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6 Steps to prevent your Product from becoming multiple Applications! All in Cartoons!

Somewhere along my long software engineering career, I sat one more time rolling my eyes and clucking mentally that one more product is about to become a series of applications! We are about to create multiple code line monsters that will be demanding and expensive to maintain! Yet, this is what happens in reality in most “Product Companies” that start out with the greatest of intentions but devolve quickly into a morass of effort and expense! Do not mistake me! This is a great problem to have and solve! If you have that many clients wanting your product you are in terrific shape to begin with! You just need to manage it carefully. How do you prevent this from happening? Here are six steps to make sure that this does not happen! All in cartoons! After all, a picture is worth a 1000 words!

1. Nothing can substitute for a proper Product Management Function

All features needed for a client need to go through Product Management. Engineering should not be setting the priorities! Product management can always balance Sales’ priorities with Engineering capacity. Not impossible! Somewhere in the past we have used the rule “If one client requests it, it goes into the Wish List. If two clients request it, it goes into the next release. If three clients request it, it goes into the next build”. But nothing is worse than promises like these. And a proper product management function, run well, can prevent it.

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2. Always separate the Product piece from the Consulting piece

If only one client requests something, it is always good to separate the product from the consulting piece. And make sure that the product has callable features that accommodate the consulting piece separately. Like through an Application Programming Interface (API) or through Service Oriented Architecture (SOA) to make it even more robust. Otherwise your whole product ends up like this

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3. Create new features out of useful Consulting Pieces

This is the challenge for Product Management. They should always be on the lookout for generalizing client consulting requirements and make them new but customizable features. Consulting requirements that work for client A hardly work for client B. However with some thought and ingenuity, you can generalize the requirements so that it is not only useful for A and B but also other future clients. It will be more code than you usually write as an application, but once done properly, can be reused for many, many clients in the future!

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4. Minimize Custom Code and Maximize Product features

Over a period of time, one of the worthwhile goals a software product company should have is to minimize custom code and maximize product features! No one really knows the exact requirements for a product unless you roll it out to at least 3 or 4 clients. You realize that you don’t need 50% of the features you thought were hot and you don’t have 50% of the features that clients truly need. This is the process of finding those out! Nothing wrong, but it is just part of the process! However, you need to formalize that process and work that in to your product release schedule. If you think this is crucial for On-premise software, you should try Software as a Service (SaaS) offerings! Even more of a challenge to get features generalized into a bunch of admin settings for a SaaS offering! One more reason to minimize custom code and maximize product features! Like here.

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5. Find and groom Consulting Partners to do the customization

Writing custom code for clients 1 through 5 may be fine but you need to get out of the custom code business. For startup companies it is always tempting to take on as much consulting revenues as possible, especially when it helps greatly with cash flow. It will smother and kill you, as I have seen it in too many companies myself! It’s a honey trap! Find and groom consulting partners that will do the custom code development as early as possible and get out from the applications business. Requires diligent testing, documentation and training. The sooner you do this, you will come up for air and get on with your future major version releases of your product. Also, from a fund raising perspective, if you look more and more like a consulting company, you have less of a story with investors, especially VCs. Consulting companies do not fit their investment profile too much!

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6. Re-Architect the Product every few years! It’s inevitable, especially if you are successful

Software products become like the cartoon in point #2 above. It is inevitable! You have a preliminary architecture, you keep adding features, pretty much with duct tape and baling wire. It is then and only then you realize how you should have designed the architecture in the first place. Plus, every five years or so, you have a whole new set of advances in software engineering methodologies, languages and tools. It pays to completely re-architect your product from the ground up! It also goes with the observation that your product has a whole lot of features you need additionally and a whole lot of features that go unused by your clients, anyway. Step #5 buys you this breathing time to go off, have a few off-site meetings and re-think how your product is structured. Plus never forget that you need to migrate all your old clients to this new one, too! Crucial!

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Successful products evolve! But not without a lot of thought into the process of getting there! Without careful, considered forethought and planning, they can come back as a whole set of applications that can smother and choke a product company!

Software is a great combination between artistry and engineering – Bill Gates

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All I know about Product Startup Recruitment…I learned from the movie Moneyball!

Today, I was watching Moneyball, the movie for the third or fourth time! Every one of those scenes and dialogues was a lesson in recruitment that every product startup could use! I have used them and they have worked for me in fantastic ways! What better way to learn lessons in startup recruitment than watch a highly enjoyable movie with fantastic actors like Brad Pitt and Jonah Hill!

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Having lived in Silicon Valley in the early 2000s, on the East Bay, having seen some of those Oakland Ace home games myself in person,  and having followed the A’s improbable victories in the media with my mouth open in astonishment, it could not get any more real and personal!

The movie starts out with the New York Yankees having a budget of $120M for player salaries and Oakland Aces having a budget of $40M. And the Yankees are stealing the best players the Oakland As and other teams too!

Sounds familiar? Competing with larger companies with deeper pockets for your employees?

So how do you compete and win? That’s the premise we start with.

Billy Beane: Aaahhh! The problem we’re trying to solve is that there are rich teams and there are poor teams, then there’s fifty feet of crap, and then there’s us. It’s an unfair game. And now we’re being gutted, organ donors for the rich. Boston has taken our kidneys, Yankees takin’ our heart and you guys are sittin’ around talkin’ the same old good boy nonsense, like we’re selling deeds. Like we’re looking for Fabio. We got to think differently.

Let’s start with that! As a product start up company when you are ramping up, you are not a rich team, you are not a poor team, fifty feet of crap, and you are lower than that, given the lack of resources, especially if you are  bootstrapping! You may have star technical co-founders but you may need a larger team. Everybody cannot be a chief.  You need foot soldiers! You need to think differently!

Peter Brand: It’s about getting things down to one number. Using the stats the way we read them, we’ll find value in players that no one else can see. People are overlooked for a variety of biased reasons and perceived flaws. Age, appearance, personality. Bill James and mathematics cut straight through that. Billy, of the 20,000 notable players for us to consider, I believe that there is a championship team of twenty-five people that we can afford, because everyone else in baseball undervalues them.

So goes a quote early on in the movie!

People are overlooked for a variety of biased reasons and perceived flaws. Age, appearance, personality.  Top tier schools have all been picked clean. Look for overlooked people. Look for that unusual project in their resume. Ask the candidates about their passions and hobbies. You may be surprised with those gems that others overlooked. Tier 2 and Tier 3 schools  will have those people who did not make it to a top tier school for whatever reason. Their parents may have been sick during their high school final year. They may not have shown enough interest at that time to make good  enough grades in their high school year to get into a top school. They will be so grateful that you have confidence in them and are giving them another chance!

This does not mean you lower standards regarding technical competencies and knowledge. Test and interview for those as you would anybody. Look for those unusual people that are good but your mind rejects unconsciously because of age, appearance or personality!

How could the A’s  keep winning games against bigger and well funded competitors with a team made up of rejects and undervalued players? The key word here is undervalued!

