2 Mental Tricks That Will Make You a Better Entrepreneur

This week at StartupYard, our current batch of companies has been in the tall weeds trying to finalize their marketing and messaging for our press launch, which went off last week.

The cliché expression for the feeling they are experiencing is “jumping off a cliff and building your wings on the way down.” A version of that quote is often attributed to Reid Hoffman, who uses it to describe entrepreneurship generally. In fact, the quote originated with the science fiction author Ray Bradbury, in a review of the National Air and Space Museum in Washington D.C.

In a way that makes much more sense. The quote describes inventiveness and forced creativity. It can be the realm of the entrepreneur, but it is more generally the realm of anyone creative.

The reason I mention this is that a founder can be both very strong in creativity, and still very unconfident in their ability to creatively communicate with customers. That’s what my job with them is all about.

Creativity and Empathy

This week I’ve done two workshops with our startups. One on “Storytelling,” and the other on “Customer Personas.

To me these are essentially the same topic. Stories are the way that the human mind invents and creates the future, and how we understand our past. It is about how every “character,” or person undergoes an arc, and how those arcs interact and impact each other. Building personas, in the way I see it, is how we examine our assumptions about people, formulate tests of our insights, and discover ways to empathize with and understand those who use our products.

Here we’re going to talk about some simple mental tools that are going to help you ideate and test your own assumptions about your customers, in order to better serve and sell to those who need your products most. In many ways these will not be unfamiliar concepts, but to the mind of an engineer or a maker, they are often mysterious and elusive in terms of application, particularly when it comes to marketing.

I’ve written a number of posts on this topic, so I encourage you to start with these. Go on, I’ll wait.

Double Loop Learning

Double loop learning is a basic model for creative and flexible thinking. In essence, it suggests that there are two ways to approach the learning process (such as in product development), a “single loop,” or a “double loop” process.

 

Here is how they look: 

 

In the Single Loop Thinking:, you begin with assumptions (a mental model), logically leading to a set of rules, which lead to a decision. From there, you adjust your decision based on feedback.

In Double Loop Thinking: You do the single loop, but at the same time, you go back to the initial assumptions and adjust the mental model, which may cause you to adjust the rules, and not just the final decision.

Example of Single Loop: In deciding on buying a car, I imagine the car I want to buy: Color, Type, Make, Model. Using this model, I decide which dealership to go to, and how much I can expect to spend (making rules). Based on this, I decide on a dealership. Now I go to the dealership, and I find out if I can get the deal I want for the car I want. If I can’t find the car, I go to another dealership (information feedback to decision).

Example of Double Loop: I do all of the above. But I also ask myself: should I be trying to buy this type of car? Were my ideas realistic? Based on what I learned from my visit to the dealer, what other cars got my interest, and might be better for me? I adjust my expectations, and make a new decision about the kind of dealer I need.

Why it Works:

Single loop is in fact the way we are taught to learn in school. We are given rules, and told to apply them continuously, looking for the correct decision given the stated rules. Just think of all that math homework you had to do.

That kind of singular repetitive learning works most of the time, particularly when a desired outcome is pre-determined. However, this can also lead people to forget that the initial mental model may be flawed, particularly after gaining real experience with it. 

The most typical case in startups, is the startup that makes some early decisions about who the customers were and what they wanted, but never came back to those assumptions, and ends up serving a smaller niche than necessary, because all their later decisions are based on data they’ve gathered so far. The longer a company remains in this “single loop,” the less likely they are to challenge their original assumptions and thus be able to successfully pivot to a new market. 

 

Here is a concrete example using a classic business case many people face even as kids:

Single Loop:

1. I decide to sell lemonade. I choose a location for my lemonade stand and a price for the lemonade, based on my intuition about what people will pay. 

2. I observe the sales cycle. How many people visit, and how many people convert to buying a lemonade.

3. I slightly adjust prices and location to optimize my sales.

4. Go to 2.

 

Double Loop:

  1. I decide on a location for my lemonade stand and a price for the lemonade based on my intuition. 
  2. I observe the sales cycle.
  3. I slightly adjust prices and location to optimize my sales.
  4. I re-examine my initial strategy, and try a new location, or even a new product (maybe ice cream?) 
  5. Go to 2.

The OODA Loop

 

Ok, maybe running a startup isn’t exactly like flying a combat mission in a $50m fighter jet in the U.S. Airforce. Still, you can learn from the mental training that fighter pilots, spies, and military strategists use on a continuous basis – often minute to minute.

 

It’s called the “OODA Loop,” for Observe Orient Decide Act, invented by Air Force strategist John Boyd, called by some “the greatest military thinker no one ever heard of.” Here is a very thorough explanation of the general philosophy behind it, written for a popular audience. In as simple terms as possible, the OODA Loop is a mental tool which forces its user to continually adjust their future expectations, based on current realities.

Why it Works: 

The OODA loop is a tool for forcing oneself to continually affirm their past decisions using current information, and to drop previous assumptions and goals based on current circumstances. The OODA loop is used as a mental tool to keep you focused on the current moment, and what is happening around you, to avoid sticking to a strategy which is not working, and to continually notice new opportunities. 

Boyd’s central thesis has become a core principle of modern warfare, and a frequently used technique in sales training, and even by professional chess players. The core tenet is this: the mental models one holds tend to lose their usefulness in chaotic situations. Therefore, updating our mental models, or “orienting” our expectations can help us to make better decisions for any given situation.

What does that look like practically? I’ll refer to a thought experiment that Boyd himself proposed:

“Imagine that you are on a ski slope with other skiers…that you are in Florida riding in an outboard motorboat, maybe even towing water-skiers. Imagine that you are riding a bicycle on a nice spring day. Imagine that you are a parent taking your son to a department store and that you notice he is fascinated by the toy tractors or tanks with rubber caterpillar treads.”

Now imagine that you pull the skis off but you are still on the ski slope. Imagine also that you remove the outboard motor from the motorboat, and you are no longer in Florida. And from the bicycle you remove the handle-bar and discard the rest of the bike. Finally, you take off the rubber treads from the toy tractor or tanks. This leaves only the following separate pieces: skis, outboard motor, handlebars and rubber treads.”

The thought experiment then asks us to orient to this new situation by putting all the elements together, not in reference to how they were introduced, but rather only focusing on what the elements themselves are, or can be.

You are on a ski slope. You have skis, you have a motor, you have handlebars, and you have rubber treads. What’s going on?

Spoiler: You’re on a snowmobile. That’s what’s happening. Nothing you learned to this point other than those facts matters. To master the OODA loop, you have to be able to clear your mind of these details when they are no longer useful.

The OODA loop focuses on observing the current situation, combining that data with experience and knowledge, and making a decision focused on what is happening right now. 

Actually we are quite familiar with elements of the OODA loop in pop culture. Films like The Bourne Identity, or the recent Bond films show classic outcomes of the use of OODA loop, which is the result of real special operations personnel training the actors and consulting on the scripts and fight scenes.

The tension that arrises from these films, in which we observe someone using the OODA loop, comes from the audience being slower to understand how the protagonists are processing situations. As an audience, we have a hard time dismissing details and living in the moment, so it is exciting to see characters who are unpredictable, and yet acting very logically.

This scene from The Bourne Identity is a classic example of the OODA loop in action.

Here’s another from the classic film Top Gun, handily labeled so you can follow the steps that the fighter pilots are using. This video has an added bonus in that Maverick, played by Tom Cruise, fails to use the OODA loop, and suffers the consequences.

 

The Monty Hall problem

The OODA loop is a practical tool in decision theory. Probably the most famous case of a practical application is the so-called “Monty Hall Problem.”

The problem was first articulated in the 1970s in response to an American game show called “Let’s Make a Deal.” The problem goes like this:

“Suppose you’re on a game show, and you’re given the choice of three doors: Behind one door is a car; behind the others, goats. You pick a door, say No. 1, and the host, who knows what’s behind the doors, opens another door, say No. 3, which has a goat. He then says to you, “Do you want to pick door No. 2?” Is it to your advantage to switch your choice?”

What’s important here is differentiating between a decision strategy, and a single decision. While the chances of the original choice being correct are indeed ½, the odds that the initial choice would be correct over many iterations are only ⅓. That means that if you consistently stick to your choice, you will only win ⅓ of the time, whereas switching will give you a win ⅔ of the time.

Why?

Think of the problem again, but with different numbers. Suppose there are 100 doors. 99 with goats, and 1 without. Now suppose you picked a door, and the host them revealed to you all 98 other doors with goats behind them. Now do you switch your choice? Whereas your initial choice had a 1/100 probability of success, your new choice, has a much higher probability. This time it’s 99/1.

If you don’t believe me, you can actually test the phenomenon here.

Applying the OODA Loop

Now that we see the difference between decision theory and probability, we can begin to understand better how the OODA loop works. Because it requires that we observe according to the latest data, we begin to see that applying decision theory in real life becomes more practical.

Take this situation:

You walk into a bar, and observe a group of large men in military outfits standing at the bar. The men are sweating profusely and breathing heavily. No one speaks. You see that all of them are carrying rifles or pistols. They appear not to notice you.

Your observation moves to orientation: your judgement says there is probably trouble. Based on the available data, you decide that turning and walking out will draw attention and cause them to panic, or even attack you. Challenging them is too dangerous, as you are alone and unarmed. You decide to continue past them to the bathroom, where you know there is probably an exit.

You get out of harm’s way and look and listen from safety. The men stand quietly. Eventually a bartender appears and they order beer. The men begin to laugh, and one of them explains to the bartender that they are just coming back from a game of airsoft.

Orientation Leads to Better Decisions

Notice first of all that observation and orientation happen always before a decision is made, or an action taken. The decision is then subjected to another round of observation, where the first set of data are taken together with the new set.

We see from this example that quick reactions are, over the long run, less important than correct decisions. Anyone who has been trained to drive a car in mountainous areas has probably been told that the best decision when a deer runs across the road in front of you is to hit the brakes, but not to turn. This is not because turning is unlikely to help you avoid the deer, but rather because swerving away *is* more likely to cause you to crash the car (possibly into another car).

Those with relevant experience know that the deer will mostly likely run away if you slow down but don’t turn. If you turn, the deer can become confused and may hold still, causing you to hit him anyway. Even if you hit the deer front on, this is less likely to endanger your life than a side collision or losing control of the car. Either way, your best decision is not to turn: no reaction is better than an overreaction.

If in the former example of the OODA loop in the bar, you had reacted as quickly as possible to the situation, you would have made mistakes. First of all, you would have suddenly run out of a bar that was perfectly safe. Or worse, you might have attacked a group of men who were armed.

If you had challenged the men, you might have been killed, or beaten. If you had run out, you might then have called the police, causing further trouble, and perhaps even unneeded violence. If you think that’s overselling it, keep in mind that police shoot civilians with distressing regularity, in some countries, for such offenses as holding a mobile phone, or a toy gun. That often occurs because the police are not trained properly – such as with the OODA loop. Your effective use of the OODA loop could prevent that from happening.

Thus, in this situation, a slow reaction was preferable to a fast one, which is why you made a conscious decision to continue to the bathroom, rather than to engage with a situation you didn’t understand yet. You then moved back to observation and orientation. Discovering that the men are just coming back from a game, you may decide that no further action is necessary.  If the new situation, by itself, does not appear dangerous, you may then decide to dismiss your concern, or you may decide to continue to observe.

OODA for Entrepreneurs

As Malcolm Gladwell points out in his book Blink, which explores decision loops in human interactions and business, as well as in historical conflicts, an ability to continually orient to one’s current circumstances is the greatest predictor of failure or success- a predictor more powerful than numerical data or objective observations.

