Posts

Sixteen Candles

My First Time (Being Invited to an RFP)

Fond Memories

We all remember our first time….

The excitement!

The performance anxiety!

The sense of accomplishment!

Truth be told, the years have taken their toll on the clarity of the memory. There was a time that I thought I had memorized every beautiful line. But now there is a haziness; the memories are a bit fuzzy around the edges. And so it goes with RFPs. As a vendor, there’s nothing quite so exciting as the first time.

Hello? Can You See Us Over Here?

We had spent years building a product and perhaps nine months selling it. It was hard work. We were early to market, but the companies that joined the online video fray after we did were better capitalized, more beloved by the press, and “on the radar” in a way that we didn’t seem to be. It wasn’t for lack of trying. Our team would rub elbows at events, but we seemed to be perpetually relegated to the audience while the management of our competitors dazzled those around us with their thought leadership from the stage at the front of the room. There is something silently disheartening about not even being an afterthought, but not being any thought at all.

She's All That

Back at the office (which happened to be my bedroom for the first couple of years) I sent emails, made phone calls, and contemplated black magic—anything to be noticed. We were the awkward girl in the high school movie and all we needed was someone to tell us to take our glasses off. And then it happened. It was a major newspaper, our very own captain of the football team, and it was asking us to the dance. “Yes! Yes! A thousand times yes!” we wanted to say, but we knew we’d have to play it cool. “Thank you for inviting us to participate in your RFP for an online video platform,” we wrote. “We’ll review the requirements and respond if they align well with our capabilities.” Just like in the movies, we were playing hard to get.

The invitation to participate in an RFP was—to us—an indication that we had arrived, that our then-tiny startup was on the map. An unsolicited invitation to compete for business felt like validation for our business. And so we took to the RFP with gusto, contemplating each word, hammering home what we could deliver right away and faithfully promising to implement any of the desired features that hadn’t yet made their way into our product. We shared the RFP with a board member who advised us not to get too caught up in the process, but who otherwise admired our well-honed answers.

The Belle of the Ball

He wasn’t the only one who thought that we did a good job responding. We were invited to the next round by the buyer. Who would have thought that the quarterback had dance moves like that? While the DJ spun some Fatboy Slim, he whirled us around the dance floor. Everyone was looking at us.

“Who is she?”

“I never noticed her before.”

“She’s so cool!”

It was so amazing; we were floating!

Unfortunately, the story doesn’t end with our making a long-distance relationship work at our respective colleges. You see, we didn’t get the deal. But in the end, we got something that we didn’t get out of any subsequent RFP: transparency. We learned that their evaluators had determined our feature set was the most robust and our pricing was the most competitive. However, we were undone by our size. The buyer went with the company that had raised more money and had a higher profile. If that meant dialing back expectations in terms of how tightly they could integrate video into their user experience, so be it.

Aftermath

Over the years, we were involved with so many RFPs, they began to blur together. After you do this enough times, the only thing you really remember is waking up in the morning and hating yourself just a little bit. You promise yourself that you’ll never do it again, but the siren call of the RFP is too hard to resist.

Imagine being able to go through the RFP process without feeling like you need to take a shower. That’s what we’re building at https://vendorful.com. Sign up and feel good about yourself again!

Marketing Automation. Because Copying and Pasting Sucks!

First Marketing, Then Automation

Several articles ago, I wrote about my coming to terms with the importance of marketing. I didn’t really even understand  what marketing was during my first startup, but this time around, things would be different. However, although I realized how critically important marketing would be for any venture, I had a very difficult time sorting through all of the technology that has been developed in recent years to make marketing both easier and more effective.

My confusion actually dates back a few years….  My previous company added a leader in the marketing automation space to our client roster. I knew the company and it seemed like every one of their customers was an A-list brand so I was particularly excited when we closed the deal. A few weeks later, I visited their site as I had received word that they had launched their online video library, which we were powering. Everything looked really slick and polished. I was so caught up in the aesthetics that it was particularly jarring to receive an email from someone on the company’s web development team. The email clearly indicated which videos I had been watching and even showed dates and times for when I had previously visited the site. Was I creeped out? No. (Should I have been? Perhaps….) I thought this was amazing.

I reached out to a contact at the company and arranged for a demo. It was my first exposure to marketing automation software. While I wasn’t a marketer by any stretch, I was an avowed “automater.” Case in point: when I was tasked with sending out “save the date” emails a few months before my wedding, I wrote a script that parsed a guest CSV file, customized the greeting, dropped in a message body, and sent the email. So it was surprising to me that after the demo, the only thing I really understood about what I had seen was the marketing part of it.

From Confusion to Clarity to Confusion Again

The product was really confusing, but beyond that, I lacked the context to appreciate – or even fully understand – its value. Fortunately, the market for marketing automation systems has become much more robust. There are tools for businesses of all stripes and all sizes. The competition has impacted buyers in several positive ways.

