Monthly Archives: January 2014

The Journey

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After almost nine years, today is my last day as an employee of Flurry. I will remain involved and on the board, but it is the end of a significant chapter of my life and the beginning of a new one. It is a bittersweet day for me.

I have been lucky over these nine years. Most start up companies fail in the first few months, many others in their first year. Not only has Flurry survived, it has thrived and now employs 150 people with a large and growing business. Today, Flurry is recognized as a central part of the mobile world and provides a clear voice for this new industry.

Along the way, I have been lucky enough to enjoy front row seats for the mobile revolution as it has changed the world. Starting in 2005, back when everyone believed the carriers controlled the world, Flurry has been at the center of mobile applications. Flurry grew up with the industry and as it changed so did we. When the Motorola RAZR became the hottest phone on the market, we were there. When the iPhone changed the definition of a phone forever, we were there. When Android was released as the first free mobile OS, we were there. When the iPad, Kindle and Nexus devices introduced us to the idea of a tablet, we were there. These important moments in the history of business were also moments in the life of Flurry, woven together like a tapestry to tell the story of this amazing revolution.

I am proud of Flurry and what we have been able to accomplish. I am proud of how many mobile developers we have helped to succeed, some of them beyond our wildest dreams. I am proud of the team we assembled and how we were able to do so much while still having so much fun. I am proud of the moments when we were faced with impossible odds and found a way to succeed.

My journey with Flurry has been amazing, but now our paths diverge. I leave the company in great hands with a promising future and will enjoy watching it grow from the sidelines. For the first time in nine years I will have a chance to catch my breadth, relax, and recharge my batteries. There are many adventures left to be had and I am eager to discover them.

So, what’s next?

Are You Sure You Are Solving a Problem?

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“So, what’s your idea?”

If you’ve ever talked about starting a company, that is the first question you always hear. It’s a simple question, but implies that companies are built from ideas – moments of inspiration where you see something no one else has seen. In reality, that is almost never true. Almost every kind of business model has been tried at some point in history. With 7 billion people on Earth, chances are that there are a few people with the same ideas that you have.

What, then, are great companies built on? There are billion-dollar companies being started right now, somewhere, by someone who is most definitely not a billionaire yet. What is their secret?

Great businesses are built by solving problems. A problem is the difference between what a person wants/needs and what they can get today. Some example problems and the companies that were built to solve them:

  • I can’t find anything on the internet. Google
  • I don’t have time to stay in touch with my friends. Facebook
  • I can’t figure out how to file my taxes by myself. Intuit

Even video game companies are solving a problem – they help you avoid being bored and make you happy. Some of these might not seem like problems because they have been solved so well by these companies, but if that company disappeared the problem would reappear. Not all problems are created equal, as problems can range from minor inconvenience to life threatening. You can often tell the difference by understanding how much a person is willing to pay to make the problem go away. For example, someone might be willing to pay $0.99 for a mobile game to entertain them for a few hours, but they would pay thousands of dollars for a new chair that relieves their back pain.

Almost all problems have solutions that already  exist but can be improved. For example, in the early days of the internet the biggest problem was how to find anything. Yahoo solved this problem with their directory. Then Alta Vista, et al, solved the problem more effectively with search engines. Then Google solved the problem even more effectively with a more advanced search engine. I expect sometime soon that there will be an even better solution, continuing the cycle of solution improvement and company creation.

If you can solve a difficult problem in a way that is cheaper, easier or better than existing solutions then you create value and can make money. The more acute the problem and the more valuable the solution the more money you can make in solving the problem.

But wait, you say, what about Snapchat and Facebook? They were started by teenagers and solve no obvious problems, yet have become huge! Well, the irony of life is that you don’t need to be aware of a problem (or how big it is) in order to solve it. In many cases, companies that are overnight successes hit upon problems that no one else was aware were problems (or that could be solved). No one understood a huge problem with existing social networks until Snapchat provided an alternative, surprising even the Snapchat team themselves. You can get lucky in this way, but it’s rare.

