We’ve all heard that line about the 10 year “overnight” successes.
A friend* recently told me a key metric of his company was growing 4% week-over-week. Actually, he related with some dismay that it was only growing at 4%, and he was looking to build another product to make their company more attractive for raising the next round of funding.
I was shocked.
The base number that this 4% growth is accumulating on top of is in the billions, without much marketing or distribution yet. They found a problem many people had, solved it elegantly, and then forgot to tell those people about it.
Instead of doubling down on something that was working, going big and blowing it out of the water, they went chasing after another adjacent product without real market validation, significant platform risk, and delusions of grandeur. All to raise a Series A.
I’ve seen this story play out before, and it doesn’t end well.
Double Digit Growth Addiction
Paul Graham’s essay on Growth is extremely important reading for early stage startup founders, and this guideline in particular is quite useful:
A good growth rate during YC is 5-7% a week. If you can hit 10% a week you’re doing exceptionally well. If you can only manage 1%, it’s a sign you haven’t yet figured out what you’re doing.
Important context for this advice, which I believe is often missed, is that the majority of companies in YC launch during the tail end of the program.
If your startup has some success in the years following graduation from the incubator, you’ll discover the painful truth: it’s incredibly difficult to grow 10% week-over-week once your TechCrunch spike is gone, you’re 3 months out from demo day, and you’re still not doing marketing because [enter excuse here].
Gone are the days of the lovely hockey stick graph you proudly showed investors from the Demo Day stage. It’s been six months now and their money is in the bank, but the rush of winning those signatures has long passed. You feel like every update you send them is a bit anti-climatic. “Grew 14% this month,” you write, and paste in a graph with bars as blue as you feel.
The 6 Month Crisis
For startups who are funded, it’s easy for founders to tell themselves that fundraising isn’t the most important thing but a lot harder to feel it, know it, and truly believe it. Often raising a round is the first external-facing “win” you’ve experienced in months. It becomes a new emotional local maximum, and six months after raising you might find yourself looking for the next burst of excitement and validation to match it.
Long gone are the double digit numbers, because the base you’re growing from is much bigger now. You can’t hand crank this machine you’ve built anymore. You need people to help you feed it. There aren’t enough hours in the day. You’re a generalist but now you need specialists.
Things have changed, and that’s okay.
Building a company is quite different from starting one. The shine of being a “startup” wears off, and it’s time to be a business. As soon as you’ve found some product market fit your job shifts from finding the market to capturing it. If you don’t make this mental switch, and keep fighting for the new hotness, you’ll be like so many companies with too many ideas and too little execution. You’ll die.
Most wins you’ll have are incremental, so subtle that you might not even realize you’re winning. When seasoned CEOs say the harder road lies ahead as you toast champagne to a milestone like a financing round closed, big contract signed, crucial hire started, key acquisition completed etc… they know the truth.
All that vision, all that ambition, all those grand dreams of the future… they felt so close as you pitched your big vision but as you wallow in the weeds and details of really nailing each sales call, each deployment, each planning session, each new hire… all that feels so far away. In some ways, you might feel held back.
It’s so tempting to dabble. Now that you have money in the bank, a team around you, and some traction you feel you could build anything. You can see your market more clearly than anyone else on Earth, and you’re intimately aware of the problems your customers face. You want to solve all of them. You want to be their hero.
Your ego is going to hate you for this, and it will fight you.
The Longest Road
Building a startup is about fighting all the temptation that lies out there for a maker. You can prototype anything, maybe you also have some visibility and platform to speak from, it’s easy to think you can dabble in anything that could be a big market opportunity. The “Crossing the Chasm” strategy of tackling and winning a beach-head, which sounded so right and so daunting 6 months ago, is now happening. You haven’t won yet but like a soldier who yearns for home you’re looking to the future and, if you allow it, that distraction can become so acute you’ll die in a daze on the battlefield. You might not even know you’re dead.
