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Based on lecture I did for my latest Startups Uncensored event, this breaks down the best ways to achieve success in all aspects of starting your own business.
Based on lecture I did for my latest Startups Uncensored event, this breaks down the best ways to achieve success in all aspects of starting your own business.
10 STRATEGIES FOR STARTUP SUCCESS 10 ways to get funding, build a product, and thrive, from a CEO who’s been there. INTRODUCTION Hello, I’m Jason Nazar, the co-founder and CEO of Docstoc. The reality is, once you start your own company, the We help entrepreneurs start and grow their business by providing uncertainties only grow. How do you ﬁnd the right co-founder? useful documents, articles, videos and other resources. Get funding to build your product? Hire the best employees? Get Docstoc is one of the 500 most visited websites on the your ﬁrst set of customers? internet, and over half a billion people landed on our website at The two things I want to avoid here are boring you, and some point in the last four years. I raised $4 million to grow sugarcoating entrepreneurship. I will do my best to capture both Docstoc into a proﬁtable business, and have spent a lot of time the challenges and the rewards of starting your own company. helping others do the same. Many people are attracted to the idea of building something I’ve done hundreds of lectures on how to raise money, pitch they love, gaining recognition and earning money. But there is a business plan, grow and track revenue. My goal today is to always trade-off. For me, it’s worth it to wake up and go to an combine all of my presentations and ideas into one ofﬁce of 50 amazing employees who care about Docstoc as comprehensive guide on how to be successful in the startup much as I do. There’s a sense of purpose that comes from that world. feeling, one you can’t ﬁnd anywhere else in life. If you’re ready to Wherever you are in the process of starting your own ﬁnd that serenity, this is a good place to begin. business, I’ve been there. Many of you want to start your own These are 10 important strategies I developed over the last 6 company, but you’re not sure how to do it. You may be scared to years of building a proﬁtable business. Hopefully they can help leave your job, or fear all of the struggles that lie ahead. you build a company you’re equally as passionate about. Edited/designed by Rochelle Bailis Ideation: The Entrepreneur’s Dilemma The ﬁrst step towards success is meaningful ideation, or the creation of ideas. When it comes to an idea, most entrepreneurs face a perpetual battle between dedication and ﬂexibility. Let me explain. There is a mythology around entrepreneurs that brands them as persistent visionaries. They are pegged as individuals who see things nobody else can, and stick to their ideas even under harsh scrutiny. Some famous examples include Steve Jobs and Walt Disney. Back in the 1940’s Walt Disney had a vision for an amusement park called Disneyland, a magical land of puppet animals named after him. People initially thought he was crazy, but he was persistent in his dream and it became one of the most iconic theme parks and brands of our time. Vision or On the other side of the coin, it’s well-known Versatility? within the startup community that most businesses will fail unless they are willing to pivot. For example, both Groupon and Twitter, some of the most prominent websites today, didn’t start out as the same service they currently are. They were struggling, and had the foresight to switch course. How do you balance these two conﬂicting drives, to be loyal to your idea but able to change direction before going under? My suggestion is to stay attached to the problem you are trying to solve but be very ﬂexible about the solutions to solve it. If there is a problem that has yet to be ﬁxed, there is an opportunity for business. Stay loyal to the issue, without letting your ego get too caught up in your solutions. I’ve come up with plenty of terrible solutions for very important problems, and only through trial and error did I ﬁnd out which ones “Stay attached to the worked. problem you are trying You will come up with plenty of terrible solutions. I know that I did, and it took me years of constant trial and error to see how bad they to solve but be very were. At that point I could ﬁnally cool down my ego enough to take ﬂexible about the feedback from people who want to alter or criticize my solutions. solutions to solve it.” If you are ﬁxated on an important problem and willing to be ﬂexible on how to solve them, you will allow room for improvement without losing sight of your purpose. Pitching Investors: The 4 P’s: People, Product, Process and Passion People Product Unless you already exited a company for a lot of People with a money, I don’t know any sophisticated investor background of that will invest in your company without a success raise product already built. Some investors don’t want more money. to hear a pitch at all, they just want you to hand The reason them a computer and let them play around on your Brian Lee, the website. They want your product to speak for Co-Founder of itself. LegalZoom and You will need to raise enough money to build a ShoeDazzle, just product and show