My wish for Martin Luther King Jr. day is for all of us to have a dream. And act on it.
If you can’t see the video, click here.
OK, they may not know what you’re wearing but there is a good chance they know your customers better than you do.
Flowtown uses emails from your customer database, (you do have an email database for your customers, right?) and can tell you interesting and valuable information about those customers.
I recently met the founders of Flowtown online. They are wicked smart guys with a product that is immediately useful to almost any business.
Below is my interview with Ethan Bloch.
Who are you and what do you do?
I’m Ethan Bloch and I’m the Co-founder and CEO of Flowtown.
Why should companies use Flowtown?
Because social media is hard and Flowtown turns social data in dollars.
How much does Flowtown know about someone from their email address?
Name, Age Group, Gender, Occupation, Location, Influence and almost every Social network they’re on.
Really? Wow. Do you know what I’m wearing right now?
I think you’d prefer I didn’t say
So this would allow companies to do more targeted campaigns. For instance, if only 10,000 of their 100,000 members are twitter users, they could do a focused campaign, right?
Totally, way more focused. For example if you’re not on Twitter it would be annoying to get an email saying ‘Hi Clay, we’re building out our presence on Twitter…” you’d be like “I’m not on there, why are you sending me this?” On the flip side we’ve found that if you know someone is on a network and you mention that in your email, the performance of that campaign skyrockets.
Is Flowtown a replacement for traditional email systems like Flowtown, AWeber or MailChimp?
In the case of mainstream email service providers, I don’t think Flowtown is a replacement but rather an enhancement. For example we’ve built an integration with MailChimp where any MailChimp user can come to Flowtown and in 3 clicks dump a ton of demographic and social graphic information back into their MailChimp list and then use MailChimp’s segmentation feature to get more relevant with their subscribers.
You guys are adding interesting new features to Flowtown pretty quickly. Tell us about some of them.
We just launched an influence calculation (powered by Klout), where now when you import a contact list we’ll show you your top 50 influencers, which you can use to do 1-on-1 outreach i.e. we’re showing you the 20% that will drive 80% of the results, in respect to getting noticed and building buzz.
In fact everything we do at Flowtown is ran through this ‘Pareto Lens’ – early on, internally, Dan and I would speak of Flowtown as the 80/20 marketing filter for business.
Tell me about your partner, Dan Martell. How did you guys meet?
He’s a Rockstar – we wouldn’t be anywhere close to where we are today without Dan.
We actually met on Twitter back in September 2008. Did an IRL meetup, discovered we’re both passionate about marketing and moving the needle for business and the rest is history…
Tell us what your typical day at Flowtown is like.
I wake up around 6:30 and immediately touch base with David (VP of Engineering), he’s on EST so by the time I get up I’m already playing catchup.
(I jumpstart my day by using a strategy from Leo at Zen Habits: http://zenhabits.net/2007/02/jumpstart-your-day-night-before-evening/)
I’ll do a brief skim of all the new email that’s came in make sure there’s no bombs going off and then then I’ll work on 1-2 of the most important tasks I have scheduled for the day, for the next 3 hours, usually product, sales or biz dev focused, this could include new product mocks, coding, emails, phone calls, brainstorming and white boarding.
After those 3-hours are up I start going into a more ad-hoc mode, where I’m answering email/tweets, talking to customers, closing new customers, working with David on new features, bouncing around the bay for meetings, testing new features, breaking things and syncing up with Dan.
Later in the day/evening is when I go to the 30,000+ foot view of life, this includes research, reading (going through my Instapaper) and planning.
What did you do before you started Flowtown?
Right before I started Flowtown I was producing/hosting a video show called WSYK? (What Should You Know?) which was syndicated by Revision3. And I was a marketer full time at Cake Financial, a start-up that was recently sold to E-Trade.
Where do you hope Flowtown will be in 3 years?
Flowtown will be responsible for raising the bar on customer experience/service, by helping all businesses care for their customers like Zappos cares for theirs.
What’s the plan then?
Not sure if I’ll be ready, but I want to help fill the massive void in education. I hated school growing up and think there’s a lot we can do to improve the experience for children everywhere.
You’re from Baltimore. Please tell me you’ve seen the Wire or we’re ending this interview right now.
“You come at the king you best not miss.”
I love The Wire. My favorite character is Omar and if you don’t know why just watch this.
If you want to try Flowtown yourself, enter your email address here.
Last week, I wrote an email to a friend who is visiting Costa Rica and is going to try surfing. As I crafted the email, I noticed some key similarities between surfing and starting a new business.
