot. "Your storyboard will help you stay organized throughout the whole process, and if you ever get lost while producing the video, the storyboard will get you back on track." If you plan on doing a straight screen-capture demo, don't just wing it; make sure you script out what you're going to say as you demo the site. Additionally, spend a few extra bucks on a nice microphone to record your voice - quality audio goes a long way in video production. Of course there are options that don't include a voice-over, but as Green points out, having one provides that human aspect to your video that will better connect with viewers. Green provides a healthy list of options for software to record you screen-capture videos with, including Screenium , Jing , CamStudio , iShowU and Captivate . One nice option that I find is overlooked these days is the screen capture abilities included with the standard version of Quicktime on Mac OS X Snow Leopard. For a low budget product, Quicktime can get the job done, but if you wan't something a little more pro looking, one of the aforementioned applications will help also. As the article continues, Green goes over techniques and methods for creating an interesting and captivating video, including things like pacing, editing techniques, and how to promote the video on the website. But if you'd rather not go through all this trouble on your own, there are a number of production houses that specialize in these types of videos. One I always come back to when talking about these types of videos with friends is Common Craft , which you may know for their "In Plain English" series of videos. While they make videos to explain complex ideas "in plain English," the artists at Common Craft also will create custom videos for companies. A visit to the homepage of Dropbox displays a video explainer of the product created by Common Craft in their easy-to-grasp paper cut-out stop-motion style. Other clients of theirs include Google, Microsoft, LinkedIn, Meetup and Intel. Another production studio that makes similar videos is Epipheo Studios , which I learned about through watching a video explaining how Yelp's review filter works. Epipheo is also responsible for some of the Google Chrome OS and Google Wave videos you've seen, as well as videos for doubleTwist, and Zoho to name a few. Videos such as these can go a long way in helping to rope in new visitors to your site. These can also be useful for an early stage company looking for a quick and unique way to explain their concept to potential investors, though I sometimes think it is better to be able to explain things through words as well. That being said, don't rely too heavily on these videos as pitch material, but rather as a link you can forward to hopefully garner interest in your idea. Be sure to check out the full Webdesigner Depot article by Stu Green , as it is brimming with useful information regarding screen-cast production. Discuss

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How to Create a Killer Explainer Video for Your Startup

Lessons From Yelp’s Ordeal: Retaining Customer Trust is Key

cgseo — Wed, 07 Apr 2010 17:00:00 +0000

Here at ReadWriteStart, we've mentioned the importance of credibility as an entrepreneur when meeting with venture capitalists and potential investors, but it is also important to carry that credibility forward into your company as you interface with customers. Amid rumors that it was extorting businesses by offering to de-emphasize negative reviews in return for adverting purchases, social review site Yelp announced Monday that it would be "lifting the veil" on its review system and removing controversial features in hopes of securing customer trust. Sponsor Yelp features a review filter that sorts through reviews of local businesses to determine which is more trustworthy and places the top ones on the business' profile page. Some have claimed that Yelp was helping businesses pick the best reviews to show if that company was purchasing advertising on Yelp, a clear case of extortion that the company has vehemently denied , calling the claims a "conspiracy theory." Now when users visit a business' Yelp profile, they can choose to look over the reviews the filter has automatically reviewed by clicking a link near the bottom of the page near the pagination links (not exactly the easiest feature to find, I had to search for "filter" to find it). Yelp has put a CAPTCHA pop-up between the profile and the filtered results to keep robots from crawling the filtered data. Perhaps this is an attempt to prevent them from figuring out how to game the system. When I tested this new feature on one of my favorite downtown Phoenix restaurants, LoLo's Chicken and Waffles , I saw some similarities among the 25 filtered reviews. A handful were from users who live in other states or who are what Yelp calls "less established users," and some were either very short, or filled to the brim with Internet abbreviations and misspellings or slang. Others, whose content was hidden from view, had managed to violate Yelp's review guidelines or terms of service, which I can assume means a variety of things including profanity or obvious spam. Yelp is also discontinuing the use of the "Favorite Review" feature, which Yelp packed with advertising deals to businesses. Yelp CEO Jeremy Stoppelman says they decided to remove the feature in hopes of eliminating any confusion. "Despite our best efforts to educate consumers and the small business community, myths about Yelp have persisted," writes Stoppelman. "[The "Favorite Review" feature] led some people to the wrong conclusions about whether businesses could control the review content on their page. (They can't.) So, to eliminate the opportunity for that misconception, we've eliminated the feature." By allowing users to go under the hood and see filtered results, Yelp is, I believe, taking a significant step in the name of transparency and openness. While they aren't revealing any special algorithms for how they determine what makes trustworthy reviews, they are responding in a timely and appropriate manner to the continued allegations of foul play. Regardless of the merit of these claims, Yelp seems bent on securing the trust of their users, a practice every startup should mimic. Also it is important to remember that a certain level of transparency is attractive to users, but not too much. There is a boundary between what should be shared with the community and what should be deeply guarded company secrets, such as fancy algorithms or the inner workings of the site's major functions. Users can trust a company more when they feel they have some sort of insider's view of the company through partial transparency. Simply blogging about the company's activity is sometimes enough to satisfy this need, but other times is may be appropriate, as Yelp has done, to incorporate features which help to underscore the product's attempts at truth, honesty and validity, if those are major facets of your business. Discuss