people, whether it’s through seed raised 27 million capital, loans or scrounging your savings. If you’re dollars for The incredibly strapped, at the very least get a designer, Honest Company in build out slides and mock up something investors can partnership with click through to get a feel for what the product will be like. Jessica Alba, is because he is one of the most successful Progress Passion entrepreneurs in town. Getting somebody to give you Passion by itself will not raise you money. People with a track money is about overcoming inertia—by But it can be the x-factor that pushes record of success, which I mean, the investor’s inertia to you over the bar when the investors are whether starting or write you a check. You must create on the fence. Imagine how passionate working within a good the momentum by showing them you are about the most important thing in company, have a meaningful progress. your life—now be twice as passionate higher likelihood of I’ve always had a fool-proof formula about your business when you are getting angel to raise money for your companies, pitching it to investors. investment from the and it’s all about setting and get-go. exceeding expectations. Even if you’ve When you have the product, but never started your don’t need further investment just yet, own company, go to an investor and tell him, “I don’t When we started Docstoc, I’d remember that want anything, I just wanted to show never raised money before, investors are you what I’m working on. I’m but was able to pull half a investing in you, ﬁrst developing this product, what do you think? I am going to complete a million dollars in 45 days. I and foremost. Before diving into a prototype in the next 3 months.” could only do that that description of your And whatever you do, make sure because I spent years building product, take a that you complete it in less time. Go up relationships with minute to explain back in 2 months and say, “Remember investors, knowing that one your background; how I told you I’d ﬁnish this in 3 months? Well, I did it in 2 months, and I day I would ask these people who you’re working with, and things also accomplished this extra thing.” for money. If you have not you’ve done that are You repeat this, returning to them for done that, start now. Tell directly applicable to feedback and updates a couple of people what you are going to what you plan to do. times, and they will see a person who accomplish, and let them see If you can’t sell they can trust to get things done. That is the process you go through to build you do it, multiple times over. yourself, you won’t be able to sell your trust that you would otherwise have to product. build over several years. Building a Team: Three Golden Rules Smarts Drive I require my I make sure to let new employees know that at employees be the Docstoc we work harder than everybody else. If the best at what they company next to us is working 10 hours a day, we do. I want new are going to work 12. If they are working 12, we are employees to going to work 15. If we want to beat the know that that’s competition, we need to put in the effort to do so. why I chose them, Trust Your Instincts and that they will be working with Ethics others who also Of course, you may develop Don’t hire assholes. There should be no bad your own standards. What’s maintain a high seeds in your company; employees need to trust important is that you stick standard of each other in order to succeed. excellence. to them, without making exceptions. Sometimes in an interview, especially when you’re desperate to ﬁll a Inspiring Excellence: Classroom to the Ofﬁce position, you’ll start making concessions. There’s a great story about the New York school system that exempliﬁes the power of a driven culture. A school principal But whenever you hear a gathered a group of teachers and told them, “You are my best voice in the back of your teachers, and I have a project for you. I’m going to give each of head telling you “This is not you a group of C students, but we’re going to tell them that they’re going to work out,” don’t A students throughout the year. You’re all such good teachers, I believe that simply by telling they’re A students and pushing them, dismiss it. You might need you will make them exceptional students.” this person in the short term, but this decision will The teachers were hesitant about this method, but agreed to give it always come back to you. a shot. Throughout the year they told the C students that they were the brightest students in the class. Every single time I was As the principle predicted, those students outperformed all the desperate to ﬁll a position other students in the class, even though they were actually in the and hired somebody in spite middle of the bottom pack. of suspecting they might not meet our standards, they At the end of the year, the principal had a party for the teachers to celebrate their success. The teachers praised the principal for his didn’t last. In the long run, idea of pairing the average students with the best teachers. The not trusting my instincts principle then pulled them aside and said, “I’m very proud of what was a negative opportunity you’ve done, but just so you know, you were actually the middle of cost to my company. the lower pack of the teachers. I