Nobody Will Win The Social Internet Race Until Social Networks Start To Understand Their Purpose To Users, And The Models That Work In The Social Network Play

There was an article today about Google+. What was most interesting wasn’t the article so much as the comments from readers. A few comments from the post:

“I could not care less what stupid pages my stupid friends like,”

“Nobody goes to facebook to look at ads, they go to discuss stuff with their friends,”

“They (social networks) all kind of suck, these companies just want your money, bottom-line.”

“They day fb let people make applications and users stormed it with all type of random, boring and time wasting applications, it started its decline.”

If you notice, these are all complaints about social network companies interrupting the user experience, which for the users is: To talk to other people. In other words, communicate. Sharing, discovering, etc. is an organic part of this interaction, but not larger than the actual functionality of communication itself.

Information delivery (Twitter’s position) is also a part of this, but it’s not the true reason or motivation of why people use social networks, either. It’s a secondary element — people breaking news and broadcasting what’s going on in the world around them has always been an ancillary element of social networks and always will. It’s not, however, the core reason why people use these type of services, really. Not to mention there are plenty of other sources for obtaining information on the internet. Anybody taking that position is very late to the game.

That’s because social networks are ultimately communications companies. Mess with that functionality, and you’ll find the decline come fast. Create that functionality with users in mind and stay out of their stream of conversation (as legacy communications companies have learned to do for decades) and you’ll find the services you offer will scale and thrive.

There is a position for information delivery that social networks can take, but it’s more of a cable distribution model of giving users access to various content from content providers, than a breaking news type of thing. This is a unique and ancillary play to the core functionality and purpose of a social network to users, and a tricky one. It can be done, but it needs to be built for and around the users, who cut their teeth first on social networks being a new form of communications service.

Regardless, in the communications service environment, ad revenue hasn’t been a strong model. That’s because inserting anything (particularly ads) in the above interrupts why users are using communications tools — to communicate. That’s why telcos (legacy communications companies) have never relied on ad models but value added service. You can learn more about the value added service model here. The ad model can work in the information delivery position, but that would likely be a revenue split with the content companies, versus intrusive advertisement cluttering the user experience.

Subscription models, of course, were always the most effective for companies in both environments, which is why people have been paying for phone and cable services for decades. Believe it or not, it’s users — not businesses — that drive the survival of subscription models, because users want a more quality experience and millions are willing to pay for it if the desire is there and the price is right. NFL football packages are a great example of this.

The winner of the social internet will be the one who understands this. Smart social network companies will not just be experimenting with how to make the user experience better, but monetization models as well. Historically, value added services were the way communications service providers made their money and that’ll likely be the case with social networks too. Eventually, everything will end up here as the rules of engagement and monetization in information delivery and communications platforms has not changed in decades or with disruption and won’t with the internet either.

But the biggest issue social networks are going to face isn’t all of the above alone. Communications over the internet is about to disrupt in a very big way — whether or not Facebook, Twitter, and Google+ survive in this environment will depend more on their ability to position for this, than any features or revenue models they use in their play.

Lately, I've been putting together a list of things that make social apps viral, mainly looking at the startups that inspire me most in that area (social). So this is loosely gathered from looking at Hashable, PlanCast, Quora, Foursquare, LikeALittle and the likes. It's just a candid look at those - and others in the same space - startups to extract what might have been part of the essence of their viral growth.

In other words : they all include some or all of the following points.

What this list is : my thoughts on the (killer) ingredients that can make your startup viral if you have the first mandatory ingredient : an interesting concept.

What this is list is not : a to do list if your startup is a social startup. It might guide, inspire, pin-point, but you'll need to adapt. Also, it's not about transactional businesses and eCommerce. 

In search of the perfect social app

There's no such thing as a magic wand you wave over your ruby and heroku to make your app take off. But, by using the following techniques or approaches, it might just help. Again, your product should be around a key, simple and interesting concept to start with : broadcast your location to your friends, keep track of your interactions with your social graph, ask questions to a panel of experts, ... But once you've got that down, here's how it might take off. 

Some features are critical : your product should have them. Some are important : it might help to include them. And the last ones are nice-to-have : if you still have time to code, well think about those.

Nothing breathtaking here, just some observation, listing and common sense.

Critical

• You have a unique & key feature that creates value for users

Your users use your product for one very clear reason. They come to your app to do specifically this. There might be other features on your app, but there's a main one clearly defined. And by using this feature, they get value. It is simple, it is straightforward. What does value mean ? Value can be content (Quora answers). Value can be an action or reaction (check-in, "count me in" on a plancast). Value can mean earning or saving dollars. 

• Your key feature is repeatable

You don't just check-in once. You check-in multiple times, each time creating value for you and others, because you share it.

• The key feature or action is sharable

Your application has integrated virality. It tweets your check-in. It shares your plans on Facebook. It alerts your network with a new answer on Quora. It tweets a new connection on Hashable. Your users actions have 600M+ ears (FB + Twitter) - speak to them.

• Your product uses the existing social graph of your users

By using your application, your users discover, inform, keep in touch, classify, meet, ... people they know (n), or people they might know (n+1). Give them the opportunity to discover friends already there, invite friends that haven't arrived at the party yet, and inform others by making their actions public (i.e. Hashable #intros on Twitter).

• It has instant utility and is different at each visit

The first time your users connect, they get value : they find interesting content on Quora, they see what they friends have planned on PlanCast. If they come back tomorrow, they'll find something new has happened : your app is real-time, or keeps track of my social graph actions on it. 

• It's based on 1 of the 7 deadly sins

This one is an addon on Dave McClure's Startup Viagra presentation (slide #8). Your key feature should be adapted to 1+ of the 7 deadly sins: it should get your users fame (pride), sex (lust), money (greed), help them save time (sloth), give them info about people they know (curiosity). If you corner one of those, it's already a good start. 

Important

• Users can follow or friends things

Follow a subject, follow a user, friend a member, ... Make it easy to do so. Each time such an action is taken, you get 1) a way to recontact the member and 2) an excuse to contact another member or potential member. Deeply linked to ...

• Your app sends notifications

Each time your users have a new friend request (Foursquare), a new followers (aaaarg Quora), a new comment (Facebook), they are invited to a plan (Plancast), they get intro'ed by someone (Hashable), they get a notification. Whether it's by email (best), on Twitter (good) or Facebook (ugly), they get it. If they don't visit, at least they are reminded you exist.

• You application is a platform based on platforms

Because it's deeply linked to/on other platforms (Twitter, Facebook, Foursquare, Plancast, ...), there is instant content once your users get in. Moreover, users don't even have to use your app or the platforms to benefit of you key feature : you post Hashable connections on twitter ; you twit your location from Foursquare. Also, thanks to your API, your very unique feature is usable anywhere else.

• You application is playful

It has game mechanics incorporated. By using your app, your users get made. They get points, badges, hashcred, connections, whatever make them feel better - and especially better in the eyes of their social graph since whatever you use to reward them is shared on twitter and Facebook. 

Nice to have

• Charge from day 1

Whether it's a premium, or a specific addon product from your app, integrating PayPal is easy. Separate clearly what is free and what could be paid for, and set a price to it. I reckon this is not critical, but you could make some small revenue. And generating revenue, even small, is good. Really.

• Your app has links, other links and more links

People love to click. Never ever let them in front of a wall or dead-end street. Take a look at any Quora page vs any Facebook page: you'll find way more <a> tags on the Quora source code than on the Facebook one (around 30%+ on average). Links are important : people click on them.

• Your app powers its users, and plays with their pride

I answered x questions on Quora, I shared y plans on Plancast, I made z introductions on Hashable. I'm a heavy user. People see me being a heavy user. Deep inside, I'm proud of being that early adopter. If you make it easy for your users to feel this, they'll be happy to do it again. 

