Speed as the Primary Business Strategy

Best Strategy Is Speed (Startup2Startup May 2008) — Presentation Transcript

Speed As THE Primary Business Strategy - Mike Cassidy

Speed Brings Great Advantages Rapid product rollout/updates makes it extremely difficult for competitors to gain traction against you (2 weeks vs. 18 months) Rapid success builds strong team morale (which leads to more success) Rapid success generates more PR (which leads to more revenue, strategic partnerships, key hires, etc.) Fast growth drives higher company valuations when fundraising or using equity for strategic deals June 3, 2009 Confidential and Proprietary

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  1. Speed As THE Primary Business Strategy Mike Cassidy
  2. Speed Brings Great Advantages Rapid product rollout/updates makes it extremely difficult for competitors to gain traction against you (2 weeks vs. 18 months) Rapid success builds strong team morale (which leads to more success) Rapid success generates more PR (which leads to more revenue, strategic partnerships, key hires, etc.) Fast growth drives higher company valuations when fundraising or using equity for strategic deals June 3, 2009 Confidential and Proprietary
  3. Typical Start-up Timeline? June 3, 2009 Confidential and Proprietary Explore ideas 3 months? Raise money 3 months? Hire core team & open office 2-3 months? Build product 12 months? Initial marketing / awareness-building / early customers 3-6 months? “ Launched” = 23-27 months?
  4. Lightning Speed Start-up Timeline June 3, 2009 Confidential and Proprietary Explore ideas 2 wks Raise money 1 day Hire core team & open office 2 wks Build product 3 months “ Launched” = 4 months
  5. Example 1: Stylus Innovation Stylus Innovation: Computer telephony software Entrenched competitors Owned 95% of market with DOS-based tools 300 customers/year per competitor Visual Voice 1st Windows based tool, Visual Basic custom control 3,000 shipped in 1st year Dominant market player within 6 months of Visual Voice launch June 3, 2009 Confidential and Proprietary Sold 2 years after launch for $13M (10,000x founders investment)
  6. Example 2: Direct Hit Direct Hit: Internet search engine Entrenched competitors Owned 95% of market (AltaVista, Excite, Infoseek, Lycos, Yahoo) Used traditional text-based inverted index algorithms Direct Hit 1st search engine based on tracking user voting (like Digg, YouTube, etc.) Provided search for AOL (ICQ), Microsoft, Lycos, etc. AOL deal within 5 months of company start June 3, 2009 Confidential and Proprietary Sold 500 days after launch for $500 million
  7. Example 3: Xfire Xfire: Instant messenger for PC videogamers Entrenched competitors Owned 95% of market (AIM, Yahoo Messenger, MSN Messenger) Focused on traditional IM (not gaming) Xfire 1st IM to track and connect videogamers Grew virally from 100 users to 3 million in 2 years Dominated market segment within 5 months of “Xfire” start June 3, 2009 Confidential and Proprietary Sold just over 2 years after launch for $110 million
  8. Speeding Up All Parts of Startup Fundraising Opening an office Hiring Getting new employees started Product development Business development Marketing/PR Changing direction June 3, 2009 Confidential and Proprietary
  9. Fundraising June 3, 2009 Confidential and Proprietary
  10. Speed and Capital Stylus: $1,500 initial capital; no VC Direct Hit: $1.3M (DFJ) – through launch, HotBot, AOL, Apple spent $400K; through MSN, Lycos spent another $600K Xfire: $1M Series A June 3, 2009 Confidential and Proprietary Biz school: Single, consistent strategy; not “ lowest cost and best customer service,” etc.
  11. Raising VC Money Quickly What are the best ways to raise VC money quickly? June 3, 2009 Confidential and Proprietary
  12. Four Keys to Raising VC Money Quickly Raise when conditions in your favor Direct Hit Series A: 1998, portals growing rapidly Direct Hit Series B: as AOL deal is closing Direct Hit Series C: as MSN/Lycos deals are closing Xfire Series C: Social networking “hot”, steep growth curve established Get all decision makers in room Synchronize timing of competing VC offers Bring “if/then” contracts with customers to your VC meeting June 3, 2009 Confidential and Proprietary
  13. Opening an Office June 3, 2009 Confidential and Proprietary
