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AWESOME presentation from Jason Putorti

putorti:

One of my favorite scenes from the movie “A Perfect World”.

“Fact” - The difference between a threat and a fact: Saying you’re going to do something is a threat, doing it makes it a fact.

I have great respect for what Matt Mireless is doing with both his business and for the NYC Startup community, however as a Technical Founder in NYC I find some issues with his latest post “The City of Founders Without Hackers.”

In his post, Matt cites a problem that there is a lack of entrepreneurially minded technical talent in NYC. While I don’t disagree there is a proportional disconnect of technical talent and “aspiring” entrepreneurs, I would also like to argue that a core of the problem is a lack of non-technical founders who understand the process of building a technology-based product.

The majority of Non-Technical Founders I run into only have an idea.  I’d say 85% of the Non-Technical founders I meet do not offer much more value to their idea than the concept itself. As we’ve learned over the years, ideas are nothing. A majority of the magic comes from execution and luck.

For an example I recently met an aspiring non-technical founder who is running into a problem finding a technical co-founder. By day they are a personal trainer, but they have aspirations of building an online destination that connects personal trainers to clients.

I asked the personal trainer about his thoughts on aspects of his venture. Things like user acquisition, user experience, distribution, competitors, etc.  His responses were not very thought out.  Turns out this would be entrepreneur has been working on this concept for 2 years.  When I asked what sort of progress he’s made, his response was “I talked with other trainers, gyms, and have been trying to get a prototype built. Everyone loves the idea, I just need to get it built.” This project is going nowhere as he’s showing he cannot execute on his own idea.

I suggested to him that he should put together his thoughts on things that will grow his business.  Things like how he plans to acquire users, how much user acquisition is going to cost, how he plans to make money on those users, and how he plans to measure it all.  What will allow him to validate his business is working or not and if it’s not working, what are the failing points.

After reading Matt’s post and recounting my experience (which happens often at meet ups) I feel that there needs to be a better crop of non-technical founders to match the available technical talent.  Without that non-technical founders will always have a problem impressing someone who is vital to building their product.  If you are a non-technical founder you must bring something to the table that’s more than an idea.  Bring something solid to show you are thoughtful and can articulate a clear vision for your business.  If you can do that I can assure you that finding technical talent will be much easier.

I shouldn’t admit this, but I rarely get up before my alarm rings in the morning.  The snooze button and I play out a familiar battle that I typically win.

However today I actually woke up a whole 20 minutes before my alarm went off. I figure I can take the next 15 minutes of time to get some thoughts down… About anything.

Last night I had a good discussion about web application growth. I’ve been learning that after building an app there are a lot more things to consider than new functionality, beautiful design, and crafty code.  Building an app is really only 20% of building a business (and 20% may be a generous # since I am a developer and product person). There are so many other things you also need to worry about.

The area that really geeks me out lately is user acquisition and revenue. I’ve been spending a lot of time thinking about that stuff. One of my recent thoughts is figuring out the sweet spot of Revenue Per User (RPU).

Say I want to earn $10k per month from my web service.  If I have 20k users that means my RPU must be $6 for the year (at $0.50 per month). For most consumer web products that’s a lot! That means I need to find something I can offer each of my users that returns $6 to me.

One way I am looking at this is by considering the variables in a simplified (and admittedly naive) equation:

# of User x RPU = Total Revenue

RPU = Total Revenue / # of Users

This leaves me feeling that I do not have direct control over the RPU as it is a function of my desired Total Revenue and # of Users.  So what can I control? Really the only thing I can control is what my desired Total Revenue is. I can lower it and thus the RPU becomes more manageable… Or I can do the more challenging thing and find new users to dilute the RPU.

If I increase my # of Users while keeping my Total Revenue the same I can distribute the RPU across those users. For example if I raise my user base to 40k users then my RPU is $3 for the year (at $0.25 per month).

