Frank Addante's FounderBlog:
Starting startups by a serial entrepreneur.

(Part 4 of a 5 part series: "So, you need to develop a product?")

Any entrepreneur, CEO or CTO should always have a development SWAT team on hand. This team should be outside of the core development team and outside of the company's critical path. This team can be made up of employees, a virtual group of employees (borrowed from their core team/job) or an outside development shop. It doesn't matter as long as they are super "scrappy" (see Scrappy versus Steady), have great vision, move extremely fast and require little direction or management.

I have had to call on my SWAT teams many times in the past. Sometimes in emergency situations, and other times to take advantage of market opportunities that quickly arise. Sometimes I have had to trash what they produced, other times it became a major turning point in a company's growth.

At L90 (Startup 3.0), we were sued by DoubleClick on the eve of our IPO for alleged patent-infrindgement. They tried to sue us in Virginia. We were scheduled to launch a new data center (of over 300+ servers) in Virginia the following week. With hundreds of millions of dollars in shareholder value at stake, I had to call on my SWAT team to do two things. First, they needed to reroute millions of dollars in computing equipment from Virginia to Texas and setup a new datacenter in less than 2 weeks. And second, they needed to architect and deploy an alternative to our core ad-serving software (which was delivering billions of ads for the Internet's top web sites at the time), because DoubleClick was trying to get an injunction to shut us down. The SWAT team was able to pull-off both of these seemlingly-impossible objectives within weeks and it gave us a lot of leverage in settling the bogus lawsuit in our favor.

At StrongMail (Startup 5.0), in the beginning, our biggest selling challenge was that it was difficult for us to visually demonstrate the value of our infrastructure solution. We had developed the world's best engine, but it didn't have a steering wheel (our strategy was to rely on other companies' steering wheels). Our internal development team was busy focused on developing our core product, but I needed to develop an application with an attractive, easy to use web user interface. I called on one of my outside SWAT teams and within months they were able to create an application on top of the StrongMail infrastructure that made it easy to demonstrate the value of the core infrastructure and it made the selling process magnitudes easier. It turned out to be a catapult for the company, and sales have been booming since then. The application is now being used by some of the world's most successful companies. After the initial product was developed, it was folded back into our internal engineering team and became part of our core product offering.

Without having a SWAT team on hand, it could have taken 10X as long to build a team, product specs, an architecture and a roadmap. The SWAT team helped us kick-start the project and get it to market in less time that it would have taken us to interview and hire a small team.

A solid SWAT team is invaluable, and to me, it is essential.


Next... Outsourcing (Part 5 of a 5 part series: "So, you need to develop a product?")

Labels: CEO, CTO, L90, product development, StrongMail, team building

(Part 3 of a 5 part series: "So, you need to develop a product?")

Good engineers are hard to find. In today's highly competitive job marketplace, it is becoming increasingly more difficult. My solution: cast a wider net. Focus on the best talent, regardless of their location.

I've built development teams in Chicago, Los Angeles, Silicon Valley and India. I've also hired engineers scattered in random locations around the world. I've built companies and teams where 100% of the development team was located at the company headquarters and other companies where none of the developers were at headquarters. I've realized that it doesn't really matter where they are, if they are the right people. There are many pros and cons to having your engineering team outside of the company headquarters (and/or in multiple locations), but I think the pros end up balancing out the cons. The main benefit to having your engineering team all in one place, at the company headquarters, is certainly communication. The con is that the developers can become 'tainted' or distracted by all the other business happenings and it can skew their thinking and creativity.

There are also geographical workforce talent pool advantages and disadvantages. Chicago was the easiest place to find engineers; they were cost efficient, hard working and very loyal. Los Angeles was a bit more difficult to find engineers; they were the most creative but more expensive than Chicago. Silicon Valley has a lot of engineers with a lot of experience, but also lot of competition, which makes it the most expensive place to hire engineers and loyalty can be a challenge. I will talk more about outsourcing in point #5, but India has terrific intellectual capital, is less expensive (however, costs have been quickly rising), but, it is very difficult to find "Scrappy" engineers (see point #1) and communication can also be a challenge.

At StrongMail Systems (Startup 5.0), our first three developers were in India. It was a challenge in the beginning, but ultimately, I attribute much of our success to making the model work. We started with three extremely talented, creative and innovative engineers. They were able to attract other talented engineers in India as we grew. There were many communication challenges in the beginning, but once we overcame them, we were able to leverage a full 24 hour development cycle between the U.S. and India and, as a result, we were able to develop product much faster than the competition. At L90 (Startup 3.0), our engineering team was based primarily in Chicago while our headquarters was in Los Angeles. As we evolved our business plan and tweaked our marketing messaging, our engineering team was shielded from a lot of the distraction (being in a different location, they didn't get sucked into the "water cooler" conversation or hallway chatter) and they always remained 100% focused on building innovative products driven by customer need. Of all of my companies, communication was probably the strongest at L90, even though the engineering and design team were completely separated from sales, marketing, business development and customer service.

Focus on the best people, not the best location... By casting a wider net, you can find better talent, better manage your costs and gain many other tangible and intangible benefits (e.g. loyalty, development and support expanded across multiple time zones, multiple geographical talent pools for growth, new and fresh perspectives, etc.) Fortunately, we live in a world where virtual locations are not only possible, but advantageous.


Next... Build a SWAT team (Part 4 of a 5 part series: "So, you need to develop a product?")

Labels: hiring, L90, product development, StrongMail, team building

Often times, companies get distracted by all the things that they -could- do, and don't focus enough on what they do best. This is especially true, and very tempting, for startup companies who can seemingly do "anything" because they are so flexible and agile. This is dangerous behavior. It results in a lack of focus and diluted brand equity.

You want to pick the #1 problem that you solve and be the absolute best at solving it. This way, when someone says "I have X problem" the default company everyone thinks of is yours.

