Resources Posts

We read the startup blogs so you don’t have to.

Jason Cohen explains how to hire employee #1 (practical, tested advice). Fred Wilson explains how to make an email intro without making yourself look bad (this is how I do it). Bill Gurley explains why Google will pay mobile device companies to use their OS. Fred Destin explains why, much of the time, he doesn’t know why he passes on investments (finally someone admits it — I look for reasons to say yes, not reasons to say no). Chris Dixon explains why he’s reassured when Sequoia invests in a Y Combinator company. Fake Steve Jobs is receiving critical advice from Vladimir Putin (from the humor department).

Enjoy the knowledge, understanding, and wisdom.

Ash Maurya‘s new blog documents his journey through customer development. This is the most by-the-book application of customer development that I have ever seen. I am following this blog very closely; it’s thoughtful and well written. Some highlights:

Is AdWords the right MVP for your product?

“For Timothy Ferris, his MVP for testing new products that don’t yet exist (micro-testing) comprises of a landing page, signup page, and Google Adwords to drive traffic. However, this approach presupposes that:

  1. You can create a good landing page
  2. You can write good adwords copy
  3. Adwords is a viable distribution channel for your product

“Unlike a book title or some other other physical product, startups are usually characterized by products where the problem and solution are unknown and have not yet been validated which makes writing good landing page copy hard, and good Adwords copy even harder (you only get 25 characters for your headline!). At best, you can guess. But starting with that approach is a surefire way of dumping a lot of money on Google Ads fast. Plus the return on learning is low – When your click-through-rate is low, or the bounce rate high, you get zero visibility into why. Was it poor copy, poor product/market fit, or both? And don’t even get me started on how expensive CPCs have gotten in competitive markets.”

Have you ever stated or revised your problem hypotheses?

“Our top 3 [problem hypotheses] were:

  1. Sharing lots of photos and videos is a hassle
  2. A lot of services downsize the images so the quality is poor
  3. Notifying family and friends of updates was manual and a chore…

“During the interview, we were particularly interested in learning what their sharing workflow was like. We set up the stage and let them tell us everything they did with their photos/videos taking them from camera to shared, what they wished they could change, and the magical pricing questions: Would they use a solution like the one we were envisioning if it were free? Would they use it if it were $X/yr? X changed from customer to customer but we kept it as real as we could.

“We talked to enough people until their answers started sounding the same. At that point we had a pretty good idea of what our product’s unique value proposition should be, a list of other benefits, and a price to put on our signup page.

“Our revised top 3 problems were:

  1. Sharing lots of photos and videos is a hassle (stayed the same)
  2. Requiring visitors to signup is annoying
  3. Photo gallery design was too busy or complicated”

Have you ever collected feedback from your customers with, like, your ears?

“By now we had also heard of the merits in listening to your users and decided to follow a release early/release often model. The only problem was we didn’t know how to listen. In the interest of efficiency and productivity, I generally avoided face to face meetings and phone calls and preferred email. Many people were struggling with the software (desktop apps are hard) but we didn’t know how to engage them. After they’d cancel their account, we would send them an email to learn why but many times it was too late.

“We were getting a lot of feedback over email but didn’t know the best way to qualify them. If more than one person asked for a feature and it sounded like a good idea, we built it. The reverse was also true, if the feature didn’t meet our model of “the vision”, we ignored it no matter how many people asked for it. And that’s how we kept busy for a while till I realized we still had a lot of leaky buckets despite all the listening we were doing.

“Determined to get to the bottom of this, I got an 800 number which I put on our website and also started calling on users directly. The findings were staggering. Most of our paying users were using a very small percentage of the application. We had built up a lot of bloated features or waste which had only taken time to build but also continued to create ongoing work with regression testing, feature dependencies, etc.

Thanks to Eric Ries for the link.

“With knowledge being universally accessible, there will be no excuses for non-performance.”

Peter Drucker

Steve Blank recently asked me to prepare a list of startup blogs for his customer development class. Here you go Steve.

I read all of these blogs. They all have incredibly useful archives. And they’re all written by people who teach and practice, so the advice is practical.