Starting from a problem provides a very useful framework for focusing your business as you grow. By always starting from the problem:

  • It is easier to formulate your marketing messages and sales pitch. Instead of trying to explain what your company does, you can explain the problem and how you solve it.
  • It is easier to identify your key customer segments by ranking potential customers by how much they suffer from the problem. You can avoid a lot of wasted time in exploring various customer segments.
  • It is easier to measure your performance by choosing metrics that indicate how well you are solving the problem. If you are trying to save people money on buying cars but the average customer only saves $5, then you are not effective in your business.

After you choose your problem, I suggest posting it somewhere prominently in your office. Reminding everyone on your team, day in and day out, what problem you are solving will bring focus to everything you do.

So, what problem are you solving?

How to Avoid Naming Your Company “Brain Rocket”

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Naming something is very, very hard. Not only is it hard to choose a distinctive name that describes your product or company, almost all of the good names are already taken. There are naming firms who charge hundreds of thousands of dollars to help large companies choose new names, and even then they often end in disaster. So, how should you pick a name?

While there is no silver bullet, it helps to have a process. In addition to reviewing the process, we will practice on a fictitious company and try to give it a name. For this exercise, let us assume we are starting a new consulting company that will help set up IT infrastructure for small businesses. 

Step 1. Metaphor
All of the best names are based on metaphors that describe what the product or company does. Literal names (such as The IT Company) are rarely distinctive enough to be remembered and easily confused with other, similar companies. The more creative your metaphors the more distinctive your name and the easier the naming process will be in the future.

For our example IT consulting company, what metaphors work? Since IT touches almost all aspects of business these days, the company will provide a wide range of services to help smaller businesses grow. Any metaphor that involves getting bigger over time would work well here, including construction and stacking. The word “grow” is interesting and seems to fit well with gardening or farming so let us choose the metaphor of gardening.

Step 2. Word Association

It’s time to exercise your creative muscles and play word association with the metaphors you chose in Step 1. The goal is to create a large list of words that relate to your metaphor, as many as you can. If your creative muscles are out of shape you can use online tools to help generate a list of source words related to your metaphor.

Based on our gardening metaphor you might come up with the following list:

  • Seeds
  • Sprouting
  • Green
  • Watering
  • Harvest

Some companies choose to include more descriptive words in their name to avoid customer confusion. It also makes finding a domain name significantly easier since all single words are taken. Some words that describe IT infrastructure:

  • Technology
  • Infrastructure
  • Hardware
  • Networking
  • Installation

Step 3. Try some names

It’s time to combine the words from our word association exercise, creating a list of potential names. It is okay if they are horrible since we’ll filter them out later. Note that combining the words into new names can take any form you like and sometimes the best names come from combining two words into one. For this exercise we won’t invent new words, just create compound names:

  • Seed Technology
  • Harvest Installations
  • Sprout Networking
  • Green Hardware

Of those, “Green Hardware” and “Seed Technology” sound like biotech companies so let’s throw that out. That leaves us with two potential names:

  • Sprout Networking
  • Harvest Installations

At this point you need to be practical. Check available domain names to make sure they are available and/or affordable. Use a service like 99 Designs to have some example logos created for your names to see how it looks. Talk to your friends and associates about the names and get some input.

It is possible that after all of this you end up with no good names, forcing you to start over again. For a given product I typically find I have to repeat this process 2-3 times before I end up with some really good candidates. If you are lucky you will find a name you really love, but often you will find a name you can learn to love.

I hope that helps. You could always just fall back on naming it after yourself (it worked for Bloomberg) and there isn’t really anything wrong with that. In the end if you have a great product or service, treat your customers well and deliver on your promises it won’t matter what your name is – people will remember it.

NOTE: This post is adapted from an answer I posted on Quora in Startup Advice and Strategy.