Consider how this can be applied in the thinking of a small business. In the fact of numerical advantages, or sudden threats (such as bad PR, or even a troll on twitter), to what degree is your decision making purposeful, and designed to accomplish a known goal? Are you capable of altering your strategy to take advantage of new information and new events?

Observing new facts is easy to do. But consciously challenging an existing mental model is much harder. Reacting to data only after deciding *how* to react, can make the difference between a major gaffe, and a well-handled situation. Those who are able to act according to the most relevant information in any given moment are likely to win in the long run. Just as in picking stocks, or playing poker, success is found in not allowing your initial strategy alone to determine your future actions.

As John Boyd himself put it, to paraphrase: “in any game, the winner is most likely the one that can orient to new developments and alter their decision making as a result.”

 

StartupYard is Accepting Applications for Batch X: Automation, Blockchain, and the Future of Work.

Your Landing Page (Still) Sucks in 2018

The Landing Page. Yes, in 2018, this is still an important part of your arsenal of marketing skills as a startup. That’s why at StartupYard, I still do a full-on workshop on just this topic, and why with every startup we accelerate, we drill these basic themes over and over again.

Why? Because the ability to write and execute an effective landing page depends on a very clear grasp of good marketing in general. A landing page is a “single serving communication,” or a piece of marketing that has to speak for itself, and be judged on its own. So it is also a great testbed for ideas, and seeing what works, or doesn’t work.

Since we face many of the same challenges with startups year after year, I thought it was high time to publish a post about the basic principles behind an effective landing page. These strategies can be used in many forms of communication (like email), because they focus on understanding the *why* of messaging decisions, rather than the *what* of any particular message.

What is a Landing Page?

For the purposes of this discussion, a landing page is a part of your website (or online product) where visitors “land” first. Depending on what kind of company you are, you might have only one landing page: your Homepage. Or you might have many. A blog post can serve as a landing page if it is meant to draw people in via search or social media.

Here are some examples of successful modern landing pages of different kinds. Take a moment and appreciate what about them is consistent and familiar.

In this discussion, we’re going to follow the KISS principle, and only talk about one kind of landing page, which is the single-purpose landing page, with one target audience, one message, and one call to action.

The Trust Pizza

Over the years, I’ve worked as a copywriter on uncountable landing pages, and other single-use marketing materials for scores of startups. I’ve devised a very simple formula for determining whether I am being effective with a particular page.

Content is King, as we say. A great message is most important. But an effective message follows from the right approach. Having a formal structure that is designed to be foolproof is important in helping you shape a message.

My formal approach is simple. I call it the “trust pizza.” Here’s what it looks like:

Landing Page

What is important about the Trust Pizza is its shape and the order of ingredients. Follow this simple strategy, and you’re much more able to judge whether your landing page is likely to work or not.

 

  1. Trust = Crust

The most boring but essential element of the pizza is the crust. Not only do we grab a pizza by the crust, we also use the crust to judge the pizza overall.

Just think about evaluating a pizza. If the crust is burnt, what does that tell you about the overall quality of the thing? On the other hand, if the crust is soft and inviting, then you know the pizza will probably be good. Looking at the middle of the pizza tells us very little about it: it might be good, but we can’t know.

The “outer layer” of a landing page is just like that. Trust is composed of every background element of your page. Do you have a header and footer? Do you have appropriate links and contact details? Is the font, color and any background image on-brand?

You should spend as much time on these details as you do on the central message of a landing page. These things tell us whether you can be trusted at all, much less believed in this particular case. Get them wrong, and forget about anyone taking a “bite” out of your landing page.

The trust crust also reminds us not to get too clever. At the end of the day, no matter how revolutionary the idea, a pizza still looks like a pizza. So it is with a landing page. The content should be interesting, but not *less interesting* than the format.

Landing Page

Not only confusing, but actually disgusting.

 

If you want to give the impression that you’re incredibly hip and modern, do so with the understanding that this may be the only message that gets across. I may admire a pizza shaped like the Eiffel tower, but I don’t want to eat it.

2. Understanding = Toppings

The “understanding” aspect of your landing page is the heart of the message. It is the information you want to convey. It’s often a number or a date. It’s a key point. If a visitor remembers anything about you, it should be this.

Of course when you order a pizza, the toppings are the focus. They differentiate your pizza from all other pizzas. Cheese and pepperoni is totally different from a cream sauce with BBQ chicken.

But remember: an effective pizza has only the right combination of toppings. Go too crazy, and you turn something good into something truly nasty. Burgers are good. Fries are good. Nuggets are good. But all 3 on a pizza are not good, they’re gross.

Adhere to the KISS principle (Keep it Simple Stupid), when choosing your toppings. If you aren’t sure how to blend two ideas together, then don’t try. Choose the most important one, and go with that.

Better a few good toppings than a mess of bad ones, right?

Landing Page

All of these things individually are amazing. All of them together are horrifying.

3. Emotion = The First Bite

Finally the good stuff. The pointy edge of your landing page pizza is the spot at which a customer will “bite.” So you need to give them a good reason to do so. You’ve presented an appealing crust, a nice set of toppings, and now you want a nice, crisp wedge shape to finish the job.

This is the Call to Action. The button, or other cue which should prompt a person to do something (take a bite of the pizza), and be led somewhere else on your website, or in your customer funnel.

The call to action is the simplest but often most important part of a page. It prompts the user with their next move, and at the same time must show them exactly what happens when they click the button, follow the link, or enter their information. The “ first bite” has to be rewarding enough: it has to be mouth watering.

The Pizza Shaped Landing Page

Landing Page

The above is a tool for planning and assembling the elements of your marketing message for a landing page. But remember that just as you must form a pizza from raw ingredients into a certain shape, so must you shape a landing page to be enticing and “edible.”

One of the keys here is “visual momentum,” or what I call the pinball effect. That is, the attention and visual interest of the page should eventually lead down to the place where you want eyeballs to be. It can’t *start* there, but it shouldn’t end somewhere else. No big exciting things to see off to the side. No distractions: just one bigger message leader to a smaller one, leading to a simple action.

In principle, you should try to keep the three key sections of your landing page organized in order of interest:

  1. The Headline
  2. The Body (or Subhead)
  3. The Call to Action

 

The Headline

The headline, while simple, should grab the most interest from the beginning. It is something bold and maybe unexpected. It is not, I repeat, *NOT* a list of buzzy words like: “Analyze. Evaluate. Innovate.”

That’s just lame folks. Your headline needs to be a statement about why you’re different. It should be something ripped straight from the “unlike” section of your positioning statement. It can even be negative: “Don’t Be Lame,” or “Had Enough BS for One Day?”

That’s an eye-catching statement. Something weak and defensive is not eye-catching. “We Care about You,” is not compelling. “Our Customers Come First,” is an eye-roll at best. Say something definitive about what makes you different, and more importantly, why your customer should even care.

Remember: the Headline is about letting the visitor know what they’re in for. It’s a signal of what’s to come. So it needs to be a strong one.

 

The Body (Or SubHead)

Here you have the most freedom. It’s toppings time! You should include numbers, or statistics, or outcomes that your product or service will provide. What’s the difference between a pizza you love and one you hate on sight? The toppings.

“Trusted by 3 of 4 Startups,” for example, or “Proven to lower your costs by 30%.” These are informative, direct statements about what the product is promising to do for the customer. They’re beautiful sausage and pepperoni, or olives if that’s your thing.

If the landing page is for an event or a sale, then it might be time to include the date or time.

Remember the It’s Not About You principle. This is not the time to explain that you are a bio-organic-cruelty-free-lactose-intolerant team of albino hemophiliacs who identify as lawn ornaments. The customer wants to hear what’s in it for them. You’re trying to tell them you’re using artisanal cheeses made by blind pagan craftsmen in the alps, but they want to know if the pizza is vegetarian or meat-lovers. They want the facts, not the fluff.

Now is also *not* the time to sell or urge action. Don’t jump the gun here. You’re being informative. You’re showing the meat of the offer, not closing the sale.

The Call to Action (Take a Bite)

Now you’re closing. The call to action is simple but very tricky. You want to accomplish a bunch of objectives at once, to some degree or another. You want the visitor to know a number of things:

  • What am I supposed to do
  • When am I supposed to do it
  • What will happen
  • When will it happen

And remember, this is a call to action that may be as long as two or three words. It has to accomplish a lot in that space of time. It needs to rely on context and build upon the preceding elements to do that.

But always consider the call to action in this context: Is it clear to the reader exactly what will happen when they press that button? And is what they think is going to happen the same as what will actually happen? As a landing page is meant to create a relationship, you need to start it off by delivering on what you’ve promised.

Don’t offer something in your call to action that you can’t deliver. Don’t lie. Don’t even get close to maybe being a little bit dishonest. Just don’t do it. 

Here are some common “Call to Action Lies” to avoid, along with the reasons they suck:

  • It’s Free! [But give us your credit card lol it’s not free]
  • Start Your Trial [Actually give us your contact so we can sell you]
  • Get it Now [But you have to wait a while]
  • Get the Beta [When it’s ready if ever]
  • Learn More [Just kidding lol buy now]

Instead, a call to action should do exactly what the user expects. If you want their email, say: “Enter Your Email,” if you want them to buy, say: “Buy Now, Save X.” If you want them to demo the product, then make the demo accessible when you say it will be.

Remember: If you’re thinking it’s a cheat, then your visitor is too. Don’t treat your customers as dumber than you are. Assume they’re smarter.

Stick to the Trust Pizza

Landing Page Pizza

Remember, whatever decisions you make about *what* to communicate, never forget the importance of *how* you communicate it. In my experience, more than half of the message is not the words you use, but rather their format.

Does it look right? Does it make visual sense? Is it weird or somehow off? These details make or break a landing page much more easily than a less than perfect turn of phrase. Stick to the pizza. Don’t reinvent it.

About Part Two: The Good The Bad and the 1999

In part two of this post, we’re going to look deep into some good, bad, and 1999 landing pages, and explore what about them works and doesn’t work.

We’ll be approaching that using the Trust Pizza methodology, seeing how effective landing pages approach visitors with building trust as their priority.

Until then: do a pizza.

Peter Cowley: How to Talk to Angels

Recently I got an email from my friend Peter Cowley, director of the UK Business Angel Association and the Cambridge Angels. Peter has been in tech for nearly 40 years, starting over 10 companies. In 2014-15 he was named UK Angel of the year for his investments in early stage companies. So when he writes down advice about angel investing in his newsletter from the Invested Investor, I pay attention.

Back To the Email. It’s clear Peter had had one too many poorly executed sales pitches lobbed his way that week (he was about to go on holiday he told me later), so he sat down to sketch out some ground rules that startup founders should seriously consider following. I’ll post them below with my comments. Any bolding is mine.

Don’t Call Me, I’ll Call You: No Cold Intros

Advice to entrepreneurs – do you like being called up by a passionate salesperson on your personal phone? If yes, you’re lying. It is a no. I am not saying that you shouldn’t approach angels, otherwise we wouldn’t be able to help you, but I want to give some of my own views on how best to approach us, or at least me!

It is always better to receive a warm introduction than a cold one. This can be through another entrepreneur, another angel or even friends or family. An angel group is a great way to find angels. Have a look for deal ‘sorcerers’ or gatekeepers for the angel group from which you’re seeking funding.

