How To Give Away Equity And Stay Alive

For some reason, over the past three weeks I bumped into three different entrepreneurs who put their equity into a fortress, 100K feet underground, with 16 guards attached to an atomic bomb. If you read the previous sentence and thought that’s a reasonable precaution to save the company’s identity and keep control, I’m glad you’re reading this post.

Just a quick reality check: you can keep all the company’s equity to yourself, but you’ll have zero progress and revenues. Learn how to give – this lesson can affect not only your start-up journey but also your relationships with other people and many other aspects of your life. The most important lesson I learned from the start-up journey is to share – ideas, equity and feelings.

equity

You are one, two (or even five) founders who thought of a great idea and are willing to execute to win. The most fundamental core engine of every start-up is the team (I don’t need to preach that, I’m sure you’ve heard it from other people). The idea will be changed X times anyway, but the team is the key ingredient of converting any idea into a real product. When you’re at the beginning of your start-up journey, your most important resource is great human beings.

Do you really want someone great to join your company only because of a huge salary and benefits? NO! Actually, you probably don’t have the money anyway; you want him to join the company because he is connected to you and your vision – and is eager to build that vision. So my first point is that great human beings are worth the equity: they’re the best investment you can make.

Second, you have great tools to help control the equity you’re giving; one example is vesting. You’ve got a great guy who is willing to join your start-up for 5% equity, and vesting allows you to divide that 5% over a period of time (for example three years); as long as he is part of the company he’ll get 0.13% of the company’s equity each month – is your paranoia level still high? Of course there are many legal tools you can use; in the near future I’ll have a more detailed post about legal tools in the start-up world.

Third, equity is great tool that can help you construct the company’s advisory board effectively and bring the expertise you don’t have within your team. Members of the advisory board often invest in the company and pull the right strings to help generate business leads.

Bottom line: you can use equity to attract the missing puzzle pieces of expertise to your company, get industry experts on board to help you grow your business, and (most importantly) get attached to and involved with your start-up. It doesn’t matter how many times I repeat that mantra, you’ll have to go through the start-up journey yourself to learn the lesson of sharing.



How To Generate Motivation

If I had to choose only one characteristic to possess, I would choose optimism. It’s the strongest action engine I know and use in my everyday life. The way I see it, optimism is a realistic view on a certain situation and the understanding that there is more than one way to deal with any problem. Optimism helps us acknowledge the fact that many times we might fail to execute our plans, but we can learn from that failure and move on. It gives you a safety cushion to make mistakes, and it gives you the courage to dare and act according to your desires. When you fail, it gives you the power to continue aiming for your goal.

I’m sure the previous paragraph sounds like the beginning of a bad motivational book you might get as a free gift when you purchase life insurance. However, if you read my post about motivational signs, you know I really believe there are practical ways to generate optimism and motivation that will push us to execute our plans and dreams.

I Can Do It!

Congratulations! You just founded your first startup; you are one step closer to taking over the world. A startup is a pressure cooker of challenges that will be thrown at you hourly, and those challenges have to be dealt with quickly and with great precision. Some define the startup journey as rollercoaster or a journey into manic depression, but here are a few habits that have helped me navigate the startup journey.

Physical Activity Yes, I know, I’m far from being a real athlete. When I was in school, I would sometimes even wear jeans to gym class, but these days I find that physical activity really improves my everyday functionality and alertness. Don’t start by running marathons or working out every day, but try to do some kind of physical activity at least a few times a week; it will help you feel good, be more awake, and, as a result, become more optimistic.

Social Life Most entrepreneurs focus on their startup twenty-four hours a day and forget about having a social life. However, it’s important to get some fresh air once in a while and meet other people so that you’ll be able to share insights and things you go through and learn from their experiences as well. It will help you keep things in perspective, and you may even get new ideas from others. Most importantly, having an active social life is a great reminder that life is all about people and having relationships with them, not being with your computer all day long.

Motivational Signs I already posted about motivational signs, and I still use them—I put them in my house, office, and everywhere I need a reminder of what really matters to me in life. It can be a sign that reminds me of the things I love to do, asks me if I went to the gym today, or even one that reminds me to go out and drink coffee with someone I haven’t seen in a while. Think it sounds weird? Try it yourself and let me know if it works for you.

Use Your Imagination It may sound somewhat abstract, but every time I have a free moment, I try to imagine myself achieving one of my goals. Whether it’s something like a big singing moment or just being with someone I love, I believe that when you imagine those scenarios coming true, your brain internalizes them, which helps you aim for your goal more accurately and increases optimism and motivation.