This seems more ideal to me as the lower I get my RPU the more obtainable options I have for creating value from my site. For example placing ads or offers on the site becomes realistic if I lower my RPU to $0.05 to $0.10. However that means I need to have 2.4 to 1.2 million users (respectively)… Yikes!

So this becomes a play on volume of users. How to I find my new users and grow to grow my service? More on that later as my 15 minutes are up!  

I’m an “independent” developer who loves executing my own ideas.  I typically will scope out a minimal feature set and run full force to build something in a short period of time.  Once I’m done, it’s very natural to feel the need to “get it out there”.

When I worked on my original vision of Cupid’s Lab in 2006 (an online matchmaking/introduction system), I was very eager to get the word out to the world.  I was able to grow the service to a few hundred users through my own network of friends, but I was really eager to expand further.  I wanted to get the word out there.

I worked with a small boutique PR firm to write a press and shot it out through PR Web.  Over the next few days I got a few reviews & write-ups from technology related blogs like Mashable.

At the time I felt the release worked well.  Within a few weeks I had grown to a few thousand users and things seemed great, but it wasn’t long until the buzz died off.  With that I also felt the urge to want and send out another release to try and drum up some more buzz. Thankfully I resisted the urge. The process was exhilarating and intoxicating, but I realized that the results were short lived and I wasn’t doing anything sustain the momentum within the application.

Had I known then what I now know, I would have held off on the initial press release.  I feel very strongly that you need to consider your press very strategically.  You may want to get the word out there, but be VERY meaningful about how you intend to execute your press and make sure that you meticulously measure the results.

For me with Plan.FM I’m working towards building a press worthy product, but at this stage I know I’m not “ready”.

When I am ready I need to answer the question: “What is the reason to do a press release?”

As a very new product/company, there are two primary reasons that I will focus on.  Those reasons are User Acquisition and Financing Round. There are many other reasons, but realistically these will be the first two I will focus on.

Before I send out a release that focuses is on User Acquisition I need to make sure my product optimally converts anonymous visitors into registered users and successfully engages users to use the application on a consistent basis. Furthermore I need to make sure I can dilute my user acquisition costs by making sure that my users have the ability to refer other users to the service.  All of these things should be in place before any release goes out.

When it comes to starting a conversation about a Financing Round, I feel a press release can help a lot.  However you need to do it very carefully.

Let’s take one of the companies I’ve been watching in the event space, Plancast.com. (DISCLOSURE: although they seem like a competitor to Plan.FM, I feel that Plan.FM is actually a compliment to their service).  They initiated their press on Tech Crunch with a glowing review (it doesn’t hurt to be a Tech Crunch Alumni either).  You can read their press here: http://techcrunch.com/2009/11/30/plancast/

One thing to note is a the following paragraph:

The Facebook integration is key for Plancast. The service was borne out of Facebook’s fbFund ‘09 initial winners (its codename was Magellen at that point), and they’ve received a micro-seed round from that so far. The next step is to raise a proper seed round, Hendrickson says.

Four months later Plancast.com closed an $800k seed round with a stellar group of angel investors (http://techcrunch.com/2010/03/08/plancast-funding/).

The press was strategically initiated to handle both User Acquisition and Financing Round in a single shot.  And it worked.

So if you’re eager to get your product out there and spread the word, think first about how you can benefit from the release.  Do not do it just to get your product’s name out there.  Do it purposefully, make it meaningful, and make sure you are set up measure the results.

This week the NY Founder Institute talked about Partners & Suppliers.  Skip Hop’s founder Michael Diamant talked about how his company manages his partnerships & suppliers as it relates to manufacturing.  Although most of our founding members are creating consumer web applications there’s a lot we can learn about how “traditional businesses” handle distribution from companies like Skip Hop.

Inspired by Venture Hacks, I give you the following video:  Somewhere an entrepreneur misunderstands the value of his product in a distribution deal. (NSFW due to language)

Layer Cake: It’s Just Business