Must read

Eric Ries – Startup Lessons Learned
Fred Wilson – A VC
Marc Andreessen – pmarca
Paul Graham
37signals – Signal vs. Noise

More to read

Brad Feld and Jason Mendelson – Ask the VC
David Hornik – VentureBlog
Dharmesh Shah – On startups
Josh Kopelman – Redeye VC

Should be posting more often

Bill Burnham – Burnham’s Beat
David Cowan – Who Has Time For This?
Naval Ravikant – StartupBoy
Steve Barsh – Barsh Bits


Yoichiro “Yokum” Taku – Startup Company Lawyer


Mike Speiser – Laserlike
Steve Blank

On the town

Andrew Chen – Futuristic Play
Dave McClure – Master of 500 Hats


Venture Capital Wear

Steve Blank, the king of customer development, has started a blog at And he’s on Twitter too: @sgblank. Steve is one of the great startup mentors of all time and he is using his blog to share 30 years of Silicon Valley war stories. Start at the beginning, and read every word he writes.

According to his book, Four Steps to the Epiphany, Steve is a “retired entrepreneur who… has been in 8 startups in operational roles from CEO to VP of Marketing… These startups resulted in five IPO’s, and three very deep craters.”

Marc Andreessen calls Steve “one of the most strategic thinkers you will find on the topic of starting high-tech companies… buy [his book], read it, keep it under your pillow and absorb it via osmosis.”

Steve’s theories are elaborate, thoughtful, and thorough. Most important of all, they’re based on 30 years of success and failure — they’re tested, not hypothetical.

A few people in the world have built big companies. Even fewer have done it many times. And even fewer can teach us how to do it. Now it’s up to us to learn.

Here’s a snippet from one of Steve’s posts, There’s a Pattern Here, to get you started:

“So what is it that makes some startups successful and leaves others selling off their furniture? Simply this: startups are not small versions of large companies.  Yet the processes that early-stage companies were using were identical to that of large corporations. In hindsight it appeared clear that startups that survive the first few tough years do not follow the traditional product-centric launch model espoused by product managers or the venture capital community. Through trial and error, hiring and firing, successful startups all invented a parallel process to product development. In particular, the winners invent and live by a process of customer learning and discovery. It’s a process that doesn’t exist in large companies with existing customers and markets.  But it is life and death for a new venture.

“I call this process “Customer Development,” a sibling to “Product Development,” and each and every startup that succeeds recapitulates it, knowingly or not.

“The “Customer Development” model is a paradox because it is followed by successful startups, yet articulated by no one.  Its basic propositions are the antithesis of common wisdom yet they are followed by those who succeed.”

Go read Eric Ries’ new blog: Startup Lessons Learned. He’s a Venture Advisor at KPCB and a co-founder, CTO, and VPE of IMVU.

Eric blogs about one of my favorite topics: applying lean/agile to startups. Lean thinking is the number one thing you can do to make your startup more effective. His post on A new version of the Joel Test is a great place to start…

On board meetings:

At IMVU, we opened up our board meetings to the whole company, and invited all of our advisers to boot. Sometimes it put some serious heat on the management team, but it was well worth it because everyone walked out of that room feeling at a visceral level the challenges the company faced.”

On solitary programmers:

It’s not true that energized programmers primarily do solitary work; certainly that’s not true of the great agile teams I’ve known. Instead, teams should have their own space, under their control, with the tools they need to do the job.”

On schedules:

Agile team-building practices make scheduling per se much less important. In many startup situations, ask yourself “Do I really need to accurately know when this project will be done?” When the answer is no, we can cancel all the effort that goes into building schedules and focus on making progress evident. Everyone will be able to see how much of the product is done vs undone, and see the finish line either coming closer or receding into the distance. When it’s receding, we rescope.”

On QA:

“Imagine a world where your QA team never, ever worries about bug regressions. They just don’t happen. All of their time is dedicated to finding novel reproduction paths for tricky issues. That’s possible now, and it means that the historical ratio of QA to engineering is going to have to change (on the other hand, QA is now a lot more interesting of a job).”

SEM on five dollars a day is another great post among many. Thanks to Andrew Chen for bringing this blog to my attention.

Go read Mike Speiser’s new blog: Laserlike. Its theme is, “Free ideas. Just add execution.”

Mike recently joined Sutter Hill Ventures as a Managing Director. Before that, he founded Epinions with fellow Venture Hacker Naval Ravikant and founded Bix (acquired by Yahoo).