5 Metrics to Run Your Business

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Whether you are running a company, driving a car or flying a jet you need a dashboard to tell you how you are doing. One of the most common mistakes is to fill up your dashboard with dozens of metrics covering every aspect of your business. The problem with this “kitchen sink” approach is that it is actually harder to understand how your business is doing. With a dozen different metrics, most days half of them will be up and half will be down – so how are you doing?

Focus on the fewest number of metrics that will allow you to understand how your business is doing. For example, I typically suggest companies use the following five metrics as their dashboard:

  1. Customer Acquisition. How many new customers are you adding every day (or week or month)? This is an important measure of how healthy your marketing efforts are working since this is the top of your conversion funnel. Depending on your business this may be new registrations, first time purchasers or application installs.
  2. Customer Engagement. How active are your customers? Just because you acquired them does not mean your customers are active and using your service. Do they use the product every week? day? hour? If your customers aren’t using your service then it’s only a matter of time before they churn out and are no longer a customer so this is your most important metric.
  3. Customer Retention. How long does someone stay a customer? This is critical to understanding your business model because this allows you to model customer churn. If it costs you $5 to acquire a user but they only stick around long enough to make you $2, then your business is upside down. The higher your customer retention, the easier it will be to grow your business.
  4. Revenue. How much money do you make every month? Focusing on daily or weekly revenue can be very noisy so for running your business focus on monthly revenue. In some cases, it might be more useful to measure revenue per customer in order to calculate a customer lifetime value.
  5. Cost. There are two kinds of cost  you might want to measure, depending on your type of business. Burn rate is how much money you spend every month on everything including salaries, rent and services. Customer acquisition cost (CAC) is how much you are spending to acquire every new user. If CAC dominates your costs then you should measure that, otherwise use the overall burn rate.

You will find that you cannot improve what you do not measure, but you will focus on improving whatever you do measure. If you can maximize acquisition, engagement, retention, revenue and cost you will have a very healthy business on your hands.

These five example metrics might not work for your company, but I bet there are five that do. Think about it and choose them carefully, they will be your guide through rough seas.

Set Your Goal Before You Begin

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If you decided to build a house the first thing you would do is hire an architect to design the house. From the blueprints provided by the architect you would know what the house will look like, how it will be built and what materials you will need even before work begins. The blueprints of the house is your goal, and then your process of building the house is focused on achieving that goal.

That sounds obvious, right? Would you build a house without blueprints? Probably not. Surprisingly, many people spend significantly longer (and more money) building companies but do not set a goal before they start. When starting a company, it is common for founders to plan for the next few days, weeks or months and postpone any further planning until later. They never sit down and think about what their business would look like years into the future and if that business is worth all the effort. In some cases they have an amorphous vision or strong feeling of what the goal will look like, in other cases they simply focus on the first few steps with faith they can figure out the rest later.

The problem with not having a goal when you get started is that you don’t know what success will look like. Yes, you can still build a house without a plan but you can’t be sure it will be a house where you want to live. You won’t know how much the house will cost to build or how long it might take. Having a goal gives you the confidence that all the hard work will lead to something you think is worthwhile.

When starting a new company, take some time to lay out your goal. The elements of a good goal plan would include:

  • Number of customers. How many customers would you have if you were a success? Are there 100, 1K, 1M or 10M people who would use your product? You want to be sure that even in your most aggressive models there are enough customers to build a profitable business.
  • Total revenue. How much money would you be making? Could you make $1M, $10M or $1B per year if you were wildly successful? The last thing you want is to build a huge company that cannot make enough money to support itself.
  • Cost of operations. How many employees do you need? How much does it cost to provide your product? You need to understand how much it will cost to operate your business to understand how much investment you will need and how profitable you can be.