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Lessons From Yelp's Ordeal: Retaining Customer Trust is Key

Why You Need to Be Developing for the iPad Right Now

cgseo — Mon, 05 Apr 2010 21:00:00 +0000

On Saturday Apple let the public get their hands on their newest creation, the iPad , setting off a flood of hype and media coverage which has likely yet to reach its peak. Yes, this is yet another post about the iPad, and my apologies go to those who are tired of being choked by the frenzy of stories surrounding the iPad launch, but a few things I learned from this weekend might come in handy for undecided developers. Sponsor Personally I tried to avoid the iPad hype this weekend, and not because I'm not a fan of Apple products or because I have a specific disdain for the iPad; I tried, and failed, to avoid the hype because I believe I underestimated its potential impact. This is just part of the reason I believe any developer even contemplating the idea of making an iPad application should do it, and do it as quickly as possible . Here's why. There Aren't That Many iPad Specific Apps Yet When I first joined Facebook in 2004 it was still very small and very young and I could remember being able to page through the less than 100 groups that existed on the site. Then it was easy to either find a group you wanted to join or to create one and gain a large membership. Now, the network has hundreds of thousands, if not millions of groups and finding the ones you actually want is much harder. The iPhone has gone through this same process. When the App Store launched, only a few thousand applications were on it, making searching for apps easy and making the potential impact of new applications much larger. Now, as we know, hundreds of thousands of applications clog the App Store and make searching and discovering new applications exponentially harder than before. The same thing will happen to the iPad, which means now is the time to jump on the train. A current search of the App Store for iPad apps turns up just over 3,200 applications, a fraction of the number of iPhone/iPod Touch apps which will likely pass 200,000 later this year. While the iPad does run these other apps, there is a dearth of iPad apps, especially those that are not just scaled-up versions of their iPhone predecessor. The time has, obviously, never been better for app developers because right now with so few iPad apps, the probability of being discovered early is much higher. The Apple Buying Culture Wants Your App People don't love Apple for their low prices; they willingly hand over hundreds, if not thousands of dollars for the company's various products. The culture of the people who buy these products has taught them that price is not the main motivation behind why they buy something, while at the same time making them more willing to hand over their cash in micro-payments for individual games and applications. From the iPod to the iPhone, iTunes and the App Store have bred a new a customer willing to pay $1.99 for music, or $2.99 for an app they've never tried without hesitation. I know I've done it before, and I should feel worse about it but I don't. I've spent a few bucks here and there on applications that I used only a handful of times but I don't get angry about it. Honestly, my music purchases are much farther scrutinized than my app purchases. For better or worse, we've been taught to accept the throwing away of a few bucks here and there, and app developers have been cashing in on that for a while now. The other opportunity around this buying culture for the iPad is that people will likely pony up a few extra dollars for each app on average. While developing an iPad app may not be twice the effort it takes for an iPhone, the customer will likely be willing to pay $1.99 for an app that was $.99, especially just after launch. If I had an iPad right now, I'd want to test out the best applications on it, and some of those apps are likely to cost as much as $9.99, but I would likely still buy them because, hey, I just spent $500 on a device, what's a few extra bucks? The Hype Window Is Big, But Not Too Big The hype over the iPad has just begun, and it will only get bigger as more people discover what it can do and start being stared at by strangers on the subway. The hype will continue later when the 3G version of the iPad launches, though it will not be quite as large as this weekend's surge. The 3G launch will likely get the media buzzing about it again, and it will help the hype live longer than normal, however, that window of excitement could close this summer. New MacBooks and new iPhones are expected to be announced, if not launched, this summer, and they could likely steal a majority of the spotlight away from the iPad, especially if the mythological creature that is the "Verizon iPhone" does in fact become a reality. Apple will likely do everything in its power to keep the hype surrounding the iPad up until the holiday season when the company does its best business, by then, however, there will be a lot more iPad apps than there are right now. This Thing Is Likely Bigger Than Most Expected Originally analysts had estimated that between 200 and 300 thousand iPads would leave shelves this weekend, but Gene Munster of Piper Jaffray revised his guess to between 600 and 700 thousand after seeing the hoards of people waiting in line Saturday. Numbers aside, the impact of the device before its launch speaks volumes to its potential from here on out. Several media companies announced they would be developing special no-Flash sites specifically for iPad browsing, and others said they would be providing HTML 5 video capability in anticipation of the device. All the while, several outlets, like WIRED and the Wall Street Journal announced they were working on iPad applications for viewing their content. After Apple's past success with the App Store on the iPhone and iPod Touch, it's no surprise that these companies are jumping on board even before the iPad is in customers' hands; they recognized the importance of early adoption and being in the store at launch. Popular technology journalists have given mostly positive reviews of the device as it seems actually seeing, holding and using the device speaks louder than just reading, or hearing about it. Personally, I didn't think the launch would be this big, but it has certainly been another success for Steve Jobs and Apple. That being said, the reasons to develop on the iPad pile much higher than those not to, so if you're even considering it, do it. Do it now. Click here to see ReadWriteWeb's full coverage of the iPad's launch . Discuss