So, what did I miss?

All this feels very 2010, and I would have been famous if this had been my first post last year. But it's here, and here to stay.

So what's your take on it? What did I miss? How is the order? Tell me! 

Among my business friends, being called a hustler is a good, even noble thing. While “civilians” may have a negative view of hustling, in the start-up world, being a hustler has a totally different connotation.

Here’s what being a Hustler means to me.

JFDI

When you have something really important to do, even if it scares you – you have no choice but to do it. Cold calling investors, pitching yourself to speak at an event, or emailing A-List bloggers to cover your company, what have you.

You just do what you have to do.

In the early days at Flowtown, I realized it was super important for Ethan, my co-founder, to build a strong network of advisors. This meant creating a list of people he admired and reaching out to them, one by one. We called it the 100 list. One hundred amazing people who’ve been successful in the SaaS space that Ethan wanted to connect with and befriend.

He dove right in, too. He just started researching and building his list of best prospects. Then he sent short, focused emails which outlined his situation and asked for advice.

Did he get a 100% response rate? Heck no. But he did get nearly 15% of the 100 people he contacted to respond. He now has a network of smart, successful advisers he can turn to for good counsel. Many have become personal friends.

What’s the takeaway? Ethan didn’t “think” it to death. He just did it.

No excuses

How many people do you know who have an excuse for everything that goes wrong with their lives? Beyond just being annoying, I wonder if they ever realize that their defeatist attitude is 100% related to the success – or lack of success – they’re enjoying.

Real hustlers don’t make excuses. They own their actions and results completely.

If you haven’t heard of Jon and Storenvy, take some time and give it a read. Jon is a straight up hustler!

Even after he got kicked out of Y-Combinator, he owned his situation and took the the next logical steps to move himself forward. He stayed in San Francisco, networked like crazy, and got a great group of guys to believe in his vision. Jon eventually raised $1.5M for his start-up. He had every reason to make up excuses why his co-founders failed him, why Y-Combinator treated him unfairly, or that he should pack it all in and move back to Austin.

But he didn’t. He hung tough. He didn’t make excuses, he found opportunities. He’s a stronger, more savvy entrepreneur because of what he went through.

Picking yourself up after failure is really what separates the men from the boys, and the stuff he went through gave him a chance to prove it.

Belief

Hustlers are great believers. They believe first and foremost in themselves, and they believe in their ideas. It’s like a religious self-belief in themselves to just persevere.

Demonstrating this deep level of personal conviction for your ideas act like a gravitational force for other amazing people. People are attracted to others who possess a strong belief in themselves.

I’ll share a personal story to show you what I mean.

I’ve always been impressed by my brother. By most people’s standards, he’s done extremely well. In just four years, he learned how to build a house, started a home building company, and is now considered the top home builder in all of Atlantic Canada. He builds nearly 70 custom homes per year and his business is growing 30% annually.

What amazes me is that even though we come from a small town (100,000 residents) and everyone told him he was too young to be a home builder … that his marketing approach to use only social media wasn’t going to work … and that his well-established competition would crush him, he was never deterred.

Despite the naysayers, my brother said, “Screw that.” and launched his business anyway. He believed in himself. He listened to what others had to say, but didn’t internalize it. He kept the good advice, and ignored what didn’t serve him.

Believing in yourself when most people expect you to fail is incredibly hard. I always look to him when I things get rocky and tell myself I have no right to let anything slow me down.

Energy

Hustlers have the unending, relentless energy that if harnessed, could easily power small towns. You feel it when you meet them. They’re like a ball of energy that’s just exploded in the room. All the hustlers I know bring a level of intense energy that most others only dream of possessing.

One of my good friends is Neil Patel. If it was possible to stockpile energy, Neil would be the first one to try. I love talking to him about business to watch his eyes light up, crack a big smile, and listen to him talk which is fast, really fast. A chat with Neil and I’m plugged-in! I want to jump from the table, make a few phone calls or hit my laptop right away.

Speed

Speaking of fast, here’s another thing. Hustlers love speed. You might even say they’re addicted to it.

They love to take an idea or project from conception to completion as fast as possible. Nothing moves them more than to see things moving quickly in the right direction. There’s a concept called the “knowing, doing gap” which describes the big gap between the knowledge of something and translating that knowledge into action.

Hustlers simply don’t struggle with this gap. They know, they do. That’s it.

A few months ago, I met the founders of Summify, and man, was I impressed!

What impressed me wasn’t the fact they asked great questions (which they did) or were super-focused on their product (which they were.) What actually impressed me was the speed of their iterations from feedback.

After a single conversation, they followed up with an email detailing the changes they had already made to incorporate the ideas we discussed. That trend continued with more emails, more changes in the product. They moved FAST. It was impressive to watch the exchange unfold. I can’t say too much at the moment, but for now let’s just say they should be announcing something very big. very soon.

Can You Learn To Hustle?

Maybe. If you’re willing to follow the steps above, focus more on your actions rather than getting lost in the ideas, move quickly, and most importantly, believe in yourself and your success with energy and conviction – then maybe soon someone will call you a Hustler. Wear it proud. I do.

At TechCrunch Disrupt, Erick Schonfeld interviewed prolific investor Fred Wilson, an early investor in Twitter, Foursquare, and Zynga. When Schonfeld asked him about the Twitter ecosystem, and the company’s recent moves to discourage app developers from building Twitter clients, he replied with this one liner, “Don’t be a Google Bitch, don’t be a Facebook Bitch, and Don’t be a Twitter Bitch. Be your own Bitch.”

Wilson and Schonfeld directly discussed the advertising ecosystem, and Wilson commented that with Twitter’s advertising plans, the company is heading towards a possible collision with advertising startups who have developed revenue models around ads on twitter (i.e. Ad.ly, 140 Proof).

Wilson added that he is feeling very good about Twitter’s monetization plans. He explained that Twitter didn’t have a set strategy at the start. If it were planned, Twitter would have launched with all platform clients, he explains. Twitter has been constantly playing catchup as developers have built more applications. “Twitter wasn’t planned,” Wilson said. “It just happened.”

Some entrepreneurs are really good at describing their idea and vision in three minutes, some are not. Here is why it is important. Investors, employees, customers, and partners all need to "buy in" and get excited about your idea.

They will form an initial impression in three minutes or less. This first impression is the lens through which everything else is viewed.

I saw about 100 startups at the Launch Conference this week, and will see another 80 at the Demo Conference next week. The good ones stand out immediately. How can you get noticed? Don't expect to tell the whole story, just enough to get them curious and wanting to know more.

You need several different pitches. The demo pit / exhibit area pitch is 1 minute. The on stage pitch to the audience is 6 minutes. The investor meeting pitch is about 30 minutes. The key to an “elevator pitch” is to get them interested, answer the basic questions, and get to the next meeting. It is called the “elevator pitch” because you should be able to explain your new company idea to a prospective investor in the time it takes to ride an elevator to their floor. What should you cover?

The Problem – Start with the problem you are solving or the need you are filling. A real life story or scenario about the problem helps the investor understand the problem or need in personal terms, and agree that it is an interesting problem that needs fixing. Dave McClure says too many entrepreneurs start by talking about their solution and whiz bang technology. How they do it versus the problem they solve. If the investor is not interested in the problem…there is no way they will be interested in your solution. Once they are nodding their head about the problem, move on to the solution.

The Customer - Who is your target customer and how much will they pay for your product or service? Your target customer defines your market segment, size, competitors, and growth potential. Investors will "connect the dots" in a few seconds and decide if they are interested in hearing more.

Stop here for feedback - If the person you are talking to doesn't care about the problem you are solving, or doesn't identify with the customer you are targeting...stop and move on to the next prospect. You are wasting their time, and more importantly, your time. If they nod in agreement, tell them about your solution.