  1. The tools have gotten much easier to use as the addressable market now includes people who don’t manage large teams and even larger budgets.
  2. The messaging around the value proposition has become increasingly clear as the marketing automation category has matured.
  3. There are options at any number of price points that should work for companies ranging from bootstrapped startups to huge multinationals.

As with most things in life, there are trade-offs. And the big one here is the paradox of choice. Marketing automation has evolved from a narrow niche into a multi-billion dollar category. SiriusDecisions reported in their 2014 “B-to-B Marketing Automation Study” that there was an eleven-fold increase in the usage of marketing automation in B2B companies over the preceding three-year period. In the years, hence, marketing automation has continued to grow in concert with the broader marketing technology, aka “martec” market. If you’re looking for a visual representation of the paradox of choice in building your martec stack, you’re in luck. Scott Brinker (@chiefmartec) has compiled the eye chart of eye charts. So whip out your magnifying glass and give this a look:

marketing technology landscape

You can look at a larger-sized version here .

But let’s not get lost in the myriad tools available for marketers…or even the myriad companies competing in marketing automation. Instead, let’s take a quick look at what marketing automation is and understand some of the key features and benefits of the technology.

Eureka!

At its core, marketing automation gives marketers back their time while simultaneously improving the conversation an organization has with its prospects and customers.

Remember the story about my “save the date” emails? Well, I was basically marketing my wedding. Now imagine that my guest list was a couple of orders of magnitude larger and that different guests found different parts of the wedding particularly appealing. Some want to go because it’s open bar. Others want to support the couple. Still others will go anywhere that there is dancing and live music. Now imagine that I wanted to personalize these emails to some degree such that I can speak to the specific interests of the potential guest. And rather than sending a single email, I was going to send a stream of emails that build the excitement. At this point, I would have to spend a bunch of time writing scripts, hacking together new CSVs, etc.

Marketing automation makes all of this simple. But it also does much, much more. Marketing automation enables you to have a focused conversation with your prospect or customer in a turnkey way. It’s not just a mechanism for sending bulk emails. Rather, it allows the user to apply logic based on data that is collected about the recipients of that marketing message. If, for example, someone who you thought was an open bar aficionado was actually more interested in dancing, a marketing automation tool can automatically start sending messages that better align with this person’s interests.

A Robust Set of Tools

The scope of a marketing automation solution merits something well beyond a 1,000-word article. In addition to email magic, marketing automation tools will typically support landing page creation, lead gathering, lead scoring, and conditional behaviors, i.e., if my prospect does this, the marketing automation software should do that. Some providers even integrate support for social media and content syndication.

What’s right for you? That, I can’t answer. However, the data suggests that you and your organization would benefit from a marketing automation solution. In 2015, VB Insight reported that 80% of adopters saw an increase in leads and 77% increased conversions. More leads and greater conversion? I imagine your interest is piqued. But where can you learn more?

Fortunately, there’s a ton of good information about marketing automation available online. At Vendorful, we thought it would be helpful to sift through that information and distill it down for you. You’re just a couple of clicks away. Please feel free to check out our Mini-Guide to Marketing Automation and/or our Marketing Automation Cheat Sheet. Let us know what you think!

BoringBack — Why a Boring Business Has Sex Appeal

Seduced By Sexy

The idea for my first business, Twistage, came to me while I was reading an article about iTunes. The music industry was struggling with piracy and being dragged – kicking and screaming – onto the Internet. I was acutely aware of what was happening to the music business. It wasn’t just from reading articles either. My then girlfriend (and now wife) was the music editor at People magazine and between appearances talking about Britney and Christina on shows like Access Hollywood and Entertainment Tonight, she would regale me with stories about declining album sales and frustrated label execs. I was closer than most to seeing how the sausage was made, but despite watching all of the butchering, there was something so…sexy about the music world.

As cool as music was, video seemed even cooler. So when I reached the conclusion that online video would, in the coming years, dramatically alter the landscape for traditional broadcasters, I pondered the kind of business I would build so that I could ride this impending wave. Then I set out to do it. Despite how appealing the business looked from my vantage point, it was tough to get traction. It took two-and-a-half years to raise dollar one from investors. And then there were the pivots. We went from b2b content distribution to a p2p content portal and finally landed back in the b2b world with a platform for online video publishers. Whichever iteration of the product we were developing, however, always oozed sex appeal in my mind. We might have been a bunch of nerds building technology, but we were doing it in the media space.

