How to get Momentum when Fundraising

The most powerful tool you have in closing an investor is fear of missing out (FOMO). FOMO only occurs when you have momentum in the round. Once you get that momentum, you start closing investors and a virtuous circle begins, increasing FOMO and carrying you to a great round. Here’s three ways to build momentum when you’re fundraising for your startup.

Low Round Targets

Setting a low round target does 2 things: first it broadens the number of investors who can participate in the round, increasing competition. Second, the round looks almost closed with even a small amount of investment. You can always increase the size of the round later as demand catches up. The only cost of this approach is creating a credible business plan for each successive target.

For example, you only need one investor with $50k to be half full in a $100k round. Conversely, if you tell an investor you’re raising $3M and have $50k raised, the situation seems less attractive. When you start getting yeses you can increase the size of the round in stages and still have the majority raised at all times.

Reserving Space

You can also build momentum by getting smaller investors to earmark parts of the round. This usually comes in the form of new, angel investors and existing investors participating with their pro rata (or more). Ask the investor if they’d like to reserve a spot while they decide? If you get a verbal yes, you can’t give that space to another investor and thus more of the round is now ‘earmarked’, ‘spoken for’ or ‘wrapped up’.

For example, say you’re raising $500k and currently have $150k committed. When talking to a new and interested investor, Investor-A, you ask their usual check size, which is $100k. Next, ask if they want you to hold that space for them while they decide, as the round is filling up. If Investor-A says ‘Yes’, then going forward you can’t offer that space to any other investors. Thus, your round is now half full.

Maybes are worse than Noes

One of the hardest parts of fundraising is hearing noes. Your fear of these noes can hinder momentum. All great companies get a lot of rejections during fundraising and being willing to push for a decision will actually help your process. Leaving a potential investor for weeks in the maybe column will almost certainly result in a no. Follow up regularly with updates but don’t blast everyone with fake success to push for an immediate decision.

To avoid hassling a deciding investor without cause, your follow ups should be focused on good news. Provide updates on new investors, or reservations, in the round, customer wins and product launches. At the end of each email you can ask if they’ve decided or need anything else. Eventually, you have to give a deadline to avoid dragging out the conversation too long. Even if that leads to a ‘no’, it’s still progress.

Hi Joe,
Wanted to quickly share some great news, the team closed Hooli today and the contract should be signed next week. Let me know if you have any questions or if you’ve come to a decision?

Raising money for your startup is a grueling test for any founder but it gets better once you have momentum. Making use of these strategies makes it easier to get started and increases your chances of getting the round you need.

Thanks to Duncan Davidson, Pejman Nozad, Mar Hershenson and Kaego Rust for reading drafts of this.

Cofounder & CEO @SendHub (Cameo Global), Faculty @AlchemistAcc. Alum@YCombinator@UniofOxford. Prev: @Klout (Lithium), @OneRiot (Walmart). IG: ashrust

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10 Due Diligence Points When Selecting a Startup Accelerator

Last week Samir Kanji (First Republic Bank) published a blog with a list of the accelerators ranked by graduates who received more than $750,000 in funding.  Cromwell Shubarth of the San Jose Business Journal pointed out a change in the rankings for the Alchemist Accelerator.

Game Changers Silicon Valley had a chance to catch up with Ravi Belani and Danielle D’Agostaro from the Alchemist Accelerator a few weeks ago.  This interview, conducted for the Game Changers Silicon Valley show, as part 1 of a two part show.  Here is a 2 ½ minute segment from the interview with the Alchemist Accelerator.

Accelerators provide an Education in Entrepreneurship

Accelerators are very similar to educational institutions, and it is important to separate “the signal from the noise” to allow company to identify the best fit among the many accelerators.

The Alchemist Accelerator admits only companies that monetize from the enterprise and who have established technical teams.

A focus on the enterprise allows companies to identify customers and generate revenues from the enterprise which improves the viability of the startup.

The classic enterprise entrepreneur is the person with 10 years of experience, although there are very disruptive companies who have never worked in the enterprise space.

Valuable learning can be gained from the mentorship via coaches and experts, every companies has a CEO coach, a Sales Coach and Goal coach plus domain knowledge experts.

There are five venture capital investors and five corporate investors who provided the working capital of the Alchemist Accelerator.

Both segments of the Alchemist Accelerator can be viewed at the link for Game Changers North America

Take-away considerations for entrepreneurs:

Not all accelerators are created equal:

Founding teams should review and qualify accelerator program in your geographic area.  Most of this information can be taken from blogs and articles.  Some of the areas for a general assessment should be:

  1. List the terms of the accelerator program including program duration, working capital provided, common stock contribution to the accelerator, physical work space, frequency of meetings, and training sessions such as pitch training and business plan reviews.
  2. What is the reputation and value proposition of the accelerator?  Most accelerators have a mission statement, a primary value proposition and an operating plan ( number of classes per year, number of companies per class, and a list of participating investors at their demo day)
  3. Does the accelerator have domain expertise via mentors or coaches in the markets or the technology areas being addressed by the startup?
  4. Does the accelerator do an in-depth review and qualify companies applying to join the program?
  5. What is the level of investor interest, traction and engagement with companies during the program, ideally there should be engagement well before the demo day.