Bottom Line: try to find the things you get motivation from, whether it’s other people, motivational signs, music—whatever generates that little feeling that keeps you aiming for your goal. Try to exercise regularly, and be sure to build and maintain relationships that you feel good about. Remember that life is a huge playground—enjoy your startup journey.



How To Find Your Next Startup Idea

A huge whiteboard filled with words such as “social,” “security,” “CRM,” “developers,” and “enterprise” — that’s how it began: our search for the next startup idea. To tell you the truth, the whiteboard didn’t really help. Actually, it was a waste of time, but it did help us understand what works and what doesn’t.

I’ve seen entrepreneurs use a lot of methods to generate ideas. Sadly, there’s no way to ensure you’ll end up with a revolutionary idea. But there are a few methods that can help you narrow down your options and get you closer to solving a big problem or just copycatting something that already works.

Good Idea

Set your goal.

This is the hardest part. Identify what you want to accomplish. What’s your strengths and weaknesses? Do you want to solve a big problem? Do you want to create a small business to generate passive income? Setting a goal will help you to define your search and stay true to your beliefs.

List the startups.

Open Excel (or your favorite spreadsheet program) and drop in names and websites of startups from any field, from art to pizza as a service. Record everything you can think of or find out about. YCombinator has an unofficial list that includes startups originating in all of their classes; you can use that list as a starting point. Also search in tech blogs such as TechCrunch, Venturebeat, and Wired. Once you have a decent list, consider each entry. Indicate whether you like that startup or not. At the end, you should have only a few names of companies you really liked. Look at those few and ask yourself what you like about those companies. Is it the specific field they operate in? Their products? The pain? Investigate that.

 Analyze other startups.

For those companies you like, list their strengths and weakness. What do they do well? What have they missed? What can you do better? Schedule meetings with your favorite companies; pose as a customer and try to learn their pitches. How do they lead the meeting? Promote the product? These days a lot of startups offer webinars and other programs; sign up for those to learn more, too. Maybe you’ll find a potential partner or competitor.

Meet new people.

Go to conferences. They’re good places to get exposed to many new startups; you may even meet your next partner. At the same time, you’ll start to generate questions that may lead you to your next startup idea. Brainstorm, but not only with people you already know. Go out and meet as many people as you can from different fields and bring them into your brainstorm group.

Bottom line: finding an idea that’s worth spending your time and energy on is tough. The right idea will emerge from a mixture of research, luck, timing, and the right people. Knowing it’s the right idea is all about understanding yourself, the people around you, and the other companies you may be competing or partnering with; knowing what’s needed; and being aware of what problems you can solve and who will pay for those solutions.



5 Guidelines For Better Startup Pitching

Almost every day I participate in a review of startups looking for investment. This experience has given me additional perspectives on what works and catches an investor’s heart and what is just badly put and creates antagonism. It’s tough to criticize someone else’s vision and dream, but as I learned for myself, it’s highly important to do so and gives the entrepreneur a real chance to put their vision to the test and get feedback.

I remember the first time my partner and I presented our startup to an angel investor. Many questions asked by the investor were left unanswered. The intuitive question: “What are each you in charge of?” was answered by: “Both of us do whatever needs to be done for the startup’s success” – does that sound like a good answer? No! He was hoping to hear that there was a clear role for each position and that each of us was in charge of a specific aspect of the business without losing focus and missing something important between us.

Better Pitch

So what are the basic guidelines we should remember during a startup pitch? I’ll try to summarize them as five bullets (little disclaimer: there is an endless number of bullets but I wanted to emphasize these particular ones):

Homework - most of the time investors will have very few little if any knowledge about what you are working on or vice versa they’ll be expert on that particular space. If you can demonstrate your mastery of the numbers, your competitors, your budget and everything else, it will provide a great indication to the investor that you know what you are talking about and it will raise the investor’s confidence that you are the right team to go and execute that startup.

Story - it doesn’t matter that you think your idea is the next big thing, if your pitch is dull, unattractive with only dry details you’ll fail to catch the investor’s attention, he’ll lose focus and BANG another one’s lost. Build a story around your startup, a story that people can relate to. Learn about the person in front of you before the meeting and customize your pitch accordingly. Use a pitch guru to help you build your story; I recommend a good colleague, Donna Abraham, the best corporate storyteller I know.

Interaction - fundraising is all about the people, and finding an investor is just like dating. If the interaction is bad the result will be a rejection. Keep eye contact, talk nicely and most importantly be kind, don’t be arrogant, don’t act like a know-it-all, listen carefully and try to answer in the most precise way you can. At the beginning of the meeting, don’t be afraid of breaking the ice. The people sitting next to you may be your next investors, so try to have a pleasant conversation and show your friendly side.