It didn’t take long to cast aside whatever illusions I had about the inherent coolness of our offering. Sure, we powered the video on pop culture staples like PerezHilton and Fast Company, but it only takes one or two 5am “This is an emergency — none of our videos are working!” phone calls to realize what we truly were: a chassis. We are absolutely integral part of the video ecosystems of our customers. But they were the sleek lines and the high-horsepower engines. Us? We provided a platform that brought everything together so that they could drive.

Embracing My Boring Ways

Bored GirlIn spite of my ultimately coming to grips with the kind of business we were, I would never have predicted that I would legally incorporate my next business with the name “Boring But Great, Inc.” And if you’re wondering, that is the actual legal name of my current startup. (We’re doing business as Vendorful because Boring But Great is a mouthful!) Sure, it’s a funny name, but it also speaks — very, very honestly — to what we’re building. Our mission is to create products that improve the buyer-vendor dynamic, ultimately improving ROI. Still think there is a thin veneer of sexy? The first product we developed focuses on RFP facilitation. How about now? Indeed, any time we give someone a demo and hear comments like, “That’s really cool,” I feel compelled to offer a correction: there is nothing “cool” about RFPs. 🙂

Lest you think that working on a “boring business” means that you don’t get to do all of the sexy entrepreneurial stuff, don’t worry – you do! You absolutely get to avail yourself of the subtle pleasures of running payroll, reviewing contracts, filing taxes, and cold calling – each of which will dazzle the people flanking you at the next dinner party you attend. And let’s not forget iterating on your PowerPoint deck, freaking out about your next round of funding, and the ever-so-sexy reorganization of your Kanban board. (If you’re one of the many first-time entrepreneurs who have reached out to me, you know that it’s a goal of mine to help reset expectations about what it means to start a business. While startups might be portrayed in a glamorous light in the media, the day-to-day reality of running a new business is far less sexy.)

Two Kinds of Businesses

Here’s the deal. Starting a business is hard work irrespective of the idea. If you take pleasure in masochism, then you might well be cut out for life as an entrepreneur. Should you choose to go down this path, I would encourage you to prioritize “broadly useful” over “really cool.” This is not to suggest that these two concepts are mutually exclusive. Indeed, YouTube has built an amazing business by being both broadly useful and really cool. There are literally billions of possible video creators and billions of possible video viewers. YouTube’s offering absolutely meets the criteria of providing value to a large audience.

On the other hand, consider Salesforce. It’s an amazing company with – by all accounts – an amazing culture. People who attend their Dreamforce convention rave about it. Everything about that business exudes awesome with the exception of the core underpinning of the business: they provide tools that help salespeople sell. Yes, I admit that at this point in Salesforce’s evolution, that assessment is a bit reductive, but if you distill their offerings, that’s basically where you end up.

The TL;DR Take

Ultimately, whether your business has surface-level coolness isn’t important. Work your ass off and find a way to provide value to a large market and execute. If you can do that, your customers and investors will think your business is sexy as hell.

Why I Fired Kevin Costner: A Story About Marketing Your Business

The Baby Won’t Stop Crying

“I found this thing called gripe water. We have to buy it!” announced my wife.

Gripe water? Why does my wife want to buy gripe water? And just as importantly, what is gripe water?

First, some background….

On the first night of my daughter’s life, she was ferried by a nurse to my wife’s room in the hospital. “She won’t stop crying and she’s too loud,” the nurse said as she handed the baby to my wife. It would be a long night for the three of us — my wife, my daughter and me — and if I slept more than an hour or two, I‘d be surprised. Days laterMarketing Crybaby, we were home, where I stupidly turned down my mother’s offer to help. Instead, I found myself pacing around my apartment at 4am, baby pressed gently against my chest as I tried to soothe her seemingly endless sadness. We had been told by so many of our friends that their newborns did little more than sleep. Ours? She barely slept. She was upset about something and made sure that everyone knew it.

Maybe a month later, at a routine pediatric appointment, the doctor uttered the dreaded “c word”: colic. “Every year, I get one kid like this,” she said. “I’m so sorry that this is happening to you guys, but it will eventually get better.” There’s a school of thought that naming things gives us some sense of power and control over it. As it related to colic, this was absolutely untrue. We were exhausted and our baby seemed miserable all the same. So we did what most other parents would do and turned to search engines to find a solution to the problem.

My wife landed on a page that advertised “Gripe Water,” a liquid formulation that purports to soothe colicky babies. “Look at this,” she said, before reciting a testimonial.

“This has been a lifesaver! Our baby stopped crying and started sleeping through the night.”

“We have to buy this,” my wife insisted.

“Huh?” I furrowed my brow. “Why?”

“That other baby stopped crying and started sleeping through the night! We need this!”

Ah, the power of marketing…. My wife is a really smart, well-educated woman who, though compromised by sleep deprivation, would certainly be considered a rational operator. The combination of her emotional state, the baby’s temperament and the product messaging made the gripe water seem incredibly compelling to her. To me though, it just seemed like marketing fluff.