Investors, advisors and other people will also start seeing the future more clearly – because you did a great job painting the picture for them. They’ll try to get you to talk about what’s next, they’ll add more temptation to focus on the next battle when you haven’t yet won this one.
Don’t let them.
*details have been changed to protect the anonymous
I received a Jawbone UP wristband last week as a gift, and it is the first quantified self device I’ve used.
Before the UP I would sporadically track my exercise and food with the My Fitness Pal iPhone app, but the UP wristband has taken it to another level with mostly passive monitoring of my activity. The only things I can optionally add in myself are my food and my mood.
As a woman in her late twenties and a startup person I’m generally more focused on my career and spending time with my friends and family than on my health, and so it comes as no surprise I have gained about 20 pounds in the past 18 months since setting out as a founder. In the past 2 months I have finally started taking steps to turn that trend around, and one of the unfun things I knew needed to start doing was stepping on the scale more regularly to see whether I was making progress.
I think most women (and many men) can relate to the years of emotions tied up around stepping on a scale, and as much I am a confident person overall I had the sinking feeling when the number read out on the screen doesn’t reflect how good you feel about the better decisions or the challenging activities you’ve been embarking on. Weighing yourself isn’t about confirming progress, it’s about conceding that what you did just might not have been enough to move the needle yet. Very rarely do I feel elated or anywhere near happy after stepping on the scale.
The UP band on the other hand has a completely different emotional connection. It shows me how many steps I’ve taken, how many minutes active and inactive, and how many calories I’ve burned for the day. It also tracks my sleep, showing me how much deep and light Zzz’s I got and also how many times I woke up during the night. When I plug in my UP to sync with my phone I am always excited to see what new progress I’ve made, and I know it’s within my control whether I will hit my goal of 10,000 steps a day or not.
Another really cool thing about the UP is that my husband has one too, so we can compare our sleep and notice patterns about each other. We speculate on how we might be negatively impacting each other’s patterns, which has made me a lot more conscientious about things like making sure the blinds are draw, lights off, door closed, etc. in the early morning hours when I’m up and about and he’s still sleeping (he tends to go to bed 3 hours later than me and wake up 3 hours later). With steps it’s more of a playful competition, and turns a walk to a meeting for me into a nudge to get up and walk to Starbucks or go to the gym for him.
Overall it has been a really cool experience so far, and I’m looking forward to seeing some weight loss progress eventually… but for now I am happy to just have a better understanding of what’s going on with my body, and I feel in control of where to go from here.
What a great product.
He has a Hipchat room that is filled with GIFs
And my personal favorite:
We never meant to stay here
We were here for the gold
We got stuck here for the winter
Blinded by golden dollar signs
We built some simple structures
Temporary, not permanent
But each year we dug much deeper
And each year things got more serious
Each year our hearts grew weaker
Blinded by golden dollar signs
We never meant to stay here
We were here for the gold
Put a lump of coal in my hand
Squeeze just as tight as I can
Hope for a brand new diamond
I know it’s slight but it’s all I can
I promise honey that when we get paid
We’ll pack our things and we’ll move away
A thousand miles from this frozen lake
We’ll find a place where we both can stay
We’ll find a city with a million people
Find an apartment where the rent is real low
We’ll disappear and no one will notice
How about it Darling?
We could both live downtown
We never meant to stay here
We were here for the gold
We never meant to stay here
But we’re just dumb animals with our paws in the hole, grasping gold
Now we’re stuck in a small town
Out on the shield
But it lost its appeal long ago
We wake up at dawn and kiss our wives on the forehead
And we slowly make our way into the caves
Where we will forget the faces of our children and our small regrets
Like, I should have kept that lucky penny while I had the chance
- I don’t think I’ve ever laughed out loud reading SEC filings until today, when I saw a filing from 500 Durians. What’s Dave up to now, naming a fund after a smelly fruit? The filings confirmed my suspicions, yes this is another fund run by 500 Startups founder Dave McClure, and it will be focused on investments in Asia.