The Solution – Explain why your solution solves the problem, and why it is better than other solutions. We do X for Y, or we are the X (well known product) for the Y market. Again, don't explain how it works…but why it works. It might be cheaper, faster, smaller, easier, more enjoyable, or whatever. Don’t waste time explaining the technology, or flowcharting the process or value chain. Just explain why your solution solves the problem better than anything else.

The Competition – If there is no competition there probably isn’t a market. Competitors help the investor understand the problem, existing solutions, and potential size of the market. Even if you think you are inventing a new market, the problem has been there a long time, and people have figured out ways to solve it. Acknowledge that there are existing ways to partially solve the problem, and companies that have part of the solution, and why yours is better. Investors will be very nervous if there is no competition.

The Business Model - Who will pay? Is your solution a vitamin or a painkiller? Vitamins are nice to have, painkillers are a must have. There are some problems that no one will pay to solve. There are other problems where the one getting the benefit is not the party that pays the money. Sometimes there are multiple players in a value chain. Be very clear about where you are in the value chain, who will pay for your solution, and how much they will pay.

The Team – What experience do you and your team have starting companies or specific experience in this market segment? Are there any well known advisors or financial backers helping you? Do you have connections to people who can help you get your first customers?

The Close – We are solving a big problem, in a growing market, with a model that works, and a team that can execute. We need X dollars to reach Y milestone. We need investor partners to help us achieve this success. Show passion and confidence. Ask them to join the crusade. This is going to be The Next Big Thing.

Spend one minute on the problem, three minutes on the solution and demo, and 30 seconds each on the competition, model, team, and close. That is 6 minutes. Practice it 20 or 30 times. Every founder and early employee should be able to do the elevator pitch. Practice in front of friends, then practice in front of strangers that know nothing about your idea. Quiz them after to see if your message got through. Every potential new hire needs to buy into the story just like investors do. In many cases customers need to buy into the story too. This is important. Get it right and life will be much easier. Get it wrong…and you will get a NO in 6 minutes or less.

This post originally appeared on Don Dodge's blog.

Have you given any thought to leaving the "security" of a regular paycheck and going out on your own? If so, this blog post is for you. It is my not so humble opinion that working for yourself—owning your own business—is one of the greatest experiences a person can have. I equate it to the difference between living in your parents home and going out on your own and getting a place to live as a young adult. It is initially pretty frightening but the feeling of independence and growth is incredible and once you’ve done it successfully you cannot imagine going back to live with Mom and Dad.

I recognize that not everyone is cut out to start his or her own business or even work outside the structure of a corporate environment. The skills required to start and then successfully run a business are not always the same and require that you switch gears quite a bit.

I’ve collected a list of attributes that can help you determine if you are the kind of person that can start your own business. I’ve been networking with the owners of businesses of all shapes and sizes for many years and found quite a few common themes that I hope you will find valuable.

You are a good candidate to start a business because…

You are willing to take risks
This is the most obvious one – so obvious I hesitated including it on the list. Starting a business is a risky proposition. You need to be sure that you have set yourself up as much as possible to absorb the risk associated with starting a business, especially the financial issues. Only you can determine what level of risk is acceptable but a good rule of thumb is to have enough money or financial security squirreled away to last you through the time it would take to land a regular job. I’ve known people that didn’t feel comfortable until they had a year of living expenses and others that had virtually no savings, just a surplus of confidence. 

It may be possible for you to start your business while you are still employed by someone else – if so, that’s outstanding. Just make sure you are not going to violate any employment agreement you may have with your company. If you (like me) are a software engineer and currently gainfully employed, pay careful attention to your existing employment agreement if you have one. Many technology companies will lay claim to any invention made while an engineer is employed by them. If it’s at all possible without jeopardizing your job, let your boss know what you are doing. It is much easier to operate in the clear light of day.

You are an optimist (but a pragmatic one) 

If you are going into business by yourself it is critical that you are an optimist. Not someone that lives in a state of denial the entire time mind you—you have to be realistic—but someone that sees positive potential in most things. If you are constantly looking at why something will fail you are going to go out of business pretty quickly. It is the job of others to tell you why something can't be done and for you to prove them wrong.

This is not to say that you cannot have a pessimist as a partner. Very often having someone that balances out an optimist and throws a dose of reality on the situation creates a good balance.

You have a vision for your business and can share it with others
Having a good idea is one thing, being able to articulate it well and get others excited about it is another. If you are going to be the one that starts the business you have to be able to get others excited about it. Keep in mind that friends and family will usually love anything that you present to them. Get outside of your circle and comfort zone by asking people that would be potential customers or clients.

The list of people that you need to convince that you have a great business concept is quite long: potential employees, bankers, venture capitalists, partners, distributors, landlords, etc. All of these folks will want to hear from you why they should take a risk on your business.

I personally never felt comfortable doing large presentations to these types of groups. I’m great with one-on-ones and very small groups but my stress level rises dramatically when I’m doing a canned presentation in front of a group of people. I compensated for this by practicing my presentations over and over again until I could present the content on auto-pilot. Once that level was achieved I was able to riff during my presentations and ensure I was reading my audience and adjusting pace and humor to keep people engaged.

Because this is a personal weakness of mine I’ve had to work extra hard to overcome it.

You can accept criticism
As soon as you share your business idea outside of your familiar circle of friends and family you will be presented with criticism. Depending on the venue, that criticism may be blunt and even hurtful. You will have invested an incredible amount of time and energy into a concept and the last thing you want is for people to tear it down.

You must have the ability to not take criticism personally. It’s fine to be defensive if the critique is off the mark or fails to account for something obvious. Depending on the venue, people can have ulterior motives for their criticism that you will need to account for. Most criticism though is an opportunity to improve. If you find yourself defensive with all criticism you will likely alienate the very people that are trying to help you improve your business.

You can modify your lifestyle
When you are first starting out it is critical that you can adopt a frugal life style. While you were gainfully employed you may have eaten out often, taken nice vacations or bought a new car every couple of years. You need to be able to adjust that quickly to take up the slack and minimize your financial risk. That frugality will help you with the business as well – it’s all a mindset kind of deal.

A frugal life style will also lead to a closely monitored business.

You have a great relationship with your life partner
If you are living with someone or are married, it needs to be a strong relationship. Some people have successfully started and built up businesses while they were in a lousy relationship – the business became a sanctuary, something that kept them away from the person they didn’t really want to deal with anyway. Others have had a relatively fragile relationship fail when faced with the time commitment, stress and financial burden associated with a new business.

This one is very personal for me. I was blessed with a fantastic wife that supported me every step of the way. On the days I just felt like I couldn’t deal with it I had her to turn to. When I questioned why I was going through the painful process of starting my business I would look at the photos on my desk of my wife and three children. It was all the inspiration I needed to make it work.

If you are in a relationship you need to know if your partner is going to support you. It will not be all happiness and light mind you – my wife and I got into many heated debates on issues that were complicated by the stress of running the business. If however we had a defective relationship it likely would have failed.

You are a jack-of-all-trades
Have you ever been described or described yourself to others as a jack-of-all-trades? If so, that’s a good thing when starting a business. If you are starting the business by yourself then you are obviously the CEO, but until you get employees you will also have a couple more key titles:

• VP of Marketing: You need to develop and execute a plan to promote your product or service.
• VP of Sales: You have to develop a sales process and make it happen
• VP of Development / Production: Someone has to build your product or provide that service. That someone is you. Outsourcing it? You still have to manage it.
• VP of Support / Customer Service: You will need to deal with customer issues and resolve problems people have.
• VP of Finance / HR: Run your accounting software, pay the bills and manage any employees you may have.