Once a startup company narrows the list of accelerator programs that would be a fit, the founders should conduct their own due diligence on the accelerator.  The following our list of starting points:

  1. Contact companies who completed the program, including both companies who received follow on funding and those who did not receive the follow up funding. Speaking with co-founders of companies who did not receive follow on fundingwill provide insights into the perceived reasons funding was not obtained as well as help verify the quality of the program.
  2. Review the alignment of the accelerator’s domain and mentor expertise to your company and the founder.
  3. Review and evaluate if the listed investors who invested in previous graduating companies are the appropriate type of investors for your company.
  4. Review the connection and relationship maintained by the accelerator with post graduate companies, can a company who has completed the program continue to draw upon the resources and advisors connected to the accelerator.  
  5. Review published videos from the demo-day presentations.  These publicly available sources provide insight into the type, status ( pre-revue, revenue) and quality of the companies in the various startup accelerators. Some accelerators have a webpage listing their demo day presentations, or do a quick search on YouTube for “accelerator_name demo day”.


The first decision is to determine if an accelerator will materially promote a startup company's progress both in development and execution of the business plan and engagement with potential investors. 

Choosing the wrong accelerator can result in a disappointing experience.  All accelerators will quote metrics on the average follow-on funding received as a result of the program.  However, the average funding percentages for companies in past programs represents only one data point. Conducting additional due diligence can significantly improve your chances for the right decision as well as a successful engagement and outcome.

For more Game Changers Silicon Valley shows:

Facebook: Game Changers Silicon Valley

Twitter:  GameChangersX

Jim ConnorExecutive Producer at Game Changers Silicon Valley; Angel Investor

Two Questions, One Answer

In 2004 I published my first book, The End of Software. At the time I was the President of Oracle On Demand, so many people found it a curious title. In the book I discussed the fundamental economic reasons software should be delivered as a service. As an example of new startups in the field I highlighted four companies: VMWare,, Netsuite and OpenHarbor, which were all pre-IPO companies at the time. While I didn’t get all four correct, three of the four have gone on to be major companies driving the second generation of enterprise software.

When I left Oracle, I started to wonder what was next for enterprise software. We’ve built CRM, ERP, HR, supply chain and purchasing software for on premises deployment and now all are being delivered as a cloud service. While delivery as a cloud service provides both lower cost and higher quality, the functionality has remained largely the same.

So, are we at the end of innovation for enterprise software?

In 2010 I started a cloud computing class at Tsinghua University in Beijing. The Amazon team was kind enough to give me $3000 worth of AWS time for the students to use. I showed up in class and told them it would buy a small server in Northern California, Virginia or Ireland for 3 ½ years. They looked bored; after all, they could also get a server in China for 3 ½ years. Or, I said, $3000 will buy you 10,000 servers for 30 minutes.

So, what could you do with 10,000 servers for 30 minutes?

Like you, I’ve heard the buzzword IoT for quite a few years. I mostly ignored it because I wasn’t sure why my toaster should talk to my coffee maker. But a few years ago I invited Bill Ruh, CEO of GE Digital, to deliver a guest lecture at my Stanford class and his talk raised my curiosity; so a year ago I decided I needed to learn what was going on in industrial IoT, or some would call enterprise IoT. With the help of a crowd of at least a hundred experts, I documented nearly twenty different case studies spanning all of the major industries: power, water, oil & gas, agriculture, healthcare, construction and transportation.

Mid way through building all of these cases the answer to my two questions became obvious. While second generation enterprise software has helped reduce the cost and improve the efficiency of some enterprises it has done little to transform our physical world. With the decreasing costs of sensors, compute and storage we now have the ability to create a more precise planet. And unless we all move to Mars, we’re going to need to produce energy, water, healthcare and food more efficiently, more precisely. And if you consider that all developing  economies require fundamental infrastructure, shouldn't we engineer next generation healthcare, power, and agriculture using powerful new IoT software? In the developing economies we skipped land line telephony, will it not be possible to skip ahead in these other critical infrastructure areas?

A few weeks ago we launched my new book: Precision: Principals, Practices and Solutions for the Internet of Things in London on the River Thames. The book is written for anyone who wants to be a student of the subject, whether you're a focused on technology or business.

The first part of the book divides the technology principals into five major areas. We discuss the things or machines themselves, how they are connected, what is done to collect information, how you can learn from things and finally what can be done with what we’ve learned.