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Why You Need to Be Developing for the iPad Right Now

Harvard Grad on Why MBAs Stumble Off the Blocks

cgseo — Fri, 02 Apr 2010 17:00:00 +0000

We've talked now and then about college programs that are making strides to provide students with entrepreneurial training , but the Harvard Business School (HBS) has so far not come up in our discussions. This might seem odd that one of the top businesses schools in the nation doesn't gather much attention from things like The Princeton Review's ranking of entrepreneurial programs , but one HBS grad may have an answer to that puzzle. Sponsor Stu Wall , co-founder of the startup Postabon with an MBA from Harvard, recently wrote about some of the reasons that he thinks cause MBAs to make mistakes when trying to form a startup. The biggest obstacle in their way is that through their years of education, MBA students are taught to meticulously plan their businesses, but nothing can substitute from actually getting your hands dirty. "With three months and ~$10K, we created a bare-minimum website and iPhone app that allowed us to iterate daily based on consumer feedback. No amount of time in Baker Library would have substituted," writes Wall. "Building a product will allow you to identify a viable strategy, iterate, and prove your team can win. Research, formatting and nicely worded emails are a prerequisite but by no means a differentiator." Does this mean that no startup ever got funded without a working demo or beta phase product? Probably not, but the point here is that the amount of discovery and business education you give yourself by actually building a product and testing it trumps anything you can learn from a lecture or a book. I would assume that at some point during his Harvard MBA education Wall had some sort of "lab" experience in which he was tasked with actually creating a business, but I can't be sure. If he did, it may not be likely that the experiments they ran were in the realm of startups, but they could have been. The point is, Wall seemed to learn a lot more about forming a startup simply by doing than he thinks he did from school. Another pitfall he sees with MBA students is that the culture implanted into the minds of most business school students doesn't jive well with startup culture. By this he means that MBAs spend tens of thousands of dollars on an education as an investment toward a future with a high paying career, but that startup culture is a different kind of road to success than they may have expected. "By the time we're thinking about career decisions, many have a 'what will you do for me' attitude," writes Wall. "Entrepreneurship is the truest form of meritocracy where 'credentialing' counts for nothing. Be humble and cognizant of your weaknesses, and put your passion for idea show (as opposed to your $$ aspirations)." Discuss