Peter Brand: Billy, this is Chad Bradford. He’s a relief pitcher. He is one of the most undervalued players in baseball. His defect is that he throws funny. Nobody in the big leagues cares about him because he looks funny. This guy could be not just the best pitcher in our bullpen, but one of the most effective relief pitchers in all of baseball. This guy should cost $3 million a year. We can get him for $237,000.

Look for those Resumes that look like people who throw funny! Extraordinary interests in a variety of tools, languages and approaches. You want a start-up team that has breadth and depth. That candidate who gets so dogmatic about Java or Objective C or Ruby on Rails and thinks that everybody else is stupid to think of any other alternative is a problem waiting to happen! It’s a person who has not learned the difference between one tool and a toolbox full of tools. You need a carpenter who knows when to use exactly the right tool, not an operator of a single tool!

Peter Brand: Okay. People who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs. 

Figure out what you need as outcomes from the team members, not the function. You don’t need programmers, you need products that work. You don’t need Customer Service representatives. You need satisfied customers. You don’t need s sales team with a Director of Sales. You need Sales! Focus on how they have achieved these things in their past life. Look beyond the resume. Talk to them!

Finally, don’t second guess yourself! Explain the mission of the start up  and ask the question – “Do you believe in this thing or not?”

Yes. Watch the movie Moneyball if you want to know how to do recruitment for your product startup company!

 

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If you want to do something, don’t over-analyze it! We do mostly Series A Funding! Helion Ventures #ThinkInvestor

ThinkInvestor is iSPIRT and ProductNation’s new initiative to serve as a catalyst between Venture Capital firms, Angels, Angel Networks and Entrepreneurs. It is to go beyond brochure ware and dig deeper into the whole life cycle of a typical investment; from introductions, funding, styles of on-going engagement, to exits. And in the process, capture their views on global and local trends, and the entrepreneurial ecosystem in India. This interview is done with inputs from Shashi Bhagnari.

think-investor-helionHelion Venture Partners is a $600 million venture fund focused on India with offices in Bangalore and Delhi. The company is an early to mid-stage investor in Indian startups in sectors such as Enterprise software, Internet, Mobile, Outsourcing, Retail, Education and Financial Services. In a conversation with iSPIRT, Helion’s Alok Goyal, Partner, talks about the company’s funding strategy, evaluating projects and making the right investments.

Tell us about the company’s background. What is its focus? What is your current fund? What is it looking at?

We formed the firm in 2006 with four founders that included Ashish Gupta, Sanjeev Aggarwal, Kanwaljit Singh and Rahul Chandra. Besides our team of analysts, our CFO doubles up as an operating partner for finance. We also have an HR advisor who works closely with our portfolio companies. We recently got someone in Product Management from Google to help portfolio companies. We are now a group of 15 people and have our offices in Gurgaon and Bangalore in India.

We focus our investments on early to mid-stage ventures, investing in technology-powered and consumer service businesses in sectors like Outsourcing, Internet, Mobile, Technology Products, Retail Services, Healthcare, Education and Financial Services. We have done about 60 investments so far.

In our current fund, we have raised about $250 million. The focus of this new fund will be divided between technology side and tech-enabled consumer investments. We will continue to look at Internet services like Makemytrip where we invested earlier, taxi services like TaxiForSure etc.

What’s your strategy on verticals? How do you characterize them?

Within e-commerce, we are bullish on Internet-only brands and marketplaces. For example, YepMe–a Web only brand focused on tier two and tier three markets. We have also invested in a venture called ShopClues which is an eCommerce marketplace.

Within consumer services, we have invested in consumer facing travel ventures like TaxiForSure. We have also made an investment in a company that makes planning travel experiences much easier. We have also funded a housing and real estate venture, Housing.com.

What stage of investment are you most interested in? Seed funding or later stage investments?

We are mostly the first or one of the first institutional investors in the company. Our sweet spot would be Series A or Series B funding. I would imagine 70 to 80 percent of our investments are in Series A. We invest between $10 to 20 million over the lifetime of an asset.

Any interesting investments you have made recently?

We had been looking at investments in the healthcare sector for a while now. We have recently invested in Denty’s, a chain of dental care units. This Hyderabad based company focuses on dentures, jaw replacement and other high end dental care treatments.  We have also invested in the area of enterprise mobility, in a company called Rapid Value that provides services in the area of mobilization of enterprise applications. Another recent investment is Linguanext, which has created a unique technology for language translation. It allows Independent Software Vendors (ISVs) and enterprises to translate any application from one language to another without any changes in the application itself.

How do entrepreneurs get in touch with you? Is there a defined process they need to follow?

Entrepreneurs are at the heart of the venture capital eco-system. It is as much or more of our job to find entrepreneurs than they reaching out to us. In fact, we use a lot of our bandwidth to get to reach out to entrepreneurs.

Entrepreneurs are most welcome to reach out to us directly. There are two ways entrepreneurs typically get in touch. First is through our personal network. Second way is through bankers. We also like to make ourselves visible in forums and events so that entrepreneurs can reach out to us and we can reach out to them.

We also have a strong outbound program through a team of analysts.

What is your due diligence process? Is it specific to all?

We view around 1500+ business plans each year. The process is similar for most. Usually the first meeting takes place with one of our analysts, unless it comes from personal contacts. Different analysts focus on different areas and they all gain a good idea after the first meeting, which is then followed up with another meeting with one of the partner(s), to understand the business better.

Due diligence for us is more Market Diligence. We also do primary research, secondary research and make reference checks. After we are through with the entire due diligence, we invite the entrepreneurs to present their business plan to the whole team.  If the partnership is positive, we issue a term sheet after which financial/legal due diligence cycle along with documentation is completed.

The entire end-to-end process is completed within a month and a half typically.

How do you interact with your entrepreneurs? Is there a process outlined for this?

Investment is not only about money. We have developed reasonably strong relationships with our entrepreneurs which begins when we start the process of due diligence. We have both formal and informal interactions on a periodic basis.

In the early stages, face-to-face meetings are held every quarter, in addition to monthly calls. But outside of that, we do not interfere in their work at an operational level. But entrepreneurs reach out to us whenever they need help. For instance, if they need clarity on product direction or to connect with other prospects, they contact us. Those interactions are in fact, quite regular. However, I personally find myself being in touch with them on a very regular basis.

Do you have any avenues where you meet your portfolio company CEOs informally during the year?

Yes, we are doing this once a year. We have also started to form groups now. For instance one group that focuses on product management can share tips with portfolio companies in that area.  We also reach out to our portfolio companies through webinars.

Tell us about your recent exits? What do you think of the climate for exits in India like?

We are just an eight years old entity, so there have not been too many exits. Our first was an IPO exit from MakeMyTrip when they went public. We also exited redBus when it was acquired by Naspers. Then we got out of Amba Research. We are hopeful that the market climate in the next few years will get a lot better for favorable exits.

What excites you about entrepreneurs these days, and what is it that you like to see in them?

