A six-step framework to make strategic decisions

Any number of challenges can arise during a startup’s initial years. Some of these changes could be major and may require rethinking strategy. Competitors enter your target market. New products are released into your market which undercut yours. Customer acquisition costs rise dramatically. If faced with these questions, it’s hard to know where to begin or how to structure an analysis to reach an answer. McKinsey uses a 6 step process to frame the process of answering these strategic questions which is profiled in this month’s Harvard Business Review.

Should founders join incubators?

Yesterday, I spoke at Columbia Business School. We had a conversation about the role of incubators and accelerators (or the moniker of your choice) within the startup ecosystem. Given the volume of first time entrepreneurs and the broad growth of interest in entrepreneurship, I think these programs are invaluable. To entrepreneurs, these programs offer up to seven value propositions, listed in order of importance, as I see it. Education - Examples include General Assembly runs a substantial education program and YCombinator operates Startup School and First Growth’s Venture Network Startup-in-a-box - TechStars offers legal help to incorporate a company, PR and marketing support for launch, banking partners, business development contacts, developer tools discounts all with the goal of eliminating as much friction as possible and helping founders focus on product/market fit discovery and execution.

The startup love affair

Every investment requires a leap of faith, an emotional act that’s not pure reason, and that’s got to carry you through in the inevitable many months, sometimes years, of horrific bad stuff that comes with the company. And you’ve got to have that energy, that sustaining belief to carry you through, because if you don’t, then you regret having done it. So when I have regret, it’s when I didn’t have that, and I’d logically talked myself into [the investment] and checked the boxes.

The Heyday of SaaS – quick observations from Dreamforce

We are in the heyday of SaaS. The conference spanned 20+ buildings, served 60,000+ attendees and was sponsored by more than 300 vendors. Free food everywhere. Skullcandy wireless headphone giveaways. DJs in every corner. Four square play areas on fake grass outside. It is one huge party. Benioff delivered a tremendous keynote. I wish I could speak in public with his confidence, control and passion. Dreamforce created the perception that Salesforce is at the center of a huge ecosystem of their own creation, which inspires confidence in customers and partners.

A startup’s transition from product development to growth

At a recent meeting, David Barrett, one of the founders of Expensify, drew this diagram when explaining his company’s structure. He has overlaid the core teams of a company with a conversion funnel. It’s brilliantly simple. As every SaaS startup transitions from development to growth, the company must supplement the engineering and product capability with sales, marketing and account management. This diagram is the simplest way to show how they work together harmoniously at a strategic level.

Data isn’t a business model – it’s much more important

The throwaway line in pitches these days is “we’ll sell our data.” Most of the time, this notion is wrong. Data is the most valuable outcome of building a successful product. It’s the insight, the secret, the keys to the kingdom. Don’t sell the keys to the kingdom. Data provides economies of scale and insights used to develop huge barriers to entry and it should be kept within an organization.

The Secret to SMB SaaS Distribution

SMB SaaS companies cannot afford to pay for distribution. At 2 to 4% conversion to paid rates and $5 to $10 monthly subscription fees, the breakeven CPC for these products on search is $0.40. The average Google click costs three times this and the iOS average cost-per-install is more than twice as expensive. The most successful SMB SaaS companies (Zendesk, Expensify, Square) build communities to drive distribution. Those communities reinforce and build a brand.