While many are implementing IoT solutions using current technology, it should be recognized most of the technology to date has been built for Internet of People (IoP) applications. But things are not people. For instance, there are many more things than people, things can be where people aren’t they have more to say, things talk much more frequently and things can be programmed, people can’t. While there are numerous technology challenges and opportunities within successfully implementing industrial IoT solutions, this distinction has great relevance to those enterprises that build machines (e.g., gene sequencers, combine harvesters, wind turbines) and finally on those that use these machines (e.g. hospitals, farms and utilities).

The second part of the book contains fourteen case studies that span the major industries of power, water, healthcare, transportation, oil & gas, construction and agriculture. You'll meet Nick August, who is a farmer on the Cotswalds, learn about how an autonomous train will run from the north of Australia to Perth this year and how you can use machine learning to predict electric grid failure.

Some companies have already begun to make the investments in industrial IoT. GE Software, for instance, was founded in 2011 with a $1B investment. CEO Jeff Immelt has declared that GE needed to evolve into a software-and-analytics company lest its machines become commodities. Immelt has set an ambitious target of $15B in software revenue by 2020. PTC has taken an M&A path and invested over $500M in a series of companies, including ThingWorx, ColdLight and Axeda. On the venture side, you may not have noticed but Uptake, a Chicago-based IoT startup, beat Slack and Uber to become Forbes 2015's Hottest Startup. They raised $45M at a $1B post funding valuation.

I’ll let you be the judge of whether it’s time to invest in IoT. But whether you’re a student at Berkeley, someone who works for an enterprise tech company, a venture capitalist, a CEO of a textile machine company, or the Chief Innovation Officer of a hospital, I’d encourage you to make Precision: Principals, Practices and Solutions for the Internet of Things part of your summer reading list and start exploring how you’ll be part of creating a more precision planet.

Timothy Chou, Lecturer at Stanford University; Chairman, Alchemist IoT Accelerator; Former President of Oracle on Demand

Use Hacker News to Source Engineers

Hacker News can be a great source of finding engineering talent for your company. Here are few ways I have found on HN to source great talent for my own startup:

Ask HN: Who is hiring?

“Who is hiring” is a monthly thread where companies can post technical job openings free of cost. A new thread is featured on HN homepage on first weekday of every month. For example, this is the “Who is hiring” thread for July 2016.

You should also check out a this cool interface for Who is hiring threads byMicah Wylde.

Ask HN: Who wants to be hired?

Unlike “Who is hiring”, where companies post job opening, “Who wants to be hired” is a monthly thread where active job seekers post about themselves. Majority of job seekers are remote workers but you can also find candidates who are willing to relocate.

Here is the google link to find past threads for “Who wants to be hired?”

Ask HN: Freelancer? Seeking freelancer?

This monthly thread is dedicated for freelancers only. Here is the google link for past threads.

Bonus tip: follow “Show HN”

Show HN is a place where hackers post their interesting projects and showcase their skills. Check that space regularly to connect with smart people who are working on technologies relevant to your company.

Why Startups Fail

“90% of startups fail.”

You’ve probably heard that before. But what does it mean?

Over the past couple years, I’ve :

  • been the founder and CEO of multiple startups
  • raised money
  • been acquired by a public company
  • participated in the world’s top startup accelerator programs,
  • failed and watched others fail
  • succeeded and watched others succeed
  • and ate a lot of ramen noodles #truth

Given my experiences, I thought it would be valuable to share my views on why startups fail.

If you understand why startups fail, you will be more likely to succeed.

In school, we’re taught history to avoid repeating the same mistakes. Similarly, as entrepreneurs (practicing or aspiring), we should understand why startups have failed so we can decrease our own chances of failure. After reading this, you will understand the main reasons startups have failed in the past, making you more likely to succeed.

Defining Failure

Startups fail when they can no longer operate -> Startups can't operate when they run out of money.

Understanding this may seem basic, but it’s important. I’ve heard many times that, “the reason a startup fails is because they run out of money.” That’s not a reason. That is the result.

Failure = No Money.

If we can agree that in most cases startups fail because they run out of money, then to truly understand startup failure we need to understand why startups run out of money. Make sense? Great, let’s dig deeper.

Top 3 reasons why startups run out of money

Lucky for us, all we need to know is the top 3, because those 3 reasons account for over 80% of startup failures. I definitely just made up that statistic, but it’s probably in that ballpark.

    Reason #1: Building something nobody wants

Over the years, it has been clear that if a startup doesn’t build a product/service that people want, they will not be able to generate revenue.  

Revenue = money; no revenue = no money; no money = fail.

In one of Paul Graham’s famous essays, he wrote about this topic and why startups need to “make something people want” ( It seems so obvious, but in reality it’s not.

Entrepreneurs need to think differently and see the future. While doing this, many assumptions are made because there isn’t enough information to make decisions - if there was enough information, someone else would already be doing it. One of the worst assumptions entrepreneurs make is that people will want their product. The problem is that this should not be an assumption, instead, it should be a hypothesis. Having a hypothesis that people will want your product means that you need to prove it. The biggest mistake entrepreneurs make is: they don’t prove people want their product. What ends up happening is founders skip this step and go directly to building products, hiring people, finding partners, then trying to sell. “Trying” is the key word here, because after they realize they can’t sell, it’s too late and they’ve run out of money.