In all my discussions there is a general belief that the quality of entrepreneurs has gone up significantly. We are also seeing a whole class of entrepreneurs moving back from the US. We are seeing a generation of entrepreneurs starting their second ventures now. Their scale and thinking is different, very bold.

What we’d like to see is stronger talent in Product Management. It is relatively more difficult in India compared to a place like the Bay Area. We are also not seeing as many deep technology assets. What we are seeing are more applications based and light IP based businesses from India. Over a period of time, I have no doubt that India will create more deeper technology companies as well.

What advice would you like to give young guys who want to start a new venture?

You should ask yourselves if you have the entrepreneur inside you or not. If you are over analyzing, you are probably not. An entrepreneur has to be “foolish” enough to purse the dream besides being passionate about it. If you want to do something, don’t over-analyze it. The important thing is the ability to take the plunge.

Entrepreneurship is not a solo sport; but a team sport. You need to find complementary capabilities in others. The bottom-line is that you should be able to pull together a team that has complimentary skills and the same passion to do it.

A startup is successful because it is focused. Defining that focus is important. Startups succeed because they choose a specific market segment or a specific problem or a specific customer set etc. and serve that market better than anyone else.

Lastly, it is important to be close to the market. You need to continuously listen, learn and act with agility. It is important to be able to iterate quickly. 

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Raja the Raja ! We miss you!

Dear Raja,

Rajendra RajaWe have collaborated on many blog posts in the past but we are struggling to shoulder the burden of this one. People say you are 63, but you worked like a 23! You didn’t care what people thought about your views – you boldly put them forward. You worked for a large company but you cared for the success of innovation in smaller startups. While your mates were fighting for their promotions you were fighting to promote the eco-system. When everyone is having hard time adapting to change, you learned twitter, facebook and what not, with the curiosity of a teenager. While everyone safely choose an MNC product, you took the risk choosing Made-in-India products within your organization and also forced your network to follow you. You saw no boundary and went across NASSCOM, Ignita, iSPIRT with the only goal of building a solid ecosystem. It is hard to merge companies but you easily united iSPIRT and Ignita. When people hesitate to accept friends requests in FB, you made us part of your family by including us in your 60th anniversary celebrations. You are great friend to all of us and we miss you! Raja the Raja !

With limitless love and affection,

Akshay Shah, Avinash Raghava, Dilip Ittyera, George Vettath, Lakshman Pillai, Nari Kannan, Purushothaman K, Sharad Sharma, Suresh Sambandam

 

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We invested in Ezetap, the Square for Emerging Markets! Mobile, Internet, Payments interest us! AngelPrime #ThinkInvestor

ThinkInvestor is iSPIRT and ProductNation’s new initiative to serve as a catalyst between Venture Capital firms, Angels, Angel Networks and Entrepreneurs. It is to go beyond brochure ware and dig deeper into the whole life cycle of a typical investment; from introductions, funding, styles of on-going engagement, to exits. And in the process, capture their views on global and local trends, and the entrepreneurial ecosystem in India.

AngelPrime is a Seed-stage fund that sits between incubators/accelerators/angels and large VC firms. Started by serial entrepreneurs, Bala Parthasarathy, Shripati Acharya & Sanjay Swamy, Angelprime believes in getting deeply involved with the companies they invest in. They have been serial entrepreneurs that understand that entrepreneurship is a long and lonely journey and having multiple minds spend sleepless nights on the business dramatically increases the chances of its success.

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ProductNation sat down with  Sanjay Swamy, Managing Partner of AngelPrime for this interview.

Here’s what we heard :

What is AngelPrime? What’s your Stage, Focus and typical investment sweet spots?

We are a group of serial entrepreneurs and we bring the perspective of an entrepreneur to our fund. We are very seed stage and we are hands-on investors. In the early 70’s  in Silicon Valley, VC firms worked side by side with entrepreneurs building their companies. Later on, they evolved to become more of financial investors. India now is somewhere in the middle. However, we believe in working side by side with the entrepreneur in building companies. We help our portfolio companies in product definition, building teams, building products, getting them validated in the market and building a global strategy if needed. There are Angels and Incubators that may invest in the order of a few lakhs. Typical early stage VC firms may do $2M to $5M and do 8 to 10 deals a year. We are in the middle, and we can dedicate a lot of time to the companies. We have bandwidth only to do 3 or so highly curated deals a year.  Our typical investments have a broad range,  from  $100K to a $1M. Our sweet spot is $400K to $600K.  Our focus is Technology-led Start ups, Mobile and Internet, Financial Services and Payments. All three founders of AngelPrime were volunteers with the UID program in India and so we are very interested in Identity related start-ups. We are seeing a lot of companies in the healthcare space and have invested in a recruiting start-up. Most important thing for us is how much value can we add.

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What’s the best way for an entrepreneur to get in touch with you? What works and what does not?

Referrals are still the best way to get in touch with us. However, we still get to know entrepreneurs and their companies through email. One of our portfolio companies HackerEarth, we bumped into at a conference! We are also finding early stage incubators to be a rich source of deals. We have found interesting companies at incubators like the Microsoft Accelerator, GSF India and Morpheus. We find that the deals we come across at these places have gone through some level of curation already, with something of a team in place, and some limited level of product validation already done. These are the kinds of referrals that we like! Typically we are the first institutional money and we are also the larger lead in a seed round.

How long does it take for you to decide on investing? What is your due diligence process?

The first thing we assess is the caliber of the entrepreneur; we look at the scrappiness of the entrepreneur and the typical two person (or so) team.  If the members of the team are similar in backgrounds, that’s not necessarily a plus. We are looking for teams made up of people who are complementary in backgrounds but work well together.

The second thing that’s important is the size of the market. This is not something you can create. It is what it is, but we assess how the entrepreneur is wanting to go take a piece of that market.

Coming to the due diligence process, we try to move very fast. We don’t believe in stringing the entrepreneur along but sometimes additional market validation may be needed. Typically at this very early stage, very little has happened that we can do do due diligence on.  However we look at how the company is structured and clean it up if we think it can create problems downstream.  We make sure that the founders, vesting schedules, CAP structures are all set up properly.  We look at the legalese and make sure that’s all good. We are very strong believers in clean and simple Silicon Valley style term sheets. No funky clauses; our liquidation preferences are usually 1X, non-participating.

Typical timelines for a decision have been as fast as 24 hours where the company is ready and it’s in our sweet spot. Sometimes we may need to go do some research on our own before a decision. Sometimes it becomes a question of our learning an area as well.  Due diligence and paperwork takes about 3 weeks.

Once you have invested in a company, what’s your engagement model? How do you interact with these companies?

There are two ways we interact with our portfolio companies. The first one is the formal weekly or bi-weekly meeting. More interesting is the informal interactions we have. We have a co-location space in our office where many companies situate themselves at this stage of their development. It helps us to have a number of water cooler-type conversations with them. We learn about new things and we also provide our advice as relevant, and asked for by these companies. We tell these companies that we can take on a variety of roles for them all the way from mopping the floors to wearing a suit and meeting with bankers with them.

