Warning: Cannot modify header information - headers already sent by (output started at /home/content/41/7017241/html/wp-content/plugins/wpheadsp/wpheadsp.php:1) in /home/content/41/7017241/html/wp-includes/feed-rss2.php on line 8
Harkador http://harkador.com Wed, 11 Jun 2014 13:29:55 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.3 10 Reasons why Boston was a great start-up town in 2011 – Looking forward to a great 2012 http://harkador.com/10-reasons-why-boston-was-a-great-start-up-town-in-2011-looking-forward-to-a-great-2012/ http://harkador.com/10-reasons-why-boston-was-a-great-start-up-town-in-2011-looking-forward-to-a-great-2012/#comments Thu, 05 Jan 2012 16:33:58 +0000 http://harkador.com/?p=533 Continue reading →]]>

In alphabetical order:

  • Artisan's Asylum  – now with 31,000 square feet on the Somerville/Cambridge line, wood shop, welding shop, machine shop, lots of how-to classes and a great mix of artists, machinists, electronic hobbyists, carpenters. You can finally, for little money, build whatever your mind can imagine minutes from Boston.
  • BostonInno , GreenHorn Connect, Scott Kirsner, VentureFizz, Xconomy and many more that I forgot to mention keeping us informed second by second on the local startup scene.
  • Cambridge Innovation Center – The CIC is an incredible space for launching companies and always a friend to the start-up community.
  • Microsoft NERD Center – The NERD center has hosted for free thousands of events in their spectacular spaces. Great to see the corporate giant doing so much for the local start-up eco system.
  • Mass Challenge  – One million dollars in prizes, free awe-inspiring office space. Attracting worldwide talent to Boston. Yowza.
  • TechStars Boston –  A fantastic accelerator program, $100K guaranteed funding, an exceptional training/mentoring program, friendly advocates for entrepreneurs and they are not in California.
  • MassInno – Month after Month, Massinno has enabled hundreds of Boston area companies to show their stuff in a festive supportive atmosphere.
  • Ice Chimes on the Greenway – The Greenway has transformed Boston and enabled great new public space and in this case cool winter art.
  • The Universities – We are blessed with many great business, tech and creative schools and more than 250,000 college students in Boston and Cambridge alone.
  • The investors – $2.4B (B as in Billions) Venture Capital invested in Massachusetts companies during the first three quarters of the year coupled with a vibrant and growing angel community.


I am sure I forgot many other compelling reasons to be here and launching businesses, please feel free to add your favorites below in the comments section.

Looking forward to a good year,



http://harkador.com/10-reasons-why-boston-was-a-great-start-up-town-in-2011-looking-forward-to-a-great-2012/feed/ 4
Before You Start a Business, Plan Your Exit http://harkador.com/before-you-start-a-business-plan-your-exit/ http://harkador.com/before-you-start-a-business-plan-your-exit/#comments Wed, 14 Dec 2011 19:28:49 +0000 http://harkador.com/?p=516 Continue reading →]]> Not usually the first thing you think of when starting a company, but where you want to end up impacts everything you do.

I sit on the board of ChatThreads, where we are in the process of raising an equity round to fund the growth of the company. Early in the process, an investor asked what the company could do to accelerate and maximize our exit.  I replied my standard response: “ We intend to build a great business. By building a great business, we create a great exit.” While my answer was accurate and sincere, I owe the investor a more nuanced answer.

What Makes ChatThreads Valuable
ChatThreads is a media research company that helps primarily Consumer Package Goods (CPG) companies evaluate with a 360-degree view in real time the effectiveness of their advertising dollars.  As an early stage business, with a coveted product offering and broad applicability, ChatThreads can grow in many ways:

  • Maximize the revenue from a few key customers
  • Maximize the profit from a few key customers
  • Maximize the number of top CPG companies they do business with
  • Maximize their penetration within a handful CPG companies, but capture all the brands within this limited number of companies
  • Replicate the success in the CPG market and extend their market reach to other verticals, like automotive, healthcare, politics and the like
  • Invest heavily to have the best possible, most automated, full-featured software product
  • Invest heavily to have the biggest/baddest sales and marketing team
  • Invest slowly


We have discussed many of these scenarios with investors and with each other.  I am also sure we could think of many other ways to grow the business.  The reality is that is that without planning your exit, at least where you want your company to be in five years, there is no way to make good decisions about any business scenario.