Here are some examples:

"I have a database problem" = go to Oracle
"I have a networking problem" = go to Cisco
"I need to sell something on the Internet" = go to eBay
"My cell phone is dropping calls" = go to Verizon
"I need a portable music device" = iPod
"I need a photocopier" = Xerox (this worked for them years ago, then they started to dilute their core message and competitors quickly stepped in with a vengeance)

Sure, all of these companies do a lot of other things... But, each have positioned themselves as the "default" or "defacto" standard for solving a problem.

With startups, it is difficult to commit to just one thing that you are best at because:

a) You don't know if that one thing is always the right thing
b) You aren't confident that you truly are "best" at solving it yet
c) You try to cast a wide net so you don't miss out on any opportunities

Bottom line is that you have to do it. Pick something, stick to it and be best. Period.

My first company, Starting Point (Startup 1.0), was an Internet search engine and directory. We were simply the best metasearch engine on the Internet. When people wanted to "search the search engines", we were the place to come. At the time, finding stuff using search engines was difficult. You had to go to multiple sources before finding the results you were looking for. (It seems as though this trend is starting to repeat itself with today's search engine results). Starting Point was best at searching the search engines and, as a result, we quickly became the 7th most popular site on the Internet.

L90 (Startup 3.0), my third company, was the "premium advertising network". When companies wanted first class advertising placement and high-end marketing technology, we were the place to come. Sure, we lost out on some of the low end business, but in the end, that actually helped the business survive the dot-com bubble burst.

At Zondigo (Startup 4.0), my fourth company, we never really answered the question "what do we do best?". So, what we became best at was changing our business plan. As a result, we ended up doing a lot of one-off custom work for clients and never really gained traction in any particular area. The company eventually failed.

At my current company, StrongMail (Startup 5.0), we struggled with trying to stick to only one core message. We can solve so many different problems with email delivery ranging from performance to reliable email delivery to dynamic content. As a result, we weren't the default answer for companies when they said "we have X problem". So, we put a stake in the ground. We focused on proving that StrongMail is the best way to get email reliably delivered to the Inbox. We went out with the message that we are like "FedEx for email delivery" and now, when people have email delivery problems, we are their first call.

It takes confidence and discipline, but it is very important to be best at something. It will help your company stay focused, it will build confidence in your entire organization (especially your sales/marketing team) and most importantly, your customers/users will think to go to you first.

Labels: internet, L90, problem solving, product development, Starting Point, startup, StrongMail, Zondigo

No, this posting is not intended for your IT department.

I'm not a big fan of secrets, NDAs or the term "stealth mode". I've noticed that a lot of people are afraid of getting their ideas out into the public. They are afraid of their competition finding out about the idea, a bigger company trying to steal it or some other entrepreneur doing it first. So, as a way to protect themselves, they keep it a secret.

Well, my philosophy is that if you keep it from your competition, you're also keeping it from potential users or customers. In trying to hide it from the 5-10 would-be competitors you're also hiding it from thousands or millions of users and customers.

Sure, you need to take the proper precautions to protect your idea first (patents, copyrights, etc.), particularly with international patent laws. However, I say throw away the NDAs and get your ideas out there! Solicit feedback, see what users think... Maybe you'll attract partners you never thought of or maybe you'll learn that no one cares about it and you won't waste your time.

If you are so concerned that someone is going to move faster than you, then that is the first problem you need to solve. Whether it be now or later, it's an issue you'll need to address before someone else comes along to crush you. Why not figure it out early before you invest a lot of time, money and energy into a new product or business idea?

Up until my current company, StrongMail (Startup 5.0), I never had people sign NDAs. At L90 (Startup 3.0), we threw our new ideas out into the public while they were still in the planning phases. We saved a ton of time in development because we allowed our customers, prospects and even our competition to provide us feedback before we built anything. Yes, I did say competition. We were able to see how they were going to react, far in advance, and we were always able to one-up them in the end.

At Starting Point (Startup 1.0), an Internet search engine, I would put links up on the site to announce new ideas. They would go to pages that said "Coming Soon..." with a "Feedback/Comments" button. I tracked the pages to see how many people clicked on it and would read all of the feedback. That is how I decided how popular an idea would be. If it was popular, I got a lot of good user feedback. If it wasn't, I didn't waste any time planning or building it. Funny thing, though, is that I found our competitors running out and building features that were never used (likely because they saw it on our site). While they were wasting time building unpopular features, I was able to develop and grow faster with far less resources. This ultimately lead to Starting Point being the 7th most popular site on the Internet with zero outside venture investment and a tiny staff.

At my current company, StrongMail (Startup 5.0), we started off signing NDAs with everyone we talked to. I thought we needed to do things differently because we were an enterprise software company. Well, the result was that we just made it more difficult for people to learn about our products and it slowed everything down. We spent a lot of time shoving paperwork back and forth and negotiating NDAs with lawyers. All this before we even got to talk about our value proposition. Well, one day, I decided to push everything to the opposite side of the spectrum. We took our software and put it on the Internet free to everyone for viewing and download. It was a dramatic shift in philosophy internally. Within weeks, we shortened our sales cycle. In fact, we had deals closed in less than 48 hours (which formerly could have taken weeks) because we had prospects that were able to find and evaluate our product while our sales reps were asleep. Intangibly, I think it also exuded a sense of confidence and also gave prospects the perception that our product is easy to use. Even further, a former competitor evaluated our software online and was so impressed that they contacted us to strike an OEM deal, leading to a very successful partnership. Probably would have never happened, had all of our information been behind our "information firewall".

So, I say, tear down your firewalls and let the world know what you're doing! You'll be able to move faster, increase agility, reach more people and, if you're smart, stay a step ahead of your competition. If not for any other reason, but because once you put your idea out there it will force you to run like hell to stay ahead of the pack.

