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I was a huge fan of comic books growing up, but what I always found amusing is that there tended to be certain archetypes of super heroes that would keep showing up.  For example - the “simple-minded strong dumb guy” is well represented by the Hulk, The Thing, Collossus, and Mr. Incredible.  

As early stage investors will all tell you - the quality of the founders is incredibly important.  Some investors have pretty methodical ways to determining the quality of a founder, others go more by gut feel.  But I think all investors have some set of entrepreneur “archetypes” that they tend to like, and they gravitate towards entrepreneurs that fit some or many elements of these archetypes.  

So for fun, I thought I’d share a few archetypes I often think about.  Some of these come up regularly in NextView discussions. So here they are:

The Talent Magnet

Some folks call these “pied pipers”.  In a resource constrained company, building a team is incredibly difficult when you have limited financial resources, stability, and certainty about the businesses future.  But there are truly remarkable entrepreneurs out there that a) bring with them excellent teams that are deeply loyal to the founder or b) are really amazing at developing a company culture and a story around the business that makes great people gravitate towards them.  This is critical both in the early stages of a company, but also in the later growth stages of the company where the financial reward might not be as significant.  Companies like Twitter are just black holes of talent, and the roots of that culture were set very early on. 

The “Force of Nature”

I think we all know folks like this.  They just do whatever it takes to get things done, and pity the fool who gets in their way. Investors like this archetype because they are decisive, are usually really good at selling and closing, and instill a hard driving and intense work ethic in their companies. These folks are particularly important when a company’s early success is dependent on some very hard-to get deals or customer relationships that mere mortals would be too intimidated to pursue. 

Note that in the image below, I used the Grey Hulk, who unlike the Green Hulk was actually very smart, but had a bad attitude. 

The Heat Seeking Missle

Early stage companies end up pivoting all the time - whether it’s the business model, customer segment, or something else.  Some great entrepreneurs are especially adept at entrenching themselves in interesting markets and quickly gravitating towards areas of promise.  These are the entrepreneurs who look like fast followers, but in my opinion are leaders in disguise. 

These entrepreneurs are especially effective in rapidly evolving markets or in grabbing hold of markets that are exploding (ie: social gaming, online ad exchanges and DSP’s, etc).  These are the kinds of entrepreneurs that investors think will “figure things out” and will spend capital wisely in that process. 

**Honorable Mention: The Knife Fighter

One of the entrepreneurs we’ve backed calls certain folks “knife fighters”.  This is a great archetype for early team members, maybe more so than founders.  

Often, you’ll hear of companies with great executive leadership that fail in early stage situations because they are used to operating with large budgets, a staff, an assistant, a strong brand behind them, etc.  Then you hear about a competing company with unproven but scrappy 20-year-olds that have an unbelievable level of output and somehow crank out double the output with 1/5th the staff. 

Or another example - some companies have very well groomed, high-brow Chief Revenue Officers or Marketers who struggle to deliver meaningful traffic or monetization in the early days of a company.  Then you hear about a guy who looks like a dwarf, stares at his computer all day, and somehow gets 200K uniques to a brand new site.  Sure, some of this traffic may be low quality, but sometimes, you need to knife-fight your way to early scale for more traditional, high-brow customer acquisition tactics to start working. 

Thoughts?  Any other archetypes you see and admire among entrepreneurs that you know?

One of the things I have the privilege to do outside of work is serve on the board of an Christian church in Brookline called Highrock. The church was founded less than 2 years ago, and it’s been a pleasure watching this “startup” develop.

I’ve also been able to see the operations of a few other non profits over the years. Many are well run by unbelievably talented and inspirational people. But there are a few best practices I’ve seen that I think could be very helpful, especially for startup non-profits. These seem like common sense (especially for folks who have worked in well managed businesses), but it’s easy for all of us to let basic principles slip.