Depending on the type of business you want, one person can pull off all of these roles and still lead a semi-normal life, though like anything else you need to be pretty good at them if you want it to be successful.

You get easily frustrated with bureaucracy
As companies grow larger they develop processes and systems to help them run more efficiently. Over time those processes evolve and change and can become less efficient. If you are working in a company and see all the places where processes can be improved or eliminated, you have a trait that is valuable in starting your own company. 

If you work for a company that is unwilling or unable to change an inefficient bureaucracy and it drives you nuts, you have some of the fuel required to power your business. Anger with the status quo is a powerful motivator.

You want financial independence
One day you look at your finances and realize that while you thought you were running hard in a race you are actually running on a treadmill. Between car payments, rent or a mortgage, living expenses, etc. you make a decent living but you are not advancing your lifestyle to your satisfaction. If you have children then it’s even more pronounced because you have their living expenses and education to worry about as well.

In my experience the best way to provide yourself with the opportunity for financial independence is to control your own destiny, and that means starting your own business. Not every business is destined to create great wealth for the person that starts it. Many people create life-style businesses that generate just enough revenue to pay the owners a good wage.

Whether you are creating a business with the intention of selling it to obtain wealth or you are creating a long term life-style business, either can provide you with financial independence.

You are patient and don’t give up easily
A critical characteristic for a person starting a business is persistence. You need to be able to face rejection and failure not as a personal thing but as a challenge to improve. A new business faces many obstacles that will tear you down and make you want to run screaming for the perceived safety of regular employment if you let them get to you. 

It’s also important to understand that some businesses take a very long time to succeed. We live in an age where things move so quickly—especially in the technology world—that a business that isn’t generating massive revenue or traffic in a short time is perceived as a failure. The reality is, many of the overnight successes that people see took years of build up and behind the scenes work before they got there.

You like to work really hard
The final attribute I’ll cover is your work ethic. If you want to build a successful business you have to have the capacity to work very, very hard. You will often hear people say that it’s not about working harder; it’s about working smarter. That mindset is great for employees that have well defined jobs but fails when it comes to a person starting a business. You have to work smarter AND harder because there is so much to do.

If you are a clock-punching kind of person then clearly you should not be starting a business, regardless of how insanely great your idea is. 

Making the decision to start a business is not one you should take lightly, however if you make a go of it I congratulate you. Regardless of the result of the business, the experience you will acquire will enrich you in ways few jobs can.

A few weeks ago President Obama visited Palo Alto to raise money the good ol' fashioned way: a $30,400-per-plate fundraising dinner. This tried and true fundraising technique is a great way to raise money if you can get the President of the United States to show up to dinner. But how can you raise money if no one has heard of you and all you have is a website? Back in 2007, when Obama was running for the nomination and trailing by double digits in the polls, that's pretty much all we had.

 

 

The Experiment

As Director of Analytics for the Obama campaign, my job was to use data to help the campaign make better decisions. We started with just one simple experiment back in December of 2007. This experiment taught us that every visitor to our website was an opportunity and that taking advantage of that opportunity through website optimization and A/B testing could help us raise tens of millions of dollars.

This experiment tested two parts of our splash page: the "Media" section at the top and the call-to-action "Button"

 

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We tried four buttons and six different media (three images and three videos). We used Google Website Optimizer and ran this as a full-factorial multivariate test which is just a fancy way of saying we tested all the combinations of buttons and media against each other at the same time. Since we had four buttons and six different media that meant we had 24 (4 x 6) total combinations to test. Every visitor to the splash page was randomly shown one of these combinations and we tracked whether they signed up or not.

Before you scroll down and see the results, which Button and Media do you think had the highest sign-up rate?

 

Button Variations

 

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Media Variations

 

Results

The metric we used to measure success was sign-up rate: the number of people who signed up divided by the number of people who saw that particular variation. Since there were a total of 310,382 visitors to the splash page during the experiment that meant each variation was seen by roughly 13,000 people.

Here are the different sign-up rates we observed for each section:

 

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Here are the sign-up rates for the combinations of the different sections:

 

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The Winner

The best-performing combination of button and media was "Combination 11" which was the "Learn More" button and the "Family" image:

 

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Before we ran the experiment, the campaign staff heavily favored "Sam's Video" (the last one in the slideshow shown above). Had we not run this experiment, we would have very likely used that video on the splash page. That would have been a huge mistake since it turns out that all of the videos did worse than all of the images. 

The winning variation had a sign-up rate of 11.6%. The original page had a sign-up rate of 8.26%. That's an improvement of 40.6% in sign-up rate. What does an improvement of 40.6% translate into?

Well, if you assume this improvement stayed roughly consistent through the rest of the campaign, then we can look at the total numbers at the end of the campaign and determine the difference this one experiment had. Roughly 10 million people signed up on the splash page during the campaign. If we hadn't run this experiment and just stuck with the original page that number would be closer to 7,120,000 signups. That's a difference of 2,880,000 email addresses.

Sending email to people who signed up on our splash page and asking them to volunteer typically converted 10% of them into volunteers. That means an additional 2,880,000 email addresses translated into 288,000 more volunteers.

Each email address that was submitted through our splash page ended up donating an average of $21 during the length of the campaign. The additional 2,880,000 email addresses on our email list translated into an additional $60 million in donations.

 

Lessons Learned

1. Every visitor to your website is an opportunity. Take advantage of that opportunity through website optimization and A/B testing.
2. Question assumptions. Everyone on the campaign loved the videos. All the videos ended up doing worse than all the images. We would have never known had we not questioned our assumptions.
3. Experiment early and often. We ran this experiment in December of 2007 and reaped the benefits for the rest of the campaign. Because this first experiment proved to be so effective we continued to run dozens of experiments across the entire website throughout the campaign.

Is it me or is everyone these days trying to get rich quick? Not only am I meeting more and more people who don’t want to work hard to make money, but they are starting to get into new business ventures that they are clueless on.

I know the grass always looks greener on the other side, but it really isn’t. Don’t get me wrong, those lucrative businesses are making people millions of dollars, but it’s probably doing that for less than .3% of the people in that industry.

So before you decide to jump ship and get into a new career, just for a second think about all the things you will be losing out on. Yes you may make some extra income in the short run, but if you put that time and energy into growing what you are already good at and love, you’ll do a lot better.

If you want to make a ton of money in business, follow these principles: 

Harsh Fact #1: Focus on what you know

If you are really good at something, focus on it. Don’t stray away from it, but instead just do that and become the leader in your space. If you don’t think you can make enough money focusing on what you are good at, then figure out what related businesses you can get into.

For example, a buddy of mine, Michael Dorausch, is a chiropractor in Los Angles. Although he does very well, he wasn’t satisfied with the income he was making as a chiropractor. But instead of jumping into a whole new field, he decided help other chiropractors get more customers from the web for a monthly fee.

Harsh Fact #2: Business development is the quickest way to grow

If you put me in a room with a thousand people and you ask me to close a deal with all of them, the chances are, I’ll fail. But if you put me in a room with one person and ask me to close a deal with them, there is a good chance I’ll be able to do so.

I am big believer that it is easier to convince one person to work with you than it is to convince thousands of people. The cool part about business development is that the one person you convince could have access to thousands people or companies.

For example, my friend Andy runs a TV website called BuddyTV. One way that he could try and grow his user base is to do a business development deal with other TV related companies such as TV Guide, Comcast, Timewarner, Verizon… The reason this is powerful is because if you can close a deal with someone like TV Guide, you then get access to all of their customers.

Harsh Fact #3: Grow your network wisely

It’s hard to put a value on networking, but it can really help your business as long as you have a strong network. Networking with people that can’t provide any value to you or your business is fine in small doses, but it can turn into huge time sync that won’t provide you with a return on investment.