Labels: L90, NDAs, partners, Starting Point, startup, StrongMail

I was looking at the website of one of our (StrongMail: Startup 5.0) investors, Sequoia Capital, and I came across the following list of "Elements of Sustainable Companies". I think this list is spot on. I guess this is how a world-class firm like Sequoia Capital finds and invests in world-class companies such as Google, Yahoo!, Cisco, Oracle, Apple, Electronic Arts and Atari.

I have copied their list of "Elements" below and I have included a few additional ones of my own at the end.

Clarity of Purpose
Summarize the company's business on the back of a business card.

Large Markets
Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.

Rich Customers
Target customers who will move fast and pay a premium for a unique offering.

Focus
Customers will only buy a simple product with a singular value proposition.

Pain Killers
Pick the one thing that is of burning importance to the customer then delight them with a compelling solution.

Think Differently
Constantly challenge conventional wisdom. Take the contrarian route. Create novel solutions. Outwit the competition.

Team DNA
A company’s DNA is set in the first 90 days. All team members are the smartest or most clever in their domain. "A" level founders attract an "A" level team.

Agility
Stealth and speed will usually help beat-out large companies.

Frugality
Focus spending on what's critical. Spend only on the priorities and maximize profitability.

Inferno
Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.



And here are my additions:

Be Scrappy
Emerging markets change rapidly. Companies need to react quickly, sometimes on instincts alone, to take advantage of a new opportunity. Not everything has to be perfect immediately.

Start Simple
It will only get more complicated. Start simple and do it best.

Handle with Care
Take care of your customers, they will help you build better products, recruit better talent and attract other customers.

Speed
Make fast decisions and figure out if they are right or wrong as quickly as possible. If you're right, you've taken a leap ahead, if your wrong, you didn't lost minimal time.

Customer, not Competition
Be a leader, not a follower. Companies often focus too much on their competition. Sometimes companies focus on the wrong competitor and follow them to failure. You'll never go wrong focusing on the customer first.

Labels: elements of sustainable companies, sequoia capital, startup, StrongMail

"Inventing things is a two-stage process. Stage one: Everyone says it's impossible. Stage two: They say the solution was obvious all along." -- Robert Fischell, Inventor (Holder of 200 medical device patents)

It is easy to come up with ideas. Convincing others to believe in your idea is hard.

I've found that a lot of people are interested in hearing about new ideas... they listen, they smile and nod, they say nice things and tell you it's a great idea. However, when you ask them to buy it or invest in it, the music stops and the number of interested parties decreases dramatically, fast.

Two things I have learned:
1. There are a lot of people out there that are happy to waste your time
2. New ideas that are obvious to you are not obvious to others

It makes sense. If it was obvious and easy, then everyone would be doing it.

My first company, Starting Point (Startup 1.0), was an Internet search engine. I spent a lot of time and energy trying to convince people (advertisers, prospective employees, investors, potential acquirers) that there was a market for search engines. Of course, a lot of that time was spent convincing people that the Internet was going to grow, and therefore there was going to be a need to make it easy for people to find content and sites on the Internet. Fortunately for me, I don't think I was the only one evangelizing the part of the story about the Internet growing. There were those who said the Internet wouldn't grow, others who said that there was no way to make money on the Internet, some who said it would be too expensive for the computer hardware and bandwidth required to operate such a site and others who said I was too young and inexperienced to make it work. Even as Starting Point grew to be the 7th most popular site on the Internet (passing up Microsoft at #8), there were still a large number of skeptics. I was 19 years old, full of blind-faith and was unphased by the naysayers. Today, I don't think I need to convince anyone that the search engine seems like an obvious idea. However, if I said that today's search engine is obsolete, I'm sure many would tell me that's impossible.

Even with my current company, StrongMail Systems (Startup 5.0), an email infrastructure company, there were a number of skeptics. You would think that the importance of email would be obvious to everyone. Not the case. I've had MANY people tell me that there are no improvements needed in email, others have told me that there isn't a big enough market for email technology, some have said that we wouldn't be able to displace the 20+ year-old freeware architectures that exist in over 90% of the world and I've even had some people tell me that email is going to go away. Personally, I thought that this was one of my more obvious ideas. Email is ubiquitous, email is ridden with spam, 25% of legitimate email goes undelivered (e-statements, e-commerce transactions, customer service emails, legitimate marketing e-mail), email usage is growing 30%+ per year and the world has been going paperless. It boggled my mind that it wasn't obvious to everyone that had an e-mail address that this is an enormous market.

At the end of the day, I think most people are momentum-driven. Once they saw us gaining traction, signing big Fortune 500 customers, signing smaller startup customers and providing technology to other e-mail companies (that many thought would be competitors), many of the naysayers jumped on the bandwagon... I can't tell you how many of the former skeptics call me saying "I knew that StrongMail would be successful." Now, lucky for us, it's becoming obvious.

No matter how obvious your idea may be to you, it will be obviously impossible to many others. So, if you've got an idea, whether it be for a new product or service, a new marketing message or new company -- be sure to invest in a good helmet and a rubber rejection suit...

Labels: inventing, product development, Starting Point, StrongMail

Is it safe to hire entrepreneurs?

Last week I attended the ad:Tech conference in my hometown, Chicago. My company, StrongMail Systems (Startup 5.0), was exhibiting. While at our booth, I ran into many of my former teammates from L90 (Startup 3.0). We exchanged stories about where our other former teammates ventured off to after L90. I was happily amazed to learn about how many of them went on to start their own, successful companies.

I've written in the past about how powerful our team was, and how little experience (if measured in years) that they had. But, they all had a certain rare fire in them that drove them to learn and grow faster than others. They were problem solvers, visionaries, hard-workers, over-achievers, evangelists; they continually thought outside of the box and had tremendous pride in their work. These are all prerequisites for a good entrepreneur. When we hired, we always said that we were looking for entrepreneurs to join our team. I’m sure to many that sounded like a gimmick, but it turned out that we actually attracted a lot of very talented entrepreneurs.

