The Illusion of Winning

Scott Adams, creator of the wildly popular cartoon series Dilbert, is a pool shooter of some considerable skill, it seems.  Although I have never seen him shoot a ball, his post on the subject of The Illusion of Winning demonstrates a deep understanding of what it takes to succeed in this game/sport/art form.  

As a pool shooter myself, and I might add with considerable humility, who has demonstrated a high degree of expertise, I suggest that the principles he describes apply equally to most of life's pursuits, including Success in Business!

Click here to enjoy his post!

What Does a CEO Coach Do?

If you have ever wondered why/if you and your business could benefit from the perspectives of a CEO coach, you should check out this video clip featuring Jerry Colonna:

10 Things Successful Startup Founders Never Say

This is some very educational material, 

and I'm sure you'll see the humor in these 

Ten Things I've Never Heard a Successful Startup Founder Say

The business of being an angel investor

For the last several months my focus was on the substantial remodel of my home.  My living conditions were sub-optimal.  


However, yesterday was a return to active angel status.  From 9:30 am through 1:30 pm there were presentations from 5 different startups, all seeking help from the approximately two dozen angel investors in the room.  Each presentation has 5 parts: to start, a member gives a very brief intro, then the startup CEO presents his business for about 10 minutes, followed by a period of Q&A, after which the CEO is excused from the meeting and the members discuss the deal for a few minutes, and finally, the CEO is invited back to the meeting and given feedback, including a list of members would like to help.  To state the obvious, the pace is Fast!

I thoroughly enjoy these presentations and the quick feedback of the other angel investors.  There are some Very Intelligent people in the room, who have great business experience as well as technical expertise in diverse fields.     

It may seem like a fool's errand, because each company is likely doomed to failure, at least from an investment perspective.  If the odds of any company applying is 100 to 1 against them, and I could bear to see 5 propositions in 1 day, it would take 20 business days (about a month) to find a good investment.  That's 12 per year*, assuming not much time to enjoy life in general, so let's say 10 per year.  An average angel investor might expect a 1 in 10 success for any one startup in his portfolio.

But even that 1 in 1000 still has great odds against becoming a financial success.  Of 100 exits, there is a 50/50 chance of making a profit of any size.  And only a 1 in 100 chance of returning 100x.  So, if 1 in 100 startups return 100x, even then the best you can do is stay even.  Being an angel investor seems to be a sub-optimal career choice.

Therefore, there must be other reasons to be an angel investor.  What I look for in the value proposition is that it helps people.  If the startup is just in it to make money with a fast flip, I will probably pass on the deal.  But if it focuses strongly on helping people in some way, has a first class Team, good business model, barriers to entry... only then am I interested.

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*Even if you could take the hectic pace of 12 investments in your first year as an angel investor, it is doubtful that the pace could be continued.  Startups need care and feeding for life; this reduces time to look at new investments.  

Note: An additional point not mentioned above is that it takes on average 5-8 years until exit.  Investors want a payday sooner rather than later, and what's good for the angels may not be good for the company and founders.  All these factors argue for considering another line of work!

The Benefits of a Board of Advisors

There's an article in Entrepreneur magazine online with the title "The Benefits of Bringing In an Advisory Board" and you can read it here.  Although it is a rather skimpy article, and doesn't go into much detail about all the benefits, the point can not be made too many times: if you are serious about your business, then start Now to build a Board of Advisors.  


I know from personal experience that it makes all the difference in the world to run your business in a professional manner.  Unfortunately, most business founders allow themselves to be so distracted by day-to-day issues that they don't give adequate attention to building the structural foundations of the business.  


The Board of Advisors is THE best foundation for a serious (non-lifestyle) business.  Begin it Now!

Startup Genome Report - Summary of Findings

You really should download the complete report and get on the list for updates, but for the time-challenged entrepreneur (who isn't?) here are a few of the more important findings of the study:


1. Founders that learn are more successful: Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.


2. Startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.


3. Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet. They also over-invest in solo founders
and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.


4. Investors who provide hands-on help have little or no effect on the company's operational performance.  But the right mentors significantly influence a company’s performance and ability to raise money. (However, this does not mean that investors don’t have a significant effect on valuations and M and A)


5. Solo founders take 3.6x longer to reach scale stage  compared to a founding team of 2 and they are 2.3x less likely to pivot.


6. Business-heavy founding teams are 6.2x more likely to successfully scale with sales driven startups than with product centric startups.


7. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.


8. Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.


9. Most successful founders are driven by impact rather than experience or money.


10. Founders overestimate the value of IP before product market fit by 255%.


11. Startups need 2-3 times longer to validate their market than most founders expect.  This underestimation  creates  the  pressure  to  scale
prematurely.


12. Startups that haven’t raised money over-estimate their market size by 100x and often misinterpret their market as new.


13. Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves.


14. B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the rules of business. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.

The Startup Genome Report

A new framework for understanding why startups succeed.

This report reveals in-depth research about what makes Silicon Valley startups successful. The report is a 50 page analysis based on data from 650+ web startups. The report was coauthored by Berkeley & Stanford faculty members. Other contributors include Steve Blank, the Sandbox Network, and 10 accelerators from around the globe.  The goal of the report is to lay the foundation for a new framework for assessing startups more effectively by measuring the thresholds and milestones of development that Internet startups move through.

This report is the Startup Genome Project’s first step toward cracking the innovation code of Silicon Valley and spreading it to the rest of the world.


Download your (free) copy of the Genome Startup Report here.