At first you may have to network with people who don’t provide much value so you can get the hang of it, but you should shift your focus to networking with individuals who can help you grow your business.

Also, you have to realize that networking is a two way street. I don’t care how many big names you have in your network, it’ll be useless if you don’t help them out as well. Because when you need their help, they’ll be more likely to help you out if you’ve taken care of them in the past.

Harsh Fact #4: Build up your personal brand

Building up your business should always be your number 1 objective, but your number 2 objective should be to build your personal brand. Now granted, you can make millions without building up your personal brand, but it doesn’t hurt to have a strong one.

When my business partner and I started KISSmetrics we were able to get our first paying customers by leveraging our personal brand. People knew about him and I and companies that followed us were willing to sign on for our product because they liked my business partner and I. In the long run that won’t help you build a big business, but in the short it does help bring in revenue.

If you build up your personal brand, no matter what business you get into, you’ll increase your odds of making money.

Harsh Fact #5: Expand when your growth rate flattens

It’s always fun to start new businesses, especially if you have ADHD like me, but that doesn’t mean you should. If your current business is growing at a healthy pace, there is no reason to expand your business into new verticals.

As I mentioned above, Michael decided to expand his chiropractic business by helping other chiropractors get more customers from the Internet. But he didn’t start doing this until his own chiropractic business started to reach full capacity. There are only 24 hours in a day and there are only so many patients he can see in a day. Once he reached his capacity, he then decided to expand, while still maintaining his practice.

If you decide to expand your business, make sure you don’t neglect your current business and customers. You have to maintain it while expanding.

Conclusion

Don’t get caught up in businesses that are sexy and hot, focus on what you know. If you are passionate and knowledgeable about a specific subject, you can make money at it. You just have to get creative.

So what do you think about all these people that are trying to get into businesses that they have no clue about?

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I talk to a lot of companies that are still hunting for customer #1, or a few sales have been made but the ball isn't rolling yet.

Most of them are making the same mistake: Their public persona is exactly wrong.

I know, because I made the same mistake! But I learned my lesson, and I'd like to share it with you.

Even before I had a single customer, I "knew" it was important to look professional. My website would need to look and feel like a "real company." I need culture-neutral language complimenting culturally-diverse clip-art photos of frighteningly chipper co-workers huddled around a laptop, awash with the thrill and delight of configuring a JDBC connection to SQL Server 2008.

It also means adopting typical "marketing-speak," so my "About Us" page started with:

Smart Bear is the leading provider of enterprise version control data-mining tools. Companies world-wide use Smart Bear's Code Historian software for risk-analysis, root-cause discovery, and software development decision-support.

"Leading provider?" "Data mining?" I'm not even sure what that means. But you have to give me credit for an impressive quantity of hyphens.

That's what you're supposed to do right? That's what other companies do, so it must be right. Who am I to break with tradition? Surely my potential customers would immediately close the browser if they read:

Hi, I'm Jason and I built an inexpensive tool for visualizing what's in your version control system. It's useful for answering questions like "When was the last time we changed this file?" Check it out and tell me what sucks!

I mean, can you just imagine a person with "Software Engineer III" on their business card taking me seriously if I just talked like a human being? What if someone gets offended by the word "sucks?" No no, big companies want to see professional language!

But I was wrong. I'll explain why from the point of view of selling software over the web, but the same lesson applies to every little company trying to get off the ground.

Now repeat after me:

My next sale won't be a 1000-seat order from Lockheed Martin.
My next sale won't be a 1000-seat order from Lockheed Martin.
My next sale won't be a 1000-seat order from Lockheed Martin.

I'm telling you this having sold software to every size of company from micro-ISV to IBM, and, well, to Lockheed Martin.

Your vision is to land $100k deals with big companies — and you will! But not today. Today your product is a shaky version one-dot-oh with bugs you haven't uncovered yet, missing 80% of the features big companies require, and with no significant documentation like case studies or a proper manual or an ROI model or a large, reference-able customer.

Today, you're a complete mismatch with Lockheed Martin! But there's a nice big niche that's a perfect match: Early Adopters.

Early Adopters are people who want to live on the bleeding edge. They like new technology, even if that means it's buggy. They like working with teeny companies where they have a personal relationship with the founders, where they are showered with attention, and where their ideas are implemented before their very eyes. They don't mind putting up with a hundred bugs so long as they get fixed fast. They want to be involved in the process.

Tom is an Early Adopter. At Smart Bear I must have had ten or twenty of these guys before our product was stable enough and feature-rich enough to start getting attention from the big boys.

The best part is, this is exactly the moment in your company's life when you need Early Adopters to help you build the right product! You don't need people who download, get discouraged, and then never call you back. You need a chatty Cathy who wants to dive in and help out.

So now back to your website, your blog, your Twitters — your public corporate persona generally. What do you put up on your website that screams out to those potential Early Adopter Cheerleaders that you are exactly what they're looking for: A cool new company with a fresh product and fresh attitude; a product that might be rough around the edges but is ripe for feedback and collaboration; a company that may be small today but is thinking big.

Well here's how not to it: Say "a leading provider of" and blather on about how you "Provide the ability to quickly and easily do XYZ so you can go back to accomplishing high-value tasks."

Puh-leeze. Can you be more uninspiring?

Balsamiq Studios is doing it right. Read their company page. It's says "Hello."  It says "Yes, a couple of guys in a studio." They don't skirt the issues of being a small company:

I know, it sounds iffy: how can such a small team create, test, maintain, market, sell, and support a software company?

Well, that remains to be seen.

Balsamiq made $800,000 in their first year of operations, so don't tell me "big companies" need to hear garbage PR/marketing language. Balsamiq got 100 product reviews during their first six weeks of operation, so don't tell me "a couple of guys in a studio" isn't a good public persona.

You want that kind of success? Stop acting like a faceless, humorless, generic, robotic company!

Put yourself in the shoes of that Early Adopter. Does she want to see useless garbage phrases or does she want to hear about how you totally understand her pain? Should you come off as a big, established, safe company or as a cool, passionate, small team who wants to make a difference? Should you hide behind "Contact Us" forms or display your phone number and Twitter account on your home page? Should you promote features and benefits you don't really have implemented yet or should you promote your forums, blog, and weekly all-customer virtual meeting where everyone chimes in with feedback?

Be human. Stop hiding. Be yourself.

Today, Groupon did something that all entrepreneurs, in their heart of the hearts, wishes they could do: spur the big acquisition offer and swing for the fences.

I got home from Graphicly HQ today around 4pm. It had been a long week, but ended nicely. To celebrate, I took a three hour nap. At about 7pm, I woke up, walked over to the laptop, and started to work again. While, I was plugging away, a flurry of tweets flew by. Each with approximately this message “what the hell is Groupon thinking?”

My reaction: “It all changes when the founder drives a Porsche.”

A couple of years ago, when Twitter was contemplating a sale to Facebook for $500mm, I was talking to a VC friend of mine. The conversation went like this:

Me: “What the hell is Evan thinking?”

VC: “Well, he drives a Porsche.”

Me: “Are you saying that the Porsche is unable to navigate to Facebook’s offices so he can collect his bags of cash?”

VC: “Founders make different decisions when money doesnt matter. He doesnt HAVE to sell, so he can wait. He can do what he thinks is right for the business. He can focus on his legacy.”

Since then, the issue of founder cash-outs has fascinated me. How does it effect the ability of the founder to execute? Is it a detriment? Or is it the difference between the success of the mega-wins (Facebook, Groupon, Twitter, etc.) and the “just wins” (so many of the $25 – $125mm acquisitions we have seen over the past couple of years.)