just told you that you were the best.” I don’t want to compromise with my team, but instead Something very special happens when you set an expectation of greatness: people will subconsciously live up to it, and will push set a collective themselves beyond what they thought was possible. When hiring, if consciousness of quality you set an expectation of excellence with people who are already that will be contagious high achievers, you create an incredible company where the sum amongst my employees. of the parts is much greater than the whole. Getting Customers: Put the Big Rocks First Years ago a man named Stephen Covey, the He looked intently at the audience. “What was author of The Seven Habits of Highly Effective this exercise all about?” he asked. People, did a famous seminar in front of a massive audience. He placed a big glass jar next Someone yelled out, “You can always get more to a pile of large rocks for everyone to see. He out of your day, and squeeze a little more in.” ﬁlled the glass jar with the rocks until it was full, “No,” Stephen responded. “The point was to and turned to the audience. demonstrate why you should put your big rocks “Can we ﬁt anymore rocks?” he asked. in ﬁrst. If you don’t, you’ll never be able to ﬁt them.” Everyone answered, “No!” For entrepreneurs, the big rock is almost always He pulled out a bag of gravel and poured the getting customers. Because it’s the hardest, gravel so that it ﬁlled in the spaces around the largest, and most fundamental issue they face, larger rocks. most founders avoid it. This is a fatal mistake. Once you have those customers, you can ﬁll in He held up the jar once again and asked, “What the gaps, and work with what you about now? Can we ﬁll up the jar even more?” have. But that ﬁrst big The audience answered more uncertainly this rock will be time, “I guess so.” the heaviest He produced a bag of sand, and ﬁlled the ﬁne load to grains of sand around the gravel and rocks. lift. “What about now?” He asked. “Do you think we can ﬁll it up even more?” The audience sounded doubtful. “Maybe…” Stephen then lifted a large pitcher of water, and poured it in the jar around the sand, gravel and rocks, and lifted it up for the audience to see. Conquer The Pareto Principle the big rocks ﬁrst to reach Another important tool for understanding customer acquisition is the Pareto principle. It states that 20% of our efforts lead to 80% of our results. But the top when you’re working in a startup, the effort-to-results ratio is even more extreme than 20/80, it’s 1/99. One big thing you accomplish will lead to 99% of the success your company needs to reach the next metric. I come into work every day and write down the one most important thing that, if I accomplish this day, week, or month, will make the biggest difference in my company. Most of the time, people spend very little time working on the most important thing they need to tackle. Why? Because it’s so damn hard. It’s the greatest challenge, and it takes the most energy. So instead, people write a long list of small things to do that will ﬁll up our day and be easy to check off. “Today I posted on Twitter, I organized my desk, I did laundry... I did all these small things that make me feel accomplished but made no difference in my business whatsoever.” Don’t make a long list. Just focus on that one goal, and put all your efforts into it. It will be difﬁcult at ﬁrst, but this is the only way to make big changes that will elevate your business to the next level. Online Trafﬁc: Paid Marketing and 7 Free Ways A big issue most entrepreneurs overlook is how 2. Press they’re actually going to get users. Ask yourself When you ﬁrst start out from day one: are you actually going to get and don’t have money for people to show up on your page and use your a PR ﬁrm, you need to get application, your product, your service? your own press. This Many new websites create a product, decide to takes persistence, by spend X amount driving trafﬁc to their website, which I mean spending and then hope it goes viral from there. weeks or even months developing relationships. You can only sustain the cost of AdWords, afﬁliate marketing or other trafﬁc driving ads if Michael Arrington, the you have a positive return on investment (ROI) founder of TechCrunch, to sustainably draw from. Most new companies wrote about Docstoc four can’t spend money driving trafﬁc forever. times before we even launched our site. Why? Over the years I’ve come across 7 free way to Because I built a personal drive trafﬁc to your site. I’d suggest developing relationship with him. as many of these approaches as you can, so that you’re not depending on one source for When I was back in law driving users. school, I skipped one of my ﬁnals when I heard he was going to a party. I crashed the party, and approached him. From his 1. Search Engines perspective, I probably came off as a stalker. But Improving SEO is the ﬁrst challenge you can take on with a high potential for I stuck around, bought driving trafﬁc. drinks for his group of friends, and didn’t leave At Docstoc there are 20 million people a month that actually type in the url until I could have a nice “docstoc.com”. The other 20 million people enter queries for documents or conversation with him and resources on search engines