1. Be Very Careful About Hiring Your Friends. 

 Starting anything is an intimidating endeavor, and it’s hard to do it alone. When building an early team, it’s very tempting to draw from your friends, especially since they are likely to share similar passions and have social chemistry with you. As a general rule however, I think it’s very very dangerous to work with or hire friends. Working with friends makes it very difficult to be objective and to give and receive feedback. It’s comfortable when things go well, but much more complicated when things go wrong (and all startups face major obstacles along the way). I think that team building should always be about determining what are the most important jobs to be done, and finding the best people possible to get those jobs done. In a world of limited resources, team decisions are very precious and hard to reverse, so before hiring a friend, be very sure you’ve determined objectively that he/she is the best person for for the job.

2. Establish a Culture and Process Around Performance and Accountability

Starting a non-profit often feels like a thankless job.  One of love and sacrifice.  As a result, I think leaders are often reluctant to institute basic management processes around performance and accountability.  I think this is a mistake.  Most workers do best with some level of structure around strategic priorities, measurable objectives, and specific feedback.  These practices not only result in higher performance, but usually in a more harmonious team.  A couple very simple things that I recommend:

a. Establish mid-term priorities for each person (6 months - 1 year).  Limit these priorities to fewer than 5. Make it crystal clear how these priorities tie to the top priorities for the non-profit as a whole. 

b. Create measurable goals as much as possible.  Measurable goals create accountability, and allows you to track progress along the way.  I find that people tend to get uncomfortable when there is a number tied to their work.  But that’s the point.  I wouldn’t be religious about “hitting numbers”, but I would make sure to track progress towards goals and have an ongoing discussion about why the person is tracking ahead or behind.

c. Establish weekly 1:1’s.  Pretty standard practice in companies.  Meet with team members 1:1 to troubleshoot, provide feedback, and make sure that everyday activities are building up to the mid-term priorities.  It also gives a team member air time to give you feedback on your leadership and the direction of the enterprise. 

d. Give feedback. It’s important to be very straightforward about both exceptional and sub-par performance.  The structures above probably give you enough opportunity for rapid feedback, but if not, carve out some time to do this.  There are lots of different ways to do this (and a lot of ways to waste time doing this). Doing a drawn out annual review is probably a mistake, but figure out what works well for your team and don’t avoid difficult conversations.  The earlier and more direct the feedback, the better. 

3. Be Diligent and Conservative about Budgeting and Planning

All startups are capital constrained and non-profits even more so.  Funding sources may be fickle with very limited long term visibility.  This would be a hard operating environment for anyone, but to make matters worse, managing an effective budget often does not match the skill-set of the founders.  My recommendation in this case is to establish some sort of an advisory board and make sure there someone with real P&L experience commits to helping the team with budgeting and planning. This person is not supposed to be a bookeeper, but someone to talk to about major purchases/hires, income forecasting, cash management, establishing a sound budgeting process, etc.  Don’t let your board members treat their participation as a token good deed of the quarter.  Give them assignments, and make budgeting and planning a major responsibility for at least one of your board members.  

Quick post today that came to me on the subway.  During my time in Venture Capital, I was surprised to see how many “rules” there are that have become gospel in the industry.  At the same time, I was surprised how little convincing evidence there was behind these rules aside from common industry wisdom. 

But markets and businesses all change, and venture capital is no different. Rules change, and players that fail to adapt become obsolete.  I remember when guys like Union Square Ventures and First Round Capital starting breaking some typical VC rules, I heard folks at other firms voice a bunch of criticisms that seem pretty silly in retrospect. 

The funny thing is that when everyone plays by the same rules, it creates market opportunities for those who can figure out how to defy the rules and do so intelligently.  It’s just supply and demand.  

Below are a couple “rules” that I think are worth breaking:

1. “We only invest in consumer companies that have a live product and traction”. 

Ok, this is actually a relatively new rule brought on by the capital efficiency of internet businesses.  But I think investors have swung a bit too far in this direction.  This rule basically means that you will only invest in a) things that are really on fire and you have to pay way up for and/or b) things that have traction but have no obvious business model. It’s a strategy that has worked for some.  But I think that this tends to disqualify some really ambitious products that just can’t be launched without meaningful investment.  Also, “traction” doesn’t just mean a lot of users. I’m usually much more impressed with a company with few users but really interesting unit-level metrics vs. something of more scale that could just be a flash in the pan. Finally, I think that some of the risk of investing in something pre-product is reduced by backing a team with a really good product process suited to the discovery phase of the business.  Oh, and a good early stage investor should be perfectly comfortable and helpful in implementing this process. 