During “AngelGate,” an email my friend Chris Sacca wrote was leaked. In it, he wrote:

4) Earliest stage founder cash-outs. Among efforts from others, we talked about my recent projects to get very early stage founders some liquidity. Traditional VCs have rarely been inclined to give founders any ability to cash out claiming it makes them less “hungry”. As someone who, just five years ago, had net worth of exactly zero dollars, I remember the difference between being “panicked” and “hungry”. As I have invested in more and more companies, I have learned that many founders would benefit dramatically from even the smallest amounts of cash (ed: emphasis mine) (compared to the overall deal size). I have worked hard to get my founders as little as $25,000 to pay off credit cards and student loans. Or, in a small deal that closed this week, I was able to get a founder the money so he can pay for his wedding and not have to worry about taking on debt. I, and the other investors in this group who do the same thing, feel good about helping our founders in this way.

What Chris outlines is very different than the money the Groupon founders took off the table when DST and Battery invested $135mm to solve “the money problem.” In Chris’ case, he is simply trying to keep the founders focus on the business, not on their climbing debts or horribly inadequate lifestyle.

With Groupon, with the money problem solved, they can “go for it.” Basically, the motivation for a big exit is no longer motivated by “how much money can I get,” it is motived by “what is my legacy.” That simple shift makes their rejection of Google’s $6B offer not that surprising.

 Mark Zuckerberg turns down Yahoo!’s $2B offer. They had raised enough money at that point, that clearly Mark had taken some off the table. He is also interesting in that it appears he has never been motivated by money (he turned down $2mm and a job offer from MSFT in high school).

 Evan Williams – sold Blogger. Not needing the money, rejects Facebook’s offer.

 Dennis Crowley (sold Dodgeball) and Naveen Selvadurai – took a couple of million of dollars each off the table in their last financing. And rejected a rumored $100mm+ acquisition offer from Yahoo.

And now,  Andrew Mason and crew have turned down a $6B offer from Google.

Surprised? Nah, the founder drives a Porsche. (BTW: I have no idea if Evan Willams drives a Porsche. He could ride a very nice SF hipster fixie for all I know.)

You know the type.  You see them on Twitter, Facebook or Plancast plotting out their next 12 conference.  You see their Tweets from airports across the globe.  Look at me!  I’m in Spain!  Now I’m in France.  Next week I’m speaking in Cabo San Lucas!  They are professional conference attendees.

They are CEO’s addicted to the schmoozing.

In the industry they’re known as “conference ho’s.”  OK, they’re known as conference “whores” but that sounded too harsh for a blog post.  Inevitably a certain number of entrepreneurs feel compelled to attend every conference.  I think I know the root cause.  It can be magnetic being at conferences especially when you’re on a panel, you’re invite to a speakers’ dinner, you’re getting to meet so many new people and you’re getting so much attention.

And for all of these reasons it’s smart to selectively go to a few events here and there – particularly those that you’re likely to have the highest hit rates of connecting with people who can change your business.  But there has to be a limit.  In the same way you wouldn’t spend all of your day in front of your computer at the expense of customer interaction, there has to be a limit to attending conference.

I’ve heard all of the excuses from these CEOs.  ”How else could I get so much BD done?  I work hard on my flights and in my hotel room?  I have a really productive head of products cranking out code.”

Bullshit.

When you’re not in your office on a regular basis you’re not showing leadership.  You’re not setting the agenda.  You’re not establishing culture, inspiring people or resolving conflicts.  When you’re on the road all the time you’re not as productive.  You reach diminishing marginal returns of the next person you met in relation to all that you’re sacrificing by not being in the office working.

It’s about you and the relationships you’re building.  It’s about the personal schmoozing and the network that’s going to help you whether you’re current company is successful or not.

So here’s the thing:

1. I often hear the non-CEO management teams from the companies left with no leadership complaining about the lack of leadership.  Leadership abhors a vacuum.  So people step in and fight.  Or stuff doesn’t get resolved.  Or somebody else becomes the “de facto” leader of the company.  If this CEO would stare in the mirror and be honest with him/herself they’d realize this.  It’s not possible to be a conference ho and a leader at the same time.

2. You think that everybody is marveling at your travels, your stories, your airplane layovers, your new friends and your photo from the South of France.  They’re not.  I hear people mumbling about how you’re unfocused and in it for yourself.  I hear investors talking about how they’d never fund somebody that spend more time in conference halls than in their office.  You’re too busy traveling to hear that they’re saying this.  Until it’s too late.

So my message to people who attend every conference has always been, “Do you see Mark Zuckerberg at every conference?  Do you see Ev or Mark Pincus at every conference? Do you see Larry or Sergey at every conference?  Name one, professional conference attendee that has built a successful software business?  If you’re in the services business, looking to sell books or work in sales I get why you might spend more time at conferences.

If you’re a startup CEO – don’t kid yourself.  Get back to work.  There’s a team in the office in need of your guidance.

This article originally appeared on Both Sides of the Table and is republished here with permission.

1. Kids have their own logic.

Kids approach the world with eyes open every day. They see new things and interpret those with a fresh, clean perspective. Entrepreneurs, too, should always try to look at their business, their competition, and their market in ways others have not envisioned. Truly revolutionary ideas come from new thinking; disruption comes from leveraging existing situations and tools to cause a shift in how business is done. What are you doing differently with your business that defies conventional thought and forces new logic?

2. Kids are curious.

Kids are curious about the world around them, about how things work, and about other people. They grow, change, and learn new things constantly and have an innate ability to absorb and process information quickly. Entrepreneurs can benefit from their example – be like a kid and move up the learning curve as quickly as possible: seek out new information; gather new ideas; grow new theories. Never stop looking at how others do things and extract the best practices for your own business.

3. Kids are creative.

Kids are ever resourceful: they devise new ways to build, figure out different ways to do things, and constantly craft new solutions to challenges as they arise. They do not hesitate to make up their own answers and are not afraid of being wrong. Entrepreneurs should be equally fearless and equally inventive in their approach to business and work.

4. Kid’s make friends easily.

When a kid goes to summer camp, or starts at a new school the first order of business is typically to make new friends. As adults we slowly lose that easy ability to develop new relationships and this serves us poorly, as relationships are at the core of most business and it is easy to see how your business profits through relationships. Entrepreneurs who are weak in this area need to re-dsicover their own ability to make friends, appreciate people, and learn about others as they come into your life.

5. Kids make do with what they have.

When a kid approaches a problem that is new to them, they use the knowledge they have and the tools they possess to find a solution. For instance, a kid who wants to climb a large tree with branches too high to reach will sometimes choose to lean their bike against the trunk to act as a stepladder to start their climb. A small business must also make do with the resources at hand to accomplish goals and solve problems. Don’t have an office? Work at Starbucks. Can’t afford productivity software? Leverage Google Apps or Open Office. Be like a child: be resourceful!

6. Kids depend upon others.

Kids are dependent on one another and on the adults in their life. They need help learning, they need help getting food, and they need shelter and clothing. Who do they turn to? Us, of course. Likewise, entrepreneurs must depend on their networks, their supporters, their investors, and their employees. Building a business can never be accomplished solely by one’s self, so good business people should ask for help whenever they practically can and be willing to provide help when it is requested of them.

7. Kids know how to have fun (and they like to ride bikes).

Remember riding your bike down a long hill? The sheer exhilaration, the thrill of the speed and the wind in your face. Starting a business should feel the same: scary, intoxicating, slightly out-of-control is how it should feel. If it doesn’t you’re probably not risking enough. If it does feel this way, be sure to keep your hands on the handlebars and watch out for the bumps!

8. Kids try things.

Before you got old enough to realize that you weren’t a very good basketball player, or artist, or musician you probably did those things just for the fun of it and just to be with the other kids who were doing those things at that moment. Great entrepreneurs often have to do things that they aren’t particularly good at because there is probably not anyone else around who can do it for you. Not so good at accounting? Well that doesn’t mean you shouldn’t get your hands dirty with the software. Human resources just not your thing? That doesn’t mean tat your employees don’t need you to have a payroll system and benefits package ready to go.