Learning Point #1: Prove that people want what you’re building. 

Before building anything, prove to yourself and your team that people actually want what you’re building. A trick I’ve learned over time is to start with designs. Create your designs on Photoshop or Sketch and use a tool like InVision. This will help you simulate your product without having to write a single line of code. It’s easier, faster, and cheaper to iterate on designs than code.

    Reason #2: No Focus

From my experiences founding and mentoring dozens of startups, I’ve seen that focus and prioritization are necessary to achieve success (and avoid failure). Again, doesn’t this sound obvious? It’s not. In a startup, you’re being pulled in all different directions. Founders think they have to do everything at once. They are meeting investors, partners, mentors, customers, building products, figuring out a marketing strategy, going to all the conferences, and blah blah blah...

In reality, there are only 1-3 things at any given time that actually matter. Ideally, you’ve identified and prioritized those things, then distributed the responsibilities across your team. Time is against startups, so it’s important to focus on what matters and optimize your time. Many startups make the mistake of prioritizing raising money from investors. This is because that’s what everyone else is doing and it seems like the cool thing to do. They end up wasting so much time because the company isn’t ready to raise money. Either they don’t have a good product or have low traction, and often they don’t know why they’re raising money in the first place. In the end, they waste months talking to investors, and in that time they could have been proving that people want their product, building it, and selling it.

Learning Point #2: Prioritize, then focus.

Figure out what are the most high value areas you need to focus on. Here’s a prioritization order that applies to most B2B startups:

1) Prove people want what you’re building

2) Build it

3) Get early customers

4) Raise money

5) Hire smart people

6) Sell to more customers

7) Raise more money

8) Hire more smart people

9) Make your product better

10) Sell to more customers

At any point, you should know what stage you’re at, and therefore, what you should be spending most of your time on. This focus will lead to stronger execution and catalyze your growth. Without focus, a lot of money will be wasted and chances of failure will be higher.

    Reason #3: No Passion

A lot of people have this notion that starting a company is the dream. It’s no surprise given all the recent exits and IPOs. Startups have become sexy. As a result, I’ve seen many people start a company because they think they’ve stumbled on a great idea. Heck, I even did this back in university.

Whenever I meet a founder, I ask: “why did you start this company?”. This is the single most important question I’ve learned to ask founders. If you asked me that question when I started my first company, I would have said, “because I think it’s a good idea and the market is huge!”. The problem is, I had no passion. That company failed. There was nothing driving me behind the idea. Similarly, many startup founders I meet have no real passion or a deeper reason why they started their company.

If you’re starting a company without passion for the problem, then during the hard times you will be less motivated to power through them, and your chances of failure will be higher.

Learning Point #3: Do something you’re truly passionate about

I heard this saying somewhere: “Attitude is Altitude”. In my personal experiences, I’ve found this to be true. When you’re faced with hardship, either professionally or personally, staying positive will always increase your chances of success. It’s easy to get mad, depressed, and/or stressed, but try to control your emotions and stay positive by remembering why you started in the first place.

Having real passion is essential to get through hard times with your company. To get through the hard times, you need motivation. I’ve found that passion is the strongest motivator. When founders are extremely passionate about the problem they’re tackling, they figure out how to solve the issues at hand. The best motivators I’ve seen are:

- The founder(s) experienced the problem themselves

- The founder(s) believe in a future that may not exist unless they create it

- The founder(s) have close family and friends that have been affected by the problem

Putting it all together

Whether you’re working for a big company, thinking about starting a company, or already founded a startup, it’s worth reflecting on the lessons we have learned from past failures.

1) Build something people want, and prove that they want it.

2) Have focus at all times by prioritizing high-value initiatives.

3) Be real with yourself and do something you’re truly passionate about.

The interesting thing is, these 3 areas also apply to big companies. But, instead of the companies failing, individual products fail. There are multiple examples of products failing in big companies because they didn’t build something people want, or they lost focus. Learn from the past, make new mistakes, and remember, "Attitude is Altitude".

Lastly, Snapchat.

I’ve found that Snapchat is a great way to talk about these topics. Everyday I try posting interesting content on my Snapstory. Don’t wait for my next post on LinkedIn, follow me on Snapchat. Add my username: nav1d

By adding me on Snapchat, you can watch me talk about a variety of startup topics. In the past, I’ve talked about Marketing & Sales Tactics, Raising Money, and Staying Motivated. Add me and share with your friends and coworkers.

#learnfromfailure #startups #innovation #product #studentvoices #leadership #entrepreneurship #businessstrategy #bigideas 

Picks — What I’m Spending Time on Now

I’ve been having a blast since we sold StackStorm to Brocade.

As promised in my last post (the 4Ps of Picking), in this post I’d like to share with you a little bit about what I’m seeing in the market.