Marketing Doesn’t Work On Me

For years, I thought that, for whatever disadvantages I had in life, I had three attributes which were hugely helpful.

    1. I don’t like the taste of beer.
    2. I don’t like the taste of coffee.
    3. I don’t respond to marketing.

I’ve spent most of the past two decades in New York City and the bulk of my early years here were spent trying to sort out my professional direction or bootstrapping a startup. On occasion, I have crunched some numbers in an attempt to quantify how much money I’ve saved by not drinking beer or coffee. The savings run into the tens of thousands of dollars. It’s harder to figure out how much I’ve saved by not responding to marketing, but for years, I was convinced that this character trait was hugely helpful.

I was wrong. And there was a consequence to my being wrong. Since I wasn’t susceptible to marketing, I made the mistake of thinking that it wasn’t important.

What You Don’t Know

There’s an expression that I encountered many years ago that still resonates with me: “You don’t know what you don’t know.” When you’re neck deep in your first startup, that’s not only true, but extremely consequential. Every quarter or two, you’re inclined to look back and think, “Wow, I didn’t know what the hell I was doing three months ago.” Some things take longer to identify. In fact, you might have to wait years before it becomes obvious to you that you missed something.

When I sold my first business, it was a good outcome. Our investors all made money; our employees all made money; the founders all made money; and the acquiring company added a profitable business that diversified its revenue stream. But looking back, I can’t help but wince a little bit. We could have had an even larger, more successful business had we decided to market it.

The Field of Dreams Approach to Marketing

W.P. Kinsella, author of the book, Field of Dreams, died just a few months before I wrote this. When I learned of his pas sing, I thought back to the book and the movie. Anfield_of_dreamsd then I thought about marketing. Yes, marketing.

The approach we took to marketing my first business was lifted right from the pages of Field of Dreams. We built an amazing product and then…. And then we waited for people to discover it. For the vast majority of the life of the business, we didn’t attend trade shows, do online advertising or pitch stories to the press. There were but one or two thought leadership pieces and our website didn’t even have a contact form. What the hell were we thinking?

“If you build it, they will come.”

When Kevin Costner’s character heard those words, which seemed to be whispered from some ethereal place, he thought he was going crazy. For me and my partners, this was the strategic vision for our marketing plan. In the immortal words of Scooby Doo, “Ruh roh!”

A New Approach

The beauty of Internet-based businesses is that they have never been easier to set up and scale. However, the problem with Internet-based businesses is that they have never been easier to set up and scale. With the playing field more level than it has ever been, new entrants file into contested categories each day. And as they do, it’s harder to get your prospective customers to find you. To maximize your chances of engaging the people and/or organizations that could benefit from your product or service, you need to market to them.

It would be a lie to say that I understand the mechanics of marketing, but I certainly understand its importance. So I’m getting myself educated — combing through papers, watching videos and reaching out to experts. We’ve purchased software, engaged a marketing consulting firm and have even set aside money for additional marketing expenses. I’m prepared to make a ton of mistakes and shake my head at my own ignorance every few months. Really, I’m okay with it. We’re building something that we think could be hugely helpful to organizations of all stripes and we’re not going to rely on chance to engage them.

I’m sorry, Kevin Costner, but you’re out of here. The Field of Dreams marketing plan is not in the cards for us. We’re pivoting to another inspirational story, but one driven by a solid marketing message — Crazy People.

Businessman as Visionary

I’m Not a Visionary and You Probably Aren’t Either

There are literally thousands of LinkedIn profiles where people describe themselves as visionaries. Why does that matter? Let’s save that for the end of the article….

The Gift of Prophecy

As a young boy, I devoured Greek mythology. Before I could read, my mother would tell me bedtime stories about Zeus, Hercules and many of the other gods and mortals. When I got older, I would read Edith Hamilton and play the stories out in my imagination. I was probably less than ten years old when I learned about Cassandra. A prophetess, she was gifted with the ability to see the future, but cursed by her inability to convince anyone that what she prophesied would come to pass.

When I grew older, I began to reference the story of Cassandra as a means to explain my missed opportunities in business. I felt, that like her, I could see possibilities just a few years out, but couldn’t capitalize on them because I couldn’t convince people that my forecasts were accurate. In 1994, I had this idea that job searching would become a popular online activity. I saw a two-sided marketplace — employers and potential employees — and the power of the web to make this happen. I found myself a partner with some money, a development team (this was before I learned to code) and we were off to the races. The problem was that my partner and I disagreed about everything you could imagine so I soon agreed to let him buy me out so I could focus on just being a college student.