I like how one angel investor described their focus on Venturehacks: “Strong preference for pre-product teams led by product-minded folks”. Refreshing. 

2. We only invest in companies going after billion dollar opportunities. 

I’ve blogged about this one before. I have two thoughts here.  First, at the early stage, investors honestly have no clue about whether a company has billion dollar potential.  What look like dinky toys to some can turn out to be monster companies, especially when the company is inventing markets, not capturing share of existing markets.

Second, the fact that most VC’s are going after companies of this scale (which they need to given their fund sizes) it says to me that there is a funding inefficiency for companies that can exit comfortably and capital efficiently at sub $100M levels.  By the way, this is where the bulk of M&A activity happens.

In my view, because of my first point, quite a few companies that may seem to be mid-sized exits might actually turn out to be venture scale.  Also, there may be some really interesting market segments out there that no investor is spending time in because it doesn’t meet this threshold (but perhaps reliably churns out mid-sized exits with reasonable risk).  

And by the way, since when was a $50M exit considered “small”? That’s pretty darn good for an entrepreneur, and will free them up to make a huge swing next time. 

Yes!  I’m saying it - we are in the early days of an entrepreneurial renaissance in Boston.  Even in the wake of TechCrunch Disrupt.  Even though every VC that talks about the greatness of New England is doing so from the Acela to NYC. 

Those of us who have been engaged in the Boston startup eco-system know that this is the most excitement we’ve seen in many years.  I was having lunch with a prominent local entrepreneur, and he remarked that there is more startup activity among young entrepreneurs in Boston than anytime in the past 10 years.  And as I’ve said before, more shots on goal will result in more big winners.

There are many reasons for this.  I’m going to talk about two.

1. We are seeing multi-generational involvement and mentorship in the Startup Community.  This is thanks both to successful entrepreneurs who are actively giving back, as well as motivated young entrepreneurs who are creating buzz and density among their peers.  For the late 20’s - early 30’s crowd, there is the PopSignal group led by Brian Balfour and Jay Meattle.  It’s THE entrepreneur gathering for the up-and-coming founders, but you will almost always see some of the more successful local entrepreneurs attending to give back to the community (guys like David Cancel, Andy Payne, Rich Miner, Mike Baker, and others). And the early 20’s crowd is not being undone, with Dart Boston getting under-30 founders together to collaborate and get feedback from top VC’s in town.  

2. There is critical mass of great companies (and recent exits) where future founders and entrepreneurial executives are being trained. Not everyone will found a company right away.  For those that don’t, it’s important to have pockets of excellence where talented folks can work, learn a trade, and gain experience behind successful entrepreneurs.  It’s also nice to put a little money in one’s pockets too, to create flexibility to experiment.  Boston has several very important pockets of excellence and great companies that are talent magents.  Including:

• E-Commerce (RueLaLa, CSN Stores, Shoebuy)
• Mobile (Quattro, Skyhook, JumpTap, Enpocket, MocoSpace)
• Marketing, Advertising, and Analytics (HubSpot, BzzAgent, Visible Measures, Pangea Media, Dataxu, Constant Contact, Compete)
• Other Awesome Companies (TripAdvisor, ZipCar, Grasshopper, Kayak, etc)
• Other companies in vibrant sectors I’m ignorant about like Cleantech and Life Sciences. 

I think what’s happening in NYC is great, and I definitely spend my fair share of time there and in Silicon Valley (and have angel investments in both locations).  But I’m thrilled to live in Boston, and I’m partially glad that other investors are spending time elsewhere.  Leaves more opportunity for me :)

I remember early on in my VC career, I chatted with an entrepreneur turned VC who remarked “as an entrepreneur, time is your enemy.  As a VC, time is your friend.”

What I think some VC’s mean when they say this is that investors typically have limited incentive to move quickly.  Unless there is a forcing function like a competing term sheet, it’s usually preferred to spend more time doing diligence on an investment mainly to get to know the founder better, watching the company make more progress (or eliminate risks), and getting buy-in from others in one’s firm.