like Google, Yahoo or Bing. build a rapport. I worked on building a relationship I didn’t realize when we ﬁrst launched Docstoc that we would be a search- with him until he was based company. But after seeing a strong correlation between the amount of willing to look at what I trafﬁc we pulled and how quickly our resources were increasing, I realized that did, and eventually write growth couple be exponential. about it. The more content we had, the more trafﬁc we brought in. So the only metric that was The single best way to important to us that ﬁrst year was growing the number of documents in our library. get journalists to pay In the beginning our content was provided by our users, so we would run attention to you is to contests for users to upload more documents. We built in features and follow them. Go to their incentivized uploading, and leveraged our community. We looked for content in publicly blog, post comments, available sources. We made deals. We did whatever we could to grow our library. re-tweet their log, reach out to them and start a You can also leverage the power of search engines outside of Google. We conversation. Don’t ask applied the advantage of search to the app store, by creating thirty free apps for anything, just with valuable titles that people are searching for. Now when someone searches interact with them and in the app store for “how to get a job” or “employee management” we rank the help them out. After 6 highest in those search results. months, you’ll have built up enough equity. 3. Social Media 4. Partnerships & Deals Simply creating a Facebook and You can always ﬁnd a way to make Twitter account before you someone drive trafﬁc to your site. Find a have any followers probably Viral Video value proposition you provide that won’t generate you new The Dollar Shave Club was a they don’t have, that’s worth them trafﬁc. small startup with the great idea of sending trafﬁc your way. shipping razors directly to men’s Try using social media You don’t need a huge, successful homes for a dollar. All they needed outlets that start was to be discovered. So they created company to get the big guys to pay conversations and have and shared a short, hilarious video all attention to you. In the startup viral potential. At across the internet, and it went viral. world, more than any other industry, Docstoc, we got trafﬁc This genius piece of marketing pulled people will work with you just through posting on link over 4 million hits on YouTube, and because they like you. was just what they needed to aggregate sites like Digg, I’m willing to make a bet on generate an explosive Reddit and Stumbleupon. I partnerships with smaller startups if I number of regular also know of major publishers customers. like their founder and I see them working that are driving a million unique hard. There’s no other industry like the visitors from LinkedIn referrals. web, where you can leverage your own personality to get people to build things with you. 5. Refreshing Content 6. Solve a Compelling If your product or application doesn’t have refreshing content, it doesn’t Need give people a reason to come back. Docstoc used to be a very transactional based experience; people visited This one is pretty straightforward, our site when they needed a document, then they left. In order to retain and possibly the hardest one to users, we started creating original expert videos and articles, so that once accomplish. If you manage to ﬁnd they arrived for a product, they’d stay for original content. an undiscovered solution to a compelling need, this will often sell itself through word of mouth. 7. Viral Loop A viral loop draws in customers, retains them and motivates them to return to the website frequently. A great way to galvanize a viral loop is not only bringing customers back, but turning them into marketers themselves. The most classic example of this was LinkedIn in 2003, when it was still fairly unknown. Back then I was in business school, and I created an account on LinkedIn. While searching the site, I saw another user who had over 500 connections on LinkedIn, and had a little badge next to his name designating him as a special user. I wanted a badge too, so I exported my 800 contacts stored on Outlook and sent them all a message to join my LinkedIn network. A meaningful percentage of my contacts that day that signed up for LinkedIn. And many of them probably sent invites to their contacts, sparking a chain of outreach that drove tens of thousands of users from my one decision. LinkedIn had turned me into a user marketer, who brought them an exponential boost in trafﬁc for free. Monetization: Grow and Track Online Revenue Making money on the web is simply At Docstoc, people pay us $20 a month for unlimited access to our documents. This wouldn’t work if we a matter of ﬁguring out how to get a had a thousand customers. Instead, we have millions of customers who spend a little amount of money. lot of people to give you a little bit Once a product is created, it doesn’t cost anything to of money for a product or service maintain, and since our subscriptions are virtual there’s no distribution cost. that has no incremental cost of That’s the magic of the internet. You can create a goods and no distribution cost. business that will reach a lot