Struggling to Sell the Dream

Fast forward a few years to the early 2000s and I was now convinced of another sweeping change that involves the Internet. Video, I firmly believed, was due for an online explosion. Not just that, but it would be led by regular people creating “user-generated content.” I found a couple of people who agreed with me and we built a website where a community of users could come together and share video that they created. To scale this thing — to really build it into a big business — was going to cost money, so we decided to start pitching.

VC after VC passed.

“Is this really necessary?”

“Who wants to watch other people’s vacation videos?”

“Interesting, but how big is this market, really? I don’t see how you can get to a billion-dollar exit.”

“Too early for us. Have you talked to the New York Angels?”

I had talked to the NY Angels. I paid several hundred dollars to have them review our two-page application and was rejected by email. After struggling to get them to return a call, I connected with a friend of a friend who knew someone there. I got on the phone with the person who had rejected our application.

“Will you be cash-flow positive in two years?” he asked.

“Not if I do it right,” I replied.

“Then it’s not the sort of business that we looking to invest in.”

And that was basically the end of that conversation. Less than a year later, I received a call from Mike Maples, who had been very gracious with his time and expertise. We had been introduced because he had invested in a startup called “Odeo,” which was focused on organizing podcasts. Mike told me to go to my computer and look up a site.

“Utube? Doesn’t look anything like what we do,” I told him.

“YouTube. Y-O-U-T-U-B-E.”

“What a terrible name…. Who is going to get the spelling right? Okay, it’s loading now. Yep, it’s similar, but we have way more features than they do.”

A “Lazy Sunday” later, we pivoted. There was no way we were going to keep up with YouTube; they were out-executing us. We closed down Vlogville, our community video site, and focused all of our energy on providing backend video infrastructure and services to businesses as Twistage. We had a nice exit, not on the order of magnitude of YouTube, but it was an excellent outcome for all involved. However, the best exit of the companies listed in this article did not belong to YouTube, however. It belonged to Odeo. Or as it is now more commonly known — Twitter.

Huh? Ev Williams, the visionary behind blogger (acquired by Google), was also behind Odeo. And he was right about podcasts. There would be loads of them:

Podcast launches over timeHowever, the timing wasn’t quite right. Add Apple’s launch of iTunes and Odeo was on shaky ground. So Williams and his team decided to offer a refund to their investors as they changed the business from podcasting to microblogging. Some investors, which included the aforementioned Mike Maples, decided to let their investment ride. Did the decision to shift the company’s resources and mission to Twitter require a vision of the future? Absolutely. But it was incredible execution that led to hundreds of millions of users.

Doers > Dreamers

Lots of people have lots of wonderful ideas. That’s why the line “Ideas are cheap” has become so commonplace in business writing. I had more than an inkling that job hunting and video would be moving online, but I lacked the ability to sell the vision at the time.

So let’s go back to the question I posed in the beginning of this piece: Why does it matter? It matters because you undermine the perception of both your idea and your ability to execute when you call yourself a visionary. But you’re lucky. There’s an easy fix for this. Simply stop calling yourself a visionary. It sounds arrogant and doesn’t really tell anyone anything about you other than that you’re not lacking for self-confidence. While the word literally means “having or showing clear ideas about what should happen or be done in the future,” the connotation has a bit more “magical heft.” I’d say that it’s best to use the word “visionary” the way people should use the word “genius,” i.e., if someone else calls you a visionary, feel free to use that in material that describes you. On the other hand, if you’re the only one is who sold on your soothsaying powers, I’d recommend that you find a different adjective.

Together, I am hopeful that we can work together to reduce the number of dreamers and increase the number of doers.

Invest and Grow

Hell Yes, I Want to Invest in Your Startup!

I have some serious deal flow here, in Goldfish Tank. Roughly every other day, I get an unsolicited ping from a startup entrepreneur. And before I get critical, I want to give the proper kudos to them for having the cajones to ask for an investment. When I started my first company, Twistage, it took me two and a half years to raise dollar one. I ate a lot of peanut butter (high caloric density for the price) and hot dogs (one of the cheapest “meat” options) during that time. And it led to interesting conversations, like the one I had with my future in-laws when I called to get their blessing before proposing to my then-girlfriend/now-wife. Needless to say, my opener – though earnest – is not one that I’d recommend for most: “I realize that I haven’t had an income for two years, but I think I’m really, really close.” (For those who are curious, they said, “Yes,” and so did she.)

Invest and GrowLet’s get this out of the way first: Cold emails suck. They are among the worst vehicles for raising money. Despite that, if you’re a first-time entrepreneur with a limited or nonexistent network of potential investors and you’re not sending cold emails, you should probably reconsider. Thanks to cold emails, I raised several hundred thousand dollars and connected with someone who would later be on our board. One of the investors, Shane, was a fellow Brown graduate whom I found on an obscure alumni message board. I looked under rocks and in daylight, too. In fact, Mark Cuban – yes, that Mark Cuban – turned me down. As you might expect, I met many, many more Marks than Shanes.