The planned exit scenario impacts all aspects of the business. Rather than analyze the whole business, let’s look at how an exit strategy impacts the classic 4PS of marketing:

What features do we develop – great data visualization tools OR great automatic interpretation tools. Better automation means better margins, better visualization tools means happier customers, and higher market penetration.  If you are more likely to be acquired by a software (analytics) company, then it might pay a higher multiple for a more sophisticated analysis tools, whereas a financial buyer is likely to pay a higher multiple for a more profit.

What is our pricing strategy? Do we want to show the best possible margins or do we want to run a profitable business and bring in more value-based customers.  From an exit scenario perspective, this question revolves around what interests potential buyers. Great profitability, access to additional customers, top line revenue?

Place (distribution)
Will we continue to sell the product directly to the brands or will we partner up with other service providers to sell through their network? Are advertising companies or other media research companies good partners for us? Having direct relationship with the brands makes us a very attractive acquisition for a growing company with limited access to the big brands. A large advertising company with established relationships to the brands would not value our sales channel as highly.

How is ChatThreads marketing the company? Are we a media modeling company, consumer insights company, or an analytics company? Are we driving sales through Internet marketing or social media? (of course we are doing all of the above) How we promote the company over the coming months will for sure influence different potential acquirers.

Exit Door

So with a wealth of options, how is ChatThreads thinking about building the business?

We are focused on delighting and owning all the top CPG companies. We are driving development, sales and budgets to support this direction. We came to this decision based on how we can maximize our value to potential acquirers.  Ultimately, we will make ChatThreads an indispensible tool to all of the top CPG brands.

How are you building your business for exit?


http://harkador.com/before-you-start-a-business-plan-your-exit/feed/ 2
Why 10 slides, 5 minute pitches and one pagers really matter http://harkador.com/why-10-slides-5-minute-pitches-and-one-pagers-really-matter/ http://harkador.com/why-10-slides-5-minute-pitches-and-one-pagers-really-matter/#respond Fri, 16 Sep 2011 10:37:47 +0000 http://harkador.com/?p=489 Continue reading →]]> Fred Wilson wrote a good post recently on the optimal size for a slide deck. His thesis was skip the slide deck and do a great demo. 

I believe in demos, mockups, product samples or any other devices entrepreneurs use to enable investors to understand what you are selling. The more actual the product is, the easier to get people (including investors) excited.  But, this post is NOT about the optimal slide count or pitch length for investors. Rather, it is about building a successful business.  Wooing investors is great, but ultimately selling a lot of product to customers is what makes a business succeed.

The 10 or 6 or 3 slide deck (as opposed to a 30 slide deck) is important because it forces entrepreneurs to think concretely about their business.  Early stage business is about efficiency. Doing the few things (maybe one) really well and delighting your customers with the things you do.  The 5-minute pitch or 10-slide deck forces hard, yes or no decisions and effectively drives the business forward. 

Should we be spending time/money on marketing, building a demo, and finding investors? Should we be courting manufacturing partners and sales partners? Whom should we hire or fire? All of these questions become much easier to answer when you have a crisp definition of your business.

In my first startup, Vert Inc, we decided to revolutionize the advertising business by putting sun-light readable color displays (TVs) on top of taxi cabs.

Several years ago, we delivered geo/time/demographically targeted out-of-home advertising. When we started, we were going to be a media company, an advertising company, an Internet software company (when software development took multiple man years). We would design and build hardened display systems to show video ads on top of taxis (a brutal hardware environment). Oh yeah, we also had to develop relationships and rent taxi roof top space from tens of thousands of unaffiliated taxi owners. 

Dynamic taxi advertising. Big concept, lots to do, so where to start?  About 6 months in to it, almost running out of funding, we had to narrow our focus, to define sharply what we wanted to be when we grew up. We had to do the one pager (OK, closer to 5) and to figure out our go-to-market strategy.  We decided to build the network, the display boxes and software, but to leave the selling and recruiting of taxis to someone else.

It took a couple more years to close a deal with Clear Channel to be our exclusive domestic partner, but we had a well articulated path to follow and we could focus on building great software and super rugged hardware. We got our A investment round, but we also got some focus. From this, we identified the problems we had to work on, the features we needed to add so we could walk into a VC or potential customers, show off our demo taxi and efficiently explain how we were going to grow the business.

Today, I am working with  a promising young company, SmarterShade, facing similar decisions to the ones I managed through at Vert. They have award-winning window dimming technology, have won multiple business plan competitions and secured other non-dilutive funding.