Twine CEO to Startups: Be Modest With Your Money

cgseo — Thu, 01 Apr 2010 17:00:00 +0000

The semantic web is one of the leading trends we track here at ReadWriteWeb, so it was big news to us earlier this month when Evri announced it was acquiring Twine creators Radar Networks . Following the announcement, Twine CEO Nova Spivack wrote an inspiring and lengthy farewell blog post detailing the acquisition, and the story behind the development and growth of Twine. Towards the end of the post, Spivack outlined some lessons for budding entrepreneurs based on what he learned through his startup experience. Sponsor The number one piece of advice he suggests is to raise as little funding as possible from venture capitalists, and to stick with revenue funds, bootstrapping or angel funding to get by. Based on Spivack's experiences with raising VC funding, he believes the conditions and strings that are attached to it aren't worth it if the company can get by without raising any funding, especially in the current economic situation. "It is no easy task to get a startup funded and launched in this economy," he writes. "The odds are not in your favor -- so play defense, not offense, until conditions improve (years from now)." Part of playing defense, he says, is to curtail spending as much as possible - a suggestion that goes hand-in-hand with the modesty of raising as little venture capital as necessary. Spivack urges startups to avoid quickly spending and expanding upon bloating their bank account with investor dollars; instead, he argues for responsible saving and planning for unexpected downturns and crashes. "Assume the market will crash -- downturns are more frequent and last longer than they used to. Expect that. Plan on it," writes Spivack. "And make sure you keep enough capital in reserve to spend 9 to 12 months raising your next round, because that is how long it takes in this economy to get a round done." One of the things we hear VCs look for in potential investments is traction, but Spivack, interestingly enough, says traction is not always a sure-fire bet for funding and success. He says VCs are more concerned with finding a company that is producing revenues preferably at a break-even level - something he attributes to an evolving VC landscape. "Venture capital investing has changed dramatically -- early stage and late stage deals are the only deals that are getting real funding," writes Spivack. "Mid-stage companies are simply left to die, unless they are profitable or will soon be profitable." Spivack provides a number of other lessons he learned from his time with Twine, and be sure to read his entire post for a touching story behind his company. For now, note his most important lessons regarding modest spending and modest fund raising. A lot of startups enter the scene looking to become as flush with cash as possible, but in some cases, with some entrepreneurs, having too much money can be a bad thing. Discuss

Dealing with Rejection: Entrepreneurs are from Venus, VCs are from Mars

cgseo — Tue, 30 Mar 2010 21:00:00 +0000

Last week we discussed how no matter how intriguing your startup is to an investor, they may still decline to get involved or look further at your company simply because it's not a fit for them. While it is important to understand that different investors have different needs and motivations, it is equally important for both parties to know how to correctly take the next step and handle the rejection in the right way. Sponsor Foundry Group investor Brad Feld recently wrote an article for Entrepreneur Magazine in which he explains that when he turns down an email pitch, the worst thing the would be entrepreneur can do is ask for a referral. The interesting thing to note here is that Feld actually wrote about this very same topic on his blog back in 2007 , so obviously, it's still an issue he is seeing three years on. "In networking seminars, classes and sales conferences around the world, people are told some version of 'if you get rejected by someone, ask them for a referral'," writes Feld. "This has never worked for me when dating. (After being rejected, I don't recall saying, 'I know you aren't interested in me, but do you have any friends that are?') I've never really understood why people think this works in a business context." As Feld articulates in his posts on the matter, the venture capital community is a close-knit group that places a high amount of trust in one another; by asking an investor to refer you to another VC, you are effectively asking them to endorse you. "Good VCs are careful with introductions because they want to make sure both parties view the introduction as valuable," says Feld. And just as entrepreneurs need to know how to take rejection, VCs need to know how to dole out that rejection. Feld was originally prompted to write on the subject back in 2007 when Fred Wilson wrote a piece titled, " Saying No ." According to Wilson, honestly is the best practice when it comes to turning down pitches. "I've tried every way to say no and my belief is the truth, no holds barred, is the best approach," writes Wilson. "If you don't think the entrepreneur can run the business, tell them that. If you think the market is too small, tell them that. If you think the competition is too tough, tell them that." Not all VCs take the time to respond to every single one of the hundreds of pitches they receive on a monthly basis, but for those who do, they should try to inject as much honesty into their reply as possible. For the entrepreneurs on the other side of the table, take your rejection for what it is, and don't push back for a referral. Remember to not take rejection personally, the whole "It's not you, it's me" mantra is actually true in some investor rejections. And don't forget to look on the bright side of rejection , as Bijan Sabet suggests. Sabet says that had he not been turned down for his first job application, he may not have found himself where he his today, both professionally with becoming an investor, and personally with meeting his wife. Discuss

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Dealing with Rejection: Entrepreneurs are from Venus, VCs are from Mars