In his second post, Mike writes,

“The theme of Laserlike is that ideas are overvalued. Entrepreneurs spend too much time worrying about protecting their ideas and not enough time launching them!

“I’m going to share my thoughts during my presentation at TiEcon this Friday at 11am, during which I am going to “give away” three of my favorite ideas. I will then blog about those ideas in more detail after the presentation and will continue sharing and discussing ideas openly on Laserlike in the future.”

My favorite idea on his blog is Shadow Market: Money management by the masses.


Make sure you read Mike’s TiEcon presentation (pdf). The section on execution is invaluable. Here are some of my favorite snippets:

“The real cost of a startup is not career risk, but rather the amount of time and psychic energy they consume.”

“Startups launch to the world too quickly and then lose some of their natural advantage of flexibility by inheriting backward compatibility.”

“Apply the same filter on your investors as you do on your founders.”

“If you have traction, you have a good deal of leverage. Even if you don’t have traction, you are better off boot strapping than going into a long‐term business partnership with the wrong person or firm.”

“While it’s possible to invent a massive new market at the same time as building the market leader in that market, it’s a low probability bet.”

“The winner in your market will likely be the one with the best leader. A startup CEO needs to convince people to make “irrational” bets with their own lives. He needs to convince customers to be early adopters. He usually needs to raise capital and manage risk averse investors. A great group of people with a weak CEO will lose. A strong CEO has a strong grasp of strategy, can sell anything to anyone, and can inspire people to do what they never realized they could achieve.”

bill.jpg In 4 Things to Do After You Get Your First Term Sheet, Bill Burnham, a former partner at Mobius and Softbank Capital, writes,

“I’ve recently been involved in helping a couple companies with their first major round of VC financing. It’s actually been pretty interesting for me because I have historically been on the other side of the table. In addition to generating several stories worthy of “The Funded” and getting a better appreciation of the trials and tribulations that entrepreneurs must go through when trying to raise money, I also gained a better appreciation for just how important it is to properly manage the “end game” of a VC financing.

“What is the “end game”? The End Game generally takes place after you have gotten a term sheet, but before you actually sign it. How well you manage this process can make a big difference in the actual terms and pricing you ultimately get, so it pays to approach this process as thoughtfully and diligently as you do any other part of fundraising.”

“With that in mind I present 4 things that you should definitely do after getting your 1st term sheet:

“1. Get a second term sheet: It may sound flip, but this is the single most important thing you should do upon getting your 1st term sheet. Nothing loosens up a VC’s purse strings or makes them more flexible on a particular term than the threat of competition. Without competition (real or perceived) you have very little leverage against a VC. Now getting one term sheet, let alone two, is tough enough, but getting two must be your goal and you must not waiver in pursuit of that goal even you after you get the 1st one. The biggest problem most entrepreneurs have executing on this strategy is that they have mismanaged the sequencing of their fundraising. Many entrepreneurs make the mistake of pursuing an “in order” fundraising process whereby they take one meeting, run that process to its logical conclusion and if that doesn’t work out try to get a meeting with another VC. VC fundraising must be pursued concurrently! You must put as many irons in the fire in as short a time as possible so that all the firms start the process at roughly the same time. As firms progress through the process, you should do your best to try and “herd” them along by trying to slow down the ones pushing ahead and speed up the ones lagging behind. The ultimate goal is to ensure that when you receive your first term sheet you have several other firms that are very close (within a week or so) to potentially issuing their own term sheets. Proper sequencing ensures that you are not forced to take an inferior “bird in hand”.”

Read Bill’s great post for the rest of his suggestions. He agrees with everything we’ve been writing about, so he is obviously quite brilliant.

marc.jpgIn The Psychology of Entrepreneurial Misjudgment, part 1: Biases 1-6, Marc Andreessen kindly interprets an essay from Charlie Munger‘s book, Poor Charlie’s Almanack:

“Mr. Munger’s magnum opus speech, included in the book, is The Psychology of Human Misjudgment — an exposition of 25 key forms of human behavior that lead to misjudgment and error, derived from Mr. Munger’s 60 years of business experience. Think of it as a practitioner’s summary of human psychology and behavioral economics as observed in the real world.

