Author Archives: Alexander Muse

Aereo’s Chet Kanojia Hubris Cost $97M

Captura-de-pantalla-2010-01-03-a-las-20.20.07Last year I had the opportunity to meet with Chet Kanojia to talk about his ‘disruptive’ startup Aereo. It was clear he was facing HUGE problems with broadcasters who were suing him for reselling their content illegally. He was personally convinced he was right. He had figured out the perfect loophole to not pay content creators for their work. The idea was novel, but it was clear to me that he was stealing content from the actors, directors, producers and broadcasters who had paid to create it. He wasn’t the least bit interested in discussing the fact that he was making money from their effort and investment – he was completely focused on his novel method of following the law AND stealing their content. It was really shocking.

At the end of the day Aereo had an amazing product. They could deliver OTA programming over the web to any consumer in a way that was better than any DVR could offer. Simple, elegant and economical. BUT, Chet just couldn’t imagine that the court would side with the content owners – i.e. that they had a right to dictate who could distribute their content at what price. Had he stepped back and realized that we need writers, actors, directors, producers, broadcasters – and that they need to get paid for their work we could have had his AMAZING delivery service – Aereo – today. Instead he stuck to his guns and insisted he had a right to steal because Congress sucks at writing laws (they do).

Take it from someone who knows, I’ve lost millions of dollars for investors (I’ve made millions for them too). The quicker a CEO can realize he’s on the wrong side of history the faster he will be able to create a return for his investors. Today Chet decided the best solution was to take his company into bankruptcy – a decision that I have made as well in the past. Hopefully he’ll be able to recognize his mistakes and make an even better Aereo out of the ashes of his hubris. Or not…

How to find female co-founders. . .

220px-LeahCulver3Last night Molly Cain texted me a picture from the Find a Co-founder event at the Addison Treehouse. She noted that there was only one other woman there and she wasn’t looking for a co-founder she was a recruiter. I received a LOT of feedback about my post titled, “Diversity Sucks” where I argued that “Investors need to invest their money in the BEST startups and founders regardless of race, creed, sexuality or disability.” Instead of complaining about the dearth of woman in startups I wish people who want more women in startups to actually do something about it. I have a few ideas.

Men and women in the 20s have very different goals. Those goals, which I won’t bother to explain, mean that women are FAR less likely to start a company than men. Despite this fact of life many women WOULD, if approached, consider joining a startup as a co-founder. Here in Dallas there are a dearth of technical co-founders (of any sex) who attend startup events – business/hustler type guys are far more likely to attend a startup event. The potential technical co-founders are more than likely at technically focused events. So start gearing events in such a way that potential technical co-founders will discover and attend the events.

  • Step One: Build a comprehensive list of STEM related graduates from Texas universities (i.e TCU, SMU, UT, UTD, TT, A&M, UoH, Baylor and so on) that live in Dallas. You can work with each University to compile this list. For example, at UT just email Lori McNabb lmcnabb@cs.utexas.edu for help.
  • Step Two: Build a curriculum specifically of interest to STEM graduates (build an advisory board of 3 women and 3 men who come from Step One). Oh and it will be REALLY easy to get sponsors for these events IMHO.
  • Step Three: Invite an equal number of men and women STEM graduates to the event representing 80% of the total attendees (the remaining 20% of the attendees should be business/hustler type guys/gals).
  • Step Four: REPEAT.

I like this strategy because it isn’t about women. It isn’t about diversity. It is about finding more science, technology, engineering and math folks and getting them into the startup scene here in Dallas. PLEASE quit complaining about diversity and start ‘solving for startups’. #solveforstartups

Note: Pic is of Leah Culver who is my fav technical female founder.

2015 StartupMuse Sponsorship Opportunities

Why feature your company or product on StartupMuse?

StartupMuse is unique in the following ways:

  • Widely followed by North Texas decision makers: entrepreneurs, executives, investors and developers from startups to the titans of tech. Total reach of sponsorship program is in excess of 250,000 uniques.
  • A daily must read for the local startup community.
  • Your brand appears alongside other leaders, not mass market consumer products or tacky pitches.
  • Sponsors receive hundreds of clickthroughs per month from intelligent readers who know exactly what they’re clicking on.
  • Combined with a widely followed social accounts including: Twitter (50K followers), Facebook (5K followers), Instagram, Slideshare and Feedburner (RSS and Email distribution).