This play on words is apt, comparing the challenges and rewards of investing in Asian startups with the challenges (the smell! the spiky hard skin!) to the rewards (the fruit, which is an acquired taste). Despite the inherent difficulties in making small investments in early stage companies overseas McClure is one of the most active angels when it comes to international startups, and the most recent accelerator batch boasted the highest ratio of international to U.S. companies yet.
He is constantly on the road visiting with founders around the globe, and this strategy rumor has has gotten him into wildly successful international companies like 9GAG and IconFinder while their valuations were still low.
In an interview with Entrepreneur India McClure was asked why he chose to enter India, and said:
“I have had an affinity for Asia and particularly India, for a long time now. I had also started a company along with some Indians 20 years ago. I have generally felt very comfortable with Asia and South East Asia because of its demographics and growth. Most of Europe has not seen any growth while Asia is growing very well. I also have a number of friends from India. This makes it natural and easier for me to invest here. India is one of the biggest markets for us primarily because of the advantages: it is English-speaking, has a lot of connections with the US, and is backed by strong talent and cooperation between the two countries. I came here first in 2011, but I feel I have been here for over a decade. Since I came to India, we have made about eight investments in the country.”
Asia is a big place, and it will be interesting to see if Dave can make 500 investments on that continent alone in the coming years.
wheels up Haneda -> Beijing. fun times Tokyo, see u again soon 🙂
— Dave McClure (@davemcclure) May 26, 2013
wheels up BLR -> BOM. Mumbai here we come! #goap
— Dave McClure (@davemcclure) February 24, 2013
wheels down Bangalore, 3am local time. next: customs, luggage, hotel, sleep. #goap
— Dave McClure (@davemcclure) February 20, 2013
— Dave McClure (@davemcclure) November 26, 2012
Don’t knock the hustle.
Thanks to Facebook, Twitter, and Tumblr, cat photos and rants from angry aunts appear in the same feeds as shared recipes and world news. Sulia is changing that by introducing subject-based â€œchannelsâ€ where users can consume media about a single topic like technology, politics, or food. Moving away from a single crowded feed towards multiple focused feeds has the potential to be helpful to readers, publishers, and advertisers alike.
Pronounced â€œsoo-lee-uh,â€ the company aggregates news in a style similar to Prismatic, but Sulia has significantly more traffic. Sulia reported a user base of 10 million users when it announced a $1.5M Series A in September of 2012 and has since, by our measures, more than doubled their traffic. Suliaâ€™s VP of Editorial & Expert Operations, Josh Young tells me theyâ€™re on track to hit 15-20 million uniques by the end of the year.
Young emphasized that Suliaâ€™s burgeoning traffic is now driving significant traffic to publishers – 100k monthly uniques to TMZ, 60k to Huffington Post, and 50k to ESPN to name a few. With distribution power like that, publishers would be wise to turn their attention towards getting their content on Sulia.
Suliaâ€™s experience is comprised of individual subject-based channels, is mostly easy to use aside from an odd absence of headlines. Each channel is an endless scroll of relevant stories from publishers, like those mentioned above, and subject-area experts like Robert Scoble & Kara Swisher in Tech & Science, and Nate Silver & Anderson Cooper in Politics. In our interview this morning, Josh explained their â€œproprietary expertise indexâ€:
â€œWe index Twitters lists and sort them into subject areas. Then we think of membership in those lists as a â€œvoteâ€ for being interesting or having expertise in that area. For example, someone who is in 4,000 lists has more expertise than someone in 300 lists. This is how we know who the top people in each field are. From there we connect these social profiles with open RSS feeds. We filter the first sentence or so of those feeds to make sure theyâ€™re relevant.â€
Twitter lists might seem like an odd place to start on the surface, but Sulia and Twitter lists have been inseparable since their inception. Initially founded in 2009 as TLists, the company helped Twitter build and manage its lists feature prior to Twitterâ€™s redesign in September 2010. After that, the company pivoted to become Sulia.
