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

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

I sit on a number of boards and advisory boards for early-stage companies. I also have a wide network of entrepreneurs that I advise on a regular basis.

Recently, I have noticed a developing trend of people starting companies and rushing to raise venture capital. I've had more people come to me in the past 6 months seeking advice on raising venture capital than I have had in the past 6 years.

I have some theories on why there is this sudden infatuation with venture capital:

1. People simply think it's "cool" or want to build their resume
2. They think that the right venture capitalist will "make their business"
3. They are afraid

Venture capitalists don't validate business models, they don't "build" businesses and they don't make it "easier". If they did, they would do it on themselves and own 100% of the business, rather than only a fraction of it. Venture capitalists provide capital for growth. Customers validate businesses.

Of my 5 startup companies, the one that did the worst was the one that raised outside capital too early (Startup 4.0: Zondigo). It gave us a false sense of validation and security and ultimately, we never developed the "hunger" required to build a wildly successful business.

Venture Capital is a resource, not a business plan. It should be used for "roll out" not "find out".

I've talked to a lot of companies that have spent a lot of time (months upon months) chasing venture capital. Often times, that time investment could have been better spent talking to customers or acquiring users. If they spent that time proving the business model, raising the capital would be much easier. Without solid traction, you'll get a lot of questions about whether the market opportunity really exists. Rather than spending time trying to persuade a VC, wouldn't it be easier to simply say "just ask our customers"? It's better for them and it's better for you.

Momentum sells. Period.


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BTW -
If there are any specific topics that anyone would like me to address or comment on, please email me with ideas or suggestions: frank@addante.com

Also, please feel free to comment on any of my posts by clicking on "Add a comment" at the bottom of the post. Thanks!
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Labels: venture capital, Zondigo

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

[Startup 4.0] Zondigo, Inc. – Wireless and Voice Application Development Software Company

Age: 24 - 25
Time Period: 2000 - 2001
My Role: CEO and Founder
High Point: Partnering with Intel and having Craig Barrett (Intel CEO) present Zondigo’s technology as “the future”

Wireless was going to be the "next big thing." I left my CTO position at L90 (Startup 3.0) to start a company called Zondigo (genesis of name: "its-on-the-go"), a wireless and voice technology company. We developed software to enable developers to quickly and easily create and deploy wireless and voice business applications.

So, I did what any other opportunistic entrepreneur does when they want to quickly build a company to capitalize on an opportunity. I immediately raised some venture capital and then recruited the most experienced team I could find. The individuals we recruited had very impressive backgrounds. However, they did not function well together as a “team.” I missed, perhaps, the single most important company building fundamental – I had failed to consider the dynamics of how everyone would work together. Nonetheless, though it was a bit of a struggle, the individuals eventually learned to work together as a team. We accomplished great things – we signed Intel as a customer and partner, developed a very strong product and generated a fair amount of awareness. But, there was always something “missing” in the teamwork category that prevented us from going full throttle.

Zondigo was the perfect example of why all good companies must be “right idea” AND “right time.” We missed out on the “right time” part. The company was about 5 years ahead of its time (starting this company today would be the right timing). Zondigo was creating the types of innovative wireless applications that you are seeing in use today. We were creating applications similar to the wireless phone/texting voting system used by American Idol or the rewards program that Coca-Cola recently launched (MyCokeRewards.com). As a matter of fact, we even pitched the idea to Coke about 5 years ago.

Again, like most opportunistic entrepreneurs, part of our growth plan was to raise venture capital. As CEO, I spent 6 months on the road, full-time, trying to raise our Series B funding. This was in 2001 when the market was tanking and all VCs were gun-shy. All of a sudden, wireless went from being the “next big thing” to being the last thing on people’s minds. As a result, like many entrepreneurs, we changed our business plan about 10 times to “fit” what the VCs were looking for so that we could fund the company and survive. Big mistake. Finally, we convinced a firm to invest.

After a small celebration, a few days later, I realized that two very bad things happened while I was out raising capital: a) the market opportunity disappeared and b) we had mangled our business plan so much that the plan no longer made any sense. But, the VCs liked it! So, for the first time at this company, I acted unlike other opportunistic entrepreneurs and I made a very unpopular decision – GIVE THE MONEY BACK!

So, we did just that. A couple of months later, we sold the technology and the rest was history.

An entrepreneur’s most valuable asset is time. You can always raise money, build things and find people – but you can never raise more time. Therefore, for true entrepreneurs, it is not about ROI, it is all about ROT (Return on Time).

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SNAPSHOT:

Venture Capital Funding: $1.25M

Exit: Technology acquired

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LESSON(S) LEARNED:

Teamwork is critical: A startup company, like a baby, is fragile and impressionable. It is important to bring in the right people at the right stages. Personally, in the very beginning stages of a company, I think it is important to find young-thinking, hungry, passionate, quick learners who are willing to make mistakes, work as a team and constantly learn and adapt. I’ve learned to put experience far behind the rest of these traits.

Believe in YOUR business plan: If VCs (or anyone else, for that matter) had all the right answers, they would be starting their own companies – they’d certainly make more money that way. At the end of the day, right or wrong, you need to believe in your business plan and execute it to its fullest potential.

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BIGGEST…

…reason for success: We did not let emotions cloud “market judgment.”

…mistake: Raising capital too early.

…challenge: Getting a bunch of smart, experienced individuals to learn to work together as a team.

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IF I WERE…

…smarter: I would have been more careful about how I built the team and adapted the business plan.

…dumber: Instead of giving the money back and moving on, I would have wasted a bunch of money and time.

…to do it all over again: I would have secured a customer first and validated the market timing before rushing to build a company.

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Next on deck: Startup 5.0… ”I’m just going to chill out for a bit… (OK, for a month…)”

Labels: L90, product development, startup, voice application, wireless, Zondigo