The Basic Program:

  • One sponsored link in the right hand column run of blog (Title, 6 lines of text or image, link).
  • One sponsorship announcement blog post (written by me).
  • One sponsored post per week (written by your staff, edited by me for tone and appropriateness).
  • One sponsorship announcement social blast (Twitter, Facebook, Instagram, Slideshare and Feedburner) estimated reach of 250,000.
  • One social blast per month for your announcements, events or other appropriate content.

The monthly cost for The Basic Program is $2500 on a month-to-month basis, $2000 six month commitment, $1500 twelve month commitment. Will consider ‘trade’ for certain services including: airline miles, legal, PR and development.

Sponsorship-StartupMuse

You can make more money, not more time. . .

simon-saying-noSince I played softball with Charlie O’Donnell at SXSW I’ve been an avid reader of his blog. This morning he had a new posted titled, “Valuing My Own Time and Saying No” where he talks about saying no to ineffective uses of his time. For example, he doesn’t do office hours at incubators and accelerators, he won’t do panel prep calls, he won’t take a 5-10 minute meeting, no networking events UNLESS he is speaking, he doesn’t drink and NEVER takes a meeting as a favor to someone. The post is worth reading. How much time are YOU wasting? I started my mentoring program as a SOFT way to say no. How do you say no?

Don’t share your idea with anyone!

Top-secret…unless you want to succeed. You’ve got an idea for the next big thing, a new iPhone application that could change the world, and you’re looking for developers and/or looking to raise capital. You are not entirely certain where to turn so you reach out to local entrepreneurs who have ‘been there and done that’. I get calls like these all of the time. Prior to 2008 most entrepreneurs here in North Texas were scared to share their ideas without getting an NDA in place beforehand. This put them at a HUGE disadvantage over their peers on the West Coast where collaboration and community have a long and distinguished history. Slowly but surely, the startup community in North Texas has morphed and has become very collaborative and supportive. But, every once in a while you’ll run into someone who is still clinging to the old, secretive ways of the past.

In fact, just yesterday I got a message from an acquaintance who told me he was working on a an app and asked me to put him in touch with local investors. I suggested he send me his deck and I’d make a few introductions. His response? He wouldn’t send it unless I signed an NDA (he obviously doesn’t read my blog). He explained that someone with experience could steal the idea in a second. I’m not sure why, but I felt really offended at the time – it felt weird to have someone asking for a favor AND at the same time explain that he didn’t trust me.

At the end of the day ideas are worthless – execution is priceless. When you’re starting a company you need as much help as possible. You need mentors, advisers, peers, partners, investors, vendors and friends. If you keep your ideas a secret it will be impossible for anyone to actually help you. Could someone steal your idea? Of course, but as I’ve said before your potential competitors are more likely to become partners. You’re far more passionate about your idea that anyone else – and most people want to partner with people with passion. Additionally, keeping your idea a secret may actually create more competitors. I explained my thinking in a post a few years ago, but Chris Dixon does a much better job explaining it than I did in his post, “Why you shouldn’t keep your startup idea secret.

My advice to mobile app developers!

Demand-For-Mobile-App-DevelopersSo often I meet promising young entrepreneurs who are building equally promising mobile applications that are missing three key features:

  1. an inherent mechanism for user growth
  2. an inherent mechanism for user retention
  3. measurement and analytics

When I press them on why they are NOT including these traits they explain that they PLAN to include them sometime in the future. I will argue that your MVP must include all three if you want a chance at success. If you can’t include these features from DAY ONE – don’t bother to build your app.

User Growth: There are scores of mobile applications on the market that are well designed and very useful – the problem is that you’ll never hear about them. There are simply too many apps vying for too few users. Even BIG brands have a hard time attracting users – why would an independent developer think he would have a snowball’s chance in hell at success? I suspect the same psychology that causes people to buy lottery tickets is at work in the minds of developers – there is a CHANCE they could win and so they roll the dice.

You should consider designing your app in a way that it becomes more useful when your user gets his friends to use the app as well. This is the most simple way to ensure that each download will result in multiple downloads. You might consider creating incentives for getting people to help you drive downloads – sweepstakes, premium features and so on.

My advice to mobile developers is simple: do not start building your application UNTIL you have a well thought out mechanism specifically designed to drive user growth. If you can’t come up with anything inherent in the design of your product that would drive user growth – don’t build the app – start working on something new.