Cold introductions can be extremely annoying. Phone calls definitely don’t work for me, LinkedIn is nearly as bad, direct emails to me will be deleted, unless you fit in with my criteria and have followed the instructions on my website. Cold emails can be sent to angel group gatekeepers. Attempts have been made through social media, but they rarely work.If you can’t leverage your own network to reach the right person, then look at that person’s own network and work from there. There’s nothing worse than getting a cold email from someone who didn’t need to do it that way.

Paradoxically, strangers will always be more willing to help you connect with someone else, than they will be to help you directly. You might call this the “someone else’s problem,” effect. You can use this to get your message to the right person by giving someone else in their network a chance to feel or seem useful and informed, ie: “Dear x, I’m writing you for advice because of your deep connections with StartupYard…”

Use the GateKeepers

Accelerators and incubators are a great way to build connections. Many angel groups and some angels are known by accelerators and incubators, so joining one will ensure warm introductions. Accelerators and incubators offer advice and mentoring and it is positive that you’ve gone looking for that already.Angel group gatekeepers are the main way into the group. You can usually go cold through a group website, and this may work for some groups, but I like to see the entrepreneurs seeking out the gatekeeper first (becauseor better seeking out an angel).

First impressions are paramount to the relationship, so make sure you are approaching the right person. I list my investment criteria on my website, and I know the vast majority of angels don’t, but this will help save time for entrepreneurs and angels. As an entrepreneur, don’t be too pushy but do show the boldness to approach me with something, that will interest me.

This may sound like a lot to think about, particularly when you have such an incredible idea. But, angels hear from so many entrepreneurs. Save yourself time and effort, as well as ours, by doing thorough research before any approach.

This cannot be emphasized enough. We have it as a mantra that “You are Only Ever One Email from a Major Breakthrough.” That does not mean you should send 1000 emails today before lunch. It means that the right email, at just the right time, can make all the difference.

It’s a continuing shock to me how few startup founders bother to do basic research. And I don’t mean googling us and finding out we’re an accelerator. I mean reading what we’ve written, looking into our network, finding common connections, and even coming up with questions you want us to answer about ourselves.

I can tell you I’m maybe 10x more likely to answer an email from someone if the email contains a thoughtful question or two. That could be about our program or about something else relevant to what we are interested in and what we talk about publically. Engagement feeds engagement. Once you start talking with someone, they come to see you as a person, not just an email notification.

Yet few founders (other than our own alumni, who are wiser) use StartupYard as the gatekeeper we are. It’s as if we’ve left a rolodex on the table full of choice contacts that startups desperately need, and they’re just walking right past it.

The best are where the entrepreneurs have researched the members of an angel group (not all members are public) and then approached one, asked for help, listened, and then that angel introduces the startup to others. The simplicity of this approach misses many founders. Instead of compiling a list of targets and sending them all a call to action, or what we might call “the numbers game,” a wiser founder bites around the edges of a network looking for a way in. The key here is to establish one contact at a time and actually listen to what they have to say, and act on it. If you were to email-blast a whole list of people at once, you’d then have burned your bridges if one of those people suggested introducing you to one of the others. Instead of “oh hey this startup seems interesting for you,” it’s “oh, yeah I got the same spam as you did.”

Be Bold… But Follow the Rules

In a follow-up email, Peter wrote this, which I think is worth highlighting: One of the advantages of my published criteria is that many opportunities never get to me, and when they arrive by email, several answer my criteria, or point out which criteria they don’t meet.The worst examples are people approaching me after an event where I have spoken (and where my name is on the programme), having done zero Due Diligence on me and then wasting my (and their) time when there are others waiting to speak to me. I’m sure my firm rejection must seem rude to some.Peter mentions this page which contains detailed criteria on investments he is interested in. What is important to note here is that he makes clear he welcomes contacts from people who do not meet the criteria. The important point is whether or not a startup knows they meet the criteria or not. We have much the same attitude. When a founder emails StartupYard aware that some aspect of their business puts them outside our immediate scope, then we can at least have a conversation about how we can help them despite this fact. If instead the founder simply reaches out without acknowledging this problem, our immediate response to just say no. The person isn’t paying attention to begin with. If the investor has to start out their reply by saying: “we can’t move forward because of X,” then you’ve guaranteed yourself a no. On the other hand, if you’ve covered that objection already, then the investor must at least think a bit more deeply about the opportunity. They can still say no, but acknowledging how you do or don’t fit into someone’s criteria can turn a hard no into a soft one. Maybe you don’t meet the criteria right now, or maybe the criteria aren’t as relevant in your case. You can’t have that discussion if you don’t know what they are to begin with. More About Peter Cowley

Peter Cowley, a Cambridge university technology graduate, founded and ran over 10 businesses in technology and property over the last 35+ years. He has built up a portfolio of over 60 angel investments with 3 good exits and several failures. He is the WBAF Best Angel Investor of the World and was UK Angel of the Year 2014/15. He has mentored hundreds of entrepreneurs and is on the board of eight startups. In 2011, he founded and has since run Martlet: a Corporate Angel, investing (currently £5+M) from the balance sheet of Marshall, a £2bn revenue Cambridge engineering company. He is chair of the Cambridge Angels and is a fellow in Entrepreneurship at the Judge Management School in Cambridge. He is a non-executive director of the UK Business Angel Association and on the investment committee of the UK Angel Co-fund. He has also had 16 years’ experience as chair, treasurer and trustee of the boards of seven charities and is voluntary equity finance chair for the Federation of Small Businesses. He is sharing his and others’ experience and anecdotes of angel investing by publishing online and offline – see www.investedinvestor.com

The Worst Term Sheet We’ve Ever Seen

Last week we talked about what makes a startup investor “Founder Friendly.” While that’s important to know, it won’t help startups much if they aren’t aware of what the opposite case looks like: when is a term sheet definitively unfriendly to founders?

With this in mind, we polled a collection of investors and lawyers who are friends of StartupYard, and they shared examples with us of the worst term sheets they’ve ever seen, and what was wrong with them. This post should serve as a handy guide to avoiding the worst terms out there.

Too Much Too Early

Several of the respondents noted problems with a company’s early stage valuation, along with protections for both founders and early investors, as a key problem in later rounds.

Innovation Nest, StartupYard, CEE Allstars

Chris Kobyletcki, Innovation Nest

I think it can go both ways. We see investors not taking into account founders for the later-stage investments. Investors take 30-40% of the company at a super-low price that will not leave space for someone new to join the cap table.

The other case is having a super high pre-money valuation that will result in a company not being able to reach the next level of valuation for the next fundraising. I saw multiple cases of rounds falling apart because of that. “ – Chris Kobylecki, VC, InnovationNest

 

Tytus Cytowski

Tytus Cytowski, Cytowski & Partners

“At the Angel Round stage, I have seen CEE angels ask for and receive a board seat, pro rata rights, drag along and protective provisions, which are typical for the series A stage. In general angel should only receive equity without any special rights unless they provide significant assistance to the startup. I have also seen CEE angels and VC investors take up 20-25% of the cap table in exchange for €200K at this stage.” – Tytus Cytowski, Cytowski & Partners

 

Peter Cowley

Peter Cowley, Angel Investor

“At the very early stage (ie seed, seed+, A-) sophisticated angels in the UK always offer ordinary shares that are identical to the founders, with no prefs, and no special rights attached to the shares.  We do however drag/tag along, pre-emption and other rights and a number of consent rights – see my own term sheet, that I use as the basis of negotiation with founders. This is more a checklist with my suggestions of how the legals should be worded and I am 100% wedded to little of this.” – Peter Cowley, Angel Investor

 

Cap Table Headaches

Another hot-button issue is the cap table, where founders and investors make mistakes that cause them future problems.

Jaroslav Trojan Equus Ventures, StartupYard

Jaroslav Trojan Equus Ventures

“The most usual scenario is that investors take majority ownership thinking they can ‘control’ the startup. Most of the problems relate to cap table I would say. Also, too many conditional investment tranches are quite a frequent mistake. I also occasionally hear that startups and investors don’t use term sheets at all which may lead to poorly managed round, confusion, and increased legal costs.” – Jaroslav Trojan, Equus Ventures

 

“One [item I insist on] that strongly surprises founders is reverse vesting, until I have explained to the founders that if one of the founders leaves the business (I have had to negotiate this three times) then their unvested shares are then available to strengthen whatever senior hires are needed to replace the founder If those shares are not used, then the remaining founder owns a bigger share of the pie.” – Peter Cowley

 

Planning Your Exit

A theme that also emerged in the responses was that founders and investors often fail to plan for the eventuality of an exit, and prepare themselves legally and practically for the eventual sale or liquidation of the investment.

Investors can and do take advantage of the smaller legal resources and lesser experience of startup founders.

“In later stage investments, the big one to watch is (participating or not) liquidation prefs, which if everything goes well, will appear toothless, but if something goes wrong… I was not an investor but there is a 10 figure exit in Cambridge where the founder (having been on the journey for a decade) was squashed to zero by the prefs.” – Peter Cowley

“In a Polish seed VC deal, I saw participating liquidation preferences set at X 2.5 with the preference participating again after payment to founders from the exit. In another deal led by a Polish VC I saw a VC insert a participating liquidation preference while the term sheet called for a non-participating liquidation. In investment agreements I have also seen liquidated damages if founder stops working at the company and/or decides to leave the board of the company. Liquidated damages started at €50K and went upto the size of the round. Standard terms like drag and tag along are often drafted excessively in favor of VC investor.” – Tytus Cytowski

Some less-than-friendly investors can get extremely creative in the ways they ensure they profit most from a startup’s success. As in the above examples, what can appear to be fair on paper can end up costing a founder any chance of profiting from their own work.

To provide some context, a liquidation preference is a clause in an investment contract which ensures that a certain investor receives the profits from any sale of the company first, up to a certain multiple of the original investment. This means that not only does an investor get their share of the company when it is sold, but they may also get more than their original share if the company is sold for less than expected.

For example, if a VC invests €1m at a €4m pre-money valuation, their stake is 20% of the company post-money (€1m out of €5m). If there is a liquidation preference set at 3x, that means that the investor expects to be paid back at least €3m no matter how much the company eventually sells for. If the company sells for €3m, then the VC would take the whole amount, and the founders would have nothing, even though they’d built a company worth €3m.

Often these issues arise because the founders believe that their companies will be worth much more at exit than ends up being the case. A high liquidation preference is not important if the company is worth even more than the multiple of the preference. But if the company sells for less than expected, the investors can take a huge piece (or all) of the proceeds.

Business Culture: Legal Fatigue

One of our own favorite startup lawyers Tytus Cytowski, who has supported our alum Gjirafa Inc. in fundraising, pointed to our regional business culture as an issue:

“Three big picture problems that translate into specific terms. First, CEE investors focus on maximizing control instead of focusing on wealth maximization. The focus on control maximization is a CEE cultural issue caused by lack of trust in entrepreneurs, corporate mentality of investors and the fact that the main LP of the majority of CEE funds is the government.

Silicon Valley on the other hand focuses mainly on wealth maximization and invests with a ‘spray and pray’ mentality. Silicon Valley investors are interested in absolute returns in portfolio, while CEE investors look at returns on the level of each company.  The control maximization problem is especially problematic in deals with Polish VCs.

Second, most of the CEE investors have a strong private equity/investment banking background, which does not work well in the startup world. For example, PE/Investment banking is focused on generating fees and strictly growth metrics. Good VCs invest with an understanding of technology, disruption and innovation, not only growth metrics.

