Don’t Get “Zuckered”

What Startup Founders Should Learn from The Social Network Movie

StartupBUSINESS.COM

In the movie The Social Network, the Winklevoss twins and their partner Divya Narendra accuse Mark Zuckerberg of stealing their idea for a social network called HarvardConnection to create Facebook. Some may argue the lesson of this saga is about collaborating only with people you know and trust, or who at least share your ethics. Others will argue the lesson is about protecting your ideas and intellectual property with good non-disclosure, non-compete, and confidentiality agreements. In my view, the primary lesson of the movie for startup founders is not one of ethics or law. It is one of execution.

The founders of the HarvardConnection got Zuckered. While they were talking about their idea and waiting around for Zuckerberg to start on the project, Zuckerberg was cranking away on coding Facebook. He was also busy organizing his friends and holding their feet to the fire to get done what was necessary to launch the product. In short, he was doing what the founders of the HarvardConnection were not doing. He may not have been the catalyst, or even the visionary, but he was the leader. He was the chief strategist and planner. He learned and adapted and grew as he went. And most importantly, he was the taskmaster. He set milestones, then executed against them. He cajoled or inspired or forced those around him to deliver their parts. This leads to the secondary lesson of the movie, as so painfully learned by Zuckerberg’s friend and partner, Eduardo Saverin.

Your stake and ultimate value as a co-founder of a startup is not earned by being there at the beginning. It is not earned by friendship, sweat equity, or even monetary investment. It is continuously earned and defended by what results you achieve for the enterprise. The movie suggests that Zuckerberg screwed his co-founder out of jealously, because he had been accepted into one of Harvard’s prestigious male Final Clubs and Zuckerberg had not. In my view, Saverin fell from grace by pursuing a business model that Zuckerberg was not yet ready to embrace. They were not on the same page. Further, Saverin made a critical mistake by disassociating himself with the team when Zuckerberg moved the company to California and he chose to remain in Massachusetts. Saverin eventually showed up at Facebook headquarters in California to learn that his stake in the company had been reduced from 30% to 0.03%. This sleight of hand had been done legally by dilution terms that Saverin himself had signed as part of the company’s angel financing. He was not on top of his game as a co-founder and certainly not ready to be the company’s CFO. He was essentially replaced by Napster founder Shawn Parker, who had ingratiated himself to Zuckerberg and taken advantage of Saverin’s missteps. In short, Saverin had been Zuckered.

There is no moral to the Facebook story. There are only lessons from the harsh realities of being a founder of a startup. Those who do will win over those who conceive. Your place at the table is only assured if you help kill what everyone wants to eat. You can’t afford to be absent during the hunt or fail to dine with the team. The irony of the story is that Zuckerberg himself got Zuckered by a savvy startup founder. Parker ended up with a significant stake for a contribution that appears to have been limited to telling Zuckerberg to drop the word “The.” Therein lies a lesson that most founders know all too well. Those who end up with the biggest stakes in a company usually had little to do with its founding.

New Technologies for New Times Drive Today’s Hottest New Companies

June 2010

StartupBUSINESS.COM set out to find the young companies that are blazing new trails in their respective markets. We found hundreds of very cool companies that are, well…hot. Innovation is flourishing in all sectors, driven by new thinking and new opportunities. Times have changed and today’s startups have changed with them. Even in this deep recessionary time, smart people are pursuing their passions and are hell-bent on controlling their futures and on changing the world.

What makes a startup company hot?

In a word…..uptake. The founders are quick to learn from their customers and quick to get traction in the marketplace. They may not be profitable, but most are seeing double-digit growth each quarter. A hot startup is one that has a unique insight. It fills a need that is not being offered by any other company in the space. It is not a one trick pony. Its products or services are really useful -- even critical -- to its customers. The industries that these companies compete in are depending upon them to bring a new era of prosperity.

A hot startup’s position in the market is defensible, either with proprietary technology, superior features, an engaging user interface, or with relentless customer service that spawns an unshakeable loyalty among its users. A hot startup is poised for growth. It has a solid business model and the business is scalable, with the goal of reaching a global market and generating significant profits. But perhaps most importantly, a hot startup company is never resting on its initial success. It is constantly innovating, improving its products and developing related products to expand its customer base.
Not all of the companies that made the list share all of these attributes, but they are well on their way. These are not house-hold names. In fact, we suspect you probably have not heard of most of these companies. That’s one of the things that make them hot. They are becoming successful and growing steadily, not on hype, but on results.