With all their success, they are still sorting through the really hard questions about the business. Are they a technology licensing company, a film company, a commercial window company, a window accessory company,  industrial window company,  selling other dimming glass solutions?  

These are all great unanswered questions. Since they are unanswered, it is hard to figure how to optimize their time. In the near term they are all about getting increasingly better demo units built, but they struggle with their mid-term focus, developing relationships with film manufacturers, courting window companies, talking to shade companies, exploring new markets for the technology, getting something into the market, even if it is not the endgame.  

Because Smarter Shade has a great team and good advisors, they will sort through all of these issues; the  really hard work is to get to the essence of your business and then efficiently describe what you are doing in 10 slides, 5 minutes or one page.

When I see the crisp 10-slide deck from Smarter Shade, I will know they have success in their sights.



http://harkador.com/why-10-slides-5-minute-pitches-and-one-pagers-really-matter/feed/ 0
What will the fall of 2011 look like for entrepreneurs? http://harkador.com/what-will-the-fall-of-2011-look-like-for-entrepreneurs/ http://harkador.com/what-will-the-fall-of-2011-look-like-for-entrepreneurs/#comments Tue, 16 Aug 2011 13:11:45 +0000 http://harkador.com/?p=443 Continue reading →]]> It is that time of the year again — the dog days of August when I wax poetic about the prospects for start-up companies in the coming months.

This post is a follow-on to my   Summer time or is business slowing post about a year ago.  At that point, things seemed slow, the economy was uncertain, but sentiment was that things would pick up for entrepreneurs. In fact, from last July to this one, things looked promising for those of us who bring new products and innovation to the marketplace.

Valuations were soaring, IPOs were picking up steam and Boston was back on the map. In March, I claimed that perhaps valuations were getting too high or bubblicious. In the middle of June, I left TechStars Demo Days feeling like the entrepreneurial scene in Boston was thriving and partying like it was 1999.  TechStars had 12 companies present to hooting and hollering, a rollicking after party with Coolio, oversubscribed rounds – the whole scene to me reminiscent of the web 1.0 days late in 1999/early 2000.  

When I first started thinking about writing this post, I was going to talk about how well Boston's start-up scene was doing despite the occasional whining about what’s the matter with Boston's negative energy. Powerful, external events intervened.

The Dow is down 8% as of Aug 15th and was down as much as 20% in the last few days. The market has been up and down over 4% in a day for many days in the last two weeks. The market is volatile which scares angels.

What does the volatility in the public markets mean for start-ups?

To get some insight, I reached out to several early stage investors and micro VCs. Most of them are on vacation (where I am headed myself until early September).  Fortunately, the prolific Angel investor, extraordinarily nice guy and always communicative Ty Danco  set me straight  this weekend. These are some of our conclusions:

1)   The investment environment for start-ups changed on Aug 8, 2011

  • The Dow lost 635 points or 5.6 %. Angel investors take a percentage of their assets, typically 10% to invest in the private, often illiquid market of start-ups.  This 10% is usually their "fun" money. If they lose it, no big deal.  When the rest of their portfolio is down 20%,  as it was just last week, this has a non linear relationship on their angel investments. A 20% drop in net worth, can translate into a 100% drop in angel investing.
  • Angel investments might just stop for now, but more likely will slow at a rate much greater than the stock market drop. Investing in early stage companies with public markets unstable is not a risk many angel investors want to take.


 2) $25K is the new $50k

  • Ty Danco paraphrased a prominent local investor about the new $50k.  The Angel community is small and tends to move in herds.
  • Angel investors, once comfortable dropping $50K into an unproven venture, will now be thinking $25K.  Of course, this is much better than zero dollars. The Angel community will not stop investing, but overall raises will be smaller and may take more participants to meet your fundraising goals.  


3) Deals will get done, but will take longer

  • When I was the CEO of BPG Motors, we closed our first Angel round at a great valuation in February of 2009.The round was in the middle of a truly historic financial meltdown. Banks stopped lending. Money market funds were paying less than a dollar for a dollar invested . It took us until Feb 2009 to close a round committed in July of 2008.  Deals will get done in any markets, but will take longer if the markets continue to be volatile or correction moves back downward.  


4) Valuations will recede

  • With fear creeping back into the market and investments likely getting smaller, the pendulum has started to swing back to the early stage investors. I don't think we will see more deals like Color's crazy $41M pre revenue investment. Start-ups for the most part will gravitate back down to more average and less bubblicious valuations.