In a perfect world, you have the personal resources to fund your startup indefinitely. In a really good world, you have relationships with well-heeled people who believe in you, your vision and your ability to execute on your business strategy. But in the world that most first-time entrepreneurs inhabit, it can be really, really hard to find someone who wants to write you a check, much less a group of people. So as a first-time entrepreneur, you have to change your world. You have to expand your circle such that it begins to include accredited investors (people who, according to the Securities and Exchange Commission, are wealthy enough to invest) who buy into whatever it is that you’re selling. That means going to events, getting introduced to friends of friends – and yes, sending cold emails.

Now that I’m a startup investor in addition to being a startup founder, I’ve been able to get a new perspective on the hunt for money. Because everyone loves lists, I’m going to drop one on you right here. The top three mistakes I see when people send cold solicitation emails.

1. The Empty LinkedIn Connection Request

I get more of these than anything else. Two and a half years steeled my resolve, but it didn’t harden me. It made me more empathetic. I know what it’s like to believe in something only to have person after person tell you that you’re wrong. I feel a certain kinship with startup founders so I try to respond to everyone who sends me something. But what about when they send me nothing? Almost every day, I get at least one blank LinkedIn request from an entrepreneur.

“Hi David, I’d like to join your LinkedIn network.”

That’s it. There’s nothing else. Before I accept or reject the request, I will send a note back inquiring about the impetus for the invitation. 99% of the time, I get a response. Here’s an anonymized reply that I recently received:

Pardon me if I was mistaken, but I thought you may be interested in taking on a new challenge, by reviewing and possibly considering, my product for an investment.

Would it have been that hard to put that in the initial connection request? Journalists are taught not to “bury the lede,” i.e., don’t hide the main plot point of the article. Entrepreneurs should heed this advice. LinkedIn is a great tool and it’s never been easier to find and qualify potential investors. Don’t waste your opportunity by sending a boilerplate connection request.

2. The “Hey Good Buddy” Email

Two days ago, I got an email, which I’ll again excerpt and anonymize:

Hi David

Our seed round at XXXXXXX is 50% closed. We have over 20k pre-subscribed users, are already yielding revenue, and are projecting revenue 12mos tout o be near $1m/month.

We have also been able to garner some great press.

Here is a link to the presentation.

Let’s hop on a call to chat further.

When are you free this week?

When I received this email, I had never heard of the person who sent it to me and I had never heard of his company. Good for them for getting traction. But there’s so much wrong with this email. First of all, there’s a pretty egregious typo. I’m sure it was an accident, but I also suspect that this was a form letter, which means that everyone on the list – a list that was probably compiled over the course of months – got the same first impression. And you don’t get a second crack at a first impression. Measure twice, cut once.

To be honest, though, the typo wasn’t the first thing that jumped out at me. It was the tone. Did I know this person? It seems like we must have been engaged in a multi-month discussion about his business and this is the latest update. But this was actually the first email that I received from this person. Two big fixes could be made to this email. First, make sure you get at least one other person to proofread your email. Second, if you’re going to ask for thousands or millions of dollars from people, take some time to personalize the email. That might mean not using automated mailers, but the ROI will be much better if you treat people like individuals.

3. The Disappearing Founder

When you’re getting your startup up and running, it can be really difficult to keep track of all of the moving parts. Every day, you walk around with a tightness in your chest and an icky feeling in the pit of your stomach. I know the feeling, and I try to be understanding when people get buried under a pile of tasks and forget things. Even when your startup is somewhat established, there are weeks when everything feels like triage.

But when you’re asking someone for money/help/advice, it’s important to make sure that you follow up. Rewind a few months: I got a not-very-good email from a startup that was looking to raise money. I replied and said that the deal wasn’t right for me for a few reasons, which I enumerated. The CEO asked if I would be open to a 15-minute phone call and I was happy to oblige. On the day of the call, I get a note from the CEO’s partner that the CEO was not going to be able to do the call but that he, the partner, would fill in. These things happen. I was perfectly happy to chat with the other partner. Our call stretched past 30 minutes. While my position regarding an investment remained unchanged, I thought that there were a few introductions that I could make that could be useful to them from both a commercial and investment standpoint.

After the call, I made several introductions. And after that, silence. A few months passed and I was on LinkedIn, looking at someone in the context of a business development opportunity. I noticed that the CEO of the aforementioned startup was a first-degree connection. “Ah,” I thought, “all I wanted was good karma, but it seems like I can get a reciprocal introduction.” So I wrote an email to the CEO, inquiring about what happened with the leads I had given him and asking for an introduction to his LinkedIn connection. And then?