There is another way to look at this hand-holding, in three phases:

1. Experiments: We help them in do a series of experiments both in the technical approach, and also with the business model. These days the cost of doing experiments is very low and the cost of not doing them, very high!  For example, in payments,  is it a per transaction fee or a subscription model? The cost of doing A/B testing these days is not much. Many times we  end up learning something from the entrepreneurs,  when they push back and say “this is today – this is what works unlike something five years ago”, because they may be  closer to the market.

2. Narrowing Down: The second phase is the weeding out of those experiments that failed and narrowing down the business and building the team for “scale-hacking”

3. Scaling: The third phase is scaling the business and in parallel preparing the company for the next round of funding. We address questions like – Do we raise additional monies here in India or the US and help facilitate introductions to suitable investors.

What are some of the exciting companies in your portfolio now? Exciting new business models?

Ezetap is a company we incubated, invested $5ook initially. It is a very exciting company where we took a very different approach than Square. We designed and developed the hardware in India instead of the usual approach of going to China for it! We took an Apple-esque approach to keeping all of the hardware and software development in house. The business model is also not a per transaction fee model like Square but a SaaS based subscription model. We raised a $3.5M Series A round from Social+Capital. Chamath Palihapitiya brought in other investors like Peter Thiel and David Sacks in this investment. Ezetap has gone on to raise another round from a consortium of Helion Ventures and Berggruen Holdings who are very well connected in Europe.

HackerEarth is a company that has put a nice business spin on TopCoder!. They are providing a very useful solution to the problem of sifting through 100’s of resumes in India to find those few programmers whose skills are  excellent! HackerEarth has solved this problem with some clever algorithms that automates this sifting process. Top companies like Adobe, inMobi and Symantec are using this solution for their hiring. The two founders are from IIT Roorkee, in their early 20’s and are phenomenal in their speed of implementation of ideas!

We have invested in another company in the Mobile Wallet space that we have not yet announced. This was also founded by two young entrepreneurs whose ability to execute is phenomenal, have boundless energy and ultra capital efficient! We have invested in another company, SmartOwner. SmartOwner is a company that allows individuals to invest in highly curated real estate deals for investment purposes.

ZipDial is not technically part of this fund but I am a co-founder, and we all individually are investors in the company. ZipDial makes clever use of the “Missed Calls” phenomenon in India where a call is made but never completed by mutual agreement. ZipDial piggybacks various kinds of actions – marketing, customer service, etc. You could send marketing messages or customer service can send back a message about being very busy now and other suggested times to call. Political parties in India like the Congress and BJP are using it for increasing engagement of voters. Out of AirTel’s 200M customers, only 60M or so have ever sent a text message. Text messaging literacy is not that high but number literacy is. They can dial numbers easily. By dialing a number toll-free (since it is a missed call), you can get feedback or information. For example, a market survey ZipDial missed call sends back a question about your MLA’s performance. It sends two or more phone numbers for each of the possible responses. You just do a missed call to the right one and it is done! This is a completely India-based business model but the funny thing is that the founder is an American, Valerie Wagoner! ZipDial was rated #8 in FastCompany’s most innovative companies!

What kind of advice would you have for someone interested in becoming an entrepreneur, especially from a stable job like at a services company?

There are some very great fortunes to be made in the entrepreneurial ecosystem. I think we need more people willing to be early employees in start-up companies. The risks look daunting but the rewards, especially in India could be huge! Get out of your comfort zone and take some risks! The opportunity cost of not trying is very big! The technical challenges involved in putting together an innovative start-up that changes people’s lives, could be rewarding in itself.  You get to conceptualize products, test them in the market and if it works out, watch it scale. If it doesn’t work out, you can always go back to a safe job.

A lot of entrepreneurs hesitate to say that they are in it for the money. Culturally, we are not yet attuned to this but there is no shame in it! Secondly, we are not accustomed to failure and fear the stigma attached to it! We don’t celebrate failure – the best lessons are when things go wrong!

Exits are crucial for Product companies to have money come in through the front door as investments. What are your thoughts on what’s happening in India?

There have been very good exits like  Little Eye Labs and the Redbus, The Little Eye Labs was a good technology company exit and Redbus took a dis-aggregated market and consolidated it nicely. MakeMyTrip had an IPO exit. There were also a number of exits that were not talked about – VentureInfoTech was a $100M+ acquisition by a european company. Prizm payments was acquired by Hitachi for over $275M. For technology companies,  Silicon Valley still seems to be the destination. Services companies are being acquired by European entities. Considering returns,  we need a little more patience in India. Things take longer but have started happening.

We advise our companies to think they are building houses as if they are going to live in them! People will come to buy the house at the right price if it is built right!

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Stay Classy! – 8 Rules for 21st Century Marketing!

As this article is being written, possibly one of the greatest Viral campaigns EVER is being rolled out for the movie – Anchorman 2 – The Legend Continues set for a release date of December 18th, 2013!. It’s a sequel to the 2004 movie Anchorman, a stinging parody of 70’s and 80’s ego maniacal TV anchors in the US!

Stay Classy! – is the catch phrase he signs off his newscasts. This also sets the stage perfectly for what it takes to do Marketing in the 21st Century, especially for product companies!

This trailer already has 4.6 million hits as I write this!

The interesting thing about this campaign is that Will Ferrell, the actor who plays Ron Burgundy has been in character for about a month now and has done various things like do a whole series of TV ads for Dodge! Like this one that already has 3.6 million hits on YouTube.  As a Brand Ambassador he, surprisingly, says dumb things about Dodge but that makes these ads funny, watchable, water cooler conversation and word of mouth material! (The ads are hits in Canada as well as The Globe and Mail attests from Toronto!).

He goes in character to late night talk shows like this one, promoting a fictitious book he wrote about how to survive a prison riot and has a testimonial written by himself on the top of the book! 

Or when two days ago he showed up as Ron Burgundy and hosted a whole 30 minute local Newscast at a local TV station in Bismarck, North Dakota as a co-anchor saying the same dumb things his character would in the movies but in a real live newscast! 

What’s the point of all of this? – The last week or so, they have been getting free public relations worth billions of dollars, all of these being covered breathlessly by every channel and every newscast in the US! That’s Marketing in the 21st Century – Blurring the lines between media of every kind – network, cable TV and Social Media like YouTube, not to talk about these links being tweeted and re-tweeted by everyone that finds these things funny!

Jerome McCarthy’s four P’s – Product, Place, Price and Promotion still capture accurately ALL the different aspects of Marketing but how people make it relevant for the 21st Century is pretty interesting and worth the attention of Product Companies!  Here are 8 rules for 21st Century Marketing:

1. Making the most creative use of Social Media

Most product start-ups these days are aware of and use Social Media like facebook, Twitter, GooglePlus, Tumblr, Pinterest extensively and that’s precisely the problem! You become part of the noise. How do you stand out among all this noise? You do something creative and unusual like the Ron Burgundy campaign above! And it takes a heck of a lot of creativity to come up with stuff like that (may be not to that scale given the nature of many start-ups) and execute for a small start-up. However, you would notice that the above campaign still relies on the inherent virality of social media and word of mouth! The 21st century has made it possible even for a tiny start-up to go viral and get the publicity it needs,  if their campaign is interesting and at the same time achieves the end goals they shoot for!