Finally, a lot of CEE investors don’t have experience as entrepreneurs and don’t understand the life cycle of a startup and what terms are crucial at each stage. Paradoxically CEE entrepreneurs that become VCs tend to have the most unfriendly startup terms from my experience. In general CEE term sheets are heavy on protective provisions (veto rights), liquidated damages and penalties for founders, drag and tag along, disproportionate equity to risk ratio of startup in favor of investor (above 10 % per round), low valuations. Exception are term sheets from Credo, Reflex and Rockaway, which follow Silicon Valley best practices.” – Tytus Cytowski

That sentiment was strongly echoed by Tudor Stanciu, a startup lawyer and advisor from Romania and former organizer of the HowToWeb conference, who wrote:

Tudor Stanciu“I think the biggest problem in term sheets is a general one, especially when dealing with corporate VCs / investment arms: the density of language being used. You see 20+ pages of term sheets/SHAs out of which most refer to standard limitation of liability/disclosures that arise from other types of transactions that the VC’s lawyers have done.

At least for early stage, pre-revenue startups, founders do not have the ability to reach out to lawyers and pay out fees to get a language-dense SHA cross-checked and simplified by a founder-friendly lawyer, and that can make a founder end up suffering from “contract fatigue” and missing out on important details oft he transaction while wasting time going through lawyer slang and verbose the effect of which is not that significant, in the end.” – Tudor Stanciu, Startup Lawyer

 

You Need a Lawyer

There’s an old Russian proverb that the writer Suzanne Massie famously quoted to Ronald Reagan in the 1980s, near the end of the Cold War: “Doveryai, no proveryai” or “Trust, but Verify.”

Trust is a tricky thing when it comes to money. There are absolutely people who can be trusted, but how do you recognize them before the fact? It might be that a person left along in a dark room with a pile of cash might be the type who never even thinks of touching it. The problem is you just don’t know until it actually happens.

Certainly we as investors at StartupYard know that we will not, as a matter of practice and principle, deceive or mislead the startups we invest in. We can tell you this until we’re blue in the face, but we have no way of proving it to you except by following through on what we say. When there is a potential for abuse, there is always a risk of abuse. Recognizing that is an important step in maturing as a company founder.

As we have long noted to our own startups and community, when it comes to early stage and Angel investments, the best protection is your network and the good reputation of the investor. However, taking money from an investor without the advice of qualified legal council is a strategic error, even if it may not lead to catastrophe in every case.

Dealing with a bad actor can just be a case of bad luck. We can’t control how lucky we are, but we can control how prepared we are. So there is no excuse not to be prepared.

An Investor Deck Isn’t a Pitch

You know that pitching is one cornerstone of building a startup. It’s an art form: condensing your business and your story into something people can understand, and remember, in just minutes. While most startups are familiar with the idea, and some can present well, delivering a really standout pitch remains a high bar of achievement for most founders.

Despite the fact that pitching is such a common cultural phenomenon in startupland, the majority of startups never do it well, in my view. There’s a reason StartupYard spends a whole month toward the end of our program on pitching, and there’s a reason many of our alumni have won pitching contests after the program.

The key, as in most thing, is preparation: mental, physical, and organizational. We’ll focus here on that last point: organization.

The Pitch Deck

In order to pitch, you need a killer Pitch Deck. That being said, at StartupYard we sense a good amount of confusion over exactly what a “Pitch Deck” is, and especially what makes it different from, say an “Investor Deck,” or a “Business Plan,” or a “Teaser,” or the 101 similar things that startup gurus insist you need to have.

Most of the time, when you contact an investor who’s interested in your startup, they’ll ask you for your “pitch deck.” That only adds to the confusion, because what they usually mean is your “Investor Deck,” “One-Pager,” or “Teaser.”

Then again you may be asked to present your pitch in front of a more general audience, such as potential investors, partners, other startups, or even employees, and in that situation, an Investor Deck is the wrong material to present.

When we’re finally meeting our applicants for the first time in our final selection round at StartupYard, we ask them to provide a pitch for our investors, team, mentors, and partners. What we frequently get from startups is not exactly a pitch, but rather a presentation of an Investor Deck.

So how do you know what to present, and when? Why can’t you just show everyone the same thing?

Investor Deck ≠ Pitch Deck

For starters, despite what investors may say, the “Pitch Deck” they might ask you to send them via email is actually an Investor Deck.

Just to make this as fool-proof as possible, here are the key differences:

General Pitch Deck

  • Supports your in-person presentation
  • Focuses on problem, unique value proposition, and differentiation from competition
  • Introduces the market opportunity, team, and future plans
  • Tells your story and vision in simple human terms
  • Slides contain only very basic info
  • For an audience with no prior information

Investor Deck

  • Can be read by itself
  • Introduces the problem and covers the key value proposition
  • Focuses on the market opportunity and unfair advantage of the startup
  • Focuses on the team and their relevant qualifications
  • Discusses go-to-market strategy in detail
  • Talks about your vision in mostly business terms
  • For an audience with prior information

We can see from this breakdown that the investor deck puts most of its focus on the information investors need to make decisions. While an investor may be deciding “should I invest in this?” a general audience member is asking “should I care about this at all?”

A common problem occurs with early stage companies when founders create their Investor Deck before doing a Pitch Deck, and end up “converting” their Investor Deck into something they will use to pitch their startup to general audiences.

This is a mistake! It’s kind of like converting a Formula 1 car to a family van. These aren’t the same species. The two types of deck are meant for completely different contexts, and they are easy to tell apart. What might seem impressive in an investor deck can seem grandiose or unrealistic in a pitch deck.

Take a look at the 500 Startups Template for an Investor Deck:

As you can see, if you start with an Investor Deck and try to convert that into a general pitch, you’ll end up with a presentation that has too much data focusing on the wrong things. Whereas an Investor Deck argues in favor of an investment in your company, the Pitch Deck argues in favor of the existence of your company. If you start backwards, you’ll end up with all the wrong data, and all the wrong messages.

More importantly, you will miss narrative opportunities that are only available when you pitch in person. A pitch is all about salesmanship, so why would you undercut your opportunity to sell yourself to the audience?

Focusing on Your Audience

The key to getting any kind of pitch right is to know your audience, and do the heavy lifting for them. Ask yourself the key questions:

– What does my audience need to know?
– What misconceptions do I want to correct?
– What impression do I want to make?
– What do I want them to do after hearing the pitch?
– What questions do I want to be asked?

The answers are obviously very different if you’re talking about an investor you have met, or someone in a general audience hearing your pitch for the first time. Giving that information without the right context makes you look like a fool, and wastes your audience’s time to boot.

Failing to focus on your audience can cause you to lose control of the impression you’re making. What seems fine in front of investors, or in an email, can seem greedy and/or totally unrealistic in front of a mixed group of people who know little about you. Founders who are probably nice people can end up seeming sinister or assholish because they’ve forgotten where they are.

On the flip side, what can seem cute or fun in front of a larger audience can seem childish to a small group of experts. Funny is contextual. Fun is subjective.

I’ve seen this kind of thing happen in person. Once, I was in the audience of a pitch where the founder completely lost control of the impression he was making. He was presenting a really complicated and in-depth Investor Deck to a general tech audience. He was making pretty unbelievable claims about the opportunity he was attacking as well. Maybe they were justified in his mind, but they were not justified in his pitch.

That might be fine for an investor deck because investors can ask about the assumptions being made. A crowd of people doesn’t get to stop you: they have to listen with mounting disbelief.

Even for a group of really smart and informed people, an out-of-place pitch gets tiresome fast. By the time the Q/A started on that occasion, snarky and hostile questions were bubbling up on the audience feedback screen behind him. Having started off badly, the founder got defensive with his answers, and people ended up actually booing him at the end.

I’ve never seen that at a pitch session before or since, but I understand why it happened. He didn’t respect his audience by showing he understood them. He talked down to them, rather than treating them as the focus of his pitch. That was his unforgivable mistake.

Saying What’s Important

The impression you give is as much how you make your audience feel, as how you talk about yourself and what you do. It’s important to stick to saying what’s most important, and not necessarily what’s most impressive or “complicated sounding.”

Keep in mind: if they wanted to become experts on the topic, they could read a book. A general audience are there mainly to learn about you, not the market you’re in or the technology you’re working on. They should come away knowing more about you and the way you think, even if they don’t really understand what you do yet. If they learn something about technology in the process, consider it a plus.

Building trust is all about being appropriate to your context; showing your audience that you are prepared for them, and they can trust you. This is why we advocate for a simple Pitch Deck, particularly for a 2-minute pitch (made famous by Techstars). The rule of thumb should go something like this:

  1. Killer intro / 30 sec, 50 words
  2. Problem / 20 sec, 33 words
  3. Solution / 20 sec, 33 words
  4. Differentiation / 10 sec,  16 words
  5. Business model & go-to-market / 20 sec, 33 words
  6. Traction / 20 sec, 33 words

 

The concrete number of slides you use is not as important as most founders think, particularly for a live pitch. A slide can be one word for example, or one image. One slide can be your whole intro, or your intro can be five slides. That’s down to individual style.

In his Medium post: Why You Shouldn’t Copy Sequoia’s Pitch Deck, Scott Sage makes a nice point, saying that the headline of each slide should, in sequence, tell the story of your company.  While he’s really talking about Investor Decks, this theory still fits nicely with StartupYard’s own “Maximum One Idea Per Slide” rule for Pitch Decks.

Simply put: don’t force your general audience to process two thoughts at the same time. That means a slide or series of slides supports one idea, not that multiple ideas are supported by a single slide. Consider what that means for a general audience pitch deck: the slides have to be very basic.

If you adhere to the KISS principle (Keep It Simple Stupid), then your pitch should only try to accomplish a very limited set of goals.

Communicate Your Message, Not Your Data

Now, if your pitch is shooting for these simple goals, it should be conservative with the amount of work it asks the audience to do. Do you need your audience reading in-depth market data if all you want to do is state that an opportunity exists? Do you need to deep dive into the unique background of your team members to show that you are suited to this project as a group?

The answer is probably not. In fact, it’s usually better to leave those details for a follow-up meeting, where anyone interested will likely ask about them or challenge what you’ve said. Don’t be defensive about your ideas from the start – allow people the chance to question you, and welcome those questions.

The best live pitches are built around developing questions for the audience to be curious about. It’s impossible to convince someone in 5 minutes, but it is very possible to intrigue them in that time.

The effectiveness of a general audience pitch is going to be determined not by how much your audience understands, but rather by if they care. An investor usually only looks at your Investor Deck because they care to begin with. You can play into that interest and take the time to inform and enlighten the investor- but that is fundamentally a differently thing from getting someone excited about you and your idea itself.

Remember, an Investor Deck answers questions, but a Pitch Deck provokes new questions. You want to give your audience the space and in a way the mystery needed to inspire their imagination. A pitch that is grounded in things like market size and opportunity, or even in-depth data on the problem itself, is not asking its audience to dream about the future – it is asking them to study the present with a clinical eye.

 

Mentorship

Is Mentorship Like a Game of Chess? (Updated)

Today our Batch 9 startups had their first meetings with StartupYard mentors. There are the first of about 6-7 45 minute meetings a day for a month. To put that in perspective, it’s about 80 hours of meetings with over 100 people. A lot to get through. 

So how do we prepare startup founders for getting the most out of this crazy rush of ideas and perspectives? Simple: we give them tools, and training on how to use them. Pro tip: start with David Cohen’s Mentorship Manifesto.