The simplest goal assumes everything goes perfectly and all of your assumptions are true. In that perfect world, is your company as big as you want it to be? Could you raise investment if you need it? Would anyone want to buy the company from you? By answering those questions now you can save yourself some hard decisions later.

These goals should be easily measurable as well, providing a head start in setting up key indicators for your business. If you know that success looks like X customers, Y revenue and Z costs you can track your daily, weekly and monthly progress against that goal to tell how close or far away you might be getting. You won’t hold yourself to the goals you set, as those goals will change, but it does help you know the direction you are going.

I have been told that this flies in the face of the Lean Startup movement that is so popular today. I disagree, the Lean approach is designed to quickly answer if your assumptions are correct. Before even launching into a lean effort to verify your assumptions you should spend a little time deciding if it is worthwhile. Otherwise, you are pursuing a random walk which is not a good way to find an optimal outcome.

Your goals will change as you build your company, they always do. However, by setting out a goal when you got started you will know that the hard work you put in is driving in a direction that makes you feel that effort is well spent. There is nothing worse than working very hard and regretting the destination that you reach in the end.

Why no one will invest in you

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I often have discussions with people who have a great idea and are thinking of quitting their job to pursue it. However, they have fixed costs (rent, car payments, etc.) and can’t afford to work for free. Instead, they want to raise some venture investment to fund their new company and pay them a salary. Inevitably, they are surprised at how hard it is and rarely succeed.

The problem that these potential entrepreneurs fail to see is that investors are looking for investments to make a return, not to fund your lifestyle. If an investor is going to invest in you it will be for one of three reasons:

  • Investing in people (you). An investor might invest in you because of who you are and your track record of success. However, unless you have started and sold companies for tens or hundreds of millions of dollars, it is unlikely that investors will invest in you for who you are. The risk for new companies is too high for someone inexperienced who doesn’t have a product or a plan.
  • Investing in your product. Investors will invest in products that have no plan (or revenue) but are growing like wildfire (Snapchat is a good example). The investor might not know you and you might not have a plan in place, but they see the product succeeding in the market and have faith that you can come up with a plan when necessary. This is exceedingly rare because the product needs to be so amazingly successful as to forgive the higher risk of not having a plan.
  • Investing in a plan. The vast majority of venture investment is in a plan. A plan includes all of the other elements including people, products, marketing/growth, financials, etc. When an investor invests in your plan, it is because they see how their investment will help you achieve your plan and in doing so produce a return on their investment.

Now, before you spend weeks writing a 50 page business plan, it is important to understand what an investor looks for in a plan. The best plans are not determined by length, but whether you can answer the following questions:

  1. What problem are you solving? Explain who your customers are, what problem they have and how much money can be made by solving it. The bigger the problem the bigger the market opportunity.
  2. How do you solve the problem? There are many ways to solve the same problem, what is your solution and how is it unique? In many cases this is a demonstration of your product.
  3. Why hasn’t the problem been solved before? There are reasons this problem exists and one of them is that no one else has solved it. Why not? Are there difficulties that you have overcome?
  4. Why are you (and your team) the ones to solve it? While this is your plan, you need to give investors confidence that you can execute the plan.
  5. How will you beat the competition? Even if you don’t have competition today, you will at some point. How will you win when the competition attacks?
  6. How much money will you make if everything goes well? This is the most important question. Investors want to see a business that will become very valuable, very quickly based on the money it can make.
  7. How much money do you need? The final question is how much it will cost for you to build the business to a point where you’ve removed a significant amount of risk. Your plan, no matter how well formulated, has a lot of risk. Instead of giving you $20M now, they would rather give you $1M and see if you can eliminate some of the risk in the plan and then give you more. It is up to you to set realistic goals and estimate costs accordingly, and the investors will evaluate the risk profile from there.

Note that these are the questions for a seed level company, one that is just getting started. As your company grows, the questions you need to answer in your plan will change. Even public companies need to have a plan for their shareholders, who are their investors.