2. Exploring the use of Big Data for your 4 Ps

Big Data  with respect to product start-ups has much less to do with the size of the data than with your use of it. Do you have data on the Audience, Channels, Content and Yield for your marketing efforts? Audience has to do with understanding your own customer segments. What channels have been effective for you? What Content among the different types of content you use to promote your product has been useful for you? What has been the most cost effective ways in which you have been able to convert or maximize the yield for your efforts? What price points have yielded what kinds of conversions for you? Do you have the data and the charts to track these? It’s never too early to get started with these kinds of efforts!

3. Checking out unusual and creative avenues for learning your customer needs

Are you trolling reviews of your Competitors’ Products yet for ideas on what your customer needs exactly? What do they say is lacking in them? Those are precisely what you need in your product! facebook or Amazon was not the first company in their categories to make it big! Having someone already in the same market as you should not be a deterrent! Here’s The Amazon Whisperer , an amazing example of how a few people built a multi-million dollar company just reading Amazon product reviews looking for the words “I wish this product had….”, then making that product in China and selling it in Amazon to begin with and then expanding to other channels!

4. Using all the 21st Century Creative options available to you for marketing

The 21st Century has made possible the most creative uses of Graphics, Sound, Movement captured in videos with just smartphones or tablets. They can be made  with professional quality with editing software. Your prospect base may have access to broadband at home and if not, very likely, at work! Are your marketing efforts making creative use of these new possibilities? Most product start-ups may have a demo video of their software recorded with screen capture and a voice, up on YouTube. How many of them show a real user telling you their story and show you how their tool solves your problem? Watch this video of a Biometric Identification System in use! Notice how they talk about problems, benefits, problems, benefits, problems, benefits! This is not a Ron Burgundy type funny video but I bet it talks *VERY EFFECTIVELY* to their prospects! So where’s your video that talks about the problems your product addresses and the benefits it brings?

5. Making your content customer centered and not YOU focused

A blog is a must for every product startup – or so they think! It is very useful to convey very broad discussions about the problem you are trying to solve when you don’t have a product ready as yet and you are in say, stealth mode! However, the game changes completely once your product is out and is in use. Not many may be as interested in your technical esoterica, as they are about the problems you are addressing and the benefits your solution brings! The 21st Century has made available such a huge glut of content in many different forms and people have only a sliver of their time each day for all of them, if at all! The content needs to be interesting, current and relevant for them to spend more than a few seconds! Turn them off with your own tech talk, they may never come back again!

6. Having true conversations with your customers, not just one-way communications from you!

Are your Social Media conversations anything like this? They are talking about the untimely death of actor Paul Walker of the Fast and Furious movies.

PaulWalker

 

 

 

 

 

 

 

 

 

 

Redbox defines itself as being in the entertainment business and so sprinkles its facebook presence with conversations like the one above – relevant, timely and engaging! No matter what your product is, there is always a larger business you are a part of and having conversations like the one above is possible if you are creative enough! Resist the urge to talk about your new releases or features all the time! The 21st Century is all about interactions and this is a good example of what those are!

7. Exploring all of the 21st Century Pricing options available to you

With the ability to keep track of demand and supply at any time, it is possible for some products to be priced with Variable Pricing or Dynamic Pricing!  This may not be applicable to all software products but the question of Free Trials vs Freemium Vs Nothing Free Pricing may be possibility with most start-ups. All of them are subtly different from each other, they need to be discussed in detail with respect to your own product, may be A/B tested before choosing one over the other!

8. Creating enough compelling calls to actions to your prospects

Calls to action can be for a variety of things you want your prospects to do – Sign Up for a Free Trial, Request a Case Study, Sign up for a Freemium account and show them a version with limited capabillities, etc. Here are some fine examples of such Calls to Action! And, here’s an interesting article on how to go about designing some, step by step!

The 21st Century has seen the proliferation of variety of new devices like smartphones and tablets. People engage in social media more extensively at home or at work. They are also very handy for anyone making pictures and videos of professional quality. Big Data and Cloud Computing have enabled the collection, analysis and use of massive amounts of data for many uses including marketing. There are many more inexpensive options for cash strapped product start-ups to explore creative ways to do marketing. It’s time to take full advantage of them!

You can buy attention (advertising). You can beg for attention from the media (PR). You can bug people one at a time to get attention (sales). Or you can earn attention by creating something interesting and valuable and then publishing it online for free. – David Meerman Scott, marketing speaker

 

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The Who, What, When, Why and How of Consumerization of the Enterprise

Users of enterprise software marvel at the ease of use of facebook, twitter and gmail on their mobiles, tablet computers and desktops! Then they wonder why their enterprise software should not be as easy to use or at least be available from their own devices. The CEO wonders why she cannot see the company graphs and charts in vibrant colors on her iPad at home on her sofa, while watching TV! This is where the consumerization of the enterprise sets up expectations of mobility, flexibility, ease of use and at a minimum, just being able to access enterprise applications from these other devices!

Consumerization of the enterprise is exciting from an end user point of view, but brings with it a number of new issues of security, availability, and application responsiveness that need to be addressed by the enterprise software maker or the IT department. Enterprise software product start-ups need to take this trend very seriously since mobiles and tablets are getting only more powerful, less expensive, and ubiquitous. By the time they mature and emerge from a start-up stage, this may not be a nice to have but a must have. So, here’s a Who, What, When, Why and How of Consumerization of Enterprise Software. This is a rather involved subject to be covered in a single article. I will cover the basics and provide links to additional material as appropriate.

The Why

Users of enterprise applications like the mobility that comes with smartphones and tablet computers. They see fairly sophisticated things done with these devices in their personal lives and are wondering why the same should not be true of their enterprise applications! They see that these devices are powerful computers in their own right and are wondering why they should not be using them for work.

The What

Consumerization results in a number of new expectations of enterprise software – use of inexpensive commodity servers for hosting the application if on-premises or a Software As a Service (SaaS) model, browser based interfaces, access from mobile devices and ease of use that matches consumer applications like Google, Twitter and Facebook. Consumerization involves the design and implementation of Bring Your Own Device (BYOD) policies where employees use their own devices to access enterprise applications and data. What happens to the enterprise data that may be stored on them,  if they lose this device or it gets stolen? What happens when this employee leaves the company? How do you make sure that the company data or the applications are no longer accessible?

The When

In many developed countries, smartphones and tablet computer penetration are near saturation already with many individuals and households having many of these devices, each. In India, the annual penetration and total market saturation may be lesser but it is only a matter of time. Even in India,  at the C-Suite level usage of these devices may be pretty much near saturation. So it’s not a question of if, but only a matter of when. This is especially important to enterprise start-ups that will face all of these issues by the time they have their products ready and achieve market fit.