So, it was no surprise to me that many of them would go on to start their own companies. They range from technology companies to marketing companies to apparel companies to real estate investments and non-profits... If I were to take a rough guess, I'd say that about 40-50% of the team (we had hundreds of employees) either started their own company or joined a startup company founded by one of their former L90 teammates. Personally, I think that is an outstanding ratio.

I’ve talked to many people about this topic and the most common objection that I hear is “If I hire someone who wants to start their own company, I run the risk of them leaving someday.” My response: “So what?” You stand that chance no matter who you hire. Why not harness the entrepreneurial spirit and use it to grow your business as long as you can? It will be rewarding for both of you. Chances are, as long as they feel like they are contributing and playing an important role in the business, and they are being rewarded and recognized appropriately, that you will both have a very long-lasting relationship. Entrepreneurs, by nature, are loyal and extremely dedicated.

Almost all of the L90 entrepreneurs were dedicated to the company long after the IPO and until the company was acquired by DoubleClick and Focus Interactive (Ask Jeeves.) Funny enough, as I was (proudly) discussing this fact with one of my former teammates, they chuckled and were quick to point out that of all of the former L90 team members who went on to start a new company, the first one to leave was me…

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My visit to Chicago re-enforced a very important lesson for me: Hire entrepreneurs! Treat them as entrepreneurs; empower them, challenge them, inspire them and reward them.

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Labels: entrepeneurs, hiring, L90, StrongMail

I realize that I have not made a new posting in a few weeks. My apologies for the sporadic activity… I am in the process of relocating back from the Bay Area to Los Angeles, so things are a bit hectic at the moment. I hope to resume my weekly posting schedule as soon as possible.

I had some time to put together this post over the weekend… This is probably one of the biggest lessons I have learned throughout my past 5 companies.


Move Fast. Be Agile. Stay Focused.

I believe that a startup's biggest assets are speed and agility. The ability to execute at faster speeds and to rapidly adapt their course is what enables them to compete and to protect themselves from the big companies.

This can be both a strength and a weakness. Moving fast without focus can be dangerous. It can quickly move you off course.

"Getting Big"
Some of my companies have moved faster as they grow, some have moved slower. The tendancy is for companies to move slower as they get bigger; they add more processes, they have to keep more people "on the same page," there is less tolerance for "scrapiness" and real-time, active communication is a great challenge.

It all comes down to company culture and the team that you build. Moving fast definitely requires a team that has the "entrepreneurial spirit." The team must be empowered, must have flexibility to experiment and it should be "OK" to make mistakes. A culture where it is not "OK" to make mistakes puts everyone in CYA (cover your a**) mode, limiting their potential and speed of execution. I've found that people will allocate bigger buffers for setting expectations, they over-hire to make sure they have more then enough resources, they over-perfect things, they have more frequent and longer time-wasting meetings, they concentrate too much on the methods instead of the results and they over-process things. I always say if you aren't making mistakes, you aren't moving fast enough.

"If you want to double your rate of success, quadruple your rate of failure" (-- Thomas Watson, IBM Founder )

As a leader, encouraging this kind of behavior requires a lot of discipline and extreme trust in your team.

At L90 (Startup 3.0), an online advertising technology company, we moved faster and became more agile as we grew in size. The team was like lightning. Our meetings were quick and infrequent (if we were in meetings, we weren't producing). I would describe them better as "touchpoints" and "rallies" as opposed to "meetings." The focus was so clear that there was never a question as to what it was. It didn't require a detailed definition or a plan. In fact, I don't even think anyone ever had to ask what it was, it was just ingrained in our culture. There wasn't a new-hire orientation or weekly staff meetings that said L90's focus was X. Everyone was just running so fast towards it that it was hard to avoid the focus or the momentum heading towards it. It was an amazing thing to be caught in the middle of.

On the flip-side, at Zondigo (Startup 4.0), a wireless and voice applications company, we had a team of people that were running fast, however, we had a severe lack of focus. This was the first (and only) company that I had started with outside capital from day one. I believe this factor caused us to behave differently than my previous startups. It's like the clock started ticking from day one and we had to rush to find the "right" answer. Zondigo was an idea, a team and capital in search of a business plan. We were afraid to make mistakes. Meetings, meetings, more meetings... longer meetings... more debates... "what if..." "that won't work because..." We spent more time "talking" than "doing"... If something didn't work immediately the first time, we would try something new and switch our focus rather than staying the course and finding an alternative solution. It seemed as though we decided to change our focus every other week. Part of this was due to rapidly changing market dynamics (2001, dot-com crash), however, most of it was due to lack of confidence in our own plan. Interestingly enough, if we had stuck with our original plan, I believe we would have been much more successful. This lack of focus was my fault, I was not an effective leader for my team and we did not start the business on a solid foundation (vision, mission, goal, focus). Unfortunately, I didn't learn this lesson until years after Zondigo's exit.

There was a brief period of time at my current company, StrongMail Systems (Startup 5.0), that we went through a similar phase; lack of confidence in our plan, vision, focus. We had tried to change it multiple times and every time that we did, it would take us further and further away from our goals. Fortunately, this time I recognized the pattern and we were quick to correct it. We reverted back to our original business plan and it turns out that it has been, by far, the most successful for us.


So, what I have learned: Believe in your plan, let loose, stay confident and go go go!

Labels: internet advertising, L90, startup, StrongMail, Zondigo

The Kool-Aid Test:

1. Why do I need anything?
2. Why do I need yours?
3. Why do I need it now?

Put yourself in the shoes of your customers or users. If you cannot come up with very compelling answers to all three of these questions, you likely do not have a viable business. Answering only one or two of these questions won’t work. The more compelling the answer and wide-reaching the audience, the more successful your business will be.