The First Best Tool: Positioning

Typically when you ask accelerators what they do to “onboard,” their startups, they’ll talk about having a party, maybe doing team building, or giving an orientation. If it’s an American accelerator, except feel-good soul-searching with optional campfires and singalongs.

That’s not really our thing at StartupYard. Day 1 is about positioning. It’s about how in hell you’re going to manage to explain to 100 people what you do, in a way that a) doesn’t drive you crazy over the course of a month, and b) actually generates useful dialogue and common understanding with the mentors.

“Product positioning,” which we’ve also written about extensively on the blog, is really as much art as science. In short, it’s the art of framing your work in a context that others will immediately understand, accept, and sympathize with. A position statement details the target customer, what their problem is, how you solve their problem, what their alternatives are (your competition), and how you’re different.

We strongly believe that starting mentorship sessions with a positioning statement is key to getting the maximum possible value out of mentors. It sets the ground rules for a conversation at the outset: helping a mentor to understand what your basic assumptions are about the world and what you’re doing, and letting them know what you’re working on, and what you know about the business you’re in.

Positioning and Mentoring as Chess

Mentorship can be thought of as like a game of chess. There are two players, they are equally matched, but one must move first. Both know the rules, but neither understands the thinking or tendencies of another before the game begins. The game is limited to the pieces on the board. Slowly, by making their moves, the two players reveal to each other what is important to them. Every move has an answer, and you don’t stop until one of you is out of moves (or time is up).

Of course, mentorship isn’t a competition, but then in some ways, neither is chess. It’s an exercise in controlled, directed communication. That is what good mentorship is: a focused, stripped down form of conversation that teaches two people about each other.

In this light, mentorship can be seen as a process you can optimize and perfect. You can get better at it over time. Moreover, your planning and preparation for a match matter as much or more than your in-game execution. Going in with a clear strategy, and developing that strategy to control the board. The game is played before you sit down, mentally. 

Here are some steps on how to prepare for mentoring:

Step 1: Setting the Board

Mentorship


Some founders rightly value their ability to react in the moment. We can call that natural salesmanship and charisma. It’s a great quality, but the truth is it is often bad in the long run for a startup founder to be too self-confident in conversation. More humble and more prepared founders end up getting more out of mentorship simply because they think more deeply about it.

A mentor that exists in the moment can be very effective because he or she meets many different startups. But a startup founder always has to talk about the same thing. Preparation helps us to avoid being predictable. Worse: failure to set the board properly can put the other person in control of the game.

Don’t Present: Lead a Conversation

Setting the conversational agenda is a vital step, and there are many ways of screwing it up. One of the ways founders fail at setting the agenda is by refusing to lead. Rather than come out and state what they do, and what they want to talk about, they will bite around the edges. They will delay, and distract, rather than getting to the point.

And this happens because of fear: fear of failure, or of looking stupid. That fear leads founders to try and push the focus of the conversation away from themselves. Sometimes they try to start with “literature” such as an executive summary or a pitch deck or video, as a way of easing the pressure on themselves. But this is usually a mistake, because the opening of a conversation is about “setting the board,” and bringing a mentor’s attention to the topic you want to discuss. A pitch deck or a video might be interesting, but it’s also impersonal. It isn’t you. You are a living mind, not a pitch deck.

If the first thing you show someone is a presentation, then more often than not, the whole conversation becomes *about* the presentation, or video, or whatever it is. Rather than engaging with ideas, a mentor reacts to things they are shown: they react to what they see, rather than what they are asked to imagine. This limits the conversation, and usually wastes time and energy.

Like in chess, getting the focus of the other player to the center of the board (and away from your side of the board), is critical to controlling the game. If you start out offering your work to a mentor for a critique, then the rest of the “game” is played on your side of the board. This is how mentoring sessions turn defensive and counterproductive.

Step 2: Following a Strategy

Mentorship

As conversations have many layers, so too does chess. There are tactics, such as using combinations of pieces or positions on the board to accomplish tasks, and there is strategy- the way you pursue your overall goals by using certain tactics instead of others. Just as in a conversation, the tactics you use are superficial: a certain combination of words or a way of speaking. Jokes are a conversational tactic. So is eye contact. But these are not strategy.

Often we confuse tactics for strategy. We talk about the superficial aspects of conversation: how to talk to people, and how to please them. But ingratiating yourself is one thing, and getting what you need from a mentor is something else. Establishing a deeper understanding is about genuinely testing the other person’s mind. 

Your strategy is more premeditated, and it requires planning. How will I win this person to my way of thinking? How will I talk to them in a way they will understand and sympathize with? We do not achieve very effective conversations by relying on charm and wit alone – those are only tactical elements. Really good mentoring only happens when the founder plans ahead, thinking carefully about what they want from the mentor, and about how they are likely to get it.

Sit down and ask yourself these questions:

  • What is this mentor expecting this to be? How can I confound that expectation to make my impression?
  • What does the mentor want out of this?
  • Where is the mentor stronger or more capable than me?
  • Where are my relative strengths in comparison?

Having a good strategy means gathering intelligence about the mentor you’re talking to, having an outcome for your conversation in mind (the thing you want the mentor to give you or do for you), and understanding what it is the mentor wants from you. 

All these questions can be asked before hand, but often are not. Some founders never engage in a clear strategy, and so they simply chat with mentors, never really getting anywhere. They try to be liked, rather than to earn respect and attention. Don’t make that mistake: having a “nice” conversation, and really getting something out of a mentorship session are not the same thing.

Step 3: The Endgame

Mentorship

Chess also has an end. Or rather, it reaches a point at which there is nowhere to go. That is the nature of the game, and to some degree, it is also the nature of a productive mentorship session.

Knowing when you should stop is as important as knowing how to start. When founders begin to repeat themselves, or to delay the end of the interaction, they start losing ground. Just as in chess, “getting to yes,” is about taking your shot when it’s available, and ending the game. Once you have agreed with the mentor on what the next steps are, you’re finished. Checkmate. 

Sometimes too, mentors like to talk. I am guilty of that as a mentor, and I rarely end a conversation myself. If the person I’m talking to is very interesting, then I don’t always want to end it. But then that is about what I want as a mentor, not about what the founder needs. Thus, I do notice when founders are unable to break away and close the discussion. If the conversation takes on an air of inevitability, then don’t drag it out. Don’t get repetitive.

By having clear goals in advance, you’ll be more able to decide when and if those goals have been achieved, at which point you can conclude the conversation, and move on to other things.

Is ending your session hard for you? I know how it feels, and there are tactics for that too. You can try to:

  • Summarize the conversation and thank the mentor for their time
  • Repeat the agreed next steps, and say “I’ll get to it,” and get up to go
  • Give the mentor a concrete time or date when they will hear from you again, eg: “expect an email from me by tomorrow evening.”
  • Bring a third party into the discussion to break up the discussion, eg: “Cedric, I was just having a great talk with Lloyd.”
  • Bring the mentor somewhere else physically, such as to get a cup of coffee
  • Check the clock and apologize for using up so much of their time

State the Outcome Clearly

It’s gentlemanly and professional to state clearly what you intend to do next. Even if you’ve not had a very good session with a mentor, make a point of articulating the action you are going to take as a result of the meeting. “I’m going to think about what you said,” or “I’m going to read what you mentioned.” If you want to see the mentor again and they have agreed, then state that clearly: “I will see you in 2 weeks,” or “You can expect my call this week.”

It’s tempting to be vague in this regard, but don’t do it. Come away knowing exactly what comes next. No “so we’ll sees” or “maybe laters.” Just reset the board, and move to the next game.

mentors engaged with founders

How Smart Startups Keep Mentors Engaged

A version of this post originally appeared on the StartupYard blog in January 2016. As a new group of Startups joins us in the next few weeks for StartupYard Batch 10, we thought we’d dive back into a very important topic for them: How do the smartest startups engage their mentors?

But first: why do some of even the most successful startup founders continue to seek mentorship?

Strong Mentors are Core to a Successful Startup

Mergim Cahani (right), CEO of Gjirafa, one of StartupYard’s most successful alumni, is an avid startup mentor himself.

Founders have to balance mentorship with the day-to-day responsibilities of their companies. But sometimes founders approach mentorship as a kind of “detour” from their normal operations- something they can get through before “getting back to work.”

This is the wrong approach. Having worked with scores of startups myself, as a mentor, investor, and at StartupYard, I can comfortably say that those who engage with mentors most, get the most productive work done. Those who engage least, are generally the most likely to waste precious time. 

How can that be? Well, simply put, the first line of defense against the dumbest, most avoidable mistakes, are mentors who have made those mistakes themselves. I’ve seen this happen: a startup decides they’re going to try a certain thing, and it’s going to take X amount of work (often a lot of work). They mention it to a mentor, who forcefully advises that they not do it. The mentor tried it themselves, and failed.

Now this startup has 2 options: proceed knowing how and why the mentor failed, or change direction to avoid the same problems. Either way, an hour-long discussion with a mentor will probably have saved time and money, simply by raising awareness. I have seen 20 minute conversations with mentors save literally months of pain and struggle for startup founders.

Recently, one of our founders reached out to a handful of mentors for information on an investor who was very close to signing on as an Angel. The reaction was swift, and saved the founder from making a very serious mistake. The investor turned out to have a bad reputation, and was a huge risk. As a result, mentors scrambled to suggest alternatives and offer help securing the funds elsewhere. That is what engaged mentors can do for startups.

Engaged Mentors Defeat Wishful Thinking

There’s a tendency, particularly among startups that haven’t had enough challenging interactions with outsiders, to paper-over issues that the founders prefer not to think about. Often there “just isn’t enough data,” to prove or disprove the founders’ theories about the market.

Conveniently, “lack of data,” or “need for further study,” can serve as an excuse for not making decisions. That’s one of the main reasons startups fail – refusing to make a decision before it’s too late.

We like to focus on things we can control, and things we have a hard time working out appear to be outside of that sphere, so we are more likely to ignore them, or hand-wave their importance away.

Founders sometimes long to go back into “builder mode,” and focus solely on executing all the advice they’ve been given. And they do usually still have a lot of building to do. But one common mistake -something we see every single year- is that startups will treat mentors as the source of individual ideas or advice, but not as a wellspring of continuing support and continual challenges.

The truth is that a great mentor will continually put a brake on your worst habits as a company. They will be a steadfast advocate of a certain point of view- hopefully one that differs from your own, and makes you better at answering tough questions. But you have to bring them in.

Treat Your Mentors like Precious Resources

I can’t say how many times great mentors, who have had big impacts on the teams they have worked with, have come to me asking for updates about those teams. These mentors would probably be flattered to hear what an effect they’ve had on their favorite startups, but the startups often won’t tell them. And the mentors, not knowing whether they’ve been listened to, don’t press the issue either.

Mentors need care and feeding. They need love. Like in any relationship, this requires effort on both sides.

But time and again, mentors who are ready to offer support, further contacts, and more, are simply left with the impression that the startup isn’t doing anything, much less anything they recommended or hoped the startup would try.

Mentors who aren’t engaged with a startup’s activities won’t mention them to colleagues and friends. They won’t brag about progress they don’t know about, and they won’t think of the startup the next time they meet someone who would be an interesting contact for the founders.

This isn’t terribly complicated stuff. Many founders fear at first that “spamming” or “networking,” is the act of the desperate and the unloved. If their ideas are brilliant and their products genius, then surely success will simply find them. Or so the thinking goes.

Alas, that’s a powerful Silicon Valley myth. And believe me: it doesn’t apply to you. Engaging mentors is just like engaging customers: even if you’re Steve Jobs or Elon Musk, you still need to be challenged and questioned. You still need support.

