Mike Collett

Serious Questions Every Startup Should Ask Now

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No I don’t think we’re in a bubble.

Yes I think we’re living in good times.

I believe every startup should dream big, be tenacious, iterate always, and change the world. But whether in plenty or in want, RIGHT NOW every startup on planet earth should take their entire core team to the mirror and ask themselves these questions:

Business Model

· Is our burn rate sustainable?

· Rinse and repeat — is our burn rate sustainable?

· How much money do we really need to solve this problem?

· When exactly do we believe we will achieve customer revenue and profitability?

· If the world falls apart tomorrow, what is the probability our valuation is ahead of itself?

· What would it look like if our next round was a down round?

· If we all had to cut our salaries by 50%, how many people would leave?

Team

· How passionate and intense is our entire team about our core thesis?

· Would our team commit to five years of doing nothing but working on this startup together?

· How have we sacrificed as a team to get here? What else may we have to sacrifice?

· Are we proud of what we’re working on? Does it change the world for the better?

· Why exactly are we here? What drives each of us?

· What mistakes have we made? Find 10 more. What have we learned from these?

· Where does each of us need to be better? How are we better as a team than apart?

· How did our funding round change us? How has not getting enough funding change us?

· Are we leading the company well? Where can we do better?

Product

· How original is our core value proposition?

· What are the strengths in our product? Cut down to top 3.

· What are the flaws in our product? Find 5 more.

· Are we impartially looking at the data about our product?

· What are the current Top KPIs we look at each day? Does entire team know these daily?

· What did we launch too slowly? What did we launch too quickly?

· How often do people say our product won’t succeed? How do we respond to this?

· Is our product risky enough?

Customers

· What do our top customers honestly think about us?

· How would we describe what our ideal customer looks like? Is this realistic?

· Do I find myself using the product because I want to or because it’s my job?

· How much time do we actually spend with our customers?

· How do we listen to our customers? Do they freely share their feedback? How can we enable this better?

Competition

· How hard is it for someone to copy our idea?

· What do our competitors do really well?

· What can we learn from our competition?

Hiring

· Do we have a list of people waiting to work at our startup? Why or why not?

· Who in the past have we hired that is not a fit? How did we handle this situation?

· How many people do we interview before we hire someone?

· When was last time we hired someone who was not looking for a job?

· Is the culture we are fostering an attractive one to the outside?

Hustle

· How strong is our customer/hiring/investor network?

· When was the last time we met with a new investor?

· How often do we listen to advice from other older/wiser mentors?

· How often do people say we won’t succeed? How do we respond to this?

· Are we doing a lot with a little? Even if we raised a large round?

Don’t let the busyness of building your business permanently descend your plane from 30K feet. Be honest with yourself and each other and great fruit will bear itself on the tree.

Loose Lips Sink Ships

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Confidential info is serious business.

I recently sat on a plane coming back from SFO and was forced to listen (for three hours plus) to a vc and startup founder in back of me loudly wax poetic about a wide range of opinions about other vcs and startups. These people should have known better, and knowing some of these companies and investors, some of their info was just wrong.

You know a lot about a startup or investor about how much comes out of their mouth. The above example is on the extreme side of cluelessness, but there are various other forms I see all the time. When you hear things like “just between you and me” or “confidentially” from people you just met, suffice to say you’re not the only one with which they’re shared this information.

Generally people share more than they should out of insecurity. They are trying to impress the other person and sharing “in-the-know” information somehow will earn their respect. Most times this instead backfires as the other side quickly judges that this person can’t be trusted.

Many years ago when I worked in M&A, you could lose your job on the spot if you let out information that was deemed confidential. I was constantly asking myself what exactly I could share with investors about companies that we were representing. I am thankful for the Managing Directors above me who continually put the fear in us about the importance of confidential information.

Nothing rocket science here, but startups shouldn’t:

1) bad mouth their competition or say things they know privately about these companies or product, even if true

2) share information about other startups or founders that has nothing to do with anything

3) talk about their customers openly and their plans (unless you want to lose them quickly)

Investors shouldn’t:

1) talk about metrics or customers of startups in which they’ve invested or seen in other startups’ decks

2) share pitch decks without getting permission from the startup

3) throw around valuations of startups, however “overvalued” they may believe they are

The world has never been flatter — information travels at the speed of light in ways you never thought possible. Just because you know something doesn’t mean you should tell even one person about it. You never know who is sitting within earshot of you.

Stacking Building Blocks (The Software Way)

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In computer science jargon, the “software stack” is software that sits on top of a system’s core kernel (or operating system). The stack gives a feature set to the operating system, expands it function and makes it sing. The more layers a developer adds to the stack, the more enriching the experience and usability of the platform.

Not too long ago, developers had few external tools available to help them build out their product. Want a messaging feature? Build it yourself. Today, the world has changed dramatically. There are now software companies that offer programming teams the ability to skip building a feature set internally and instead just hook into an external platform to customize what you want. This mindset change is one of the most exciting things we at Promus Ventures believe is happening in the software industry today.

As technology continues to reinvent everything, we are quite long this “building blocks” thesis and are investing in teams who focus on a certain customer application layer of the stack and build out a deep feature set for any company to use.

Dedicated Computing

Layer is a prime example of a building blocks company.

Layer enables developers to build their own messaging and communication features into their products so that they own the data that flows through their own product. Instead of having to hire a back-end team to code SMS, photo, voice, video, or video messaging, dev teams can use Layer’s APIs and SDKs to power their existing front-end, or even plug into their existing UI customizable components. There are now more than 10,000 companies currently using Layer’s code to build out their messaging features.

Layer has recently partnered with Mapbox to bring these tools to logistics companies. Mapbox enables developers to insert maps and location data into their stack. One should view Stripe (building blocks for payments) as well as Dispatch (building blocks for on-demand services) — in the same building blocks club.

Further, Layer today has announced the Layer Fund, which invests in fast-growing startups through AngelList utilizing Layer’s messaging products. I expect to see more “platform funds” emerge from other building blocks companies to give yet another reason for startups to use these products and integrate in their communities.

It is mind-blowing that developers today can utilize third-party APIs, SDKs and web and mobile clients to help scale their business and efficiently manage costs. It seems almost silly that startups wouldn’t leverage what these powerful building blocks companies offer. The goal is to own your data and build meaningful analyses and dashboards for your customers, not ship your proprietary data off to someone else’s platform for them to mold and fashion as they wish.

It was never fun as a kid not to be able to reach that cookie jar on the top shelf. A new breed of startups have emerged to bring these cookies down off the shelf so everyone can get their fingers in the jar. Enjoy the goodies.

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