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Examples:

B2C Example (for an eBay user):

1. Why do I need anything?
> I need to turn my junk into money.

2. Why do I need yours?
> eBay has the most reach.

3. Why do I need it now?
> I need to pay the rent.


B2B Example (for a StrongMail user):

1. Why do I need anything?
> I need to send marketing, e-commerce or e-statements emails to my customers to drive revenue or reduce costs.

2. Why do I need yours?
> StrongMail is proven to be the fastest, easiest and most reliable solution for email delivery. The world’s most demanding enterprises, such as Ticketmaster, Fox Sports/MSN, Intuit and Williams-Sonoma turn to StrongMail for their critical customer communications.

3. Why do I need it now?
> On average, 25% of legitimate business email goes undelivered and every day that I don’t fix it, I’m likely losing money or revenue potential.

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Most companies can answer #2 (Why do I need yours?) because they are so focused on being better than their competition. Some companies are good at answering #1 (Why do I need anything?) if they started a business that was driven by market demand (as opposed to new/cool technology). Few companies are good at answering #3 (Why do I need it now?) - what is the compelling event that will cause people to use it today?

For me, this test also serves as a strategic guideline for almost everything I do:

- business plans
- investor pitches
- sales pitches
- marketing messaging
- product management
- press/media calls
- etc.

Try it! Take your last business plan, the marketing/messaging on your website or sales PowerPoint deck and see if you have clearly provided answers to these three questions. If not, go back and update it – I bet you will find it to be much more effective!

Labels: entrepeneurs, internet, product development, startup, StrongMail

- Background – The S:C (Simplicity to Complexity) Ratio
- 80/20 Rule for Products
- Less is More; More is Difficult
- Don't Think Too Much. Stop Chain-Thinking!


Background – S:C (Simplicity to Complexity) Ratio
Complexity drives me crazy. My philosophy has always been to move as quickly as possible and the only way to do that is to practice the art of keeping things simple.

I have found that if an idea is incredibly complex, it inherently requires more time to develop and is harder to explain to customers, users, partners, employees, etc. And if customers, users, partners and employees have a hard time understanding or explaining the idea, then it will eventually fail. So, don’t kill your idea with complexity.

This “keep it simple” discipline was easy to practice when I was younger. Because I was not tainted by previous experience, everything naturally started out simple. For example, Starting Point’s (Startup 1.0) user interface was very similar to Google’s user interface in the sense that it was a very simple, plain web page that had one search box and a button to search.

As I grow older, I find that it is more difficult to adhere to this discipline. The more I learn, the more I feel compelled to apply ALL of my learning to new projects. Whether it be product development, marketing, sales, negotiating or raising capital, I find myself trying harder to not get bogged down with unnecessary details. Instead, I try to forget everything I know, wipe the slate clean and take a fresh, clear approach to improving the S:C ratio (Simplicity to Complexity). Finding simple solutions for solving complex problems is increasingly more difficult as the complexity increases, but if you achieve a high S:C ratio, it will be exponentially rewarding.


"80/20 Rule for Products"
I believe that 80% of the market will only learn, understand and adopt 20% of the features and functionality in your offering. The remaining 80% of the functionality will address very specific needs for the remaining 20% of the market.

For example, how much of the total functionality of Microsoft Office do you know how to use? What about your friends? Your kids? Your parents?

In general, startup companies that are in emerging markets should be focused on the former -- and should worry about the advanced parts of their offering later, when the market matures. At L90 (Startup 3.0), we developed an online advertising product (called adMonitor) that delivered emails and digital advertisements for blue-chip customers such as Microsoft, Visa and AT&T. We developed the product, took it to market and acquired 3,000+ customers in less than 3 years. While our competitors had hundreds of engineers focused on developing more complex bells and whistles, we had a fast-moving, killer team of 12 engineers focused on simplifying our product. We were successful because our product had, by far, the highest S:C ratio. It was quick and easy to set up, had an extremely simple-looking user interface and was very easy to use. Our “keep it simple” strategy enabled us to move faster than our competition, and more importantly, enabled our customers to move faster than their competition.


"Less is More; More is Difficult"
Think about successful products and services such as the iPod, eBay or Google. Their strategy was to provide very minimalist, easy to use products and services. Many of their competitors tried to beat them by developing more feature-rich offerings. Apple, eBay and Google focused on perfecting the core functionality that 80% of the market experiences during every use, while their competitors simply confused their users with more clutter. More complex clutter can also be thought of as "more rope to hang yourself with."

At StrongMail (my current company, Startup 5.0), using those same principles, we recently launched a product called Message Studio which takes very manual, complex email integrations and workflows and simplifies them with an easy, point and click graphical user interface. The first thing people say when they see it is “wow, that looks so easy.” The reason being is because we took user interface styles that people are generally familiar with already (concepts similar to Microsoft or Apple products) and applied them to what used to be very complex email workflows. As a result, this kind of customer reaction has stimulated rapid growth for our company.

In today’s complex world of technology and buzzwords, simplicity puts the user's mind at ease, gives it a rest and makes them feel refreshed.


"Don't Think Too Much. Stop Chain-Thinking!"
Spending too much time over-thinking things will lead to complication. People often spend too much time on the methods and lose site of the results. If you find yourself saying things like "and, we can also..." or "but, what if..." -- these are common phrases involved in what I call "chain-thinking" -- just stop!

I found the perfect video illustration of what I am talking about. It is a video spoof on what the iPod packaging would look like if Microsoft designed it.

CLICK HERE TO WATCH THE VIDEO
(The video is less than 3 minutes long, I definitely encourage you to watch it.)

Get your offering in your customers' and users' hands as quickly as possible.

Try this:
1. Listen to yourself explain your offering to your user (pay attention to how you describe it – does it sound simple to you?)
2. Watch them use it (do they struggle without your help?)
3. When finished, ask them to explain it to you (does it sound simple when they describe it?)

In general, make sure that your offering is:

- Simple to Understand:
If they can’t understand it, they won’t use or buy it.