One of my current partners calls this “hanging around the hoop”.  It’s a good strategy in basketball, but I think it’s pretty lame as an early stage investor, and specifically at the seed stage. 

I was chatting with another successful entrepreneur today who is also an active angel investor.  He emphasized the high value he places on speed of decision-making, and remarked that being known for speed will lead to positive selection bias.

This is particularly true for repeat entrepreneurs.  Often, successful founders can fund the early stages of their company themselves.  But if they are going to raise outside money (to provide feedback, help, and leverage on their dollars), they are more likely to go to folks they know will move fast and make decisions on rational dimensions that will actually help the company.  They will avoid investors who hang around the hoop, or send entrepreneurs on assignments that aren’t truly productive.  The truth is all VC’s can make fast decisions if they need to, they just need pressure to be applied properly. 

It’s hard to force an investor to move quickly unless you create competition.  But what you can do is try to tell whether the VC is doing good vs. bad due diligence.  ”Good” due diligence doesn’t take up entrepreneur time, burn the time of their valuable references, and are usually productive towards the goals of the company.  They include:

1. VC’s doing backchannel due diligence on the team.  This is good practice as an investor, and doesn’t burn a lot of cycles for the entrepreneur.  Usually if the VC is reaching out to their own networks, it means that they care enough to burn the time of their own contacts. 

2. Introducing the entrepreneur to real prospective customers and partners and seeing if they can close.  This is very informative for the investor and entrepreneurs want to sell to good customers.

3. Introducing the entrepreneur to executives with deep domain knowledge in the space.  This is a real opportunity for the entrepreneur to learn and the person may end up being a valuable advisor or even a member of the team. 

4. Meetings with a purpose.  The investor and entrepreneur want to get to know each other better.  But these interactions should be structured and constructive.  Debate business models, discuss product priorities, interview the founders to understand their strengths and weaknesses… these are all good, but definitely have a purpose and prepare to dig in deep at a level that the entrepreneur finds beneficial. 

5. Quick “no’s”.  It’s counter-intuitive.  But if a VC gives a quick “no” but with a very clear reason that seems addressable, there is no better due diligence than seeing if the entrepreneur responds and comes back having addressed the issue.  It happens rarely, but if the feedback was genuine, responding to the feedback will create genuine interest.  

Bad due diligence looks like:

1. Calling all an entrepreneurs references just to go through the motions or for selfish gain.  This does happen a lot.  The investor may know they are very unlikely to invest, but they think person x,y,or z on the reference list is interesting, so they’d love to talk to them. 

2. Multiple meetings rehashing the same information.  Lame.  It’s part of the difficulty pitching to large partnerships, but you’d hope that an investor would sufficiently brief his team so that conversations go deeper each time into the critical levers of the business.  Not rehashing generic stuff.  Also, this is a signal that the entrepreneur is hanging around the hoop.  They are waiting to hear an update and aren’t prepared and focused towards driving to a decision. 

3. Making entrepreneurs fly to partner meetings when they aren’t extremely enthusiastic about the investment (particularly a danger for junior VC’s).  Total waste of time and money. The investor in this case is not only hanging around the hoop, they are trying to take the temperature of their partnerships to see if they should spend more time with you. Remember, junior VC’s get “credit” for perceived activity, so they are more likely to do this so their partners know they “saw” the investment even if they know it won’t get through the partnership. 

4. Doing due diligence to inform an investment in a competitor (obvious and happens a lot, surprisingly).

5. Lame introductions to irrelevant people.  Of course, VC’s can’t always assess what kinds of customer/partner/executive intros would be fruitful, but their ability to get close is a) a signal that the investor “gets it” and b) really will be able to help.  But when there is a generational/industry gap between an entrepreneur and an investor, you are more likely to get intros to random or ill-suited people.  For example, there has been more than one example of Boston consumer internet companies in need of technical leadership talent that got directed to really old-school enterprise software executives.  Those types of cases are a waste of time at best, and truly harmful to the business at worst. 

As an entrepreneur, it’s not always easy to tell whether the VC is doing good or bad due diligence.  Hopefully these signals help.  But I would say that overall, speed is a great indicator.  If they are making progress quickly, that’s great.  If it’s taking a long time, it means they are hanging around the hoop.  And this is what should happen to people who hang around the hoop. 