Read the rest of the story, see the list-->

"Who’s Eating Your Dog Food!?"
Entrepreneurs’ are a passionate lot. They fall hopelessly, sometimes blindly, in love with their ideas. It’s that passion that consumes their every thought and drives them to figure out how to turn their ideas into real products and services. I know this because I count myself among their ranks. The really good entrepreneurs can seduce everyone around them into believing that fame and riches are sure to follow. Aunt Bea becomes an investor. Old college buddy, Gary, signs on as a cofounder. It’s usually at that point that an idea becomes a business. I know this too. Aunt Bea died disgusted with her favorite nephew and Gary rarely speaks to me anymore.
All around the world, but particularly in the United States, the same scene unfolds several million times each year:
1) Light bulb goes on.That’s a great idea!
2) Name it.That gives it a personality, which in turn bestows life upon it.
3) Incorporate.That makes it official.
4) Write a business summary.That describes the idea in detail to people who can be helpful.
5) Raise some money.That pays the mortgage until the riches come.
6) Develop the product.That proves you are not just another dreamer.
7) Encounter distractions and unrealized expectations.That’s where most of those millions of promising startups go awry.
Here’s where I shall insert the subliminal messages that all startups must heed.
There is so much to think about [get a customer] and so much to do [validate, validate, validate], founders busy themselves with everything except [testimonials] the most important thing that needs to be done: Sign up paying customers. [Sign up paying customers].
This is so obvious, but so often overlooked by entrepreneurs, that by the time they figure it out it is often too late. I know this from experience. It is only after they have burned through all of Aunt Bea’s money and buddy Gary’s patience that they seek divine intervention. Otherwise known as, The VC. After an energetic and impassioned presentation by the entrepreneur, which fails to stir The VC in the least, He speaks.
"Who is eating the dog food?"
To which the entrepreneur sheepishly replies, "Huh?" At least that was my reply.
"The customers!" The VC yells. "Who is using the product?!"
"Well, uh, no one yet. We’re about ready to go into beta testing."
"Fine. Come back and see me when someone noteworthy is using it. You gotta have a lead dog if you’re gonna hunt!"
It took me awhile, but I finally understood both messages. First, there is nothing more important than having a customer testify to the benefits of the product or service, i.e., "eating the dog food." Second, before you go out to raise money, i.e., "hunt," you’re likely to get skunked unless you have a lead dog, preferably, a pack of dogs. To this day, whenever I hear an investor say, "No one is eating the dog food," or "That dog don’t hunt," I know the deal is going no where.
The single most important thing a startup company can do is to validate the business opportunity by having referenceable accounts. It is the thing that will attract investors. More importantly, it is the thing that will attract even more customers. All pack dogs want to eat what the lead dog is eating. Startups need to launch with a few lead dogs.
All the other things that startups think they need to do are nothing but cleverly disguised distractions. Get a customer that has some brand power – which other people in the space know and respect. Ask them to be a reference. Validate the business. This should be done at the exclusion of everything else, including the tendency to spend more time and money to improve the product. Feature creep is a never-ending battle. The product can always be made better. You can’t do everything at once. Sooner or later somebody has got to buy something.

[Test Tynt]

What makes a startup company hot?



In a word…..uptake. The founders are quick to learn from their customers and quick to get traction in the marketplace. They may not be profitable, but most are seeing double-digit growth each quarter. A hot startup is one that has a unique insight. It fills a need that is not being offered by any other company in the space. It is not a one trick pony. Its products or services are really useful -- even critical -- to its customers. The industries that these companies compete in are depending upon them to bring a new era of prosperity.



A hot startup’s position in the market is defensible, either with proprietary technology, superior features, an engaging user interface, or with relentless customer service that spawns an unshakeable loyalty among its users. A hot startup is poised for growth. It has a solid business model and the business is scalable, with the goal of reaching a global market and generating significant profits. But perhaps most importantly, a hot startup company is never resting on its initial success. It is constantly innovating, improving its products and developing related products to expand its customer base.



Not all of the companies that made the list share all of these attributes, but they are well on their way. These are not house-hold names. In fact, we suspect you probably have not heard of most of these companies. That’s one of the things that make them hot. They are becoming successful and growing steadily, not on hype, but on results.







Read more: http://www.startupbusiness.com/Hot-Startup-Companies/hot-startup-companies#ixzz0rht0ciep

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Top 10 amusing, puzzling and downright irritating things investors say --
-- and what entrepreneurs would really love to say in response

10. "We'd be interested in investing when you finish the technology, get your patents and sign up some customers."

So would my mother. Why do you call it venture capital. You should call it no risk, no thrills, expansion capital.

9. "After you fill-out your management team we might come in."

Funny. The slated management team said they would join just as soon as you guys put some money in.

8. "You couldn't possibly spend that much money between now and then."

You don't know my wife [ha ha]. The fact is, in the race to be first to market, I could spend it twice as fast as you could give it to me. For every dollar spent on building the company and getting to market, we increase the value of the company by three dollars.

7. "What are you going to do if Microsoft gets into this market?"

We'll open a donut shop, but no doubt they will enter that market as well. Heck, we'll just buy'em.

6. "The first thing we need to do is bring in a CEO."

I've risked my career, my savings and my marriage getting the company this far, but I suppose I can find something else to do.

5. "I'll need to call your customers and strategic partners."

I'm sure they would love to hear from you and 50 other investors, asking them why they want to do business with a struggling startup that has no money.

4. "You've overvalued the company by 50%."

Did I say we had a $5 million valuation? I meant we had a $15 million valuation.

3. "We've invested in a competitive venture and we don't sign NDAs, but send over the business plan and we'll take a look at it."

Why don't we save you and them some time? Give me the email address of the competitive company and I'll send the plan directly to them.

2. "We'll come in if [Blue Chip VC] comes in."

Blue Chip VC could care less if you come in and, if they do, we could care less too. Riding on the coat tails of the big dogs to minimize the risk and due diligence work is a great way to build a fund if you can get away with it.

1. "We only do early stage deals if we get preferred stock, warrants and two board seats."

Here are the keys to the office. I'm sure it will be great to work for you.

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