- Simple to Use:
The quicker they figure out how to use it, the quicker they'll buy it and the quicker they'll be able to show it to others.

- Simple to Promote:
It needs to be easy for other people to explain. You need other people talking about your offering to generate buzz, awareness and scale.

- Simple Looking:
Perception is everything -- if it looks easy, then it is. The marketing and the product itself should look simple. You should make it easy for your customers to buy (i.e. no complex contracts or pricing schemes) or adopt (i.e. no complex sign-up processes.)


For more information on this topic, a friend and colleague of mine, Peter Sealey, wrote a book called "Simplicity Marketing." Peter is an adjunct-professor at Berkeley and Stanford, was the former Chief Marketing Officer of Coca-Cola, President of Columbia Pictures and has been either on the board or has served as an advisor to my past three companies. Peter and I share very similar philosophies on "simplicity" and I believe that his book says it well.

“Keep it Simple” has been my #1 golden rule. I believe it has been the single greatest contributor to the success of all of my companies and their respective products. My next posting will be about the second greatest contributor: “The Kool-Aid Test.”

Next on Deck: The Kool-Aid Test: “Why do I need anything? Why do I need yours? Why do I need it now?”

Labels: L90, product development, simplicity, Starting Point, StrongMail

[Startup 5.0] StrongMail Systems, Inc. – Digital Messaging Infrastructure Company (incubated by Addante and Associates, LLC)

Age: 25 - 29 (present)
Time Period: 2002 - present
My Role: Founder
High Point: TBD

Here is a summary of my experiences to-date with StrongMail:

1. Relaxing
2. Incubation
3. Genesis
4. Go-to-Market
5. Spam Changes Everything
6. Venture Capital Funding
7. Relocation of Headquarters from LA to Silicon Valley / Culture Confusion
8. Stress
9. First-time Sequoia CEO Insecurity
10. Growth
11. Transition from CEO
12. Off to the Races

StrongMail is a digital messaging infrastructure software company. We provide turnkey digital messaging appliances for enterprises, service providers and software developers to send marketing, e-commerce, CRM and customer service email. Blue-chip customers such as Intuit, Williams-Sonoma, Fox Sports/MSN, Ticketmaster, Glaxo Smith Kline, Clear Channel, WebEx and Netflix turn to StrongMail infrastructure to bring enterprise-class reliability to their email systems. StrongMail’s software ensures reliable and timely delivery of their critical customer communications. Prior to raising $16M+ in funding from top-tier venture capital firms such as Sequoia Capital, Globespan Capital and Evercore Ventures, StrongMail was self-funded and cash-flow positive.


1. “Relaxing”
At the age of 25… After four back-to-back, high-action startup companies, it was time for me to take a rest. I decided that I was going to consult/advise a few companies and relax for a bit. I setup a nice little home office for myself and started dabbling with a few ideas. I started an incubator/holdings company called Addante and Associates to be the umbrella company for my ideas and consulting projects. I started dabbling with a few ideas around online advertising, search engines and other random projects. I developed a technology product called DHARMA (stood for Dynamic Hybrid of Advertising and Response Management Applications). It was intended to be a single solution for all-things advertising online (banner ads, email, content management, search advertising, etc.). This would later inspire the genesis of StrongMail. The LAST thing that I wanted to do was start another company. So much for resting!


2. “Genesis”
At the same time, I was consulting to the company who acquired Zondigo’s (Startup 3.0) technology as the foundation of their voice-recognition personal assistant product. During this time, L90 (Startup 2.0), was transitioning its technology group over to DoubleClick and many people from the L90 team were left behind, including Tim McQuillen, a great friend of mine and my co-founder at StrongMail. Tim was my right arm at L90. We initially hired him as our in-house recruiter. We needed to ramp up very quickly. Tim did such a great job of hiring the best, brightest people so quickly that our company infrastructure wasn’t keeping up. Our IT group was not able to support all of the new people we hired. As CTO, it was my job to solve this problem. So one day I had an idea… I walked up to Tim, put the MIS pager on his desk and said “congratulations! you are our new IT manager.” This interaction was about 20 seconds long. I had to run to catch a flight and was gone for the next couple of weeks. I came back and he had everything under control (even though he had no prior IT management experience). From that point forward, Tim was my “go-to-guy." Whatever the biggest, most challenging, most demanding, most important job we had at L90, I always turned to Tim. He went from recruiter to IT manager to technical sales… Then, he did such a great job in sales that we had to build up more infrastructure for our ad-serving and email delivery platform to support the increased demand. So, I put him in charge of our data centers and technical operations. He became a technical operations expert and did an outstanding job managing our entire infrastructure of over 750 computer servers which processed billions of advertising and email transactions per month. Companies such as Visa, Microsoft, Disney and Proctor and Gamble relied on this infrastructure to facilitate millions of dollars in revenue on a daily basis – so, needless to say, it had to work 100% of the time. This was one of the largest, most demanding IT infrastructures ever built, and Tim conquered it; a guy, who less than 2 years prior, was hired to be our recruiter. This proved to me that smart, motivated people, with a passion for learning, can accomplish anything if given the right opportunity. Tim is one of the smartest, most honest, driven and passionate people that I have ever met. This, combined with his expertise in managing high performance email systems, was the reason that I started my next company with him.