VC’s always talk about the “deals” they have done.  The word is thrown
around like crazy and is ingrained into the VC vocabulary (deal flow,
deal pipeline, my deals etc).

I think “deal” is one of the ugliest words in the business.  It’s
really a terrible word for everyone.

For entrepreneurs, it belittles their companies and their personal
sacrifice.  I once even heard a prominant executive recruiter call his
placements “deals”.  I will never work with this guy.  Entrepreneurs
and executives are people. Their companies are their babies.  They
aren’t transactions.  They aren’t deals.

For LPs, it’s terrible because it connotes that the job is done when
the “deal” is closed. It’s obviously not - that’s when the work really
begins. For younger VCs, it creates a really bad motivation to “get
deals done”, which is not the objective of the game.

When I first started in this business, I saw that I was letting this
word creep into my vocabulary.  My former colleague Santo saw the word
in an offsite deck I was preparing and reminded me: “we don’t do
deals.  We make investments.”.

I want to strike this word out of the VC business.  Maybe no one else
cares, but there has to be something better.  ”Investments” works, but
it’s too long.  ”Opportunity Pipeline” is way better than deal flow,
but is too long as well.

Any other suggestions?  Let’s get rid of this ugly word.

This is the first post in a series of interviews on Product Leadership.  I’m very pleased to kick this series off with an interview of Max Ventilla at Google.  Max was a co-founder of Aardvark, a social search company backed by Harrison Metal and August Capital that was acquired several months ago by Google. 

What struck be as unique about Aardvark early on was the way the initial product came together, and the fact that the company is a 30 person organization with no product managers.  Instead, they are heavy on user focused designers and product focused technologists. 

I’m not a journalist, but I’m going to keep this in Q&A format, but won’t jot words verbatum (although the content was approved by Max).

RG: What problem were you trying to solve with Aardvark and how did you go about it?

MV: We were solving the problem of searching for subjective questions.  Different people can search for the same concept but are looking for very different answers because they are different and the context of their question is different.

Startups are most likely to succeed when founders really understand a space and they are taking advantage of timely trends (making the wind at their backs) 

Our team really understood search and the trend of increasing openness of personal information was at our backs.  The opening of the Facebook platform was a catalyst for us to really go after this problem. 

RG: You talked about being user driven in your product design approach.  Tell me about what this meant for Aardvark. 

MV: My last startup had a great product but limited user traction.  We decided to approach this one differently.  The very best product managers are right 20% of the time.  Most are right less than 10%.  There’s too much “hunch” in product decisions, so we set out to build products that could be tested.

It is tremendously beneficial to choose a product that you CAN be user driven about.  It’s hard for some enterprise products, or a search system that requires that you process responses in milliseconds.  We tried to test products that we thought could be appealing even if they were in a very raw form.  

RG: So, phase 1, you have a problem and no idea how to solve it.  What did you do?

MV: We self funded the company and released very cheap prototypes to test.  What became Aardvark was the 6th prototype.  Each prototype was a 2-4 week effort.  We used humans to replicate the back end as much as possible. We invited 100-200 friends to try to prototypes and measured how many of them came back.  The results were unambiguously negative until Aardvark. 

Once we chose Aardvark, we continued to run with humans replicating pieces of the backend for 9 months.  We had 8 people managing queries, classifying conversations, etc. We actually raised our seed and series A rounds before the system was automated - the assumption was that the lines between humans and AI would cross, and we at least proved that we were building stuff people would respond to. 

As we refined the product, we would bring in six-twelve people weekly to react to mockups, prototypes, or simulations that we were working on. It was a mix of existing users and people who never saw the product before.  We had our engineers join for many of these sessions, both so that they could made modifications in real time, but also so we could all experience the pain of a user not knowing what to do. 

This is a step beyond the “launch early and often” approach. It’s very very qualitative in addition to quantitative.  Launch early and often and being extremely data driven works, but when you have thousands of users.  It takes a long time before startups get that many active users. 

Stealing from Max’s blog here: “I’d estimate that we moved about half as quickly as if we’d just gone with our gut consistently.  In return, we dramatically reduced the chance that we would make wildly wrong bets…. Ultimately, investors gave money as much for our process as for our team and concept.”