Comfort - be comfortable, wear the clothes you usually wear. I am always amazed by the people who come overdressed and you can see by the look on their face that they are not in their comfort zone. Create an environment that will make you feel as comfortable as you can.

Have fun - simple as that. It’s really important that you have fun during your pitch and throughout your startup journey in general. I know you work 24/7 and are busting your ass building your startup, but hey, if you’re not having fun you’re in the wrong place.

The bottom line: The enthusiasm and obsession of entrepreneurs for their startups is magnetizing and very important but the way you pitch and present your startup and ideas are crucial to succeeding in front of a potential investor, co-founder, employee and every other person you want to bring on board.



Dummy Features And How To Use Them

Lots of times during our product development we face the question, “What’s the next feature that will be most valuable to our customers?” or “What feature do our customers want and don’t have?” Those questions are hard to answer and are most often answered by good analytics that you extract from the product itself, from customers, or by running gut-feeling A/B tests.

We take the “lean startup” concept very seriously and believe that you must have a good MVP (minimal viable product) that works (that is, accomplishes your goal, whether it’s conversion from free to paid or any other goal) and only then adding other features requested by customers or those you think will add more value to the product.

Dummy Features

But how will you know if those added features are worth the development time and other resources? Dummy Features is one tool in your toolbox that you can use to determine whether it is worth it to focus on and develop more features. So, how is Dummy Features used? Basically, if you can’t decide what’s next, you do front-end implementations, add them to your service and grab figures on how many customers tried to use them.

What’s more, dummy features are great when you need to release your product as soon as possible. A great example is in payment processing; it usually takes a lot of time to integrate a billing system and take payments from customers. For instance, the first time we needed to take payments from customers, we just emulated all the billing forms and didn’t save any information or charge the users – YES, you heard correctly! – We didn’t charge the users! Why? Because at the first release of a product, what you really care about is (1) does it work? (2) do customers like it? and (3) what are the conversions? It’s well worth it to release the product faster and add the billing system later.

Another example is a dilemma we had about whether we should add an SMS notifications feature in which every time a new security vulnerability was found on a customer’s website, he’d get an SMS notification. Before we even implemented that feature, we inserted a check box with an SMS notification label and tallied how many customers checked it and wanted that feature (of course, we showed them a nice message box saying that feature would soon be available). Surprisingly, more than 60% wanted SMS notifications, so we implemented that feature and now everyone is happy.

Bottom Line: If you can’t decide if a new feature should be added, just create the user interface, add the feature to the service, grab the analytics on how many users tried to use it, and you’ll make a more fact-based decision on what the next feature should be. In addition, Dummy Features can be used to shorten development times and bring the product out faster.



Find Yourself A Mentor

Take a few minutes and ask yourself if you have someone in your life with whom you can share the dilemmas, worries and situations you face during your startup journey. If the answer is YES, this post will remind you why it’s so important to have that someone, that mentor. If the answer is NO, I really hope you’ll be eager to find one after reading this post.

The way I define a mentor is a person who gives you a different point of view in looking at certain situations, someone who is not emotionally attached to your current dilemma and is able to offer objective advice. It’s better if it is a person who has been on the path you are going through, or at least has some kind of “Life Wisdom. It’s very hard to give specific parameters for the perfect mentor, but in my opinion, the perfect mentor is one you feel comfortable with and who gives you confidence in making hard decisions.

In my entrepreneurial journey, I have two close mentors, and a few others, that I ask for advice. It’s important to note that one of the close mentors is completely a “gut feeling” thinker, operates mostly with intuition and relies on it very strongly. The other is a very analytical thinker, believing in statistics, metrics and data points. The combination of these two is the perfect balance between gut feeling and pure analytics, which gives me the ability to analyze dilemmas with clear points and make my decisions easily and with more confidence.

Bottom Line: Find a mentor with whom you’ll be able to share your dilemmas; don’t keep them knotted in your stomach. Try to have at least one person you can share your concerns and problems with so you’ll be able to make better decisions.



Pick Your Hat

Last week we had Open Startup day, where more than 50 startups opened their doors and let everyone who was interested in the startup scene come and visit, hear presentations and get a feeling of startups.

During the Q&A I said that investors value teams by trying to understand the value of each individual on the team to determine whether that’s the right team for the right company. One of the visitors asked me, “Is it necessary to have a diverse team? Why isn’t it enough for the investor to invest in a team that has passion and the right idea?”

My answer was pretty straightforward: “Investing is like dating. On your first date, the first thing that investor will look for is whether he wants to sit down and have a coffee with you, if he likes the way you speak, present and understand the space you are looking to conquer. The second check mark the investor looks for is execution. He wants to understand if your team can execute the idea he just heard about. That’s why he’s interested in knowing exactly what each of your team members do and what their position titles are.