User Retention: Getting users is actually EASIER than keep users engaged in your app. It is heart breaking to acquire a user only to realize they have forgotten that you exist a month later. You shouldn’t be surprised to learn that the majority of apps are only opened once. Don’t make that mistake – create a reason to keep in touch with you users. Create excuses to contact your users via push, text or email on a regular basis. The contacts need to be relevant and wanted – make them regular. This is why Facebook and LinkedIn have such great cohort numbers.

Again, my advice to mobile developers is simple: do not start building your application UNTIL you have a well thought out mechanism specifically designed to drive user engagement. If you can’t come up with anything inherent in the design of your product that would drive user engagement – you simply aren’t trying. Get back to work.

Measurement: Don’t just focus on ‘Vanity Metrics’ like downloads, total sessions, total first time users – instead focus on REAL Discovery Analytics. Things like cohort-based analysis – quantify exactly how specific groups of users continue to use and engage with your app and which groups generate revenue over time, user-centric funnel analysis – understand how distinct user segments covert on specific goals and ARPU – calculate the average revenue you are receiving across all, or segments of your users. The reason? You need to know how well you are doing BEFORE you pivot, before you update before you make a change. By constantly measuring you will know what works and what doesn’t work.

At the end of the day – set yourself up for success.

If you’re not falling your not learning. . .

I spent part of my youth growing up in New England. I spent an inordinate amount of time skiing and the one lesson that I learned was, “If you’re not falling you’re not learning.” It was a break through for me. Through ‘failure’ you can learn how to succeed. I’ve spent a LOT of time failing. Turns out I’m not alone. Checkout Michael Jordon talking about his own failures:

How much should startup founders pay themselves?

most-startup-founders-pay-themselves-this-totally-reasonable-salaryLast night I spent about 30 minutes talking to a couple of startup founders about how much money a startup CEO should make. Then again this morning I met with another startup founder and we talked about how much equity he should have AFTER his Series A investment. There is no answer, but I’ll give you a few ideas.

My experience is likely pretty close to what most of my peers have experienced:

  • Architel – worked for one year without pay, $150K second year.
  • ShopSavvy – worked for three years without pay, $195K fourth year.
  • ViewMarket – worked for one year without pay… (hope I get paid soon :)

Brad Feld, one of the most respected early stage entrepreneurs suggests startup CEOs should make $100-250K with a potential bonus of $0-100K and equity ranging from 1-20%.

Peter Thiel insists that a startup CEO should NEVER make more than $150K per year. He explains, “A categorical rule of thumb that Founders Fund has developed is that no CEO should be paid more than $150k per year. Experience has shown that there is great predictive power in a venture-backed CEO’s salary: the lower it is, the better the company tends to do. Empirically, if you could reduce all your diligence to one question, you should ask how much the CEO of a prospective portfolio company draws in salary. If the answer is more than $150k, do not invest.”

Prolific angel investor David Rose argues, “It should be discussed directly with the Series A board director, and it is up to you to propose something.  … it will likely end up somewhere between $100K and $200K. I’d personally suggest +/-$150K.”

Seth Levine from Foundry Group suggest that companies that have raised $1M or less should pay between $75-125K. Companies that have raised less than $500K should pay $75K. Companies that have raised $1-2.5M should pay around $125K.

At the end of the day 100% of the experts in the space ALL agree, “Don’t starve yourself. Make enough, just enough, not to starve so you can focus 100% on the success of your startup.”

Focusing on Revenue TOO Soon

If you are starting a company between the coasts (i.e. not on the East or West coast) you likely get CONSTANT questions about revenue from investors. In many cases, focusing on revenue generation early is a great idea; however, in other cases it is a HUGE mistake. Seriously.

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It is not uncommon for venture firms like Sequoia to recommend that a startup wait to monetize, but that advice is almost never given to startups here in Dallas. For example, one of the entrepreneurs I mentor has a technology product that is currently in beta trials with potential customers. His investors are pushing him to generate revenue, but the truth is that he’d be much smarter to focus his energy on getting more FREE beta trials with more potential customers. The trials are really helping him refine the technology and building goodwill with his potential clients. To top it off, his sales cycle is LONGER than the amount of cash he has available. If his investors demand he focus on sales he will fail even if he succeeds. What should he do? Convince his investors that monetization should happen AFTER his Series A.

If your product isn’t ready for prime time – don’t try to sell it. If your investors are looking for revenue tracking PRIOR to your next round AND you know that you can’t meet their expectations you need to change their expectations. Don’t be afraid to honestly evaluate your situation and set yourself up for the win – not the failure…

Sneak peak at my book: Founders

What do you think about the proposed dust jacket for Founders?

founders-3D