Aside from Twitter lists, users can influence the content displayed in each channel by clicking the â€œtrustâ€ button on each expert or publisher for given interest channels. The more â€œtrustâ€ experts & publishers accumulate, the more likely the content their is to appear. Through this, Young says Sulia is building the first â€œtrust graph,â€ their key to breaking through the noise on todayâ€™s crowded web. The methodology seems sound, if not at least difficult to â€œgame.â€
Building the Business
15-20 million annual uniques and interest-segmented audiences isnâ€™t just good for publishers though, itâ€™s also good for advertisers. In an interview with Business Insider in November Jonathan Glick, Suliaâ€™s CEO, explicitly stated that the motivation behind organizing content by subjects is to segment audiences for marketers & advertisers. In his words,
â€œOne of the things thatâ€™s difficult about organizing content in the way that Twitter, and Tumblr, and Facebook do it today, which is all intermingled without a subject, is that a marketing message thrown into the middle of that feels a little bit like spam…whereas if youâ€™re in the cooking section [of Sulia]…an ad for a new kind of canned soup makes a lot of sense.â€
With the rise of native advertising on sites like BuzzFeed it isnâ€™t surprising that Sulia is experimenting with this format as well. Content from sponsors like Dyn, as seen below, utilize Suliaâ€™s existing layout and story format.
Driving hundreds of thousands of hits to publishers and itself seeing unique visitors in the tens of millions with no plateau in sight, Sulia is on track to become a major player in business of online publishing, and potentially a model for advertising as well. In our interview, Young said their focus in the coming months will be refining and improving their core IP, the â€œtrust graphâ€ in the interest of building a more useful tool for readers, publishers, and advertisers alike.
According to a regulatory filing Boulder-based startup SpotRight has raised $2,870,889. The company previously raised $1M in funding in July 2012 from Grotech Ventures, Access Venture Partners and FFP Holdings, and also raised a $1.4M Series A from the same investors under its original name Giveo in January 2011.
SpotRight was originally launched as part of TechStars Boulder in the Summer of 2010 and merged with Spot Influence in July 2012. According to the announcement of the merger:
“As a combined company, SpotRight unveils an unparalleled platform that helps direct response marketers access social data on their customers and act on it to create real business value.”
- If you invested in Yahoo the day before Marissa Mayer was announced as the new CEO you’re probably pretty happy right now. The price has climbed from $15.36 per share on July 15, 2012 to close at $26.58 today – a 73% gain. For long suffering employees with underwater stock options and shareholders waiting for the price to move this undoubtedly comes as a welcome change.
Yahoo’s stock price is now at it’s highest since May 2008 thanks to a steady stream of acquisitions including the purchase of the Tumblr blogging service for $1.1B today, policy changes and other positive PR for the company. While this is still a far cry from the 10 year high in late 2005, or peak price of over $100/share in 2000 prior to the dot-com crash, Mayer has done more to move the needle in her 10 month tenure than the 4 predecessors who came after Jerry Yang’s departure in 2009.
Scroll down to see Yahoo vs. Google stock price growth comparison for the past year.
Google vs. Yahoo Stock Price Growth – 1 Year Comparison
HT: Hacker News, Images via Google Finance
- In a regulatory filing Project Decor revealed they have raised $5M in venture capital, which includes investment from Launch Capital. The company was founded in September 2011, and previously raised $1.6M in March 2012.
Project Decor is cofounded by Andy Appelbaum, Cliff Sirlin, and Aaron Wallace. CEO Appelbaum is a well-known New York angel investor and cofounder of online food delivery service Seamless Web, and previously founded several companies alongside Sirlin. Project Decor aims to help people decorate their homes, and is part of a hot space lead by Houzz and Tastemaker. AngelList currently lists 88 home decor startups on their site.
For their part Project Decor seems to be amassing a following, with more than 1,300 likes on their Facebook page and over 2,000 followers on Twitter. For a social shopping service building visibility and a community will be crucial, and we’ve added them to the Startup Index as one to watch.