The sounds of silence…. It worked much better as a song by Simon & Garfunkel. There’s a saying that’s bounced around Startup Land for years: “If you ask for money, you’ll get advice. If you ask for advice, you’ll get money.” From my vantage point, this seems to convey that people don’t want to be valued for their money, but for their wisdom. Conversations, not transactions, lay the foundation for a relationship. There’s a reason that founders almost always have a “friends and family” round before seeking outside capital. They tap into the relationships that they have cultivated for years. This doesn’t mean that you can’t be forthright about being interested in an investment. However, that investment might not come until the relationship has been established. That takes time and effort. At the very least, you should be replying to emails.

Although I had struck out with Mark Cuban, I remained optimistic when I cold-emailed Jerry Colonna. Jerry was a former venture capitalist whose fund, Flatiron Partners, was the highest returning venture fund in New York during his tenure. When I first met him, he told me that he was no longer investing in startups, but that if he did, my business would have been interesting to him. I wasn’t going to see a dime from him, but he had a wealth of knowledge and experience as well as a calming demeanor. I was going to have this guy on speed dial for advice? Forget money, I had just won the lottery!

It was a little over a year later when Jerry woke me up with an early-morning phone call. I was groggy, having slept fitfully after trying to track down a bug in my code in the wee hours of the morning. “David,” he began, “I’ve decided to invest.”

Shark Tank

What Shark Tank Gets Wrong: Valuation

Every week, my DVR records the latest episode of Shark Tank. And every week, when I’m done watching it, I wonder why I continue to do so. The show is not without its merits —  it’s compelling television. However, aspiring entrepreneurs whose views on business are formed largely through “Shark Tank University” are going to be ill-prepared to succeed. Tempted as I am to clickbait you with “The Five Things Shark Tank Gets Wrong,” I’m going to focus on one thing at a time. In this article, we’re going to take a look at what is likely the most contentious subject on every episode: valuation.

The Valuation Calculation is Wrong

Valuation, or the financial value ascribed to a business, is frequently a point in which the investors on Shark Tank push back against the entrepreneurs or even disagree among themselves. In that respect, the show mirrors the real world, i.e. different people will disagree as to how much a particular business is worth. We can talk about market dynamics and how rounds are actually priced in another article. The key point here relates to the specifics of the valuation calculation based on the data that is presented to the audience. On every episode, we are introduced to new entrepreneurs and each comes with a specific dollar figure to raise and the percentage ownership an investor will receive in return.

Those two numbers are sufficient to derive the valuation of the business, but the formula that is used on the show is wrong. While I believe that the “Sharks” know this, I suspect that the producers ask them to fudge the numbers to make it easier for the audience to follow along from home. It’s a shame because the show could easily add some graphics that walk through the calculation. But alas, the show is more entertainment than education.

Let’s take a look at how they calculate valuation on the show and then compare that with what entrepreneurs and investors do when they’re not on television.

An Example

Bob’s Road Trip Diapers launched 8 months ago and Bob has moved $50,000 worth of product in that time. Bob is bearish on gas station bathrooms and thinks that this business can own a (particularly off-putting) segment of the long-distance driver market so he’s asking for $100,000 for 33.3% of the company.

Mr. Wonderful cocks his head to the side and says, “So the imputed valuation for your poopy product is $300,000. You’re out of your mind! There’s no way this business is worth more than $200,000 right now.”

Mr. Wonderful says you're dead to him when he hears your valuation

Ah, But I Am Very Much Alive

If you’ve never raised capital or been an investor before, Mr. Wonderful’s math makes sense:

$100,000/33.3% = $300,000

It might make sense, but it’s wrong. It’s wrong because it doesn’t actually reflect the value of the cash that was injected into the business. If you have a business that is worth $0 and someone invests $100,000 — forget the percentage ownership for a moment — what is the new value of the business? Well, you started with $0 and added $100,000, which looks like this: $0 + $100,000 = $100,000. This is an extreme example because all of the value of the business comes from the new investment. However, it should be clear that it’s folly to dismiss the impact of new money in the calculation.

So let’s revisit the fake Shark Tank scenario from before. Mr. Wonderful is contemplating an investment of $100,000 so he can come away owning 33.3% of the business. What’s the actual valuation of the business as it’s being pitched?

$200,000.

At this point, some percentage of you who are reading this have one question: “Huh?” Don’t worry, the math is still pretty straightforward. But before we get to the math, it’s a good time to get clear on terminology because the valuation issue on Shark Tank results in part from ambiguity around the words they use.

Understanding Terminology

When discussing valuation, there are actually two numbers — and terms — that are used: pre-money valuation and post-money valuation. (To get you more comfortable with startup slang, I’ll drop the word “valuation” below.)