5) Capital efficiency will creep back into the lexicon

  • In 2009, capital efficiency was omnipresent. It’s coming back. Then, there were no exits and investors were intrigued by capital- efficient businesses.  Can your business succeed with the smallest amount of capital possible? Capital efficient businesses tend to be the double and triple kind of start-ups and not the homeruns. As the confidence in the market fades, we will see the market sentiment swing back to performance over promise.


6) VCs will continue to invest

  • Valuations stagnating or falling are great opportunities for VCs to buy low and sell high.  The VCs with funds already closed will see lower valuations as an opportunity to invest.  VC deals will continue to happen, but perhaps with increased due diligence (slow the deals down).


​7) Timing is everything

  • To all those great companies that closed your rounds in July, congratulations. You did your deals before the spigot started to close.  For all entrepreneurs, the great lessons here begin with time, rarely on your side. No matter how great your business is, you are subject to external market conditions. You always should be running to get your deals done because you really never know what external factors are going to affect your success. 


8 ) Sky is not falling

  • Valuations were likely getting high before this market correction.  Deals were getting done at a crazy fast pace.  Valuations will not plummet; deals will continue to get done. Entrepreneurs will continue to thrive. Great companies will continue to be great companies.  
  • Less great companies may not get funded and good companies may have to work a little harder.  Remember: while the markets may have slowed, this fall will be a heck of a lot better than the fall of 2008.


What do you think?  As always, I would love to hear what you think the fall with bring for entrepreneurs. Please leave your comments in the disqus section below.

http://harkador.com/what-will-the-fall-of-2011-look-like-for-entrepreneurs/feed/ 1
Carnegie Mellon Entrepreneurs Group Boston Early Stage Funding Breakfast http://harkador.com/carnegie-mellon-entrepreneurs-group-boston-early-stage-funding-breakfast/ http://harkador.com/carnegie-mellon-entrepreneurs-group-boston-early-stage-funding-breakfast/#respond Mon, 23 May 2011 16:48:56 +0000 http://harkador.com/?p=402 Continue reading →]]>

As a proud member of the Boston Carnegie  Mellon Entrepreneurial Group, I helped organize and present at a panel session last week at TechStars/Dogpatch Labs in Cambridge. We had a great diversity of investors on the panel, Bob Crowley, B. Christopher Kim, Jim Lang, and Katie Rae.  Rick Lucash  hosted the panel.  Thanks to the presenters, TechStars for hosting and thank to everyone that attended

Take Aways

Your network matters. The panel was in universal agreement that investors, particularly in Boston, are not going to take your phone call or read your business plan, if you aren’t introduced by a trusted source. This is not your standard old boys’ – or old girls’ — network. It is a filtering process. If you can't find the kind of investor the project requires, then you probably are not building a business to thrive. If you are building a business, you have got to network, face-to-face, and not virtually. There is no excuse for not getting out there and talking to people. Between Greenhorn Connect and VentureFizz, you can likely find a networking event in Boston every day to attend. Enjoy the free pizza and beer and build your network.

Low capital intensive companies make more sense to investors.   Angels like businesses that don't require gobs of capital. Later stage funding is becoming more prevalent, but it still hard to raise later rounds.  When companies do raise later rounds, angels usually don't have the capital to preserve their ownership position in the company.  My friend Andrew Varley from Swellr had some poignant thoughts on this subject: "I think for a lot of businesses that straddle Internet and offline, finding ways to minimize capital intensive offline issues is key. Rang true to me as we look for ways to crowdsource business leads from natural community partners."

Great teams act as a team. As Henry Miller said, “The real leader has no need to lead – he is content to point the way.”  When your team is meeting with investors, act as a team. It sets the wrong tone, if every time someone on the team is asked a question, the CEO answers. Investors pick up on this dynamic really quickly.  Build and trust your team.

Traction and progress before funding.   Some more input from Andrew: "Have a hypothesis, setup an experiment, record results, and do again.  Along these same lines, there needs to be continual testing of the product with quick iterations.  By showing a track record of successes (and failures) of your hypotheses, you can look for money with a stronger argument and hopefully give away less." An additional take away from this line of reasoning is that investors are not likely to fund software development.  Most Web 2.0, mobile apps, software businesses today can launch beta software in less than a man year.  If you believe enough in your product to raise capital, figure out how to get the software done on your own nickel.  Again, if you can't self-fund the demo/beta these days, you are probably not going to get very far with your business.