The Who

Consumerization involves a host of policy and technology issues. Not all of them could be resolved only with the software product maker or the IT department. Access to applications and data may be policy issues to be determined by management and implemented by the IT security folks within the company. Software designers may need to address the ease of use issues that bring the enterprise applications closer in user experience to popular consumer applications like Google, Twitter and facebook.

The How

Consumerization involves making the user interface of the enterprise application on mobile devices, easy-to-use like those of consumer applications, native or HTML5 based. Bring Your Own Device policy implementation may involve the use of Mobile Device Management (MDM)  software which allows organizations to register and allow only authorized devices to access enterprise applications. In case employees need to be allowed access only to certain applications and not to others selectively, Mobile Application Management (MAM) software may need to be used. Chris Swan presents these issues in a very organized and understandable fashion in a video here and a presentation here, in case someone wants to dive deeper into the technology issues.

Consumerization of the Enterprise is about managing the expectations of the users of enterprise applications properly; answering questions such as – why can’t I use my smartphone or tablet to access the company’s application? Why shouldn’t their interfaces be as easy-to-use as my Gmail, Twitter or facebook? The technology and the design approaches for making this happen are already there. It’s only through careful analysis and addressing of issues that these objectives can be met, while at the same time balancing other issues such as security of data and applications!

Water cooler chatter 15 years ago used to be about what happened on Seinfeld. Now it’s ‘Look at what I’m doing on the enterprise network with my mobile device. – Bob Egan, vice president of mobile strategy at Mobiquity

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Choice Overload prevents a Sale. The 4C approach may overcome this!

Too many choices make your customers just stop with browsing. They don’t buy and move on! So if you have too many looky-loos and not enough purchasers, you may be giving them Choice Overload!  Too many Free Trial users and not enough conversions? Choice Overload may be one of the problems in that case also. Whether you are an e-commerce business or designing a user interface, you may be overwhelming your intended audience with too many choices! Luckily there is a 4C approach, proven with social research, that may help you overcome this problem.

Here is a terrific TED talk by Social Researcher, Sheena Iyengar:

Sheena talks about experiments they did with handing out free samples of 6 different kinds of jam vs handing out 24 different kinds of jam. They found out that more people bought the jam when they were shown fewer choices, only 6 kinds of jam!

More people put money in retirement savings accounts when they were shown only a handful of retirement finds than when they were shown hundreds of options!

That’s the Choice Overload problem! Too many choices, people don’t choose and move on! Nice insights! But how do you overcome Choice Overload? Sheena recommends the 4C approach.

1. CUT – Cut the number of choices you are presenting. Whether it’s your e-commerce site or your user interface design, too many choices frustrate people. You need some choice, but too many choices may hurt your objective!

2. CONCRETIZE – Make your choices vivid! Don’t describe something. Show pictures of what happens when someone chooses something. Show the consequences of making a choice, not just more about the features of that choice. Talk about benefits of a choice!

3. CATEGORIZE – Chunk your choices into Categories that make it simple for your customers to narrow down what their choices are. Don’t overwhelm them with too many choices upfront! Make pre-defined combinations of packages where you could. In User Interface design, Wizards are a great example of making choices on behalf of the user, making it easier for them to start quickly.

4. CONDITION – Condition for Complexity! – Make simple choices easy to make and hide complex choices for later, once they have some experience with you.

Great research whose applicability can extend beyond just social research! Can help a lot in product start-up companies in designing and presenting choices or in designing user interfaces.

When you have to make a choice and don’t make it, that is in itself a choice – William James

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How Much is your Company Worth? – A Valuation Toolkit for Software Product Startups

When you see Yahoo offer $1.1B in cash for Tumblr or it pays $30M for Summly, the reactions around the world range from kudos to the founders and initial investors, to “I’ll have some of what they are smoking”! But most of the time, there is some sanity behind all that madness but there have been times when it has been more of insanity as at the peak of the Dot.com boom, in the early 2000’s. The question is a confounding, personal one, whether it’s your start-up company that you are trying to value, or considering investing in one. Company valuations are usually a science when it is a mature company with products already in the market, with revenues and profits. It moves more to the Art side of the continuum, the more early stage, the start-up is. It is different if you are consumer or enterprise focused, pre-revenue or post, traditional software model or SaaS based.  It is better to be armed with a toolkit of various valuation approaches, picking and choosing what may apply in a specific situation. Typically valuations could be arrived at as a cumulative of various components all added up together as appropriate. Some of the approaches that make up this toolkit, when and where they may be applicable, are:

a. Asset Valuation: If the company has a product and is making revenues already, the current contracts, and those close to signing, may have their own value and these need to be added up to the revenues and hence, the value of the company.  The cost to replace existing assets can also be used to add to the valuation, especially in acqui-hire kinds of situations – where a company buys another company for its engineers and talent, rather than the products themselves. This may be of special interest in start-ups based in India. How much time and effort would it take for another company to assemble the talent and experiences the employees of your company may represent? In the simplest case you can add up all the recruitment expenses for assembling the talent you have over the years adding a premium for the time-value of the whole thing!

b. Similar Company Comparisons: There is nothing like comparables with recent valuations of companies similar to yours, in business model and stage of development. Other companies that have received funding recently may be good justifications for your own valuations. This is why networking not just with VCs and Angels but also fellow startup company founders and chief executives is important. They should feel comfortable enough with you to share this kind of highly confidential information with you! Think about it!

c. Market Size and Growth Potential:  For those that think “why should Tumblr be valued at $1.1B”, have you looked at the first year revenues of Google and Facebook? In no other industry would you see companies go from $0 to $1B in as short a time as some of these companies with just ad revenues! Traditional brick and mortar companies would take decades to reach this level of revenues! According to Yahoo!’s May 20 letter to shareholders, Tumblr site has 300 million active monthly users, meaning, Yahoo! is paying around $3 per user, while Facebook paid around $30 per Instagram user; apparently Yahoo! is doing a good deal. So as this article on The Motley Fool says, it’s all about traffic, stupid!  Eyeballs may not be dead if you can make it work still, although it will be harder these days! This is where we may want to think about the advantages of going global vs going for the Indian market alone! The Indian Smartphone Market has grown from 4% growth to 6% growth from 2012  to 2013! So it may may still make sense to focus on the Global consumer smartphone market instead of the Indian market alone if you want to grow fast! But the SMB market in India seems to be large already and growing at a reasonable rate! So if your startup is focusing on the Indian SMB market, market, more power to you!

d. Intellectual Property, Barriers to Entry and Ecosystem Building Potential:   Think about Microsoft SQL server or The Oracle Database Management system.  Think about the millions of people around the globe that make a living out of these ecosystems – providing skills in these products, skills in the applications built around these products, having jobs around the globe with companies that use these products and applications built around them. Those are ecosystems! These are worth trillions of dollars just around the ecosystem building potential of these! Google and facebook are in the process of building their own ecosystems now. If your Intellectual Property is anything like this, you may want to increase your valuations proportionately. What barriers to entry have you built around your technology? What prevents any tom, dick and harry from replicating what you do? If that’s solid, it’s worth a lot of money and you can confidently reflect that in your valuation and articulate the same to your investors. Here’s a link that explains different kinds of ecosystems you can build!