As always, there are a few simple best practices to follow.

1. A Mentor Newsletter

Two of StartupYard’s best Alumni, Gjirafa and TeskaLabs, provide regular “Mentor Update” newsletters. These letters can follow a few different formats, but the important things are these: be consistent in format, and update regularly. Ales Teska, TeskaLab’s founder, sends a monthly update to all mentors and advisors.

In the email, he has 4 major sections. Here they are with explanations of the purpose of each:

Introduction

Here you give a personal account of how things are going. You can mention personal news, or news about the team, offices, team activities, and other minutiae. This is a good place to tell small stories that may be interesting to your mentors, and will help them to feel they know you better. Did a member of the team become a parent? Tell it here. Did you travel to Dubai on business? Give a quick account of the trip.

Ask

This is one section which I love about Ales’s emails. I always scroll down to the “ask” section, and read it right away. Here, Ales comes up with a new request for his mentors every single time. It can be something simple like: “we really need a good coffee provider for the office,” to something bigger, like “we are looking for an all-star security-focused salesman with 10 years experience.”

Whatever it is, he engages his mentors to answer the questions they know, by replying directly to the email. This way, he can gauge who is reading the emails, and he can very quickly get great answers to important questions or requests.

Audience engagement happens on many levels. Not everything engages every mentor all the time, and that’s important to keep in mind. A simple question can start an important conversation. You don’t know what a mentor has to offer you until you find the right way to ask for their help.

Wins

Here, Ales usually shares any good news he has about the company. This section is invaluable, because it reminds mentors that the company is moving forward, and making gains. A win can be anything positive. You can say that a win was hiring a great new developer, or finally getting the perfect offices. Or it can be an investment or a new client contact. These show mentors that you are working hard, and that you are making progress and experiencing some form of traction.

You’d be surprised how many mentors simply assume that a startup that isn’t talking about any successes, must have already failed. StartupLand in can be like Hollywood that way: if you haven’t seen someone’s name on the billboards lately, it means they’ve washed out.

The fact might be that you’re quietly doing great business, but see what happens when someone asks about you to a mentor who hasn’t heard anything in 6 months. “Those guys? I don’t know… I guess they aren’t doing much, I haven’t heard from them in a while.” There’s no good reason for that conversation to happen that way.

KPIs

Here Ales shares a consistent set of Key Performance Indicators. In his case, it is about the company’s sales pipeline, but for other companies, it might be slightly different items, such as “time on site,” or “number of daily logins,” or “mentions in media.” Whatever KPIs are most important to your growth as a company, these should be shared proactively with your mentors.

If the news isn’t positive, then explain why. You can also have a little fun with this, and include silly KPIs like: “pizza consumed,” or “bugs found.” This exercise shows mentors that you are moving forward, and gives them a reliable and repeatable overview of what you’re experiencing in any given week.

I heard one mentor complaining not long ago about these types of emails. “The KPIs don’t change that much, it’s always the same thing.” But he was thinking about the startup in question. The fact that the KPIs hadn’t changed might be a bad sign to the mentor, but probably the absence of any contact would be worse. At least in this case, the mentor might care enough to reach out and ask what’s going on.

2. Care and Watering

Mentors aren’t mushrooms. They don’t do well in the dark. Once you’ve identified your most engaged mentors, you need to put in as much effort in growing your relationship as you expect to get back from them.

How can you grow a relationship with a mentor? Start by identifying what the mentor wishes to accomplish in their career, in their life, or in their work with you. Do they want to move up the career path? Do they want to do something good for the human race? Do they just want to feel needed or important?

A person’s motivations for mentorship can work to your advantage. Try and help them achieve their goals, so that they can help you achieve yours.

Does a mentor want his or her boss’s job? Feed them information that will help them get ahead of colleagues and stand out. Mention them in your PR, or on your blog to enhance their visibility.

Does the mentor want to be a humanitarian? Show them the positive effects they’ve had by sending them a letter, or inviting them to a dinner.

Does the founder yearn to be needed? Include his/her name in your newsletter and highlight their importance to your startup. These things are all easy to do, and can be the difference between a mentor choosing to help you, and finding other things to do with their busy schedules.

ideas

Your Ideas are Worthless. You Should be Glad.

Yesterday we received an email that I can only describe as an “hysterical screed” from a disappointed startup founder who felt that his ideas had been “stolen” by the likes of Y-Combinator some years ago. The email included links to an elaborate set of documentation including YouTube videos that compared two products that sort of, kind of do similar things.

Note, neither the message nor the documentation ever contended that any actual intellectual property, such as code or wireframes, had been stolen. Only the ideas behind them.

What was more arresting was the content of the email, which verged into conspiracy theorism and fantasy.

We get our fair share of weird mail. Investors seem to attract people who combine sad desperation with megalomania. Some just want money. Still when Cedric sent me this email saying: “Maybe a blog post?” I responded: “Hell yes.”

I am not posting this to defend the good name of startup accelerators worldwide, nor to defend StartupYard against such an accusation. I’m also not posting it to ridicule this person, because I am sure their problems are deeper than professional disappointment.

Rather I’m hoping to show startup founders how insidious and destructive the concept of “Idea Ownership,” really is, and why they ought to think very hard before making accusations of IP theft. Again, not because these accusations are particularly damaging to those who are accused, but because they are quite damaging to those who make the accusations, and to the many people out there who have great ideas to share.

You’ve Got an Idea? That’s Nice Dear.

The general gist of the supposed conspiracy was summed up in a few bullet points I will paraphrase (though I won’t give free publicity to the author):

Step 1: Accelerators Collect Startup Ideas (via F6s)

Step 2: We “Steal those Ideas” and Give Them to “Our” Startups

Step 3: We Exit Companies 5 Years Later for $300m

Please understand, I am not exaggerating. It was taken as a given that finding the best ideas out of thousands of applications would lead to multi-hundred million dollar exits.

If only that were the case! How easy life would be for accelerators like StartupYard. Not to mention those lucky startups we would give the stolen ideas to.

But sadly no, it just does not work that way. Your ideas are pretty much worthless. Let me explain why that is:

  1. Your Ideas Aren’t New, and We Don’t Care

The central plank of this theory is that investors and VCs are out digging through your garbage and listening to your phone calls trying to steal your ideas.

We’re not. You know why? Because we’ve heard them already. Yes, even that one. A typical VC is pitched a couple of hundred ideas a year. I see around 400-500 a year. Every year. It gets so that when I hear a pitch these days, I sometimes struggle to remember whether I have already met the founder who is pitching, because I know about the idea already.

What was funny to me about this particular email was that the idea the author purported to own was not only not a new idea, it was a problem already being solved by existing enterprise software. The pitch was for turning existing functionalities into an SME level product. That’s what we call “an execution play,” in investor lingo. It means the idea is the market, not the product.

You should know this if you’ve ever been to a pitching event with a Q/A. There’s always a smarty-pants judge who points out he’s heard every idea before. Most of them have, it’s just that lazy judges say that instead of something more useful. We’ve all heard the ideas before. There’s nothing new under the sun.

That’s ok because we don’t care much about ideas. We care about finding big problems to solve, because that is going to determine how successful your company is. The thing about big problems is that everyone knows about them. If they didn’t know about them, they wouldn’t be problems to begin with.

So our biggest problems with picking startups is finding the right team to solve that problem, and doing it at the right time.

Just think about this logically for a minute: you have an idea, and it’s a pretty good one. Genius in fact. What industry is it in? How big of a problem does it address? How many people work in that industry? How many people are customers or users of the products of that industry?

ideas, startupyard, accelerator

Even if we’ve never heard an idea before, it usually takes about 30 seconds of googling to figure out it isn’t a new idea. Even if we can’t figure that out, one of our alumni or mentors can, and frequently do. The question is not whether an idea is new, but whether the problem being solved is real.

The bigger the problem you’re solving is, the higher the likelihood that somebody, somewhere (and more likely many people, everywhere), have had the same exact thought. Their description of it might be different, and their way of fixing it might be different, but the idea is effectively the same.

2. Ideas are Easy to Copy. Vision cannot be copied.

We choose startups based on their vision, and how that vision makes sense for that team, that technology, and the problem they want to solve. It is mostly about people.

To someone not familiar with our thinking, it might look like we hear ideas, then “give them” to our startups. But, thats pretty misleading.  It would be like accusing a filmmaker of watching other films, or being inspired by literature. Ideas are wonderful and sometimes very clever. They are just never really entirely new. If they were, they wouldn’t make sense when you heard them.

Of course the iPhone would have been a truly new idea before the invention of electronics. But then, nobody ever had any reason to imagine such a thing before the discovery of electricity, let alone computing and the million other nested inventions in a smartphone. Inventions are always a blend of established knowledge with new approaches.

This popular phenomenon of “idea theft” is more pronounced today in the tech industry than in almost any other- and it’s particularly true in products that rely on a simple central value proposition that is easy to copy. Many products can “do the same thing,” but very few can do it in just the right way.

Look at Facebook, and the endless accusations of their “stealing,” the Stories idea from Snapchat. It’s true that Facebook recognized an opportunity when it presented itself, but the idea of using media to create a narrative was invented in the past few years is ludicrous. Do we accuse Uber of stealing the idea of a livery service?

One of my favorite ever blog posts about this topic is from the creator of the game 3s. When I first read this piece when it was published, I was a fan of their copycat competitor, 2048. Since then, I’ve adopted 3s and actually played it on a near-daily basis for the past 3+ years. Today I understand the piece very differently. What I saw then as mostly whining about competition, today I see as a powerful argument in favor of vision:

“We wanted players to be able to play Threes over many months, if not years (…)The branching of all these ideas can happen so fast nowadays that it seems tiny games like Threes are destined to be lost in the underbrush of copycats, me-toos and iterators. This fast, speed-up of technological and creative advances is the lay of the land here. That’s life! That’s how we get to where we’re going. Standing on each others shoulders.

We want to celebrate iteration on our ideas and ideas in general. It’s great. 2048 is a simpler, easier form of Threes that is worth investigation, but piling on top of us right when the majority of Threes players haven’t had time to understand all we’ve done with our game’s system and why we took 14 months to make it, well… that makes us sad.”

What this really is, is a startup founder talking about how simple his idea was, and how important his dedication to his craft was to the delivery of a special product. He was absolutely right to point out that comparisons between his product and the copycats were unjust, and would eventually be judged premature.

He may not have ended up with the most popular game, but he did end up with the best game, and customers paid for that game, not for the copycats (which were free). They “lost” in terms of being a market leader, but they succeeded in their vision for their users and product.

When you actually stop to think about it, it’s hard to name a lot of first movers in tech who managed to dominate their industries, or even survived. As CBinsights has pointed out using data supplied by failed startups themselves, “late to market” doesn’t even qualify in the top 20 reasons for failure.

  1. First to Market Isn’t a Predictor of Success

Shockingly, being first on the market is not a powerful predictor of success. In fact, study has shown that it may be associated with a higher risk of failure. MIT Sloan Management Review noted over 20 years ago that claims of first-mover advantage among successful businesses across a broad base of industries was caused by an effect known as “Survivorship Bias.”

Survivorship Bias, a form of selection bias, occurs when we attempt to judge the relevant qualities of a group, such as a group of startups, after they have become successful, while ignoring the qualities of those who don’t make it. This can lead us to misjudge the importance of some qualities in survival, because we are not looking at all the data.