  14. Every Day, Every Hour, Every Minute Counts June 3, 2009 Confidential and Proprietary 4/21 8:15am pitch DFJ; 4:30pm get term sheet; dev team gives notice at current jobs 4/22 Fly back to Boston 4/23 Negotiate lease on office space; order Dell computers 4/24 Order network software, phone system, office alarm system, DSL, office LAN/phone wiring 4/27 Incorporate, set up bank account, Paychex, desks/chairs 4/28 Source control software, property insurance 4/29 Hardware arrives, set it up 4/30 Set up LAN, phones, desks 5/4 Open office, first day team has been hired, have C++, email, PC, LAN, payroll, etc. (13 days after term sheet received)
  15. Hiring June 3, 2009 Confidential and Proprietary
  16. Think Speed in Everything You Do Experience level: Stylus : 4 sr. product managers (5+ years) -> CEO, VP Eng, VP Mkt, VP Sales Direct Hit : 5 th product manager ->VP Eng; 10 year dev; 15 year dev Xfire : 10 year dev; 10 year dev; 10 year dev Known talent: Stylus : 13 out of first 15 had worked with before Direct Hit : 12 out of first 15 had worked with before Xfire : 2 out of first 3 top devs came from absolutely trusted source Close: Group huddle during last interviewer Offer letter ready before interviewee arrives Make offer on same day June 3, 2009 Confidential and Proprietary
  17. Getting New Employees Started June 3, 2009 Confidential and Proprietary
  18. Speed Starts the First Day a New Hire Arrives What do YOU do when a new employee comes on board? June 3, 2009 Confidential and Proprietary
  19. Speed Starts the First Day a New Hire Arrives Before the first day Give her material to read the day she accepts the job Give mundane “first day” paperwork before arriving First day Absolutely have desk, phone, email account, etc., set up in advance Absolutely have goals/projects/deliverables written down; give to new hire immediately June 3, 2009 Confidential and Proprietary Set tone for speed
  20. Product Development June 3, 2009 Confidential and Proprietary
  21. Which Is Faster? A. Incremental development. Build 1 module/feature at a time and then launch. Add features as you go. Figure out over time what features users want and then try to add them. OR B. Spec your product CAREFULLY. Make sure you do great customer research! Hit the market with a rich, compelling product because you only get ONE first impression. If the product is lame, people will never come back. June 3, 2009 Confidential and Proprietary
  22. Journey of a Thousand Miles Begins with a Single Step Stylus Innovation Visual Voice 1.0 let people build a 2-line IVR system Added digital 32-line capability within 6 months (plus fax, a dozen other features) 3.5 months from “go” to launch Direct Hit Patented algorithm included two dozens variables (time spent at a URL, related searches, time of year) Launched with small subset of this feature set 3.5 months from “go” to launch Xfire Launched with 2 features: presence detection and 1-click join Added a new feature every 2 weeks 1st year and every 3 weeks 2nd year 3.5 months from “go” to launch June 3, 2009 Confidential and Proprietary
  23. Business Development June 3, 2009 Confidential and Proprietary
  24. Biz Dev Deals – Fast or Never “ Probability of a deal ever closing declines by 10% each day it doesn’t close” Use calendars/maps with “limited supply” Sponsorships for July, Aug, and Oct already sold… Map of USA with certain regions already controlled by competitors June 3, 2009 Confidential and Proprietary
  25. Marketing/PR June 3, 2009 Confidential and Proprietary
  26. Fastest Way To Get the Word Out? PR is faster than Marketing Stylus No marketing budget Editorial in CT Mag (including cover) Direct Hit No marketing budget (until Q4 ’99) Cover of Industry Standard Xfire No marketing budget Extensive coverage in Fortune, CNN, GameDaily, Forbes, WSJ, USA Today, Marketwatch, Wired, Red Herring, SJ Mercury, etc. June 3, 2009 Confidential and Proprietary
  27. Changing Direction June 3, 2009 Confidential and Proprietary
  28. If Something Is Broken, Fix It - Immediately Stylus Innovation Original name = “Dial-a-Fish” Changing the way Americans shop for groceries, with $1500 in capital Decision to change to Visual Voice took less than 2 weeks Once decided, 100% of company effort immediately shifted Xfire Original name = “Ultimate Arena” Play to win $$ Decision to change to Xfire took less than 2 weeks Once decided, majority of company effort immediately shifted June 3, 2009 Confidential and Proprietary