Plan and people both matter. Investors like plan and slide decks that are clean and accurate.  They certainly understand that the business plan will change, but your ability as an entrepreneur to cleanly articulate a plan is important. The numbers do need to tie together and you need to be able to explain what you are working on, what you expect to do in the coming months/years and where it will take the business. The plan is important, but it is not enough. People really matter.  Katie Rae reviewed 600+ plans to get to 12 TechStars teams in Boston this year.  In order to get to 12 finalists, she spent a lot of time interviewing the teams. Why? Because people matter. It is not enough to have a great plan without the team to make the plan happen.

Here are some other comments I received about the panel session:

  • Strategize communications with investor as you would for a PR plan: connect through their trusted connections, plan on follow-on communications when you've hit milestones, and stay focused on the overall story you want them to have about you and your company.
  • Evaluate what investor is right for you and your company and qualify investors based on this criteria. The goal should be finding the right funding, not just finding funding.
  • Creative Funding Structures – as someone who loves exotic financial products I was happy to hear there are funds out there that are looking for other ways to fund early companies.  I am not sure how they would apply to our model but I would definitely want to learn more.
  • Search for the right investor. It is easy to talk with people who will never invest in you.
  • Ask your friends and to sell yourself. "At the beginning, it is just you" it's my favorite sentence.
  • important to build a relationship with an investor that you are courting – need to demonstrate that you can make and communicate progress on a consistent basis


Any other thoughts on the panel? Please feel free to add your comments below.

http://harkador.com/carnegie-mellon-entrepreneurs-group-boston-early-stage-funding-breakfast/feed/ 0
Bubblicious – Warning, Entrepreneurs! Social media valuation bubble distorts the entire market http://harkador.com/bubblicious-warning-entrepreneurs-social-media-valuation-bubble-distorts-the-entire-market/ http://harkador.com/bubblicious-warning-entrepreneurs-social-media-valuation-bubble-distorts-the-entire-market/#comments Wed, 30 Mar 2011 14:19:35 +0000 http://harkador.com/?p=199 Continue reading →]]> Color raises $41M in a series A round with no revenue.  Twitter is valued at $7.7B with $45M  revenue (171 times revenue) in 2010. Facebook is now valued at $65B up 30% over 6 weeks relative to the valuation when Goldman Sachs invested.  Hiring a couple of hot software engineers today is Silicon Valley is the equivalent of the Red Sox signing Adrian Gonzalez and Carl Crawford.

Another Internet Bubble: that’s what it looks like to me.

The difference this time is that the companies have revenue and might be profitable when they are valued at crazy high valuations.  The predicted IPOs of Groupon and Facebook will be for revenue-generating and profitable companies. Google has proven that high valuations can be sustained. However, a bubble — is still a bubble.

Can a photo sharing site that hasn’t launched really need or justify $41M? Facebook was reported to have a trailing price to earning (P/E) ratio of 125 @ a $50B valuation.  Today it is at a P/E of 162. Google by comparison has a P/E of 22 and a market cap of $180B. Valuations are just, well crazy — Bubblicious.

What is the bubble doing the entrepreneurial eco-system?

For the good:

  1. Valuations are crazy high for any company that can integrate the words Social Media into its business plan.  This is great for entrepreneurs in the Social Media space — if the markets soar long enough to get to an exit or trade their shares on emerging secondary markets. It is particularly good for social media startups in Silicon Valley where early stage valuations have been soaring.
  2. Lots of very early stage companies are being funded by micro VCs and super angels. In fact there is a stampede of funding in this area. All 43 Y-combinator (nascent stage incubator) companies now have the option of taking $150,000 fromYuri Milner with no questions asked.
  3. Software engineers with the right skills are in huge demand
  4. At some level, a rising tide lifts all boats, so crazy social /mobile media valuations help all early stage valuations.

For the bad:

  1. Lots of companies are being funded with virtually no operating history or visionary technology.  Today’s programming tools enable incredibly rapid development of websites.  What used to take several man years can now be executed in a few months. New companies often have a prototype website running before they are funded.  So, there is a little special sauce in the actual coding. Sure, the design aesthetic may be unique, but getting the actual site coded or copying someone else’s site is for the most part significantly less than one man year’s worth of work.
  2. The hope is that 1 in 20 or 1 in 50 will be the next Facebook. Since the businesses do not have much technical differentiation or market traction, it is all about finding the right entrepreneurs from the swamp of competitors and hope they drive and thrive.  In fact, business plans are considered old school. Don’t plan much, we are now told, but get out and do.  Has anybody heard this before ?
  3. What’s the bad part about lots of companies funded at increasingly higher valuations?  The 20, 50 or 500 small bets that investors are making in very early stage startups take money away from other parts of the ecosystem.  Yuri Milner’s $150K investments in Y-combinator companies alone add up to $6.5M in capital that could have been invested more productively.
  4. Companies with some operating history and real plans not in the social media/mobile space continue to have a hard time raising money.  At some level it seems easier to raise money on the hope of a great future than if you actually have proof points and, yes, some operating history. These less glamorous businesses in many ways have a higher likelihood of success, but don’t fit into the noisy herd of investments these days.
  5. Hardware-based businesses, which by their very nature require more investment capital, find it very difficult to raise early stage capital today. Investments in hardware and surrounding IP builds businesses that are much more defendable than 99% of the social media businesses.
  6. Finally, like all of them, this bubble will end — badly.

One poignant point on the bubble nature of the market. I have a friend who went from developing hedge fund models to a social media startup guy. He is loving the startup world and can’t wait for the Groupon IPO. Not because he wants in, but because he is dying to short the stock.

Bubbles are fun, but they distort markets and end painfully. Until then, enjoy the ride.

http://harkador.com/bubblicious-warning-entrepreneurs-social-media-valuation-bubble-distorts-the-entire-market/feed/ 3
Is first to market really a good strategy ? http://harkador.com/is-first-to-market-really-a-good-strategy/ http://harkador.com/is-first-to-market-really-a-good-strategy/#comments Fri, 04 Feb 2011 16:26:57 +0000 http://harkador.com/?p=159 Continue reading →]]> Looking at the recent crazy high  $15B  (yes billion) valuation of two year old Groupon got me thinking about why? What did Groupon do correctly? Are they winning because they were first to market with group online discounts ? I don’t think so; Town Hog and Living Social were both founded earlier. I can think of many variants of online couponing companies that have come and gone over the years .  What Groupon has done really right and continues to do really right is make a massive investment in outselling and out hustling their competition.

OK raise your hands, how many of you have written, spoken, read or heard the words: “We will dominate the markets we enter by being first to market”. I have written this phrase into a few business plans and have heard it many times from entrepreneurs. Googles nifty word frequency analysis tool shows that “first to market” increased in usage 400% in the last decade peaking somewhere around 2002. The Internet age has driven businesses to drive to be first to market like Ebay and gain “the first mover advantage”.    What we forget is that Google, Ebay and Amazon were not the first movers in the market. They were later entrants that dominated the market through better capitalization or in Google’s case a better product.

The holy grail is not really first to market. It is first to a dominant market position.  Aiming for a dominant position sets businesses on a different trajectory then shooting for being first to market. In almost every instance, it is better to let others take on the burden of educating customers and defining products.

I am having hard time finding any examples of the first entrant to a market winning. Reviewing business week’s top 25 Tech companies, I see only three companies that come close to being first to market.  Lets look at the other 23 first.  Top 25 performers Google, Apple, Oracle, BYD (chinese battery/electric car company), Samsung were not at all first to market. What they did was evaluate the market, see what other players were doing and out executed, out marketed and ultimately out performed their competitors. The three players that I might consider first to market me are RIM (Blackberry), Priceline and  Netflix.  While RIM dominates the corporate email market, based on their patent issues, they were clearly not first to market. In fact, RIM claimed the email service they provided was in the public domain as a means to invalidate some of their competitors (patent trolls) patents.

That leaves us with two out of 25 (4%) companies , Priceline and Netflix, that truly may have won because they were first to market. Priceline took a long time to get there, but has been a success and holds the patents on their business model.

Netflix I believe was the first to launch their mail based video rental business model and was quite successful, but ultimately is remaining strong by being a late but dominant entrant into the online streaming video market.   So while being first helped Netflix initially, being a later but dominant player is driving their second success story.

In the final analysis, a few companies (less than 4% of successful tech companies) win by being first.

If you want to really create value, design your start-up to dominate the market and win through sales and execution and not a race to be first.

http://harkador.com/is-first-to-market-really-a-good-strategy/feed/ 4
What if you stopped tweeting and dropped Facebook? http://harkador.com/what-if-you-stopped-tweeting-and-dropped-facebook/ http://harkador.com/what-if-you-stopped-tweeting-and-dropped-facebook/#comments Fri, 10 Dec 2010 13:23:17 +0000 Continue reading →]]> What if you stopped tweeting and dropped Facebook?