Like many, I see a greater gulf than ever between the frontier of what is possible and the performance of the average enterprise. You can see this gulf when you measure metrics in terms of operational agility — such as deployment frequency or deployment lead time (time spent in the queue before production).

And you can see the gap in outcomes in studies such as the Puppet Labs sponsored State of DevOps survey here:

One of my favorite (hello StackStorm and auto-remediation!) is that the MTTR for super high performers is 168x faster than average performers.

So with that as context, here are a few of the spaces into which I’m looking:


Given my background having helped create the open storage and software defined storage space, storage is a natural for me albeit one that is under incredible pressure and stress these days in part thanks to too much venture investment chasing what is a large but mature market. I have a bunch of friends and colleagues in storage and am confident in my picking skills in this space.


I’m really proud that Cloudian has invited me to join their advisory board.

Cloudian has a unique offering in the storage space — it is a massively scaleable 100% compliant on-premise S3 cloud that includes far better metadata than does S3 for use in management (thanks in part to an early bet on AWS and Cassandra). They are achieving great outcomes for their customers both by saving them money on object storage (speeds, feeds and dollars per GB!) and, more importantly, by improving the productivity of IT teams all the way up to and including the development teams.

They have spent literally years perfecting their object storage with customers like NTT hosting and tier one financials. And now the word of mouth is spreading.

Cloudian is a much later stage company than some of the others I advise. It’ll be in the news quite a bit in the weeks and months to come thanks to their well deserved accelerating momentum.

System Z:

This is the first of a few stealth mode start-ups I am advising. This one is looking at the coming impact of 3D memory. I cannot reveal much other than to say that putting many many TBs of non-volatile memory next to the CPU at nearly memory speeds is insane and wonderful. By the time this company emerges I’m not at all sure it’ll be seen as a storage company; storage as a space has been utterly transformed and yet storage companies are too often in my opinion stuck in the speeds, feeds and $/TB mindset of the early 2000s.

Machine learning and data science:

This is an incredible area to learn about. There is so much hype and yet also it goes without saying that some of this deep learning stuff is getting awfully useful. I am not an expert here, unlike storage, and yet I’ve made it an area of focus in my networking and learning. I’m starting to grok the various camps in machine learning in large part with the help of many of the companies I mention below. I’m also getting hands on with my limited Python chops. Fun stuff.

My sense is that those companies that best focus their AI or machine learning on specific pain points will flourish and that many of the opportunities for platform companies that provide for example “data science as a service” have faded away.

With that in mind I’m extremely excited to be supporting TextIQ. Apoorv, Omar, and the entire team at TextIQ are harnessing cutting edge machine learning to address some real pain points in the legal industry. They have tremendous traction and when you meet Omar and see the demo it is easy to see why — clarity of vision, tremendous energy, high CPU, and yet active listening and more. This a rocket ship on the launch pad; yes — slightly hyperbolic and yet I could not be more bullish on their prospects.

They are hiring — and picking their next handful of proof of concepts and production deployments as well.

I’m also working with Andy and Xavier at Data Fellas. This team has a track record implementing data science pipelines for some of the larger users in Europe and are leveraging this experience to build related software. They are also prime drivers for the now widely used Spark notebook. You can see Andy’s activity on GitHub here:

As the name DataFellas and the tag line “we make offers to data they cannot refuse” both suggest, these guys are fun and a little bit irreverent. More importantly, each time I chat with them I come away more impressed by their understanding of what it is like to deliver an distributed data science pipeline to enterprises. They have spent so much time helping actually drive outcomes for customers that they truly feel their pain.

DataFellas are close to getting their product out in alpha / beta form — and in the meantime are doing workshops with folks doing data science at cost in return for getting additional product feedback. Back in March O’Reilly picked them to do their on-line training “Building Distributed Pipelines for Data Science using Kafka, Spark, and Cassandra” — so their expertise speaks for itself. Get in touch with them now — Andy is speaking in NYC this week and is scheduling chats and at least one training now:

In both cases, as you dig in, you’ll find incredibly energetic teams that have survived rigorous PhD programs and are now doing the real work of building great companies. I’m hugely proud of the progress both teams have already made.

Somewhat in the space as well — although not yet deploying machine learning — is CareerWave. At the highest level CareerWave is sort of like uber for career and business coaching. However it is more than that — we are all told these days to “own our own career.” Ok, but how? Not everyone can afford thousands of dollars a month for a coach and yet study after study suggest that coaching helps lead to happier and more successful people. And maybe more importantly for companies, unhappy people under perform and eventually leave. What if we can apply software and machine learning to the problem? That’s the gold standard of coaching, and it’s CareerWave’s approach — they are signing up betas now and also

There is yet another company in stealth mode that is looking to leverage machine learning for support related tasks. Stay tuned.