9. Money doesn’t mean much to kids.

Kids prefer candy to money. Does that mean that you as the owner of a small business should give p your profits for a quick Snickers bar? Not at all – it just means that you need to appreciate the fun things, the sweet things about building your business and understand that the pursuit of profits, noble though it may be, is not the only reason for doing this. Mmmmm, Snickers.

10. Kids know how to entertain themselves.

How many times have you seen your kid (or someone else’s) sitting a playing by themselves? They have an inherent ability to find their own way to be entertained. They pick up a book, or a toy, or a game, or they watch TV, or ride their bike, or play with their dog. If you are bored with what you’re doing, you should probably not be doing it; when the challenge is gone it is time for entrepreneurs to move on to the next thing.

I know I said 10 things about kids, but there is one more that I can’t leave out:

11. Kids are picky eaters.

What is the lesson for entrepreneurs about picky eating? Um, I don’t really know, but it always amazes me how stubborn kids can be about food. Maybe it’s the stubbornness? Should entrepreneurs be stubborn? Hm. Maybe something there after all…

There’s a famous line about consultants that clients love to repeat, “consultants take your watch and then tell you the time.”

I suppose there’s some truth to that but of course it’s an over simplification.  I used to work for Andersen Consulting (for > 8 years) – mostly building computer systems for large companies in the fixed telecoms, mobile and Internet sectors.  On every project in which we worked it was clear that there was corporate knowledge built up around the organization.  It occurred to me that it was my job to find the data, synthesize it, summarize my conclusions, provide options for better decision-making and lead the decision-making process.  Such is leadership.  And VC.  And I learned the skills in my days as a consultant.

After a few years in the business I was used to clients questioning my existence on every new project.  I started telling them, “I’m a tourist in your company.  I don’t know nearly as much about it as you do – you’ve lived here for a long time and I’m quite new.  And as a tourist I’m not likely to stay here very long so you’ll have to live with the results.  But like any person living in a city for a long time, I find that my clients often stop visiting certain attractions that used to excite them.  They stop questioning why things are the way things are and just accept the status quo.  And the great thing about being a tourist is that I get to visit many places and can bring some good ideas that I’ve seen elsewhere that you may like.  But let’s be clear – I’m only a tourist.  You really know your town.  And if I’m going to help a bit while I’m here the better I know ‘what’s what’ the easier it will be for me to help and be on my way.”

I must have given versions of that speech 20 times or more.

And it’s true.  I found that I was always more curious about issues like “why do you charge for your web hosting services this way when newer non-incumbent players do not?” or “What would happen if we didn’t bid for 3G services and in stead built our network on 2.5G until the technology matures?”

I tried hard, though, never to confuse my curiosity with real wisdom.  I saw it as my job to probe, challenge, question, analyze, present facts and summarize options but in the end to leave it do the client to own the results.  I wanted to push them to make and own decisions by showing them the data and the decision tree.  Forceful.  Persuasive.  Even combative.  But in the end they decide.

And that’s how I view VC today.  I’m a tourist in your company.  I get to ask all of the awkward questions about why you do this, that or the other.  I’m there to spar with you precisely because I’m not ensconced in the details on a daily basis.  If you’re not engaging your VC this way you’re losing out.  You should be presenting data to your VCs and framing the decisions that you’re trying to make into cogent frameworks that will allow a group of experienced people to help you with decision making.  I have often found entrepreneurs want to present the positive progress of the company to impress the board rather than engage in debate about how to make things better.  It takes self confidence to do the latter.

And you should be pushing to find out how things are done in other “cities” or better yet get them to help intro you so that you can also visit those cities on your own.

And don’t limit it to VCs.  Find other tourists to visit your company.  Find ways to get friendly people to do peer reviews on parts of your business and offer the same in return.  Let them see data.  Let them meet your staff and ask awkward questions.  Don’t try to defend every process you have or every design choice.  Your job is to hear how it feels for a tourist who’s visiting – you can later decide whether their contributions were insightful.  The best major changes I made to my first business were from people who asked “awkward” questions.

And similarly be careful of the reverse.  Know that a tourist who loves your cities star attraction may not really know what it’s like to live with your key features on a daily basis.  They might really not be a good proxy for the “voice of the customer” even though all VCs think that they are (myself included ).  I think one of the greatest weaknesses of boards is that they are tourists by definition and sometimes confuse their observations and advice for actionable insights.  For the most part, boards challenge and manage teams need to interpret the tourist comments and decipher how to apply them (or whether to push back against them with better data at a later date).

Of course there are times where a board’s voice is gospel: mergers, raising capital, replacing the CEO, etc.

But for most issues VC’s and boards are tourists.  And you don’t only want their money – you want their insights.

Let’s say you’re a college student who wants to be an entrepreneur. Let’s also say — for one reason or another — you don’t want to jump in and dedicate all your time to an idea right now. Maybe it’s money, maybe it’s confidence, maybe it’s the lack of available co-founders or some combination of the above. From what I’ve seen, most people in this situation do one of the following:

1. Join a big company and plan to do your startup later.

2. Join another startup as a non-founder.

3. Go to graduate school.

I have a different suggestion: go into sales. Take a commission-heavy sales job at a company that gives you the ability to source and manage your own leads with as much independence as possible. Find a larger company in your space of interest and just go learn to sell things there.

The ability to sell is the most underappreciated startup skill. In the get-bought-by-Google model, you just have to be able to code and (possibly) market a product. Ideally, you build something so awesome it just takes off by itself. Sadly, this rarely happens. Instead, almost all companies have to sell something at some point in their lives. And this isn’t a bad thing. It can keep your company (and you) independent of venture capitalists and other control-seeking investors. Having a fundamental understanding of the psychology of sales and the sales process can be the difference for your startup.

Also, sales isn’t IBD analyst-style slave labor. There’s literally no cap on the amount you can make, which means that you can potentially bring home a decent six figures a year if you’re really good — way more than most first- or second-year analysts in investment banks. The hours can also be ridiculously flexible; if you’d like, you can work hacker hours.

For whatever reason, sales jobs are off the radar of most Ivy League college graduates. Since a nice degree doesn’t mean anything in sales, little to no recruitment is done on campus. And Ivy League undergrads love to be recruited.

There’s no better training for being an entrepreneur than actually starting your own company. But if — for whatever reason — that’s not feasible, sales is an good and woefully underappreciated route.

Jun 30, 2010 -

Call it the Catch-22 of startup life. 

You need talented employees to help grow your business. But without enough cash flow, you can’t get the money to pay them.

“It’s the dilemma every early-stage company faces,” says Rosalind Resnick, CEO of Axxess Business Consulting in New York.

Certainly, you might be willing to work 24-7 with little financial reward for many months. But you can’t expect an employee to do the same.

So how can you compensate the top-level talent you need to boost your business? Consider these steps. 

Offer them stock. Of course, the most obvious approach is to supplement salaries with company equity. If employees feel confident the business will take off—and those who don’t shouldn’t be working for you—then they’ll probably be willing to accept lower-than-market wages, as long as they’re getting stock.

Trouble is, the tack is only useful for certain types of businesses—the kind backed by outside investors that are likely to go public or be bought by a company with deep pockets. As a result, “It’s not a strategy many small businesses can employ,” says Resnick.

Another tack for companies that intend to remain private is to offer so-called phantom stock. In this type of plan, you provide employees with shares in the company. But, unlike stock awarded in publicly traded enterprises, there are no voting rights and the value increases only as the company’s value grows. More important, you can structure it so that vesting takes place over, say, a five year period, giving your firm time to grow.

