Some of the lessons learned after 15 years in software startup market

1. Startup 101
SOME ACCUMULATED LESSONS
Demian Entrekin
Oakland, CA

2. Believe & Doubt – how to straddle the gap
Perhaps the toughest
discipline of all is to
move back and forth
between deep belief in Believe
your project, and a Doubt
sincere willingness to
doubt your data and
your assumptions

3. Focus Pocus – pick a path
 Small teams have this advantage: the ability to focus
on a very tight target– that’s how they win.
 Keep narrowing your focus until you believe you can
identify, reach, engage and differentiate.
 Be different, not better. Better is a dead end.
 You can’t climb the mountain face in one move –
find a single crease and go one foothold at a time.
 Keep looking for alternate paths in case the one
you’re on does not go all the way
 “If you don't let go, you can't fall off!” Jerry Moffat

4. Funding – open your eyes
Liquidation Preference by Series
 The bar keeps
getting higher with
time, so be careful
who you sign up
with or get it right
the first time.
 You will be
working closely
with your investors
for a long time, so
make sure that it
can keep working.

5. Finanicals – cash cash cash
 Revenue matters, but cash flow matters more than
revenue – much more
 You can’t make payroll with revenue – you make
payroll with cash
 Revenue matters once you get to a certain level of
critical mass for your industry
 For many companies, that’s somewhere around $5M
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash 2,500,000 2,250,000 2,000,000 1,750,000 1,500,000 1,250,000 1,000,000 750,000 500,000 250,000 0 (250,000)
Cash Flow (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000)
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:-)
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:-)
:-(
Payroll Manager

6. Risks – look in the mirror
Strengths Strengths Strengths
CEO Weaknesses Weaknesses Weaknesses
Blind spots Blind spots Blind spots
Risk Category
Key Players Key Players Key Players
Internal to Company Broken Stuff Broken Stuff Broken Stuff
Financial Plan Financial Plan Financial Plan
Macro Market Macro Market Macro Market
External to Company Micro Market Micro Market Micro Market
Competition Competition Competition
Pre Revenue Pre-Profit Post-Profit
Time

7. Roles – collaborate but know your positions
Stage Concept Pre Revenue Pre Profit Profit/Growth Liquidity
Situation: highly fluid, no Situation: version 1.0 done, early Situation: Close customer
Situation: vision defined, product Situation: Investors want to
infrastructure, no solutions, no adopters, differentiation, sales engagement, competition,
development, go to market realize their returns
resources tactics differentation, sales
CEO/Founder 1. Concept Identification & validation 1. Team building (Fi, Svc, ops, etc.) 1. Board management 1. Board management 1. Corporate development
2. Hypothesis development & testing 2. Board management 2. Tactical selling 2. Partner management 2. Stock price optimization
3. ROM Financial modeling 3. Cash management 3. Customer life cycle 3. Revenue optimization 3. Board management
4. The Vision (The Problem) 4. Partner management 4. Market segmentation 4. Profit optimization
5. Hire CTO & VP Sales 5. Vision validation 5. Cash management 5. Process improvement
6 .Fund Raising 6. Scope management 6. Incent and Inspire 6. New opportunities
7. Company Formation 7. Corporate positioning 7. Pricing validation 7. Governance
8. Executive Level Selling 8. Advisory board management 8. Economic model adjustments 8. Risk management
9. Board formation 9. The Mission 9. Fund raising
10. Advisory Board formation 10. Focus focus focus
11. Business Plan
CTO 1. Architecture and Design 1. Team development 1. SDLC optimization 1. Tuning 1. IP optimization
2. Concept Modeling 2. Development standards 2 Competitive advantage 2. Quality measurement
3. Market research 3. Core stack design decisions 3. Monitoring and SLA 3. Risk management
4. Hire VP engineering 4. Development methodology 4. Tuning and performance 4. Thought leadership
5. Idea to Launch Process 5. IP development 5. Vendor management 5. Competitive advantage
6. COGS
VP Sales 1. Partner Identification 1. Sales Process 1. Sales metrics 1. Channel expansion
2. Partner management 2. Sales Model (Inside vs. Channel) 2. CRM and customer lifecycle 2. Partner development
3. Executive Level Selling 3. High Skill/Will Talent recruiting 3. Reference-ability 3. Hiring and managing leaders
4. Concept validation 4. Compensation planning 4. Lead-to-close process 4. Lead-to-close optimization
5. Sales model (inside, outside, etc.) 5. Partner management 5. Channel Development
VP Marketing 1. Corporate positioning 1. Campaign management 1. Campaign management
2. Differentiation 2. Public relations 2. Public relations
3. Campaign Planning 3. Analyst relations 3. Analyst relations
4. Product positioning 4. Product marketing 4. Product marketing
5. Vertical content development 5. Lead gen cost effectiveness
6. Channel Support
CFO 1. Cash management 1. Cash management 1. Negotiations
2. DSO 2. DSO 2. Stock price optimization
3. Banking and debt 3. Banking and debt 3. Financial Leverage
4. Fund raising 4. Fund raising
5. GAAP basics 5. GAAP basics
6. Contract management 6. Contract management

8. Development Process – do your homework
Analysis Need Problem
Definition
Scope
paralysis is a
figment of the Specs
imagination. Prototyping Research
I’ve seen plenty Build
of political
paralysis, but
most folks skip Test
the analysis Requirements JAD Sessions
part and pay a Deploy
heavy price
later.

9. Concept Sales – partner for pain
 Early stage sales is concept sales – find fearless allies
who will take risks for personal gain
 The first five sales are the hardest so don’t waste
your time on dead ends and happy talk
 Make sure you have domain expertise to gain trust
and credibility before you open your mouth
 Just because someone will buy what you are selling
doesn’t mean they are a good customer
 Point the organization toward a repeatable sale as
fast as you can