My last two tweets were Oct 12 and Oct 20. I was not a huge Twitter emitter before that, but I did tweet every day or two during the previous couple months. My last blog post was Oct 6. The last time I spoke publicly was a panel session on October 20. I also have been off TweetDeck and Facebook for most of October, November and December. Clearly, I have not been doing much outbound communication or monitoring what others are saying. This brings up two interesting questions:

1. Why the falloff in my social media involvement?
2. What impact has opting out of social media had on my business and personal brand?

1) The falloff is easy to explain. One of the hats I wear is CEO of BPG Motors and the other is running an early-stage consulting practice, Harkador Partners. BPG has been in serious crunch mode and what was designed to be a part-time job has been consuming many hours. Maintaining my consulting practice beyond BPG and also seeing my family occasionally during this period has left virtually no time to blog and tweet.

2) As for the impact, there are pros and cons. At BPG Motors, we are in heavy-duty development mode at the moment, which means we are not seeking customer feedback and are not yet focused on building our brand. Did BPG suffer? Yes and No, because right now BPG needs to be laser focused on product development. However, one area that may have suffered is building excitement with our investors. Ultimately, a stellar product trumps early promotion. BPG is focused on finishing the prototype and I expect made the right tradeoff between promotion and product development.

My consulting business, Harkador Partners, however, has several objective indicators that my decreased social media presence has negatively impacted my business; specifically, a decrease in existing business and potential new business. During this time period, my billable hours went down, and, more concerning, visits to my website have been off dramatically, down 25% in November as compared to October. Website visitors are a leading indicator of potential new business.

My social media activity does not operate in a vacuum. Online activity should be blended with other brand building opportunities. While I don’t have the precise data, website activity spikes for Harkador Partners and BPG Motors in conjunction with my blog posts and public speaking engagements, like the panel session I sat on in October.

Getting a viable prototype for the U3 for BPG has been my top priority for the past several weeks (and many months before that), but at the same time I lowered my online presence. Decreasing my online visibility has diminished incoming leads. So, while I continue to focus on BPG, my personal numbers speak for themselves. Social media needs to be maintained. To ensure ongoing and future opportunities for Harkador Partners and BPG, it is essential to carve out regular and consistent time to both maintain and enhance my online brand.

What do you think? What is your personal ROI on the time you spend on Twitter, Facebook, Buzz and the like? Is it just a distraction or time well spent?

http://harkador.com/what-if-you-stopped-tweeting-and-dropped-facebook/feed/ 15
Bending iron in a facebook world http://harkador.com/bending-iron-in-a-facebook-world/ http://harkador.com/bending-iron-in-a-facebook-world/#respond Wed, 06 Oct 2010 19:05:01 +0000 http://harkador.com.previewdns.com/?p=17 Continue reading →]]> I like software companies. I really do. In fact, I sit on the board of a software company, consult to another, advise a couple more and I am in the early stages of building a web based business. Super Angels such as Ron Conway are investing into up to four businesses (generally software/social media plays) a month looking for the next facebook or more likely the next company sold to facebook, Google and the like.

I spend a lot of my time in a different world running BPG Motors, a start-up that is building a compact self-balancing motorcycle. My team spends their days bending and cutting metal, whirling motors and designing systems that encompass long lead-time parts. Rapid prototyping a product for us usually takes months if not years and not days. This is not a business where you set up a good developer with a case of Coke, and a Mac Book Pro and you get a working demonstration of your product finished over the weekend. In this post, I want to explore the parallel universe that hardware start-up companies live in. My colleague Matthias also has some poignant views on building hardware companies that are worth reviewing.

Hardware start-up companies – The Good 1. Tend to have defendible IP. If you have the tenacity to build a hardware product, you are probably doing something novel and you can successfully patent what you are doing. 2. Hardware development takes longer and requires more resources so there are fewer products developed and it is easier to defend your market position. 3. Hardware companies produce tangible goods. Time and again, engineers and investors tell me how satisfying it is to be working on something that is real and not virtual. 4. Hardware companies are not generally all-or-nothing propositions like most Web2.0 start- ups. 5. 3D modeling, FEA and other software design tools, low cost global suppliers, free online collaborative tools, better connectivity have all contributed to dramatically lowered development costs for hardware companies.