DevOps Automation:

  • System X
  • System Y

Yes, sorry, these are two stealth stage start-ups. Each of them intends to help enterprises better measure and automate their operations — and so at a high level they may seem like the Nth monitoring or orchestration or continuous delivery solution. And yet, each are different in part by explicitly focusing on enterprise adoption as opposed to primarily on community usage. The DNA of these companies, much like StackStorm, merges deep DevOps experience with company building and enterprise operations experience as well.

The founders of both of these systems are already gathering around them an incredible team and some great early adopters as well. I’m bullish on both. And I will share more as their founding teams are ready for me to do so.


I’m now spending about half of my time meeting new companies, attending meet-ups and so forth. The other half is split between helping existing companies and doing some hacking and preparing for various Spartan races.

A couple of other machine learning related companies I’ve just gotten to know are again characterized by brilliant technical teams that are drilling into specific pain points. I think the entire team at Alchemist Acceleratordeserve a lot of credit for helping these teams iterate towards product / market fit quickly — while also shared a lot of otherwise very hard earned knowledge about company building. While I’ve just gotten to know these companies, I think they are both interesting:

  • DataCulture — here Karthik and team have drilled into a specific pain point in ecommerce that they are addressing with AI powered software and services. They are about 5 days away from revealing their MVP here:
  • — Russell is a well known agile data scientist — after all he wrote the O’Reily book of that name — with a track record building out such capabilities at LinkedIn and elsewhere. He’s now applying and extending his capabilities in order to drive waste out of the sales and business development processes.

If you are interested in someone like me helping you out — or at least hearing you out — please do get in touch. My network of friends and of people that seem to trust me has expanded quite a bit over the years. I’m looking for founders and later stage companies that could use my particular insights, relationships, and drive.

Speaking of drive, one thing I’ve learned since selling StackStorm is that I’m definitely not done yet. I’m having a blast and feel every bit as competitive as I ever have.

Community hackathon:

Last and likely least I’m also shooting for some upcoming hackathons to test and stretch my Python skills. Here I’m most interested in apps that help support community engagement and that shine a light on our governments. The deeper I dig into my local government the more I see the need for transparency and innovation.

I’m also proudly volunteering time as a member of the Vestry at St Matthew’s Episcopal in San Mateo. It is a warm and welcoming community with inspirational leadership.

My ask for you is — what am I missing? What do you think about my areas of focus? If you were me, what would you do differently?

Please keep in touch.

3 Reasons to Scrap Your Startup

Contrary to common belief it’s not poor market timing, aggressive competition or a lack of ability to raise capital that kills the bulk of startups. Rather, according to CEOs of failed startups, it’s a lack of market for their products. That’s right—all too often startups burn through their funding, iterating on their big idea, without validating that it solves a problem at a price customers are willing to actually pay. In the enterprise, this is even more critical as early adoption needs to be closely matched with the proper pricing structures.

But even if you’ve hit on a true need in your market, there are still a number of other pitfalls that can be hard for first-time entrepreneurs to avoid. Three of the most common reasons I see enterprise products and start-ups fail include:

  1. Low customer adoption/use. If it takes too much time to onboard, doesn’t resonate with CIOs or your target buyer (which could be the head of marketing, sales, finance, HR) or is too cumbersome for employees to use, it won’t gain traction.
  2. Product is not working as intended. Customers may have initial patience for a few minor bugs, but ongoing problems requiring significant rework can sink your company. This is especially true in the enterprise market, as your product outage could cost your customers thousands or even millions of dollars.
  3. Doesn’t address a top problem of your target customer. No matter how amazing your product is or how well it solves your customers’ problems, most companies only have enough budget to address their top two or three pain points. Creating robust buyer customer personas ensures you’ve done more than just scratch the surface of their true organizational needs, allowing you to prioritize your product roadmap accordingly.

The Road Map for Ensuring Startup Success

Communication is key. At Norwest Venture Partners, we’ve found that it’s important for enterprise companies to start by creating a customer advisory board and involving them in the development of each new product or product iteration. Test and obtain feedback from them in real time, as they use the product and test out your demos, and do a weekly gut check to evaluate how sentiment is trending. Start small and work out the kinks before scaling up to your overall customer base.

By involving your customers in your product iteration, they become more invested in your success. In turn, that means they’re more likely to give you the level of rich feedback you need to take your product to its next level and win over your market.

Some founders worry that they can only keep their clients happy by delivering every product iteration they request, but that’s not the case. If you involve your customers in your product development process, they will see the issues you encounter along the way, and won’t be surprised if it doesn’t ultimately work out. Focus on how you can get them excited about helping to define the roadmap–which may include scrapping some products that won’t keep your product on the path to success and longevity. Your customers aren’t just buying that initial product you have on offer. They’re buying your long-term vision too.  

If you’re concerned that scrapping a feature too soon is going to sink your company, consider the alternative. What if you hold out hope for six, nine or even twelve months and the end result is still the same? By failing to take decisive action, you’ve now wasted resources, money and customer time on feedback for your doomed product. This misstep can put you at a disadvantage to your competitors and even cause you to lose some great people who wonder why you let them sink so much of their time and creative energy into a project that had little hope of seeing the light of day.  