The logical error is easy to spot when you know how. If I told you that a study of billionaires shows that 75% of them wear white shirts, but only 25% wear other colors, you could conclude that having a white shirt improves your own odds of success. But you would likely be in error. The population as a whole might be 90% white shirts, meaning that in fact another color is even more correlated with success when looking at all the data.

Think about that the next time you dress a certain way because Steve Jobs did. That would be aggressively missing the point.

Survivorship bias arises when we don’t have good data on failures, obviously because they have failed. However, there are ways of determining that survivorship bias is at work. For example, the inconvenient truth that the failure rate for Silicon Valley based startups is actually *higher* than in many other regions. As the Guardian suggests in the above article, this is precisely because so many successful companies are based there. The local standards for success are higher, so failure rates rise.

Does that mean you should or shouldn’t move to Silicon Valley? I don’t know. I know it does mean that moving to Silicon Valley is not guaranteed to help you.

Want even more proof of why first to market is overrated? Of the top 10 startups according to StartupRanking.com, not a single one of them was first to market. Some, like Slack, were not even the first multi-billion dollar companies in their own category. Booking.com offered private flat rentals in the 90s, a decade before Airbnb, and Couchsurfing was founded in 2003, a full 5 years before.

4. Most Ideas Don’t Come from Startups Anyway

A dark and terrible secret of the tech industry -just kidding, it’s obvious- is that most of the ideas that end up getting made don’t come from the founders themselves anyway. The core idea is there, but the final product with market fit is usually a distant cousin of the prototype- the work of many minds.

Where do most actionable ideas come from? Users, customers, advisors, investors, partners, friends, family, and hatemail. I’m only sort of kidding on that last one. The point is that startup founders generally start with wanting to solve a somewhat unclear problem in a somewhat unclear way. They attend accelerators and get early users, investors, and corporate partners on-board to help them make the problem and the solution more clear and actionable.

The really successful founders are not idea machines, they are execution machines. They know how to listen, recognize a good idea when they hear one, make it work, observe the results, and adapt further. There is great creativity and invention in this process, but it is not about ideas, it is about empathy, passion, and skill.

You Should be Glad Ideas Are Worthless

Now that I’ve ruined your beautiful vision of the perfect idea that will make you rich, I will give you a moment to thank me.

You should be happy after all: now you can get on to the stuff that really matters, like building a company you can be proud of, that provides something your customers really value.

Here’s another reason you should be celebrating: you can work on anything you want to. Somebody else already tried it? Not like you will. The problem is already solved by somebody else? I bet some of their customers aren’t happy.

Oh and nobody can credibly accuse you of “stealing their idea,” since ideas are not automatically intellectual property. Intellectual property is the work product of an idea, not the idea itself. Copyright applies to words and images and code. Patents require you to actually design an invention and describe how it works in detail; even then, it’s not automatic. A patent is for the bread slicer, not the sliced bread.

ideas,

Call the lawyers. We’ve got a live one.

If someone has already done what you want to do, thank God somebody has already proven you can make money in this field- that makes your job a lot easier. Or thank goodness somebody else tried this and failed. Now you know not to make those same mistakes. See? Now that ideas don’t matter, the world is truly your oyster. Go forth and start up.

Startups Fail

Our Top 3 Reasons Startups Fail: Featuring CB Insights Data

This is going to be a post about what makes startups fail. But first of all, if you don’t regularly read CBinsights and receive their newsletters, then stop reading this post and go sign up. There’s a reason most newsletters don’t have 400,000 weekly readers.

If you do, then you may have seen a bit of content that CB insights has been updating consistently since 2014: The Top 20 Reasons Startups Fail. This is a list compiled from a sample of over 100 “Post-mortems,” written by founders and employees of high profile startups that failed.

The list is ranked by the number of times a specific reason for failure is cited – each post-mortem contains some combination of these reasons:

StartupYard’s Top 3 Startups Fail, and How to Avoid Them

We won’t detract from this piece by hashing out every reason startups might fail. Instead, we’re going to focus on 3 of these reasons, and how to avoid letting them kill your startup before it starts.

Some of these reasons also explain why we choose not to work with some startups that apply to our program. If you’re thinking about applying to an accelerator or talking to early-stage investors, then these are important questions to ask about yourself and your business.

  1. Ignoring Customers

Oh boy. This is a big one. For me, this is the big one. The mistake that kills a startup dead like a beautiful rose in a dry vase. Ignoring your customers, refusing to think about them and to be driven by their needs, is the kiss of death.

It all starts so innocently: a humble coder working nights and weekends on a passion project. That’s the way a startup should start, but the nature of a startup is to grow – not just in size but in mentality.

Every startup investor and mentor has had this conversation:

Mentor: who are your customers.
Founder: Well we are our own customers.
Mentor: Yeah… but who is going to be your customer? What do they need?
Founder: They need our product.
Mentor: Why?
Founder: Because it’s awesome. They’ll love it.
Mentor: Yeah but… why your product? What not a competitor?
Founder: Because we are newer/smarter/cheaper/better UX, etc.
Mentor: How do you know that’s what they’re looking for?
Founder: Because we are the customer.

Points to you if you can spot the tautology in this reasoning. I strongly agree that a problem you are passionate about solving has to be one that affects you. In that sense, you should be your first user, you just need to remember that the customer is somebody you can also learn from.

A good way of remembering that is this: you didn’t buy your product. You built it. Your customer will buy it. Even if you both have the same problem, you are not the same person.

Again, it’s essential to create something you would use yourself. It just isn’t enough. Great products involve a deep insight into the motivations of customers; even when that insight is a very simple one, or an instinctual one, it does not come about by chance, but by observation and curiosity about people.

Thinking About Your Customers:

How to avoid this one? It happens that we’ve shared a lot of content on this theme. Positioning for Startups, Bulding a Killer Customer Persona, and The “We” Problem, are good places to start.

In short, it comes down to having a process. Here is one you can try:

  1. Develop customer focused product/messaging frameworks (aka: Positioning)
  2. Make educated guesses about your customers in that framework (aka: Personas)
  3. Test these frameworks with real people and an early product or mockup.
  4. Redevelop your product and business strategy based on what you’ve learned

There’s not one way to do this, but there are plenty of ways to do it poorly. Not having a clear idea of what you know and don’t know about customers is a mistake that’s easy to avoid. Paul Graham put it this way in one seminal blog post:

When designing for other people you have to be empirical. You can no longer guess what will work; you have to find users and measure their responses.” -Paul Graham

2. Lacking Passion

“You need passion,” we are so often told. Less often are we told what that means.

I think this is why some founders confuse “having passion,” with “being energetic,” or “assertive,” or “dominant.” These are not the same things.

Passion comes from within – it’s not a performance art; it guides what you say but also how you think, what you are willing to do, and what setbacks you are willing to accept. In short, it’s not about how you behave, but about who you really are.

Everyone has some passion. It’s the thing that keeps you up at night, and bothers you throughout the day. A little voice in your head telling you something needs to be done.

Understanding their own passion is pretty hard for some people. We’ve seen that a lot. We spend a lot of time with founders trying to find out what gets them really engaged and excited about their work. What gets you out of bed in the morning is what’s most important in your work.

One of the first thing we ask applicants to StartupYard is: “Why are you doing this?” The answer says a lot about your passion.

A lack of passion is easy to spot, if you know what to look for. Here’s an overview of the qualities that typically tell us a founder lacks the passion they need to move forward:

  • Risk Avoidance: Founders who are unwilling to take risks, such as leaving a job, moving to a new place, or bringing on a co-founder.
  • Waiting: The founder who bases their decisions on the actions of others; who waits rather than acts with intention. “I will leave my job if you give me funding.” “I will decide what to do based on what investors say.”
  • Focused on Money/Valuation: Some founders who are overly focused on “getting the best deal,” do so because they value control and personal gain more than achieving their stated goals.
  • Motivated by Opportunity: I sometimes say: “don’t pitch me an opportunity, pitch me a company.” A founder who talks about getting a piece of a huge market might not be doing what they do out of a love for the work.
  • “Win At All Costs” Attitude: In my opinion, this happens when founders confuse passion for ambition. Ambition isn’t a bad thing, but it isn’t passion for what you do- it’s a passion for winning. Your passion for helping customers has to ultimately outweigh your personal ambitions, or else you won’t make decisions based on what’s right for them (and thus your business), but rather what fulfills your ambition.

Seeking your Passion: How do you know you’re doing things for the right reasons?

In my view, this is a simpler question than people often make it. We are taught from an early age that we should emulate those who are successful, but education systems often don’t help us to really understand why successful people are special to begin with: because they have a passion for what they do.

For all the tactics, tricks, and habits of the rich and famous, passion underlies everything. People succeed when they do what they are good at, enjoy it, and are willing to work harder at it than anyone else.

Just consider the following questions if you want to get in touch with your true passion:

  • If I were rich, would I stop doing this?
  • Are there better uses of my talent?
  • Am I waiting to enjoy what I am doing?
  • Am I doing this in order to be able to do something else?

If your answer to any of these is “yes,” then you ought to think hard about what you’re doing. You haven’t yet found your passion.

3. Missing Product-Market Fit (PMF)

“When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins. When a great team meets a great market, something special happens.” – Andy Rachleff, CEO, Wealthfront

Even if you’re doing something you really care about and you’re doing it for customers you understand really well, you can still fail to make the right product for the right market.

Andreessen-Horowitzs  has a fascinating post on product market fit, in which they quote Andy Rachleff who developed the PMF framework, starting with what he calls a “Value Hypothesis:”

A value hypothesis identifies the features you need to build, the audience that’s likely to care, and the business model required to entice a customer to buy your product. “

There are two sides to the PMF equation. Market, and Product. Missing PMF means failing to address a specific market with exactly the right product, at the right price.

Right Market

Andreessen-Horowitz heavily emphasizes finding the right market first, which is another way of saying that you must identify the right problem to solve. If you pick the wrong market, you can end up building a product that people love, but won’t pay for.

This happens more than you’d suspect: plenty of popular products have never gained good PMF. Even mega-popular products like Twitter can teeter on the edge of failure, and take over a decade to achieve PMF (which Twitter seemed to do only in 2017, with their advertising business and focus on media and news).

Other orphans of bad PMF are products like Tumblr, Vine, Soundcloud, and BetaMax tapes. Each of these has either failed, or is now on life-support. The latter example of BetaMax is included in this extensive list from Business Insider. In fact, virtually all the products in this list failed because of lack of PMF. Not because the products were bad, but because the business model didn’t work: the market didn’t sustain them.

The Right Product

“First to market seldom matters. Rather, first to product/market fit is almost always the long-term winner.” – Andy Rachleff

So picking a problem you can solve, for a market that wants a solution critical. Still, you can manage this and still fail. The product that solves that problem also has to appeal to the customer enough for them to use it.

A great example of this also comes from BI’s list: The Apple Newton line, which lived from 1993 to 1997, and which Wired later called a “Prophetic Failure.” What most people don’t know about the Apple Newton line was that they very accurately predicted three distinct product categories, which would emerge in the following 15 years: the smartphone, the tablet computer, and the modern consumer laptop.

In many ways, looking at a Newton from 1995 feels like looking at a cyberpunk version of a modern device, made to look like a 90’s product.

 

The Newton failed in three categories that would go on to be the fastest growing market categories in history for computing, but still failed because the technology wasn’t ready. As the project lead Steve Capps said later: ““We were just way ahead of the technology. We barely got it functioning by ’93 when we started shipping it.”