of people with very little cost of goods and distribution. When to Start Charging Try Charging You might come up with a niche concept that’s difﬁcult to sell to investors. If you are for Everything having a difﬁcult time raising money, or think you will, start charging right away. Too many The mistake a lot of entrepreneurs make is they planning scale and then monetize entrepreneurs are without the funding to sustain this model. If at some point you’ll have to stop building scared to charge. out your product because you’ll be out of money, you’d better start charging for your You'll be surprised product from day one. what people are willing to pay for. If you do have the funding to scale, work on building a great product that you can charge for once you have the trafﬁc. If executed properly, you may be able to make Test different prices. more than if you start charging right away. You don’t know what your product is worth Facebook can make a lot of money off simple advertising today because they have until you know what almost 900 million users. This was the case at Docstoc as well; if we started charging for someone’s willing to documents from day one, we never would have scaled to the size we are now. pay for it. If it Works, Focus on it If you ﬁnd something that works, don’t be afraid to dig your heels in. A common mistake entrepreneurs make is they ﬁnd something that starts to work and instead of going as deep as they can into that technique they look for more. If you ﬁnd a way to bring in revenue, put your energy into getting better at it. At Docstoc, the ﬁrst month we ever made $500 off AdSense a light bulb went off in my head. I saw a path of proﬁtability, and started down that road. We placed AdSense everywhere, and tested and optimized constantly. This generated us enough revenue to sustain ourselves, and after two years we didn’t need funding. Once we accomplished that goal, we were able to look at other revenue streams. Business Development: 10 Tips for Better Biz Dev 1. Get Warm Introductions 2. Deal With the Decision Markers If possible, meet someone through a mutual Your goal is to speak with the person who makes the connection so you can establish legitimacy and decisions, whether you can do it immediately or are familiarity. Be friendly; if the person likes you working your way to them. Figure out who that person immediately this will take you a long way. is, and don’t be afraid to ask for them. 3. Only Pansies Aren’t Prepared 4. ASK, Don’t Talk This seems like a no brainer, but prepare The single biggest mistake I see is that people don’t thoroughly before speaking with someone about know when to be quiet. The best business growth biz dev opportunities. Take time to do research on comes from people who know how to listen to their company and their business, lay out ways people’s needs and cater to them. that you can beneﬁt them speciﬁcally. 5. Provide as Little Information as Possible The reason you provide the bare bones of information is it gives you the chance to hook a person. You’ll often need to get past a person who sifts through offers and decides whether to pass them on to the decision maker. They’re used to blowing people off. But a minimal description implies that you’re too busy to push them desperately, and also might pique their interest to know more. Business 6. A Picture is Worth... development is all Don’t look like a slob. You don’t need to put about preparation on a full suit or try to over-impress, but and persistence looking like a casual business professional will give the right ﬁrst impression. 7. Manage the Follow-Up Process 8. Please, Persistence and Pressure In social situations, you stop reaching out to people if Always remain pleasantly persistent in moving the they don’t respond to you. Business is not like this. deal forward. Oftentimes you need to not only be You need to continue pursuing somebody until you relentless, but walk them through every single step. get a hard “no” or they agree to meet you. They Don’t wait for someone else to move things along. might express interest in the meeting, but particularly You can avoid sounding like a nagger by asking the for the busier professionals you will need to be the person if it’s okay to send them a reminder in a couple one to take the lead on following up. days if you don’t hear back. 9. Keep Up Excitement Until Closing 10. The Sale Begins After the Deal Ends Your enthusiasm will be half the battle. Until an Remember, you can’t give up after you’ve closed a agreement is made, maintain excitement about the deal. This is your chance to impress, and a stepping mutual beneﬁts you will both receive. stone for garnering the interest of other potential partnerships. Strategy: Four Factors to Factor The word “strategy” is tossed around a lot in the Every company has a start and end, a ﬁnite life. business community, and has become somewhat of Each step you take has an opportunity cost. a ﬂuff word in my opinion. Strategy is simply the We don’t know what that timeline is right now, but best way to achieve a set of results. Strategy in it’s limited. Most entrepreneurs hope that, by the itself holds no value, it’s a means to an end. A lot of end of their company’s life, they’ve helped people, board members or advisors will suggest different made some money, and possibly have liquidity that “strategies” for your company, but many of their creates value for the Co-Founders, their ideas will sound great without bringing about a shareholders, and their employees. valuable result. The single biggest variable that increases the At Docstoc we have a matrix for making decisions, likelihood of having a positive outcome is the to conﬁrm they are worth our time. Believe it or not, number of iterations made along the way. Every the most precious resource that you have is not decision you make will affect your path, and these money, or customers, or even your own are the four factors that we use at Docstoc to judge intellectual capital. It’s time. whether they will be constructive for our company. 