3. “Incubation”
I brought Tim into Addante and Associates and we worked on various projects together. Addante and Associates had a number of projects going at the same time. Including everything from one-off development consulting projects, to building an auction site for Ticketmaster (called TicketExchange, recently launched), to developing a search engine, email hosting service and an online photo slideshow site. Some ideas lasted months, others lasted hours. We used some of the proceeds from these consulting projects to fund the development of StrongMail, along with personal funds. StrongMail was originally supposed to be the email infrastructure for the DHARMA project. We needed an email delivery infrastructure solution that was easy to operate and maintain, cost-efficient, could scale to handle millions of email messages, address the needs of a wide-variety of customer demands and could later be expanded to deal with other forms of digital messaging (e.g. SMS, MMS, Instant Messaging, etc.) Our “little project” turned into something that had enormous potential and wide-reaching demand. From there, we focused all of our attention on StrongMail…


4. “Go-to-Market”
Halfway through the development of StrongMail, we realized that every company that was using email had the same needs and went through the same rigorous process of developing custom infrastructure. About 80% of any email application is the same. Companies were spending most of their time developing the plumbing behind their email applications and a very small percentage of their time on the business logic. We thought that if we could invert that percentage that we could advance the way the world uses digital messaging to communicate. So, we decided to focus on developing a turnkey, digital messaging infrastructure solution that we could supply to enterprises, service providers and software developers. With StrongMail software, companies could focus on their business logic and create innovative email applications without having to worry about the underlying plumbing. Now, finally, we would see advancements in the way people use email!

We invested the first $1 million to develop version 1.0 of the product, file patents, hire a small sales team and launch a marketing program to take StrongMail to market. It took us about 18 months to develop and prepare the product. Within 3 months of launching the product, we were cash-flow positive.


5. “Spam Changes Everything”
Not so fast… While we were getting the product ready for market, email broke. All of this stuff started happening around us – spam, phishing, regulatory compliance requirements (e.g. SOX, HIPAA, CAN-SPAM)… Everything changed. Now, email systems around the world were breaking. Receivers were trying to block and tackle spam and senders were trying to keep up with all of the change. At first, I thought this was going to destroy our business – email was no longer trustworthy. Then, the opportunity became clear. With all of the changes came new laws, new protocols, new industry standards and a whole lot of complexity. These things would require every company in the world to adapt their existing email infrastructure to deal with the changes, and keep up with the rapidly evolving requirements. It turned out that this drove even more demand for StrongMail. This became the immediate compelling event.


6. “Venture-Capital Funding”
As I mentioned earlier, the last thing that I wanted to do was to start another company. But, this opportunity was hard to ignore, that entrepreneurial itch came back… Ah, why not scratch it?

Since everyone in the world will need to make a choice between continuing to update their existing, cobbled together email infrastructure or move to a commercial solution, we saw an opportunity for someone to own the market for an enterprise-grade digital messaging infrastructure solution. We wanted to get there first.

So, we said if we can find the right partner, with the right terms, then we would go raise venture capital. I went up to Sand Hill Road looking for a “pile of money.” To my surprise, within 3 weeks we had a number of competing term sheets from well respected VC firms. It appeared that we were really on to something…

We decided to go with Sequoia Capital and Evercore Ventures and closed a $6M Series A round. Sequoia has a tremendous reputation, but it was also important to us to have a local (Los Angeles) VC as well. We really liked the partner at Evercore and thought that he would make an excellent addition to the Board and the company.


7. “Relocation of Headquarters from LA to Silicon Valley / Culture Confusion”
Shortly after closing our Series A, we realized that it was difficult to find enterprise software people in Los Angeles. So, we decided to move the company to Silicon Valley (with a little encouragement from Sequoia, of course). We made the decision quickly and assumed that we could move along, business as usual, with little impact to the company. The reality was that I had no idea what kind of impact this would have on the company’s development.

We moved into an office in Redwood Shores, we lost some good people because of the move, we hired a bunch of new people and started growing the company. A startup company is extremely fragile, I never realized this until we relocated the company. With the move, we had lost part of our culture and identity. We also did not anticipate the full bearing of the distraction it would create (setting up a new office, learning new hiring standards/benefits, restart on our hiring progress and customer networking (typically it's easier to find your first few customers close to you geographically so you can visit them face to face), looking for places to live, replacing the employees that we lost...) We underestimated the full weight of such a move and we never adjusted our plan to take all of this change into consideration. Additionally, we did not fully appreciate or understand the different nuances in the work culture between Los Angeles and Silicon Valley. With tech companies in Los Angeles, people show up to work in jeans, are laid back, work hard, have diverse work experience (beyond software) and simply focus on results. In Silicon Valley, people are much more competitive, have more focus/experience in software backgrounds and often focus more attention on the methods first, then the results. In the beginning, we hired a bunch of people based on the “LA profile” that we were used to, and ended up hiring the wrong people. It took us about 6-9 months to adjust to the cultural changes, put the right team in place and put the distractions behind us.

Looking back, if I were to do it all over again, I don’t think I could have avoided this adaptation – I just chalk it up as a great learning experience. The one thing that I would change, however, is the way that we arranged our office. We opted to go with an office layout that had executive offices on the outside and a mix of high (private) and low (open) cubes in a big, open space. Tim (my co-founder) and I were the first (and only) two people in the office. Since we were hiring and interviewing a lot, needing privacy, we setup shop in the exterior offices. We were moving so fast that we never left those offices and it set a pattern. As we hired VPs, they wanted offices and everyone else wanted to sit in the “high cubes.” This created a culture of “management” and “employees” which, in turn, created a “big company” type of communication environment.

I have spent a lot of time trying to foster a more efficient, open communication culture. Fortunately, we have a smart, adaptable team and communication continues to improve and it makes us stronger everyday…


8. “Stress”
Stress was always a foreign concept to me. One day, I remember asking my wife to explain to me what “anxiety” felt like. I would always move forward, adapt, let anything negative roll off my shoulders and kept focus on “the goal.” With this company, at the age of 26, I learned what stress was. Stress is what happens when expectations are not in alignment. I figured out why I learned stress at the age of 26. Up until that point, I don’t think anyone had set any expectations of me because I was always viewed as the “young kid, over-achiever who never knew what he -couldn’t- achieve,” so people simply let me go as far as I could and expectations could have been limiting. This time, there were a lot of expectations from my family, our team, investors and my co-founder, Tim. Expectations are fine, provided that you understand them and properly manage them. This was a lesson that I have since learned.