e. Income Valuation Approaches: If your start-up already has revenues and profits, the Income Valuation approach may be used  to arrive at the income component of the valuation. The usual methods used are Discounted Cash Flow (DCF) methods. At their essential simplicity, they are estimating future revenues and profits and arriving at the Discounted Present Value of those profits given an interest rate. For example, if you are projecting profits of $100, $150 and $300 at the end of years 3, 4 and 5, what are their current values? What amounts today if invested at say 8% would  yield incomes of $100, $150 and $300 in years 3,4 and 5?, You add those profit values as of today and calculate valuations based on those! Usually Earnings Before Interest, Depreciation and Taxes (EBITDA) are used instead of Net Profits since EBITDA reflects much more accurately the exact earnings potential of your startup! You can also use some rough rules of thumb for valuations based on sales –  Horizontal Software between 1.35x and 2.1x. Vertical Software from 1.4x to 2.1x.  Consumer Software a bit lower, 0.5x to a just under 1x sales.  Infrastructure  – 1.5x to 2.5x sales.  Internet and Software is 2.19x to 2.7x.  IT Services, which is people intensive, is lower, 0.6x to 0.74x.  The actual numbers don’t matter as much as the difference in how different kinds of startup companies are valued, in relation to each other and why.

f. Scarcity Premiums: The basic principles of Economics – Demand and Supply may apply to startup company valuations, just as well. If too many investors are chasing after a limited number of  shares available in a start-up company, the valuation goes up! This is the reason you need to create an imbalance between investors interested in your company and the number of investors and the money you are willing to take in – creating a scarcity! This is also the reason you need to start build as big a network of investors way before you need them to invest in you! You expand your demand way ahead of time! However, Scarcity Premiums can come back to bite you in your next round of investments if you have oversold your value and cannot meet your revenue, profit or product development goals before the next round. Down rounds are no fun! If you raise this round at a high valuation and the next round is a down round, your company may be perceived as a failure. That’s why you need to be careful about taking money at higher valuations, even if you could!

h. Insanity Premiums:  There have been times like the Dot.Com boom when insane valuations prevailed and entrepreneurs took full advantage of them. Mark Cuban sold Broadcast.com to Yahoo.com for $5.7B . This is acknowledged as one of the worst acquisitions in history! Mark Cuban was not the worse off from this deal since he cashed out and moved on to other investments on his own. If it’s not a total exit, the same caveat about subsequent down rounds still may apply!

As a start up company, you owe it to yourself to take a systematic approach to valuing your own company and conveying your logic to your investors if they ask for it. In the worst case, experienced investors may choose the methodology that gives you the worst valuation and you can be ready with your own bargaining position with careful, considered logic and a better valuation!

 Price is what you pay. Value is what you get. – Warren Buffett

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5 Essentials of SaaS Revenue Models for Product Companies!

Enterprise as well as Consumer Software is moving fast towards a Software As A Service (SaaS) model. Who would not like paying a per user, per month charge as opposed to doling out huge amounts of money for licenses upfront and paying 16 to 20% Annual Maintenance Charges year after year! But the short history of SaaS companies is already full of companies that grew too quickly, or chose the wrong pricing or customer acquisition strategies, ran out of money and had to go out of business! The same revenue model for a SaaS product business can also become its Achilles Heel if it is not understood and managed properly!

Understanding SaaS Revenue Models in all their glory is key to building a sane, reliable and successful way to build a product company. There are a few venture capital companies that have had lots of practical experience building successful SaaS companies and can share with you a lot more detail. Like Matrix Partners’ David Skok who has written almost a thesis on SaaS economics – here is a sample –  The Saas Business Model – Drivers and Metrics. David has partnered with HubSpot and NetSuite for all of this exploration and they must know what they are talking about! Other good references are  Doubling SaaS Revenue by Changing the Pricing Model and SaaS Revenue Modeling: Details of the 7 Revenue Streams.

But for a start, here are 5 essentials of SaaS revenue and pricing models a product startup needs to remember for success:

1. Monthly Recurring Revenues Vs. Getting them to pay Annually:  Get your customers to pay annually if you could (depending on the nature of your product – enterprise or consumer facing). It’s a hassle for them and you to process these invoices every month and follow up on late payments, etc. It has a clear effect on the cash flow. Plus you may not have to worry about churn that much since they are not making that decision to pay you month after month where they could pause and decide to churn! If Annual billling does not work, try at least a quarter at a time. It may not be worth all the processing time doing it month after month.

2. Churn and Negative Churn:  Churn is the periodic turnover of your customers. Companies mentioned above have found that about 2.5% to 3% churn is OK. You need to be concerned if it goes beyond that. However with Up-selling and Cross-selling, you can actually make it positive churn too! This is when the marketing funnel that becomes narrow from the top becomes broader again with upselling and cross-selling. Which brings us to discussing more of the shape of the Marketing Funnel when it comes to SaaS Vs. non-SaaS product companies!

 

 

 

 

 

 

 

 

 

3. Marketing Funnel Economics: 

The marketing funnel on the left shows a typical one for non-SaaS product companies. The one on the right shows the one for SaaS product companies. The main difference is the top of the funnel is much wider and uses organic traffic, in-bound marketing, search engine marketing and optimization and prospects from other paid sources.

 

 

 

 

 

 

 

 

 

The relative sizes of the tops of the funnels also show the difference between how wide the top of the funnel needs to be for SaaS product companies!

3. Balancing Customer Acquisition Cost (CAC) vs. Customer Long Term Value (LTV):  There are only 8 hours in a day for selling. Traditional licensing models offer an initial large amount in a sale and annual maintenance fees of about 16 to 20% every year after that. SaaS models may offer a smaller initial set up fee and uniform cash flow month after month, year after year after that if you keep the customer. So you need to line up more clients in a SaaS model for reaching the same level of sales as when closing traditional licensing sales deals. So you need to necessarily reduce Customer Acquisition Costs (see the widened top of the marketing funnel in the figure above – that’s what that represents).  Some rules of thumb regarding CAC and LTV are that the Long Term Value of the customer needs to be greater than 3 times the Customer Acquisition Cost and the months to recover the Customer Acquisition Cost should be less than 12 months! This also makes a compelling case for designing and developing related products and do some effective cross-selling and up-selling enabling you to realize that Long Term Value even if your CAC is high! Also making sure that you get the Customer Acquisition Cost in less than a year takes care of the problem of churn and if they continue after a year, you have already made your money!

4. Repeatable Sales Model:   SaaS product companies rarely can afford the same direct sales model that non-SaaS models do. This is just given the smaller initial sales numbers even though the revenues are recurring rather than an initial large amount and 20% every year after that in maintenance fees in the non-SaaS traditional model. This makes it imperative that the SaaS sales model is easier, quicker and repeatable.