Identifying the Right Market to Disrupt

To be successful, a startup must build products that solve real problems the right way.

“You have to look for new enabling technologies, or major trends, like fundamental trends, that create a wide gap between how things are done and how they can be done,” said Aaron Levie, CEO and co-founder of Box, in his Building for the Enterprise lecture. “Looking back in time to our business, the gap was basically storage was getting cheaper, internet was getting faster, browsers where getting better yet we are still sharing files with this very complicated, very cumbersome means. Anytime, between the delta of what is possible, and how things work today is at its widest. That is an opportunity to build new technology to go solve a problem.”

But even great ideas can fail. So how can you recognize when you’re actually on to a billion-dollar valuation-creating product? In my experience, immersing yourself in your customer’s world is the best way to gain the awareness to spot the real opportunities for market disruption.  For instance, it’s unlikely that Marc Benioff would have had the inspiration, confidence and vision to have moved CRMs into the cloud with the founding of Salesforce without his years of success at Oracle. As Benioff counsels in his book Behind the Cloud,  “Don’t be afraid to ignore rules of your industry that have become obsolete or that defy common sense.”

Although some outsiders have a knack for coming in without prior industry experience and hitting the ball out of the park, most successful startups are founded by someone who is obsessed with creating a better customer experience, who understands the industry’s pain points and daily challenges inside and out. If you can tap into the issues that are driving your customer crazy and causing them to lose sleep while efficiently solving them, the market is ripe for your taking.

- Written by Sean Jacobsohn, Cloud VC | Partner at Norwest Venture Partners

Learn forward: 4Ps for Picking Better Than a VC

This post is, like many a blog, written largely as a bread crumb — a way to track my thinking. In the weeks since closing the sale of StackStorm to Brocade I’ve set off on a great adventure — getting to know many more entrepreneurs and investors while attempting to sharpen my understanding of relevant domains and technologies.

My goal is simple — I want to learn to pick opportunities better. And while doing so I want to help entrepreneurs and learn a lot.

This blog covers the discipline I’m attempting to follow in evaluating opportunities. My next blog will cover some of the opportunities I’m uncovering.


Josh Kopleman from First Round (@joshk) has a great series of tweets recently on the importance of picking for entrepreneurs as well as investors. One of my favorite tweets:

Yes, +100. So how does an entrepreneur pick?

(Please, please correct and expand my thinking here.)

  1. The $1bn bar. Michael Porter in effect.

The trick is to find opportunities that you *know* can create a space or at least become a winner in a space that is large enough that you’ll be worth $1bn with growing revenues in less than 10 years.

OK, once again, how? How do you make that determination? In my case, I write-up 5 forces frameworks. And I have a lot of question marks in the key areas that I seek to fill in through conversations and education. I’m hopeful that these write-ups will themselves become breadcrumbs that will help me and the entrepreneurs I’m supporting.

I tend to drill in on ecosystem and community dynamics because I’ve been somewhat successful in understanding and leveraging these areas. I am extremely confident in my ability to see how hard or easy it will be to get a community and a channel going.

And here is one spot where a VC — who has lots of advantages versus me in picking including an infinite network — does not have something I do have: years of experience in actually doing the work. It is easy for me to go from a) potential space to b) community dynamics to c) relevant partners and d) a team than someone who is looking at many, many opportunities.

The judo I typically try is to define a space and to start to market that in my discussions with potential teammates, investors and users. Also something that has been helpful for me in the past is to think about a tag-line for the space — think of the space itself as a product worthy of positioning.

Once you find such a space — one that you can both help create and that you are confident is worth billions — then claiming leadership of it is pretty straightforward. Think software defined storage and Nexenta or event driven automation (still young) and StackStorm. We were able to seize leadership of those spaces (for better and worse) because I had helped to create them.

2. Personas

While arguably you could subsume a focus on personas as one part of the 5 forces framework, I choose to break these out.

A focus on who are the users, where do they hang out, what do they believe, how are they changing is all important. This does not necessarily mean that you need to be one of them. However you do need to know the secret handshakes. Only by getting inside their head can you become the natural choice for them.

Yep, I’m talking design from the get go. If an entrepreneur pitches me an idea and yet does not engage with me on who exactly is the user and how is that profile changing over time, well, at the very least they need a lot of help.

I’m working with one company that has recognized that developers have become all important to their adoption. And yet they have not yet unpacked what that really means for the self adoption journey from hearing about them through initial usage and support and so forth.

3. People

At this stage of my career it almost goes without saying however the people need to be people I want to spend years with -> I’m going to help them achieve their dreams, will I care about them, respect them, go the extra mile for them and with them?