The series failed at least partly because the market was not ready for such devices, but also because of its infamously bad character recognition feature. Even though later editions of the devices improved on the original, it was too late for Apple, which would spend the next 20 years rebuilding itself and slowly reintroducing all of these concepts in the form of the iPhone, iPad, and Macbook.

Testing the Value Hypothesis:

Like listening to your customers, PMF is all about trial and error. Make certain assumptions, test them with a minimum viable product, make more assumptions, and test them. The clearest milestones for PMF come from customer feedback about the Value Hypothesis.

You can begin to test this hypothesis right away, even with just an idea- with no product to show. It’s pretty simple: if you get confusion, lack of enthusiasm, or even hostility, either it’s the wrong product or the wrong market. Find out what the person you are talking to does want, and also look for others who do want the product you’re pitching. Chances are the answer is somewhere in the middle.

This is a bit like fishing. Either change the location or change the bait. It just takes time and consistency. Fish long enough, and you can get lucky.

For example, I was attending a tech conference a few months ago, when I got the chance to meet the former Senior Vice-President of a major electronics company. He mentioned that he helps early stage hardware companies find PMF, and I mentioned we had just such a company seeking PMF: Steel Mountain.

He asked me what the company did, so I gave him the 90 second water-cooler pitch. Within a few moments he was nodding. When I got into some of the features, he was saying: “yes… yes.” When I finished, he exclaimed: “I can’t believe no one has done this! When can I buy one?”

This, I must repeat, was the former Senior VP of a major electronics company, whose products you probably own. Nobody had ever pitched him this particular idea in just the right way before. That is a powerful indication of PMF.  You don’t have to convince the customer they need the product, because they know they need it.  

Still I may lack some important information. Is this customer representative of a distinct market segment? Is the business model workable for the target market? Does the product work the way they want and expect?

You still have to explore all those details, but enthusiasm for the product’s core value proposition is a great milestone. It was then the Steel Mountain team’s job to continue testing the product with the same customer and others like him.

 

Startup Skills: How to Create a Killer Talk

The Killer Talk: TL;DR: A Long Complicated Post

Creating a killer talk is complicated. Therefore this post is complicated, and because I want to go into detail on some of the points, I’m going to start with a quick TL;DR summary table. If you’re like me, and enjoy a nice wall of text, skip down and start reading!

 A killer talk

  • Preface
    • Practice is everything
    • Gifted speakers give bad talks too
    • Bad speakers can become great presenters 
  • Understanding Story Structure
    • Clear structure makes things memorable and easier to understand
    • Stories are present in all forms of expression, like architecture
    • Proper story structure helps us to manage attention and not be boring 
  • Picking the Story
    • 3 Key factors
      • What the audience expects
      • What the audience wants
      • What the audience needs
  • Complicating the Story
    • Subvert the 3 key factors and introduce conflicting ideas
    • Bring your story to an unexpected solution
    • If it’s not arguable, it’s not interesting 
  • Telling a True Story
    • Make yourself or someone else the hero of your story
    • Create an interest villain too
    • Have your hero’s story be a framing device for your views on the topic
  • Pro Tips: Establishing Authority
    • Always frame your talk in the context of your expertise and experience
    • Embrace your limitations as your advantage (unique perspective)
    • Make your authority clear by your words, not by declaration

 

People ask me sometimes how I prepare for the talks I frequently give at tech conferences and universities around Central Europe.

They say preparation is everything, and I agree. At StartupYard, we’ve been able to turn seemingly hopeless public speakers into real stars. It just takes dedication and time.

The truth is though, certain people are just good at public speaking. I have always been one of them, and that has made me slightly lazy when it comes to preparation. However, as expectations have risen over time, I’ve taken my speech prep more seriously.

This, by the way, is another common problem. Those who *are* naturally gifted public speakers tend to under-prepare. We’ve all had the experience of listening to a great speaker give a mediocre presentation for that reason.

The opportunity to change minds through public speaking is in many ways more powerful than in almost any other medium. It is an art our species has practiced for longer than any other. Standing in front of other people, and challenging and influencing their sense of truth, of justice, and of reason, is as good as it gets in the marketplace of ideas.

Public speaking is the Cadillac of communication.

So then, as a reformed lazy person, how do I prepare for public remarks? How can you learn from my experience?

Understanding Story Structure

“My mother always said: whatever you do in life, don’t be boring.” – Christopher Hitchens

The greatest sin in public speaking is to bore or confuse your audience.

I have covered the storytelling topic in detail in other blog posts. Still, I’ll provide a short primer here:

To be truly interesting is to be memorable. And memorability requires some structure- something the memory can attach itself to. The structure of a talk, just like that of a building or a piece of music, or a book, gives the listener/viewer/reader the shape of the idea, and helps them to remember it.

We call this structure “story.”

Think of it like architecture: the visible elements of a building help us to understand how that building works. Where are the entrances? What is the building for? These clues help you understand what is an office building, rather than a hospital, or what is a grocery store versus a warehouse.

An architect tells a story with the design of a building. In this analogy, we can see that it is possible to fail at speaking the same way you can fail at architecture. There are entire genres of architectural criticism that focus on this problem (and that particular blog is a hilarious example).

Is your talk a maze, or is the layout clear? Do people recognize the entrances and exits? Does it appear to be what it actually is? Does it make sense in the context of its time and space? Is it balanced?

Story structure is about answering these questions.

Note that not all of them have to be answered in the same way! Sometimes you want a maze. Sometimes you want the exits to be hard to find (like in a casino), and sometimes you want a building to stick out, and not fit in. But just like in architecture, we cannot simply ignore structure if we want to be different and memorable in the way we speak in public. We have to master story first.

Picking the Story

My strategy for creating a story for a talk is to understand 3 basic things very clearly. Again, this approach could be applied to any creative medium, even things like music (in fact, studying music theory and composition is where I learned this approach).

The three elements I start with are: what the audience expects to hear, what the audience wants to hear, and what the audience needs to hear.

So let’s take a practical example like Blockchain – the latest hot topic everyone wants to tell everyone else about. If I were to give a talk, I would follow these steps:

  • Think about what the audience expects you to say. Blockchain is the future? It’s a revolution? It’s safe? It’s better than alternatives?
    Pro Tip: Try to find something (which you also believe), that the audience doesn’t expect you to say. Blockchain will solve world hunger? Blockchain will cause a worldwide crisis?
  • Think about what the audience wants to hear. That blockchain is working out the way they hoped? That decisions made in the past were good? That the future is bright? Maybe the audience wants you to be negative about it as well. This is specific to the context of the talk, and who will hear it.
    Pro Tip: Acknowledge what the audience wants to hear, but don’t say it. “I know what you’re probably expecting to hear from me, but I’ll have to disappoint you.”
  • Think about what the audience needs to hear. What are the inconvenient truths about blockchain? What are the things people are ignoring? How are most people wrong about it? What is hard to grasp for this specific group?
    Pro tip: Avoid saying things the audience doesn’t need to hear or already knows. Blockchain is a popular subject? Yes. Only say this if it has a rhetorical purpose: “Of course blockchain is a popular topic but… (insert something the audience needs to know).

Complicating the Story

“Learn the rules as an artisan, so you can break them as an artist.” – Attributed to Pablo Picasso

So we’ve seen in essence, that a great talk is one that doesn’t say what people expect, that contradicts what people want to hear, and which says what people need to hear.

The art of public speaking is the way in which you complicate this process.

Complicating the story means introducing information or ideas that are in conflict with each other. One narrative appears to emerge, but is then challenged by a new narrative. A good public talk examines a story from more than one perspective, and shows how these narratives intersect and diverge.

So then an uncomplicated story begins with the three elements above, but stops there. It tells a narrative in conflict with previous narratives. A really complex and interesting story goes further, and challenges its own ideas in the same way, to arrive at still different conclusions. Often we do this by making the story about our personal journey of discovery: how we started by seeing things one way, and ended up seeing them another way entirely.

You will understand this concept quite instinctively, even if you have never noticed it before. Think of a classic story like The Lord of the Rings, or Casa Blanca. We are at first presented with two opposing ideas: a battle between the good guys, and the bad guys. But inevitably, the interesting part of these stories is what the good guys do that is bad, and what the bad guys do that is good.

You can’t have Frodo without Smigel. Casablanca’s Rick Blaine would never do anything interesting without his antagonist and rival Louis Renaultm to provoke him to action.

Remember: If it’s not arguable, it’s not interesting. Nothing worth your audience’s time is obvious. If everyone agrees with you all the time, then you’re probably not going deep enough. If you agree with yourself all the time, you’re probably not talking about anything that matters.

I know a talk has been a success when people come up to me afterwards to challenge my ideas. “Haven’t you considered this?” “I don’t agree with your conclusion about that.” These are positive outcomes for a public talk: that it inspires more people to think and talk about what you’ve said.

If nobody wants to give you their view, it may be because you haven’t really challenged them.

If it's not arguable, it's not interesting. @lloydwaldo on Creating a Killer Talk Click To Tweet

Telling a True Story

You may recognize the patterns i’ve talked about as similar to that of a classic TED talk, and with good reason. TED is masterful at helping presenters to illuminate a topic from a very specific point of view, and build a story around it.

Ted talks are most often shaped around the “Hero’s Journey,” narrative device. This is a common storytelling practice in which a character (often the speaker themselves), goes through a series of experiences which change their view of the world, and leave them better off than when they started.

A story that can seem flat and uninteresting if told without this device, can come alive for the audience when the hero is included. Take, for example, this classic talk from Will Wright, creator of SimCity, on Spore, birth of a game, from 2007.

On the surface, this could be a very dry discussion of game design in the 21st century. But because Wright makes himself the hero of his own story, we are taken on a journey from his early experiences with game design, through his personal discoveries about science and the theories of the universe, and arrive at the present day, understanding much more about why Wright has created this new game.

This strategy also works when you are not the subject of the story. We routinely see this in political speeches, for example: stories of average working people whose experiences are used to explain a political position or a decision. Investors often use this device to talk about the companies they invest in.

Pro Tips: Establishing Authority

Any time you’re being asked to speak as an authority on a given topic, it’s your job to help your audience understand not only what you think about that topic, but also how you came to have that position in the first place.

A poor way of establishing your authority is simply to state that you are an authority. “I am an expert in this topic,” is the lazy presenter’s mode of persuasion. Better is to list your accomplishments, and even better still, is to actively demonstrate your knowledge and experience in what you say.

A speaker’s authority is as important as what they say. This does not mean that one must be the highest authority on a topic in order to be persuasive, but it does mean that the speaker must frame their arguments in context with their authority to make those arguments.

For example, if I’m being asked to give a talk on Blockchain, I cannot give a persuasive presentation based on my knowledge of the technology. I just don’t know enough about it. There are others who should be listened to on that.

I don’t have to avoid talking about blockchain though. Instead, I would need to pick a point at which my authority intersects with the topic, and examine it from that perspective. Speaking outside my area of authority diminishes my arguments, but sticking to what I do know can bring up important points about the topic that another type of expert might miss.

Everyone is an expert if you look deep enough. @lloydwaldo on Creating a Killer Talk Click To Tweet

Can a marketing expert and an experienced startup investor tell you something meaningful about the blockchain? Absolutely. However, it should be something only a person with those qualifications would know or be able to argue effectively. I could talk about how the technology is marketed, for example, or what the technology’s implications are for marketing in general. I could talk about how the technology interacts with my discipline and my areas of experience.

Inside your area of authority, there will always be perspectives that can be valuable to others. So don’t ask “who am I to address this topic?” but rather “what does my expertise and experience tell me that others need to hear?”