“In this series of blog posts, I will walk through all 25 of the biases Mr. Munger identifies, and then adapt them for the modern entrepreneur. In each case I will start with relevant excerpts of Mr. Munger’s speech, and then after that add my own thoughts.”

munger.jpgI started making a cheat sheet of Marc and Charlie’s key points—I thought I would share it with you. It’s a handy reference once you’ve read the full article.

(For another great article on cognitive bias, see Cognitive biases potentially affecting judgment of global risks.)

1. Reward and Punishment Super-Response

Once you realize how much incentives influence human behaviour, you need to assume their influence is even bigger than you think. Never think about something else when you should be thinking about incentives.

“If you would persuade, appeal to interest and not to reason.”

– Benjamin Franklin

Incentives are so powerful that every incentive should have a counter-incentive to restrict gaming of the first incentive.

2. Liking and Loving

Liking and loving something conditions you to (1) ignore faults of and comply with wishes of the loved, (2) favor people, products, and actions associated with the loved, and (3) distort other facts to facilitate love.

Wanting to be liked by your teammates impedes you from firing people and making unpopular but good decisions.

3. Disliking and Hating

Disliking or hating something conditions you to (1) ignore virtues in the disliked, (2) dislike people, products, and actions associated with the disliked, and (3) distort other facts to facilitate hatred.

Startups should focus on their customers, not their competition—whom they may dislike.

4. Doubt Avoidance

Execution is often better than further contemplation:

“A good plan, violently executed now, is better than a perfect plan next week.”

— George Patton

Believing that something will happen, and convincing others that it will be so, makes it more likely to happen.

While a hypothesis is still doubted, wise entrepreneurs know whether (1) persistence and iteration will prove the hypothesis, or (2) the hypothesis will not be proven and additional testing is a destructive waste of time—a new hypothesis is required.

Related: Realists vs. Idealists: Thoughts about Creativity and Innovation and Decide To Do Something That Will Probably Fail, Then Convince Yourself And Everyone Else That Success is Certain.

5. Inconsistency Avoidance

Have strong opinions, weakly held. New and correct ideas may not be accepted simply because they are inconsistent with existing ideas.

Your existing ideas may be unknown to you. They may be hidden assumptions. We often make hidden assumptions about unknown unknowns.

If existing customers in the market aren’t ready for a product that is inconsistent with their behaviour, go after customers who aren’t in the market because they can’t afford the existing product or don’t have access to it. See The Innovator’s Dilemma and The Innovator’s Solution.

6. Curiosity

Insufficient curiousity prevents you from learning. Hire curious people and discover your customer’s true needs—not what you think they need.

Hilarious new t-shirts for the “top 2/20%” (get it?) of the population from VC Wear:

vcwear_fund.jpg vcwear_noidea.jpg

vcwear_wemovequick1.jpg vcwear_powerpoint.jpg

vcwear_toiletpaper.jpg vcwear_mom.jpg

vcwear_puke.jpg vcwear_yesno.jpg

There are more awesome t-shirts at VC Wear as well as a Powerpoint Pitch and a Buy it (the company) Now button.

vcwear_google.jpg There’s truth in every t-shirt. I’ve heard that “every” VC in Silicon Valley passed on Google… sometimes more than once. David Cowan of Bessemer Venture Partners confesses to passing on Google in their Anti-Portfolio:

“Cowan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine”. Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage?”

We’ve started a Venture Hacks page on Twitter: (RSS).

We’ll be posting interesting quotes, links, and other things we like. We’ve started with a few quotes:

“Common stock is decorative.” – Anonymous Investor

“Valuation is temporary, control is forever.” – Venture Hacks

“You never ask board members what they think. You tell them what you’re going to do.” – Bill Watkins, CEO of Seagate

If you use Twitter, feel free to send us quotes, ideas, tips, suggestions @venturehacks.

I also have a personal Twitter profile where I post aphorisms: (RSS). Here’s a few to get you started:

“Confidence in nonsense is required.” – Burt Rutan, Aircraft Designer

“None of us have a real understanding of where we are heading. I don’t. I have senses about it.” – Andy Grove, CEO of Intel

“You can’t be normal and expect abnormal returns.” – Jeffrey Pfeffer, Stanford Business School

If you use Twitter, feel free to reach me @nivi.