1. Potential Upside 2. Likelihood of Success A lot of entrepreneurs spend too much time on To balance out “potential upside” there is the tasks that, even when accomplished, won’t likelihood of success factor. make a meaningful difference for their Sure, if you share your product on Oprah it will business. take off. But what’s the likelihood of that If there isn’t a signiﬁcant potential upside, you actually happening? In cases like these, it’s not shouldn’t be wasting your time on it. You need worth the amount of time you’re going to invest to be growing quickly, and tackle projects with unless you have a connection or jumping off a large possible gain. point. Aim big, but use your judgment. 3. Effort Involved 4. Strategic Value When the potential upside is big, many young Strategic value is simply bringing all three startups will miscalculate the effort involved. previous factors together, and evaluating Effort involved is something that you will gauge whether the decision is strategic. better through practice, and is important to Is it worth your time in the short and long assess every time. You must be able to weigh term? How will it help you build out your whether the effort involved will be worth the core mission? beneﬁts. Managing a Board: Setting Expectations The sales process does not end when you raise Let’s say I promise $100 million in revenue and money. It begins. It’s after you get somebody’s deliver $80 million, versus promising $70 million and money that you must demonstrate value and build delivering that same $80 million. The $80 million trust. hasn’t changed, but I’m the hero if I bring in $10 million more than predicted. Why? Because these people have preferred shares in your company, and will therefore have the right to My board members always joke that I am the only dictate some of your decisions. These are also the CEO they know who promises a certain amount of people that will reinvest in the next round of your growth, and over-delivers every single time. I have company when you need enough capital to solidiﬁed the conﬁdence of my board members by continue growing. managing their expectations. My approach to building trust with board members is simply to over-deliver, every time. Whatever annual revenue I project Docstoc will achieve, I tell my board we’ll accomplish 20% less. I keep a separate team plan and board plan, and push our team for higher goals than I set in the board meeting. Finding Balance: The Unintended Consequences of Startups The ﬁnal point I’m going to make is about the life of health, and strong friendships. You get a startup a startup founder. Don’t doubt for a second that and one other thing – that’s the rule. You can’t your business will take over your life. Docstoc has have a startup and be in a relationship, stay in become completely intertwined with my identity, shape, see your children all the time and stay in and that comes with its ups and downs. touch with extended family. Choose one. The startup world has an understandable allure. Balance comes with time, after you make the big You have the opportunity to create a company sacriﬁces. The decisions you make will have born of your own passion, and make money doing consequences, so be sure you believe in them. It it. That all sounds well and good, but what people bothers me that more people aren’t brutally honest don’t tell you is that your friends will stop calling. about this fact, because every entrepreneur goes Really, my friends gave up on me because they through it. know I wouldn’t respond. I also gained 40 pounds, In spite of it all, I knew it was what I had to do. I’ve and neglected my family. I couldn’t sustain any always felt like I was destined to be special, to live relationships, and spent a lot of time by myself. a different life from the daily grind. If you’re like me, For the ﬁrst two years of Docstoc, I worked 16 you will ﬁnd a sense of congruence, passion and hours a day, and spent all of Saturday just peace of mind from running your own business, recovering. Honestly, if I’d known how hard it one that you will never be able to ﬁnd anywhere would be, I might not have done it. So here’s one else. last piece of information I leave you with. It’s not a Obviously you’re reading this, so you’re interested. tip, but more of a fact: There is never a “right time” to start your own You can’t a start a company and maintain a company. All that you need to do is take that ﬁrst rewarding personal life, a good marriage, great step.
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