RG: There has been some discussion about the limitations of “lean startup principles” and the Henry Ford adage that “If you asked users what they wanted, you would have gotten faster horses.”  What do you think of that?

MV: In our first phase, the concepts came from the team.  We tested the viability with people, but the vision of the products came from us.  The concept of having a “human” that you would talk to via IM was based on our own intuition, which we tested.  When we were developing the product, we also don’t ask users what they want us to build. We see what works, what doesn’t work, and the underlying problems behind our users struggle. We have a blog post on our methodology on our site here. 

RG: Thanks Max.  Best of luck at Google and we look forward to the continued growth of Aardvark and your new endeavors. 

Stay tuned everyone for our next two interviews with Adam Medros at Tripadvisor and Ben Foster at Opower. 

This past Friday was my last day at Spark Capital.

It has been a privilege to be a part of this team.  I have grown in ways that I didn’t expect, and was glad to be part of a firm that allowed me to interact with such wonderful entrepreneurs and early stage investors each day.  I owe a lot to the partners at Spark for their support and mentorship and am proud to say that I was a part of building this firm over the past several years. 

When you end something and embark on a new adventure, it’s always important to look back. I didn’t really intend to become an investor when I moved back to Boston from Silicon Valley.  But I did, and I learned so much that it’s hard to distill into a few points.  But here are a few highlights:

1. The value of diversity.  In starting a company, there is a big temptation to form a team that looks just like you.  Either in terms of personality or ability.  It’s especially true in private equity partnerships, because the team of partners must work together to make difficult investment decisions.  But in the case of Spark (and in many successful founding teams) it’s diversity that creates great outcomes.  I’ve always respected the way that the Spark founders surrounded themselves with people with a fair bit of non-overlapping backgrounds and personalities.  At times, it creates more tension and conflict.  But if diversity is coupled with mutual respect, the conflict leads to more creativity and better decisions.  

2. The role of a good board member.  I had limited exposure to boards prior entering Venture Capital.  My leadership professor in B school, Rob Kaplan, actually encouraged me to take a class on boards of directors.  In retrospect, I should have taken his advice.  What’s interesting is that board members can range from being damaging, to non-existent, to ridiculously helpful.  A good board member wears many hats: from business development guru, to CEO coach/shrink, to product strategist, etc.  And this is all under the umbrella of fulfilling one’s fiduciary responsibility to the company’s shareholders (and to the investor’s own Limited Partners).  It’s the ultimate unstructured job, but it’s also one that brings considerable influence (mainly through the levers of approving a company’s budget and hiring/firing senior management).  Obviously, I have a lot more to learn in this area over the coming years, but it was great to be able to watch experienced board members add value to companies on a regular basis. 

3. The art of evaluating people.  There may not be another job where you have to make snap judgements on people so frequently.  In a given week, I probably meet 15 people for the first time in 1:1 type meetings (and many more in group settings).  And if we are digging in on a potential investment, we really go deep and spend a lot of time with the team and do a bunch of reference checking.  Over the past couple years, I hope that I’ve developed some pattern recognition for the kinds of entrepreneurs that I think will be successful and would be a good fit for me to work with.  I’ve also learned some tricks to structure the way I evaluate people that allow me to drive towards objective criteria vs. just gut feel (btw, I recommend Geoff Smart’s book or paper for anyone looking for a good framework for this).  Finally, I’ve also learned that you want to be diligent in reference checking, and really try hard to find some real negative feedback.  No one is perfect, and exceptional people are often polarizing.  It doesn’t pay to ignore or avoid the negative feedback.  

There are plenty of other learnings that I will continue to share in the coming months on this blog.  But this all begs the question: What’s next?

The answer is that I’m starting something new that I am very excited about.  My co-founders and I have already begun laying the groundwork, but we aren’t ready to talk openly about what we are doing just yet (stealth mode is back in vogue again, after all.)  That said, I’ve always been a pretty open and transparent guy, so I’m sure I’ll be sharing more details soon.  

In the meantime, I’m going to continue to be active in the local entrepreneurial eco-system, and will continue to be an advisor to startups that I’m excited about.  I’m also planning to make a number of small angel investments along the way as well.