Tie salary to meeting milestones. When Paul Emery co-founded a Campbell, Cal-based telecommunications company four years ago, he promised employees a salary that was 60 percent of the market rate for compensation. But, he also agreed to raise compensation substantially and at regular intervals, as long as the company met such milestones as alpha and beta test completion and successful fund-raising. 

After about a year, according to Emery, employees’ salaries were raised to 80 percent of market rates and, six months later, to 100 percent.

Hire interns. It’s a good way to grow your own talent at a low cost. By hiring promising employees who are still in school or are recent graduates, you can bring on board talented people with a lot of potential—at a price you can afford.

Look for people with a cash cushion. In these times of high unemployment, a company with enough growth potential might be able to hire a few qualified employees willing to work for a very small salary temporarily, because they believe in the company’s potential.

But, you need to be sure they’ll be happy with the arrangement—and able to afford it.

In some cases, you might want to protect yourself by hiring people with sufficient financial wherewithal. Take Bradley Will, owner of a one-year-old startup, Socialspin.com in San Francisco. He hired several high-level employees, including the former president of a successful mid-size company, who were willing to accept a salary of $2,000 a month, with the promise that their compensation would increase once Will was able to raise enough money from investors. 

“We set the salary ahead of time, with the understanding they’ll get that when we’ve brought in the capital,” he says. “But I knew it wouldn’t work unless they were able to wait.”

Forget about hiring full-time staff. If you just don’t have the cash to pay a regular staffer, you should consider using independent contractors. For example, instead of hiring a salesperson, you can turn to manufacturers’ reps. They won’t receive a salary, but will take perhaps 20 percent of every sale. 

For her part, Jennifer Silva, founder of Sign Up for Camp in San Francisco, uses mothers who are re-entering the job market as salespeople and pays them entirely on commission. “Not only do they know the local camp industry well, since they’ve sent their own children to camp, but it’s also a way for them to get back into the workforce,” she says.

If you decide to use independent contractors, be careful. State and federal agencies are cracking down on the misclassification of independent contractors. So, you’ll need to make sure you’re following appropriate tax and labor regulations.  

On July 4, 1776, some of the greatest entrepreneurs the world has ever seen took action, forever altering the history of the world. The founding fathers of the United States of America signed the Declaration of Independence, beginning a start up of an entire nation. Like entrepreneurs today, they too faced difficulties, although a bit different and more life-threatening, such as a military super power sending their army to muscle them out. Although they weren’t starting a business, they were taking huge risks to create a better life for themselves and their loved ones, a characteristic of the American ideal, an ideal that is probably best represented in the form of entrepreneurism.

America has always been a land of opportunity, where the motto of “pulling yourself up by your bootstraps” is widely used and believed in. Starting your own business has always been an option, and has been encouraged throughout life. Lemonade stands are a childhood memory that many cherish, the kids in class who had their own business of selling candy at lunch were always admired, and now today, even in a time of recession and despair, people are tapping into American ideals and starting their own businesses in record numbers.

It’s being reported that between 500,000 to 1 million new businesses were started last year, a stunning fact that seemingly stands in defiance to the economic times. People are becoming disillusioned with the idea of becoming lifers to a corporation, realizing that the dream promised to the last generation is now dead and gone. Instead, young dreamers are following their hearts and becoming their own source of financial security, becoming truly independent.

Young entrepreneurs are finding problems that need solutions, fixing them, and showing the world that there are options other than becoming a subservient slave to the corporate machine. A prime example is Daniel Newman, jumping at the opportunity to fix the “death grip” problem for the Apple iPhone 4 by making his own product and selling it at a third of the price that Apple is charging.

People are now opening franchises, restaurants, clothing stores, and other businesses, with the hopes that not only can they help their community, but to help themselves in the process. They invest in buildings, point of sale systems, products and employees, taking risks that many would not, all for the hopes of a better life and leading the American dream. Many believe that in order to succeed you need to be initially wealthy, that social mobility isn’t a possibility. It’s true that having that privilege will help, but having prime location office buildings, cutting edge pos systems, and all the starting capital you’ll need can’t replace the drive and will that someone with a dream has.

Independence Day just passed, and it feels great to know, that after centuries of wear and tear the ideals this nation was built on are just as strong as ever.

Andrew Sale is an expert writer on phone systems based in San Diego, California.  He writes extensively for an online resource that provides expert advice on purchasing and outsourcing decisions for small business owners and entrepreneurs such as VoIP service at Resource Nation.

If you took the time to sit down and sift through the US Census Bureau data, you’d see that over the past few years, entrepreneurs are starting new businesses at an unprecedented rate.  Consistently, the number of existing businesses at the end of the year has increased by between 500,000 and 1million.

That means that before subtracting out the number of startups that fail, the gross number of new businesses started is actually much higher than 1 million per year.  And that’s in the U.S. alone.

Why are entrepreneurs starting new businesses in record numbers?  The first chapter of my new book, Conquer the Chaos, makes the case we’re in an “Entrepreneurial Revolution” and it’s happening due to five big reasons.

Corporate disillusionment.  Downsizing, outsourcing overseas, pension scandals and general corporate irresponsibility have left employees disillusioned and embittered.  The antiquated notion of going to college, getting a job and becoming a “lifer” was the ideal of the baby boomer generation.

Today’s worker holds no such ideal.  The old notion of getting a stable job with a big company has eroded, leaving many workers to feel the security of a corporate job is not so secure after all.

A technology power shift.  The Internet has changed everything.  You no longer need a bricks-and-mortar shop on which to hang out your shingle.  With your product or service, a quick website, some online advertising and an email marketing program to keep your followers apprised of your activity, you’ve got the makings of a start-up business.

All the research you need is at your fingertips.  And you can compete effectively with long-established businesses.  The Internet has simply torn down the barriers to entry and now entrepreneurs are able to jump into the game without amassing a small fortune before they get started.

The promise of overnight success. As aspiring entrepreneurs look around, they see friends, acquaintances, high school rivals and even past (less-savvy?) co-workers making it on their own.  Of course, they don’t typically see the blood, sweat and tears that went into the successful venture because that’s not human nature.

Instead, human nature sees what looks like an overnight success story—and that is a seductive siren call to the disillusioned corporate worker who’s constantly thinking, “If Bob can do it….”

An expanding work force.  Speaking of those baby boomers, many of them are entering the ranks of entrepreneurship.  The Kauffmann Foundation has done a bunch of research on entrepreneurs and, interestingly, their research shows a large contingent of first-time business owners are between middle age and the golden years.

It makes sense: Baby boomers now have a longer life expectancy, they frequently have a nest egg they’ve accumulated over the years, they’ve finished their “career” and they want to try their hand at an entrepreneurial venture they’ve always dreamed about.

The recession.  This is a biggie that’s been driving a lot of entrepreneurial activity over the last couple years.  Unfortunately, we don’t yet have the Census Bureau data on this period of time, but I’m willing to bet it will show an increase in the number of businesses started.

My daily experiences tell me this is true.  My company works with entrepreneurs and we see droves of people who’ve been forced into entrepreneurship.  They lose their job, get a severance package, take a little time to think about what’s next… and then commonly start a consulting practice or some sort of solopreneurship.  And frankly, I believe this is a great thing for our economy—to have more entrepreneurs out there creating value, filling in voids in the marketplace, conjuring up new products and services that just might become the next big thing when the market turns around.

Sure, this new breed of entrepreneurs will take their lumps and it won’t be as easy as they thought, but many will find their freedom. And that freedom is the one thing every entrepreneur seeks: freedom in terms of more money, more time, more control over their lives and more purpose in their work.  I love seeing entrepreneurs take the plunge in pursuit of their freedom.  And I believe it’s exactly what this country needs to break out of a sluggish economy.

Photo by hufse via Flickr