Hardware start-up companies – The Bad 1. Capital Efficiency (a rallying cry for early stage investors these days) is lower than for software companies and has to be measured on a different scale. $50,000 will feed and nurture a lean software start-up for six months and often be enough to reach a significant business proof point. $50,000 often wont cover the material costs of an early hardware prototype. Budding hardware entrepreneurs must understand early on that even with 100% sweat equity they will need more investment dollars to make an alpha, beta, prototype and final product then a software company. 2. At least in BPG Motor’s case, there is no easy way to gather quantifiable customer feedback without building a working prototype. We did a ton of CAD work, but ultimately we only get real customer feedback when we have people sitting on the bike and riding it. 3. Getting it right requires a lot of pieces to come together. Not just on the engineering side, but also on the product side. There is less and less technical risk in software-based start-ups, so much more of their resources can be focused on defining and marketing their product. Hardware companies ultimately require just as much marketing support, but are less likely to have the capital to invest heavily in marketing. 4. Hardware companies tend to have lower margins since cost of goods sold (COGS) is not zero. 5. Hardware businesses are out of favor with investors. Largely because of my first four points above: investors, particularly early stage investors, are migrating towards web 2.0 businesses. This makes the pool of investment dollars smaller and makes it that much harder to a launch a hardware business.

OK – So why start a hardware company? 1. I really enjoy it. 2. While it is harder to raise money, it is not impossible. You are just looking at a different pool of investors. 3. Ultimately, an entrepreneur can be successful in any industry, even selling puppy turds. You just need to be passionate about what you are doing and find enough people that show similar passion for buying your product.

There are plenty of growing hardware companies in the Boston area. Some of my favorites are: Kiva Systems, WiTricity and Sand9. You can do it too, but you need to understand that the timeline and funding requirements are very different then the vast majority of facebook-like startups you read about.

What is your experience building a hardware business in a facebook crazed world ?

http://harkador.com/bending-iron-in-a-facebook-world/feed/ 0
Summer time or is business slowing ? http://harkador.com/summer-time-or-is-business-slowing/ http://harkador.com/summer-time-or-is-business-slowing/#comments Wed, 01 Sep 2010 16:22:06 +0000 Continue reading →]]> I started conceiving this blog post in August when things were indeed slow. My consulting business had very little new sales activity and I got to thinking: is it me, the economy or just summer. My first approach was to gather some data. I thought for a long time that email traffic, at least the volume of quality (more about quality later) email traffic, was a strong indicator of business activity in general and a good indicator of successful new business activity. Mid month, I found out how to Analyze (My) Email Usage with Mail Trends. Being that August was slow, I took the time to install Mail Trends on my Mac. I went back to my geek days and pulled up a UNIX terminal window and collected some insightful data on the 74,119 emails in my Gmail account.

In 2009, email activity dropped to 77 % of the monthly average for July and August. 2010 was a little harder to interpret because the yearlong trend indicates a 134% jump in my monthly email volume over 2009.
I believe the increased email traffic occurred mostly because of biking, triathlon and entrepreneurial email groups I joined. These meetup groups dramatically increased the volume of emails I received in 2010. Biking and triathlon activity is definitely July and August focused so what was a down month in the past for email traffic, is now an up month for low quality broadcast emails. Nonetheless, July and August 2010 still showed email activity dropping to 84% of the average level of 2010.
So, the bottom line is, business activity as indicated by email communications does slow during the summer.
A better indicator would be the volume of “quality emails”, actual emails that involve two-way communication and not just the broadcasting of information. Google is attempting to help with the “quality email” issue with their new Priority Inbox. It would be great to be able to use their prioritization algorithm to evaluate my email traffic. Perhaps the talent behind Mail Trends can incorporate this feature.
Kevin McCarthy took a different look at the summer slow down phenomena by analyzing the number of blog posts during the summer and came to a similar conclusion I did, activity is down in July and August. I for one added to the decrease in blog posts by waiting until September to write this post.
In general gauging the business climate is tricky, and particularly hard for early stage businesses where a single new customer can have a huge impact on your prospects.
My overall conclusions are the following:
  1. Business did slow during the summer.
  2. Despite the slowing, one of the companies I work with closed on a significant investment from multiple sophisticated investors during July and August. So while you can plan for a slower pace during the summer, do not accept that business just won’t get done.
  3. The macro economy is slowing, but I am bullish on the prospects of all the companies I am working with.
  4. Despite still being pre Labor Day this week, I have seen a distinct up tick in business activity and I am excited about the prospect for the fall.
What do you think? Will the entrepreneurial economy bounce back starting next week?
http://harkador.com/summer-time-or-is-business-slowing/feed/ 1