Fixing the Formula

On Shark Tank, the word “valuation” is regularly used in place of “post-money valuation.” In the real world, when investors and entrepreneurs discuss valuation, “pre-money” is what’s being discussed the vast majority of the time. Got it? Now we can get back to the math. When Bob walked into the tank, what value did he assign his business? He indicated that he wanted to raise $100,000 and give up 33.3% of the ownership in return.

Here’s our formula:

investor percentage ownership = investment / (pre-money valuation + investment)

Now let’s plug in the numbers:

33.3% = $100,000/(pre-money valuation + $100,000)

If we solve for pre-money valuation, we arrive at a number that is different than Mr. Wonderful’s: $200,000. Now let’s look back at fake Kevin O’Leary’s objection, which while fictional is actually consistent with his actual approach: “So the imputed valuation for your poopy product is $300,000. You’re out of your mind! There’s no way this business is worth more than $200,000 right now.”

What none of the Bobs who are on the show do is say, “I am in total agreement with you on the question of valuation. $300,000 would represent a 50% premium on top of the valuation I’ve assigned the business. So this will be an easy negotiation. I’ll take the $100,000 at a $200,000 pre-money valuation and give you 33.3% in return.”

Wrapping Up

There have been a few episodes of Shark Tank where entrepreneurs have referenced “pre-money valuation,” but to the extent that there was additional commentary, it seems to have ended up on the cutting room floor. I can only imagine what would happen to an entrepreneur who wanted to negotiate liquidation preferences! While I remain a regular viewer of the show, I’m disappointed that the Shark Tank platform isn’t used to demystify entrepreneurship more proactively. Oddly enough, HBO’s Silicon Valley, a work of fiction, rings true in many ways that “reality TV” doesn’t.

Butterfly on Leaves

Is That Gastroenteritis or Am I Starting a New Business?

I had forgotten the feeling.

It’s a sensation that quite literally feels like it’s emanating from the pit of my stomach. It is, at once, foreign and familiar.

Butterflies.

That’s a nice word for it. Adorable little things, flitting from flower to flower. Nothing about this feels adorable though. I don’t like it at all, but am comforted that it’s there.

It’s been a bit over a decade since I launched my first startup. Then, I had a strong opinion regarding online video. It was going to be big, I thought. Big enough that I should stop whatever it was that I was doing so that I could direct all of my intellectual energy to that one concept. Big enough that I should recruit, evangelize and proselytize. Big enough that every VC rejection had me shaking my head that they were wrong and I was right. And so I poured myself into this startup, which we called Twistage. We showed it to people and I was excited that we were building the future that we had envisioned. And then we launched…officially.

Butterflies.

While they would visit my abdomen from time to time, there were never so many beating wings as when we launched. So here I am again. Older, presumably wiser (though many of those close to me would beg to differ) and definitely more even keeled. And those damned butterfly wings are pounding in my gut. My heart rate is elevated, my body ready for fight or flight as I sit in a chair, the clackety clack of my keyboard competing with the whirring of the building’s HVAC.

“Are we ready?” Hell no. But, the thinking goes, if you wait until you’re ready, then you’re too late. Besides I’ve done this before and I know (intellectually) that you’re never ready because you’re never truly done. There is a feature you could add here, a rough edge to smooth there, and a whole new set of opportunities for you over the hill yonder. Unfortunately, your product won’t work for those people because it’s missing some other features that you dismissed as unimportant six months ago. “Are we ready?” I guess we’re as ready as we’re going to be.

Now, having run afoul of every content marketer, journalist, and editor on the planet, I present you with the lede (yes, that’s the way journalists spell it in this context) that I have so gloriously buried. Today, we are pleased to announce the official launch of Vendorful’s Smart Strategic Sourcing and Vendor Management. Does your organization completely lack or rely on an ad hoc purchasing process? Great, you’re right in our wheelhouse. Does your organization have a formal buying process that sits atop a foundation of RFPs and RFIs? (Don’t you hate RFPs and RFIs?) Awesome – you’re going to love Vendorful. Our solution takes away the pain of vendor discovery and selection.

Those of you who are stuck replying to RFPs and RFIs – don’t worry! We haven’t forgotten you. You can use our tools to manage your answer database, assign answers to colleagues who are subject-matter experts and collaborate across the organization with stakeholders who maximize your chances of nailing your RFP responses. Did I really just use the term “stakeholders” in a sentence? Man, I’m more bought into this enterprise world than I had thought!

There it is. I’ve told you. The proverbial cat is out of the bag. All that remains is for me to click a couple of buttons and it’s official. I’ll stop worrying about the Vendorful launch and refocus all of my anxiety around Vendorful adoption. How many people are clicking through to the site? Are you reading this? If so, that means you didn’t click the link above! Should I give you another link? Nah, that would be too pushy. How about in a subtle parenthetical? (Something like this: https://vendorful.com.) Ah geez, here comes the next round of butterflies….