9. “First-time Sequoia CEO Insecurity”
Even though I had started many companies before, I had never been the CEO of a “Sequoia-backed company.” Since Sequoia has such cache, I thought that meant I needed to do things differently. So, I tried to do everything “by the book.” I listened to logic and reason instead of trusting my gut. I listened to everything that my Board told me to do. I hired people with lots of experience in enterprise software and I tried to do things like other Silicon Valley enterprise software companies. There was one problem with this – I never felt good about my decisions, because they were not my own, and it resulted in a loss of confidence. It made it even more difficult to trust my gut. This was the first time in my career that one of my companies was not doing well and I did not know how to handle it. I became more stressed, unhappy and frightened of failure – these were all feelings that I had never felt before with any of my companies. Before giving up, I owed it to myself to try one more thing – do it my way.

So, from that point forward, I promised myself that I would always trust my gut and my instincts –right or wrong- and move forward. I needed to feel confident in my decisions. That’s exactly what I did and almost overnight, the entire company was transformed – we started growing quickly, exceeding our targets and we have been seeing extremely positive results ever since. Interestingly enough, we ended up going back to exactly the same business plan that we started with – with some extra polish and improvements. And, most importantly, it all feels good.


10. “Growth”
StrongMail is my first enterprise software company. Traditionally, growing an enterprise software company is very different from a dot-com or an application service provider solution. Things seem to move a lot slower. With the web, you can change things everyday because it is always in your control. With enterprise software, your product sits at the customer’s site. So, you cannot change it all that often because it usually takes “work” on their side to update the software. So, most software companies only update their software quarterly. I would pull my hair out if we could only make updates 4 times per year, so I have been determined to change the dynamics of enterprise software. It involves changing the way people think, starting with our team. There are a few things that we have already done that accelerate the dynamics of enterprise software including turning our software into a turnkey appliance and creating “Live Updates” capabilities that let us change the behavior (frequently and often) of the software to adapt to industry change without any risk or work from the customer. The market has responded extremely well to this type of turnkey, auto-updating model and it will enable a new model for growth going forward. As a result, StrongMail is growing faster and stronger than ever.


11. “Transition from CEO”
Entrepreneurs need to ask themselves how they can best serve the company to move it forward. At different stages in the company, that might take on different roles and responsibilities. I believe a founder’s #1 job is to always think about how to move the company forward by running out a few steps ahead of everyone else and “pulling” them along. A CEO, on the other hand, needs to be constantly “pushing” the team to achieve the company’s immediate objectives while preparing it for what’s next. Additionally, entrepreneurs get tired. After putting in a constant 110%+ effort to build a company, a product and take it to market – things only continue to get more difficult. There are more people to manage, more products to support, more customers to satisfy and more investors to answer to. There comes a point where it is a good idea to bring in another “partner” to build the company with. Often times that is a CEO, in some cases it is a COO.

I transitioned from the CEO role and simply took on the title of “Founder.” I purposely did not assume a new title for two reasons: a) I wanted to set an example for everyone that titles are only what you make of them, and b) I could not fit myself into any one particular box – I describe my role best as “free safety.” One hour I might be spending time working with customers and partners, the next day raising capital, the day after that working on product vision and the next hour talking to the press.

Companies need to be careful when doing such a transition. Again, a startup and its culture are fragile, and entrepreneurs are fragile in the sense that they are self-motivated by their own emotions and inspirations. We probably did not do the best job that we could in making this transition. The CEO and I got along very well. We recruited him as our Executive Chairman and then slowly transitioned him into the CEO role. He went from Chairman to Interim-CEO to CEO. We were moving so fast that we did not do the best job of communicating the transition to the company, I did not do a good job of communicating to the rest of the Board what my expectations were, nor did I take the time to understand how their expectations would evolve. As such, it created a lot of confusion. Fortunately, again, the company is strong and resilient and we worked through it. In the future, I know not to take such a serious thing so lightly.


12. “Off to the Races”
It may have been a roller coaster ride getting here, but the company is well-positioned for great success. It is all about focus and execution from here. We are in a very large market with enormous opportunity. It is up to us to prove how far we can take it. We will need to adjust with the rapidly evolving market, we will need to re-invent ourselves from time to time to take us up another level, but that is all within our control. If we make the right decisions and execute them well, then we will succeed. If we make the wrong decisions, we will not move as quickly and risk failure. The important thing is to make decisions, feel confident about them, pursue them with “animal execution” and find out as quickly as possible if they are right or wrong. If they are wrong, we’ll have time to quickly adjust, if they are right then we take another step ahead of everyone else.

Today, the company is in high growth mode. As with any growing company, it will most certainly continue to be a roller coaster ride. It should be interesting…

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SNAPSHOT:

Venture Capital Funding: $16.5M+ total ($1M seed funding (self funded) + $15.5M (Sequoia Capital, Evercore Ventures and Globespan Capital))

Exit: TBD

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
LESSON(S) LEARNED:

Trust your gut: As an entrepreneur, you have to trust your gut. There is no “how-to” book for your company. You’re writing that book as you go along.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
BIGGEST…

…reason for success: Focus on the customer; thinking outside the box.

…mistake: Pushing too hard too early.

…challenge: Moving the company from Los Angeles to Silicon Valley; adjusting to the geographical cultural differences and rebuilding the company’s culture and identity.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
IF I WERE…

…smarter: I would have trusted my gut more and avoided the period of insecurity.

…dumber: We would not have stepped on the accelerator at the right time. We hit the market with the right product at the right time.

…to do it all over again: I would have stuck to the original plan from the very beginning; but would have “walked” before we “ran.”

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Now that I have brought you up to speed on the past, the future focus of this blog will be to share various trials, tribulations, thoughts, ideas, lessons learned, advice and personal strategies…

Next on deck... "My golden rule: Keep it Simple"

Labels: entrepeneurs, startup, StrongMail