So, if you are looking to raise money for your company be sure you have a plan that justifies the investment. And quit your job first, no one wants to invest in your plan if you don’t believe in it enough to go all in.

Everyone is Successful, Except for You

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If you spend too much time in Silicon Valley, I guarantee that you will start to think that you are the only one who is not wildly successful overnight. Once you step foot here you are quickly surrounded by stories of easy success from your friends, peers and strangers you meet. It is almost impossible to escape.

For example, at a typical networking event you might meet these three people:

  • Bob who just sold his company to Facebook after only 12 months.
  • Carla whose new startup just launched, got featured on the AppStore and is growing by leaps and bounds.
  • Phil who just got started in venture capital and has his first IPO in a few weeks.

Pretty soon, you wonder what is wrong with you since Bob, Carla and Phil found success so easily. You are struggling with your company, dealing with product bugs, fighting for every customer and working 14 hour days. You have been at this for two years and it isn’t getting easier. Where is the short cut, the easy street that they found?

The truth, of course, is that there’s nothing wrong with you. In fact, most of what you heard was an illusion. Bob‘s company was acquired, but it had been running out of cash so it was a fire sale and the only upside was a small retention bonus for employees – no one got rich. Carla‘s company is growing but they only have a few months of cash left and are not having luck with fundraising so she’s looking at layoffs. Phil does have his first IPO coming up, but since he’s junior at the firm he has no carry and he won’t get more than a token bonus.

Of course they will never tell you that, despite the fact that they are very nice people. In Silicon Valley no one talks about bad news as if it is some kind of social more. The correct answer to “How are things going?” is always “We’re killing it” regardless of how things are really going. If someone ever answers “We’re struggling” to that question you would probably die of shock.

There are signs that this might be changing and bad news might become an acceptable topic of conversation. For example, a new conference called FailCon brings together entrepreneurs to share stories of mistakes and failures. I hope this trend continues and people who are working hard are not ashamed that they haven’t found easy success. Regardless, we have a long way to go: even at FailCon, NPR notes that most of the failure stories are told about successful companies by successful people.

Building companies is hard. Yes, some people get lucky and find success quickly and with minimal pain. However, that is more like winning the lottery than finding success, the chances are so small as to be virtually impossible. If you feel like building a company is hard, that is because it is hard. And it gets harder, the more progress you make. Start up companies are not for the faint of heart.

Lest you think this is all fiction, I have met Bob, Carla and Phil (not their real names) myself. They are real people with actual facts. The next time you feel that everyone else has it easy, consider that everyone might think the same thing of you.

Never Play Fair

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When you are starting a new company you are, by definition, the underdog. Your market may have established competitors with massive resources, or maybe the market is new and unproven. As the underdog you are at a disadvantage in the game of business and if you play the game by the rules you will lose.

So, in order to win you have to cheat.

Cheating in business means having an unfair competitive advantage, something that competitors (and the market) can’t easily replicate. There are many kinds of competitive advantages and I’ve listed a few of them below.

  • Technology. A technology advantage allows you to do something no one else can do. The technology could be some new kind of software, new production process or new mathematical model. Any technology advantage is really a head start because someone else will find a way to replicate your technology in 6-9 months. Yes, even if you have a patent. However, that 6-9 month head start is a lot of time to make use of your technology to build other advantages, or continue to improve the technology to extend the head start. Examples: Google, New Relic.
  • Cost Structure. A cost structure advantage means that it costs you less to provide the same or better service than existing competitors (sometimes this is called a “new business model”). Maybe you outsource labor overseas, have volume discounts or have a better process that requires fewer people. Cost structure advantages can last longer than technology since established competitors often have trouble making fundamental changes to their business. New entrants won’t have that problem so you can expect other start up companies to copy your model quickly if it works. Example companies: Amazon, Walmart.
  • Happy Customers. An existing base of happy customers is a huge advantage. Customer acquisition is one of the biggest costs for any business (especially marketplaces) so if you have already acquired customers it becomes that much more expensive for competitors to take them from you. However, they need to be HAPPY customers so you need to continue to invest in customer satisfaction to maintain this advantage. If your customers become unhappy then this becomes a liability quickly. Example companies: Uber, Etsy, Airbnb.
  • Data. If you know something that no one else knows you have an advantage. The trend of Big Data is really just a translation of the data companies already had into a competitive advantage. This is the most maintainable of the competitive advantages since it is a lot like a trade secret – managed correctly your competitors will never know what you know. However, it’s also the hardest advantage to translate into revenue since you need to use it to create new technology, make your customers happy or improve your cost structure. In the best case scenario you can get customers to pay you for your data. Example companies: Facebook, Twitter.

