Best Strategy Is Speed (Startup2Startup May 2008)

Speed As THE Primary Business Strategy Mike Cassidy

Speed Brings Great Advantages
Rapid product rollout/updates makes it extremely difficult for competitors to gain traction against you (2 weeks vs. 18 months)
Rapid success builds strong team morale (which leads to more success)
Rapid success generates more PR (which leads to more revenue, strategic partnerships, key hires, etc.)
Fast growth drives higher company valuations when fundraising or using equity for strategic deals
June 3, 2009 Confidential and Proprietary

Typical Start-up Timeline? June 3, 2009 Confidential and Proprietary Explore ideas 3 months? Raise money 3 months? Hire core team & open office 2-3 months? Build product 12 months? Initial marketing / awareness-building / early customers 3-6 months? “ Launched” = 23-27 months?

Lightning Speed Start-up Timeline June 3, 2009 Confidential and Proprietary Explore ideas 2 wks Raise money 1 day Hire core team & open office 2 wks Build product 3 months “ Launched” = 4 months

Example 1: Stylus Innovation
Stylus Innovation: Computer telephony software
Entrenched competitors
Owned 95% of market with DOS-based tools
300 customers/year per competitor
Visual Voice
1st Windows based tool, Visual Basic custom control
3,000 shipped in 1st year
Dominant market player within 6 months of Visual Voice launch
June 3, 2009 Confidential and Proprietary Sold 2 years after launch for $13M (10,000x founders investment)

Example 2: Direct Hit
Direct Hit: Internet search engine
Owned 95% of market (AltaVista, Excite, Infoseek, Lycos, Yahoo)
Used traditional text-based inverted index algorithms
Direct Hit
1st search engine based on tracking user voting (like Digg, YouTube, etc.)
Provided search for AOL (ICQ), Microsoft, Lycos, etc.
AOL deal within 5 months of company start
June 3, 2009 Confidential and Proprietary Sold 500 days after launch for $500 million

Example 3: Xfire
Xfire: Instant messenger for PC videogamers
Owned 95% of market (AIM, Yahoo Messenger, MSN Messenger)
Focused on traditional IM (not gaming)
Xfire
1st IM to track and connect videogamers
Grew virally from 100 users to 3 million in 2 years
Dominated market segment within 5 months of “Xfire” start
June 3, 2009 Confidential and Proprietary Sold just over 2 years after launch for $110 million

Speeding Up All Parts of Startup
Fundraising
Opening an office
Hiring
Getting new employees started
Product development
Business development
Marketing/PR
Changing direction

Fundraising

Speed and Capital
Stylus: $1,500 initial capital; no VC
Direct Hit: $1.3M (DFJ) – through launch, HotBot, AOL, Apple spent $400K; through MSN, Lycos spent another $600K
Xfire: $1M Series A
June 3, 2009 Confidential and Proprietary Biz school: Single, consistent strategy; not “ lowest cost and best customer service,” etc.

Raising VC Money Quickly
What are the best ways to raise VC money quickly?

Four Keys to Raising VC Money Quickly
Raise when conditions in your favor
Direct Hit Series A: 1998, portals growing rapidly
Direct Hit Series B: as AOL deal is closing
Direct Hit Series C: as MSN/Lycos deals are closing
Xfire Series C: Social networking “hot”, steep growth curve established
Get all decision makers in room
Synchronize timing of competing VC offers
Bring “if/then” contracts with customers to your VC meeting

Opening an Office

Every Day, Every Hour, Every Minute Counts June 3, 2009 Confidential and Proprietary 4/21 8:15am pitch DFJ; 4:30pm get term sheet; dev team gives notice at current jobs 4/22 Fly back to Boston 4/23 Negotiate lease on office space; order Dell computers 4/24 Order network software, phone system, office alarm system, DSL, office LAN/phone wiring 4/27 Incorporate, set up bank account, Paychex, desks/chairs 4/28 Source control software, property insurance 4/29 Hardware arrives, set it up 4/30 Set up LAN, phones, desks 5/4 Open office, first day team has been hired, have C++, email, PC, LAN, payroll, etc. (13 days after term sheet received)

Hiring

Think Speed in Everything You Do
Experience level:
Stylus : 4 sr. product managers (5+ years) -> CEO, VP Eng, VP Mkt, VP Sales
Direct Hit : 5 th product manager ->VP Eng; 10 year dev; 15 year dev
Xfire : 10 year dev; 10 year dev; 10 year dev
Known talent:
Stylus : 13 out of first 15 had worked with before
Direct Hit : 12 out of first 15 had worked with before
Xfire : 2 out of first 3 top devs came from absolutely trusted source
Close:
Group huddle during last interviewer
Offer letter ready before interviewee arrives
Make offer on same day

Getting New Employees Started

Speed Starts the First Day a New Hire Arrives
What do YOU do when a new employee comes on board?

Speed Starts the First Day a New Hire Arrives
Before the first day
Give her material to read the day she accepts the job
Give mundane “first day” paperwork before arriving
First day
Absolutely have desk, phone, email account, etc., set up in advance
Absolutely have goals/projects/deliverables written down; give to new hire immediately
June 3, 2009 Confidential and Proprietary Set tone for speed

Product Development

Which Is Faster?
A. Incremental development. Build 1 module/feature at a time and then launch. Add features as you go. Figure out over time what features users want and then try to add them.
OR
B. Spec your product CAREFULLY. Make sure you do great customer research! Hit the market with a rich, compelling product because you only get ONE first impression. If the product is lame, people will never come back.

Journey of a Thousand Miles Begins with a Single Step
Stylus Innovation
Visual Voice 1.0 let people build a 2-line IVR system
Added digital 32-line capability within 6 months (plus fax, a dozen other features)
3.5 months from “go” to launch
Direct Hit
Patented algorithm included two dozens variables (time spent at a URL, related searches, time of year)
Launched with small subset of this feature set
Xfire
Launched with 2 features: presence detection and 1-click join
Added a new feature every 2 weeks 1st year and every 3 weeks 2nd year

Business Development

Biz Dev Deals – Fast or Never
“ Probability of a deal ever closing declines by 10% each day it doesn’t close”
Use calendars/maps with “limited supply”
Sponsorships for July, Aug, and Oct already sold…
Map of USA with certain regions already controlled by competitors

Marketing/PR

Fastest Way To Get the Word Out?
PR is faster than Marketing
Stylus
No marketing budget
Editorial in CT Mag (including cover)
Direct Hit
No marketing budget (until Q4 ’99)
Cover of Industry Standard
Xfire
No marketing budget
Extensive coverage in Fortune, CNN, GameDaily, Forbes, WSJ, USA Today, Marketwatch, Wired, Red Herring, SJ Mercury, etc.

Changing Direction

If Something Is Broken, Fix It - Immediately
Stylus Innovation
Original name = “Dial-a-Fish”
Changing the way Americans shop for groceries, with $1500 in capital
Decision to change to Visual Voice took less than 2 weeks
Once decided, 100% of company effort immediately shifted
Xfire
Original name = “Ultimate Arena”
Play to win $$
Decision to change to Xfire took less than 2 weeks
Once decided, majority of company effort immediately shifted

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Best Strategy Is Speed (Startup2Startup May 2008)

by Dave McClure on May 16, 2008

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Best Strategy Is Speed (Startup2Startup May 2008) — Presentation Transcript