5. Scaling Pricing with Customer Value:  Many SaaS product companies shortchange themselves by improving their product so much that they provide much more customer value than they are charging them for. Scaling pricing by clustering value adding features together and packaging them and offering them as upgrade packages is key in ensuring that your pricing keeps up with the value your are providing.

These are only some basics. I highly recommend checking out the references I have earlier in this article. There is a treasure trove of experience and knowledge about how to make it work, all online and free!

In sales, a referral is the key to the door of resistance – Bo Bennett. 

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10 Rules for Effective Product Company Advisory Boards!

Advisory boards are rarely meant for fixing fundamental flaws with business plans. Having big names on the advisory boards, purely for their name value, rarely works. It might help a little in raising venture money, if at all. However, when composed and used wisely, advisory boards can help your product company choose the right corporate, product, market and sales strategies. Simply put, your advisors should be people whose expertise or experience you respect highly, and feel sincerely that their advice will benefit your business. And if giving advice is an art, asking for, receiving and using advice is also an art!

Here are 10 rules that can help you make effective use of advisory boards:

1. Friends and Family may not be good candidates:   A natural instinct with some entrepreneurs is to appoint some of their friends and family members to the advisory board. They usually may not turn out to be good advisors unless they are otherwise qualified to be there.

2. Get advisors with fully complementary skills: Have three or four advisors, maximum. Find people with strong engineering and product development skills,sales experience or marketing experience in products related to yours or subject matter expertise.

3. Find the right people for your advisory board:  With LinkedIn and search engines like Google and Bing available, you can always find the right people for your advisory board and reach out to them. Their experiences need to be related to your product company. You may need to do the research to make sure that your company and products may be of interest to them currently. With internet connectivity linking people all over the globe easily, a company need not limit itself to any particular city or even the same country. You can even reach out to people in the US or Europe if you think they may be interested.

4. Clearly outline the time commitments to advisors:  Typical time commitments for advisors are one face to face meeting for a few hours every quarter (if everybody is in the same city or online, if not) and one full-day meeting and discussion once a year.  This may work out to be about 40 to 50 hours per year including their time for reading your materials and preparing answers and discussing them in your meeting.

5. Prepare a list of questions or topics you want advice on and send it ahead of time as an agenda:  Prepare an agenda of topics or list of questions in different areas like technology or science involved, product strategy, product management, engineering, marketing or sales. Sending it ahead of time to advisors will help them prepare properly for the meeting, quarterly or the annual one.

6. Arrange for convenient ways to participate:  With web conferencing services and tools like Skype and Google Hangouts, it has never been easier to arrange online advisory board meetings when advisors are geographically dispersed.

7. Compensate them for their time, expertise and advice:   Product companies rarely can compensate advisors with cash but the customary way to compensate them is with stock options. Usually it is around 1% or less of the company vested over 4 years or so. You can vest the first year’s options  (1/4th) at the time an advisory board agreement is signed and 1/4th the total number of shares every year after that.

8. Hold the right to fire them:  Advisors may sign on with the best of intentions in the beginning and for many reasons, it may not work out well for you subsequently. They may not find the time or may not be interested any more. The agreement should have a clause that lets you remove them from the advisory board if it is not working out for any reason.

9. Don’t confuse the advisory board with your board of directors:  Keep a clear separation and distinction between your advisory board and your board of directors. Your board of directors can introduce you to potential clients or customers, and they can help you with thorny issues with your management team, stock options or compensation issues. Advisory board members are there for a different reason and may not be compensated enough on the same scale for such activities.

10. Don’t confuse your advisory board with an extended sales team: Some companies sign up advisors for the board and also provide them with a small commission percentage for prospect introductions and such. This rarely works out in practice and confuses issues and may cause problems down the road. It is better to keep advisory services separate from sales activities.

All of us, at certain moments of our lives, need to take advice and to receive help from other people graciously- Alexis Carrel.

 

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Mindmaps for Product Startups!

In a product startup you may need to deal with lots of information about your own product features, your market, your competition, your competition’s product features, results of internal brainstorming sessions you may conduct or information about who you can partner with for various aspects of your business.

Mind-maps provide a great way of organizing all the information you gather or generate internally, and create documents or pictures that capture the relationships between them precisely. Most importantly, it can help convey the same concepts to your investors, co-founders, colleagues, employees and partners. It can help you organize mentally for your own use or convey a large amount of information to others in a short amount of time.

Wikipedia’s definition:

A mind map is a diagram used to visually outline information. A mind map is often created around a single word or text, placed in the center, to which associated ideas, words and concepts are added. Major categories radiate from a central node, and lesser categories are sub-branches of larger branches. Categories can represent words, ideas, tasks, or other items related to a central key word or idea.

Typical ways you can use MindMaps in Product Startups:

  • Analysis of the Market: How does the market you are looking at addressing organized? Mobile devices could be tablets, smartphones and feature phones. Tablets could be smaller or larger. Within each you could have iOS and Android Devices. Within Android devices you could have different versions supported by different devices, and so on. All of these branches could be captured effectively in a mind map.
  • Product Ideas Generation – What are all the different product ideas you could consider initially and in an on-going basis. How are they organized with respect to the various products and versions that you are already producing or planning to produce?
  • Generation and Organization of Product Feature Groups and Ideas – Very useful for product managers modeling existing feature groups and features, new features generated and where they might fit in.
  •  Analysis of the Competition: Competition in the market is not always straightforward. Competitors may offer products and services that may be in a related market, overlapping markets or completely unrelated markets. Competitors may be offering a service that may compete with your product. All these nuances can be captured effectively in branches off branches.
  • Analysis of Pricing Models:  If you considering different pricing models – One-time licensing vs Subscriptions, Annual or Monthly, etc., you could capture all the different variations in mind maps.

There might be plenty more uses for mindmaps once you get comfortable with what it does and how it can be used. Some of the Mind Mapping tools come up with ways of annotating each node with additional notes that can pop up once you hover over a node in the mind map with the mouse or a pointer. This can come in handy in naming each node with a short name and including more descriptions in the additional notes.

Mind mapping can come in very handy at the start-up stage even before you have a plan for your business. When you are doing your preliminary research or putting together your business plan later on. Or when you are already operating and your product management takes on a formal function!

There is a huge selection of Open Source and Commercial Mind Mapping Software that you can use – more details here in Wikipedia.

I have had very good luck with the Open Source version of FreeMind. It allows me to create mindmaps in their proprietary format and send them to others who have the same software (.mm format). For others who may not have FreeMind, I export the mind maps to PDF formats and send them along.  You can check out downloading FreeMind available for various Operating Systems and playing with it here.

Here are a few examples of Mind Maps I created using Free Mind. These are PDF versions of two mind maps I created when I read two interesting books sometime ago:

Jennifer Aaker’s Book The DragonFly Effect

Designing Brand Identity – Alina Wheeler

 A Picture is worth a Thousand Words! – Anonymous