Stay tuned for more!

I’m pleased to have David Knox guest blogginig on robgo.org today.  For those of you who read my blog, you’ll know that I’ve done a series on Brand and CPG marketing on the internet and why I think it’s going to be a huge area of growth.  Today, I’m pleased to have David contributing this thoughts from the opposite side of the table.  David is a classically trained brand marketer and leads a number of digital brand marketing initiatives for Procter and Gamble.  He is sharing his thoughts on how startups can take the lessons learned from the CPG world to better deliver products and marketing messages that delight their customers.  Thanks David!

*** 

Increasingly when I get the question of what my job is, I tell people that I play the role of a “translator.”  After all, working in Corporate Marketing, I do not spend my time only focused on a single brand.  Instead, my role leads me to interact with a variety of brands, both inside and outside of the company.  One day that might be a fellow Brand Marketer at a consumer package goods (CPG) company.  Other times it will be a strategic partner, whether that is an agency or digital media company.  But increasingly, I am finding my interaction to be with more and more start-ups and the Venture Capitalists who invest in them.

It is in this last bucket where my role as a “translator” becomes the most evident.  After all, the numbers behind Consumer Packaged Goods are daunting when you consider comparisons such as this:

• Pampers has annual net sales of approximately $8 billion, which makes it larger than Yahoo ($6.5 billion in sales for 2009)
• In 2009, the advertising spending of the top 4 companies in the US was greater than the total fund-raising by US Venture Capital Funds ($14.5 billion vs $13 billion)

These numbers are not to say that bigger is better.  Instead, I would say that the worlds of Brand Marketers and Start-ups are just two distinct cultures.  Like all cultures, they have their differences, but also their similarities.  But more importantly, there are things that both cultures can learn from each other.

In his previous posts in this series, Rob has done a great job of providing the perspective from the start-up side of the table.   Now I wanted to provide my perspective on what start-ups can learn from the culture of CPG Brand Marketers.

#1 - The Consumer is Boss:

This is a mantra that was first coined by AG Lafley, former CEO of Procter & Gamble.  But you could say it is just an evolution of what David Ogilvy once said – “The consumer isn’t an idiot… she’s your wife.”   Consumer is Boss is a simple saying but it holds a universal truth for Brand Marketers who spend billions of dollars a year on market research.  Consumer is Boss is about letting the people using your brand / product guide your decisions.  This doesn’t mean that you follow a consumer blindly off a cliff.  But it also means you don’t add a feature just because it is a fun engineering challenge.

Now you might say that true innovators think the opposite of this.  After all, Henry Ford once said “If I had asked people what they wanted, they would have said faster horses.”  But that is taking the mantra of “Consumer is Boss” much too literally.  When Ford asked people what their problem was with transportation, they likely said that horses were too slow and that trains did not give them the freedom to go where they wanted, when the wanted. That understanding of the problems faced by consumers…the needs that they had in their lives…is what led Ford’s innovation.  Whether he realized it or not, he was one of the first people who practiced a Consumer is Boss mentality by understanding the motivations and desires of his potential consumers.  That conveniently leads to the second point…

#2 - Know Your “Who”:

Brand Marketers spend a tremendous amount of time focused on their brand’s “Who.”  Broadly defined, a Brand’s “Who” is their target consumer, the type of person with whom the brand has the greatest business potential…both in the short term and the long term.  The “Who” is a profile of a consumer and paints a picture for who that person is, what is important to them, and why they make the decisions they do.  If a brand has done a great job defining their “Who”, it makes other decisions that much easier.  Need to figure out if a product feature is worth investing the time / money to develop?  Check if your “Who” to see if that feature address a barrier your consumer has to using your product.  Need to create your marketing plan for your start-up?  Well then look at your “Who to determine where they can be most easily reached with a message about your product.  Your brand’s “Who” can be the foundation of just about every business decision your start-up makes.