There are, of course, many more possible advantages. The best companies have more than one of these and the struggling companies might not have any. I recommend picking out some companies you respect and thinking deeply about their competitive advantage; it is not always what you think.

When you are getting started it is important to know what your competitive advantage is or what you want it to be. Everything you do should make use of your advantage or help strengthen it. That is how you cheat, you use your advantage to compete and win.

This makes prioritization for your company easier because you stop asking the questions “What can we create?” and “What can we sell?” to “Where do we know we can win?“. Playing an unfair game is how you win and you make the game unfair by maximizing your advantage.

5 Rules for Choosing a Co-Founder

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It is extremely scary to start a new company. The risk of failure is high and the workload is intense, so it’s not a coincidence that few people start companies alone. However, many companies fail not because of their market, product or finances but because the founding team has a falling out due to interpersonal problems. Choosing the right co-founder(s) is critical to avoiding those pitfalls and boosting your chances of success.

When you are looking for a co-founder (or co-founders), these are some of the questions you should ask:

  1. Have you worked together before? People behave differently under heavy stress, especially when a lot of money is on the line. Just because you are old friends with someone does not mean you know how they react when things get tough, and in many cases it would surprise you. If you worked together in a highly stressful environment with someone then you know how they handle pressure and you have settled at least a few disputes successfully. Not everyone is ready for the pressure cooker of starting a company and you do not want to learn the hard way that your co-founder is not.
  2. Do you have the same runway? If you have enough savings to last two years (which I recommend) and your co-founder has only six months, then your company only has a six month runway. That is rarely enough time to prove your idea and test it, so you will be making short cut decisions you might not otherwise make. Resentment will grow in both directions and decision making will become harder since you each have different perspectives. If you have the same runway you will both be on equal footing.
  3. Do you want the same thing from the business? Never assume that others have the same goals and motivations that you have. People build companies for many reasons including money, fame, curiosity, boredom and desperation. Whatever your reasons, make sure you are clear and explicitly ask your co-founder about theirs. If you are looking to solve a big market problem but they just want to flip a company quickly then you will find yourself fighting over key decisions.
  4. Do you have complementary skills? Far too many companies are started by people with exactly the same skills. This seems like a good idea at first when there is a lot of code to be written and having two coders is faster than one. However, once the code is written, who will do the marketing, sales, fundraising, customer support, etc.? Bringing on a co-founder with complementary skills gives you a better chance of success by diversifying your companies strengths early. I have seen many teams of engineers write a lot of code and become helpless when their product is not magically adopted by customers. Think about your strengths and weaknesses  and find people who are strong where you are weak.
  5. Do you really, really like each other? This seems like the silliest question but is probably the most important. For any potential co-founder, ask yourself if you would want to be trapped in your apartment with them for a week. You will spend so much time with their person that you really better like them a whole lot.

Even if you can answer yes to all these questions does not mean you will be in perfect sync with your co-founder(s). At the end of the day someone has to be in charge and it needs to be you, the CEO. I agree with Mark Suster who recommends hiring your co-founders, making you the majority shareholder and clear head of the company which helps reduce the impact of co-founder issues.