My personal opinion is that passion and an idea are not enough on their own. Passion is very important, don’t get me wrong, but the idea is not the main issue. The team is the most important element of a startup’s success. If you have the right team, you’ll be able to execute and handle situations like pivoting to other directions and many other situations that require a strong team.

Bottom line: if you want to have a successful startup, you must have the right team. Ask yourself how each team member can best use his abilities to the company’s advantage. Each team member must also understand exactly what he is in charge of, to minimize collisions during the startup journey.



You Are Blind Without Analytics

So you’ve got a great product that you’ve been working on for a while, now you want to launch it and win the jackpot. How will you know if it rocks, sucks or is totally ignored by your customers? You must have analytics! And when I say analytics I mean in every part of your product – the website, web application and mobile app – you must have the ability to analyze and understand how a user reacts when using your product.

First, ask yourself what’s the main goal of your service? Is it to get users to upgrade to a premium account? Is it to keep a user playing your game as long as possible? Define your goal, that will help you understand where and what you want to monitor in order to understand your users’ reactions.

A great time to use analytics is during A/B testing. For example, if you build two versions of your pricing page then you can see on which page the customers paid more, what price was selected most often and all the other variations you can think of.

It’s hard to summarize analytics in one short post, but if you want to read more on how to integrate analytics I would suggest you use either ClickTale, Google Analytics or Mixpanel, both of which are great services for analytics. Though please note that Mixpanel has more features for monitoring events in your backend servers.

Bottom Line: In order to build a product that will be loved by your clients and profitable for your company, you must monitor and measure every part of your service so that you understand what works and what doesn’t and then you can optimize it.



Are You Afraid of Speaking In Another Language? READ THIS!

Splash news: my mother language is Hebrew. In the past few years, however, I’ve needed to speak English almost daily with board members, customers, and other entrepreneurs. I admit, I have tried to avoid it as much as possible. I was afraid of sounding silly or of not being understandable to the other side. In every situation, I thought, “Thank god my partner is an American; he can handle all the English conversations.”

But then one day, two years ago, I realized that when I was seventeen I wasn’t afraid to consult enterprise companies for security audits, build crazy technologies, and quit my day job without a paycheck so that I could work on startup ideas. So how come I let fear of a foreign language take over me and keep me from sharing my ideas, interacting with people, and fulfilling my dreams?

I met with my partner and asked him to speak with me in English every day, every minute. I explained to him how important it was for me to fight that fear and add fluent English to my toolbox. Since then, I have pushed myself to speak and write in English as much as I can.

Now is a good time to thank my dear partner, Nitzan Miron, who has helped me become an English ninja.

Bottom Line: A second language is one of the most important tools you can have in your entrepreneurship toolbox. Don’t avoid your foreign language fear; deal with it! Share your anxiety with friends and colleagues, and find someone who can mentor you. A speaking partner can help you to excel in speaking the language and feel comfortable doing it.



3 Ice Breakers For Conferences

You have finally arrived at the conference you’ve been waiting for so you can come to hunt your targeted partners, investors, or who knows—perhaps the love of your life—now what? Well, if you did a decent job with your background check and listed all the interesting people you’d like to speak with, you are pretty much ready. But what about the hidden opportunities you have in conferences to speak with people you don’t already know?  I have listed three favorite moves you can perform to stir up some interaction:

“What’s the Wi-Fi password?” That trick worked flawlessly at a conference I attended in Germany. My partner and I came with only few hours’ notice and had performed nearly no background work due to time constraints. At the conference, we were provided free Wi-Fi access, but it was  password protected, As such, asking for the password served as a great ice breaker. I simply approached  nearly anyone I could asking for the password as an opening for conversation and then tried to get a grasp on who was in front of me and if there was perhaps a fit.

Your t-shirt will help you. When you arrive at conference, you may want to wear a t-shirt related to why you decided to attend. For example, when my partner was at a conference filled with many potential clients, he wore a shirt with the printed message, “Afraid of hackers? Ask me what to do!” and that call-to-action really worked well. Many people approached him asking questions concerning what he could do to help protect them from hackers.

Social Networks.  Nearly every conference has a special hash-tag for Twitter as well as a Facebook page, etc. Use all these devices and write a short message that asks people to contact you. Don’t forget that, just like you, other attendees go to conferences to mingle with others who are there for identical reasons. These people also can’t wait to speak with someone about their ventures/latest investments and myriad other topics.

Bottom line: I think the common denominator is to act, not just to come and be passive. And that’s really important for conferences because you don’t want to merely stare at and listen to (often) boring lectures; you came for a specific reason. Pursue that with everything you’ve got!

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