I would argue that one the pillars for GroupOn’s success is that really understand their Who.  If you look at their About Us page, they list their company philosophy including this statement: “We sell stuff we want to buy.”  There is a lot of power in that short statement.  GroupOn makes their decisions about products to feature based on the things they would want to buy themselves.  They understand their Who, because they are their Who.  The company also knows that their other “Who” are local businesses that want to drive foot traffic into their stores and deal with expiring inventory.  Lots of startups approach this market with sophisticated tools taken from the online advertising realm.  But the GroupOn team understood the motivations of local businesses such that they created a very simple and practical ad format that got feet through the door and didn’t require a major onramping effort from merchants.  

Not all start-ups will be lucky enough to launch a business where they are the consumer they are trying to reach.  It is a challenge constantly faced by CPG Brand Managers and a reason why we put so much focus on really understanding our brand’s Who.

#3 - Design Matters:

Why can you recognize the Google logo even when they use different themed graphics on the home page each day?  And why has Method cleaning products been able to grow so fast in every category they enter?  It is because these brands have put a huge focus on Design, including incredible attention to their Brand Identity.  I am a huge believer in the design revolution that Jason Putori, Designer in Residence at Bessemer Ventures (formerly of Mint.com), is trying to bring to the start-up world.  Great design can be a major competitive advantage.   And this advantage is multiplied with a consistent use of the design in everything that your brand does.  You know an Apple product or message the second you see it.  With great design…and great consistency in that design… you can have the same for your start-up

#4 - Think about “Share”:

Share is everything to a Brand Marketer.  The career of a Brand Manager can be made or broken based on Dollar Share or Volume Share.  At retail, Brand Managers pay close attention to “Share of Shelf” or how many facings their brand has compared to competition.    In media, CPG Marketers look at “Share of Voice” to track the percentage of time consumers hear their brand message versus competition.  This constant, some would say obsessive, tracking of “share” is what keeps brand marketers focused.  Having viable and impactful measures for your start-up that you track consistently is something every business should do.  It helps you prioritize and keeps you focused on what moves those other important financial numbers (ie revenue, profit and cash flow)

#5 - Everything you do is part of Brand Building:

From day 1, your start-up is a brand whether you like it or not.  As Seth Godin once wrote,

“a brand is set of expectations, memories, stories, and relationships that, taken together, account for a consumer’s decision to choose one product or service over another.”

When a CPG brand thinks about Brand Building, they take that to mean much than just advertising.  In fact, often you will hear Brand Marketers talk about “Moments of Truth”.  The First Moment of Truth is often the experience in-store from merchandising to how the product looks on shelf.  The Second Moment of Truth is about the experience after the purchase when people use the product for the first time.  While he didn’t use the language of “Moments of Truth”,  Sean Ellis of 12 in 6 is talking about that very thing when he makes this point:

Starbuck’s process of building their brand is a great example for any startup.  There was no heavy spending on brand advertising.  At Starbucks it’s all about the brand experience.  They obsessed over everything – from the quality of the cups to the quality of the toilet paper.  The music, colors, furniture…  It’s all an orchestrated brand experience.

For a CPG Brand Marketers the process of building a brand involves every facet of the business from customer service to marketing to even your company letterhead.  While a start-up has many things they have to juggle, how your build your brand should always be near (if at) the top of the list.

I’m getting my IPAD this weekend, which makes me think that I’m going to do even more reading in the near future than I already do.

RSS has made a little resurgence in my life recently.  It’s nice to have a stable of content to read during my commute in addition to the serendipity of great content on Twitter or crowdsourced stuff on Techmeme.

But I’ve found that I’m reading way too much stuff written by VC’s and investors.  Not that I mind, I learn a lot.  But I often learn the most from entrepreneurs (BTW, most VC’s do… where do you think the inspiration for the blog posts come from? :) I know Larry has a great list of top VC bloggers. I’m wondering who the top 20 internet entrepreneur bloggers are.  Please tell me who you read and get the most value from.

I’m particularly interested in guys who share deep and practical knowledge about their sectors of focus.  I’m less interested in entrepreneurs who are hawking their own companies and services (although I understand that there is usually always some of that happening).  I’m also not counting academics/researchers/consultants like Steve Blank or Sean Ellis, although their stuff is excellent. Right now, the three that I follow regularly are:

1. Chris Dixon

2. Dharmesh Shah

3. Nivi and Naval

Who else?