Also, not quite the same point, but the more I do this the more I understand the importance of taking the time to shake and grow the network to find the penultimate list of experts as teammates and as initial users. If I were thinking about a start-up focused on public government I’d be looking to get on the President’s calendar. And if you cannot get to that level then something is wrong either with the idea, your pitch and positioning, or — your passion.

4. Passion

At some point something should click. For me I imagine betting absolutely 100% of everything on the idea, including the next 5 years of my life. Will I bet my daughter’s college fund on this idea, team, and opportunity? If so then I know I’m onto something worthy of all out effort. If not, then I owe it to myself to not dive in and to help the entrepreneurs see what at least for me is missing. As an aside — note to self — if I don’t chase at least a small percentage of the entrepreneurs away by being too direct and candid, then I’m being too nice and wasting everyone’s time.

For those following closely you might have noticed that this boils down to 4Ps: Porter (i.e. the space and 5 forces), Personas, People (focusing on the team and early user)and Passion.

In the next post I’ll highlight a few of the spaces I’m learning about and companies I’m helping or at least trying to help.

As a bit of foreshadowing, I’m trying to improve my extraordinarily rusty coding skills — doing some python hackery — and am fascinated by opportunities being created by machine intelligence, serverless computing (and other aspects of the AWS effect), non volatile memory, and more. I also think DevOps has a long, long way to go before becoming mainstream, which is both a shame and a huge opportunity. And I’m wrestling in a few cases with whether a company should focus on picks and shovels or whether they should be mining the gold themselves.

- Written by Evan Powell, Founding CEO of Stackstorm and Nexenta, and Advisor / Angel investor in a few Alchemist companies including TextIQ and Data Fellas.

Is it Time to Invest in IoT?

I published my first book, The End of Software, in 2004. At the time, I was president of Oracle On Demand, which served as a starting point for Oracle’s billion-dollar cloud business. In the book I discussed the fundamental economic reasons software should be delivered as a service.

As an example of new startups in the field, I discussed four companies, VMwareSalesforce,NetSuite and OpenHarbor. None of them were public companies when the book was published. Salesforce was still under $86 million in revenue. While I didn’t get all four correct, three of the four have gone on to be major companies driving the second generation of enterprise software.

It’s 12 years later. Some have said that enterprise software is a mature business; CEM, ERP, HR and purchasing software are now all being delivered as a cloud service. So is it the end?

I don’t think so. While second-generation software has helped reduce the cost and improve the efficiency of some enterprises, it has done little to transform our physical world. Power, water, agriculture, transportation, construction and healthcare have barely been touched. But that’s about to change.

Industrial machines or enterprise things are increasingly being instrumented and connected. John Chambers, former Cisco CEO, says 500 billion things will be connected to the Internet by the year 2025. While you may question that, we already know 100,000 wind turbines are connected with the capacity to send 400 sensors’ worth of data every five seconds. So we’re going to end up with a lot of smart, connected things.

Unfortunately, all our connection, collection, analysis, learning, middleware and application technology has been built to support applications for the Internet of People. Things are NOT people. Things exist where people aren’t. Things have much more to say and things talk much more frequently. A Joy Global coal-mining machine has vibration sensors that sample 10,000 times per second. We need a new generation of enterprise application, middleware, analytic, collection and connection cloud service products to build precision machines for mining, transportation, healthcare, construction, power, water and agriculture.

Some have begun to make the investments. GE Software was founded in 2011 with a $1 billion investment. CEO Jeff Immelt has declared that GE needed to evolve into a software-and-analytics company, lest its industrial machines become mere commodities. Immelt has set an ambitious target of $15 billion in software revenue by 2020. GE plans to achieve this through its new Predix software platform under the leadership of CEO of GE Digital, Bill Ruh.

PTC has taken an M&A path and invested more than $400 million in a series of companies: ThingWorx for $112 million, a $105 million acquisition of ColdLight andAxeda for $170 million. On the venture side you may not have noticed, but Uptake, a Chicago-based IoT startup, beat Slack and Uber to become Forbes 2015’s Hottest Startup. They raised $45 million at a $1 billion post-funding valuation.

I’ll let you be the judge of whether it’s time to invest in IoT. But if you’re an early-stage or even late-stage investor, it would be wise to be a student of this area as it promises to create as big a disruption as the second generation of enterprise software. And if you’re a startup with a vision to build products for things, not people, get started. Maybe in 12 years we’ll talk about you like we now talk about VMware, NetSuite and Salesforce.

- Tim Chou is the former president of Oracle On Demand, a computer science lecturer at Stanford and chair of the IoT Track of the Alchemist Accelerator. His book, Precision: Principles, Practices and Solution for the Internet of Things, will be released in May.

5 Metrics to Run Your Business

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

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

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

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

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

- Sean Byrnes is an entrepreneur living in the Bay Area where he is the CEO of a new company called Outlier. Previously, he started a company called Flurry which was acquired by Yahoo! in 2014. In his free time he advises some early stage technology companies and invest in many others.