Conditions are critical
Even excellent surfers can’t surf when the water is flat. On a day with perfect waves, even amateur surfers catch a few good rides. (On rough days, you can spend 80% of your effort just paddling to get into position.)
When market conditions are perfect, even average businesses can succeed. When conditions get worse, only the very best can thrive.
Experience trumps tools
Experienced surfers can make do with average equipment, whereas rookies aren’t helped by a brand new surfboard.
A spreadsheet does not make someone a financial analyst. Keynote does not make someone a good speaker. A twitter account does not make someone a social media expert. Good tools reward experience.
Timing is everything
Paddle too early and you’ll burn out when the wave comes. Paddle too late and the wave will pass you by.
Burn through your cash too early and you won’t be around to sustain the tough periods. Wait to long to change your business due to an industry paradigm shift (like the end of traditional publishing) and you’ll be left underwater.
Do you have a secret recipe for the best salsa ever but can’t seem to sell it on that e-commerce website your niece made you for $500?
Is your aunt Kate’s spiced pear butter ready for the big time?
Until now, there has been a serious gap between rocking a booth at a farmers market and getting shelf space at Whole Foods.
In their words,
We are an online marketplace where you can discover and buy food directly from small passionate food producers and growers. We are a part of a bigger mission, to help change the way people eat. Our small piece of that mission is to help the small food producers across the country find customers and grow their business. We believe that instead of a small number of large food companies there should be a large number of small food companies. We’re a bit obsessed with good food and passionate about connecting those that like to eat it with the people that make it.
Foodzie handles credit-card processing and tax calculations for producers, and supplies prepaid shipping labels to the makers of such items as salami, apricot jam and ‘single malt scotch dark chocolate bars.
In return, Foodzie takes 20% of sales. (Explaining the math to aunt Kate should be pretty easy.)
They started in Colorado but recently moved to San Francisco and now Silicon Valley legends like Digg’s Kevin Olson are stopping by for tours.
Foodzie identified a gap in the marketplace and filled it. Now they’re filling stomachs and the pocketbooks of artisan producers all over the country.
I for one, hope they succeed.
A freelancer gets paid when they work.
An entrepreneur builds a business that makes money while he sleeps.
A freelancer starts from scratch.
An entrepreneur borrows money.
A freelancer works to make himself money.
An entrepreneur sets out to gain an enormous return for his investors.
A freelancer’s business is themselves. When they are gone, it is gone.
An entrepreneur sets out to build an enterprise that will last long after they are gone.
A freelancer can change direction quickly.
An entrepreneur must stay focused on a singular goal.
Neither is inherently better than the other but it is critical to know which one you are and act the part.
So which one are you?
We recently ate a late night dinner at the Nob Hill Cafe in San Francisco. It’s a cozy, bustling little cafe with the aroma of fresh food and spices emanating from the kitchen.
As we waited to order, our waitress brought us the usual pre-meal basket of bread, except there was nothing usual about this bread. A warm, pillowy soft foccaccia, the dense chewy interior contrasted with the firm, crunchy rosemary crust. We all silently looked at each other in amazement as we slowly chewed this heavenly bread.
After we ordered our entrees, we sheepishly asked our waitress for another basket. She didn’t look surprised in the least and with a wink, promised to check if there was any more in the back. She said that people often come early just for the bread and they often run out by then (we were seated around 10pm). We were in luck and she scored us the final basket before our entrees came.
I failed in my attempt to acquire the recipe for this miraculous rosemary foccaccia but next time I’m anywhere near San Francisco, I know I’ll be back. The rest of the food was very good, but the bread was clearly the star.
The basket of bread didn’t cost us a dime (and only cost the restaurant a few dimes), but it was the most memorable part of the meal. It not only brings the same diners back night after night and month after month but the bread is so good, people tell their friends.
It’s the little things.
What little things are you offering your customers to bring them back?
What little things are you doing to help them tell your story?
Radiohead, U2 and Trent Reznor have publicly embraced some innovative new ways to sell more than their music. They sell an experience.
Josh Freese, former NIN drummer has a new album (titled ‘Since 1972′) and he has decided to take the whole “souvenir / experience” model a little further. OK, a LOT further.
This is brilliant. I for one, hope he sells out all the packages.
* Digital download of Since 1972, including 3 videos
* CD/DVD double-disc set
* Digital download
* CD/DVD double-disc set
* “Thank you” phone call from Josh for buying Since 1972. You can tell him what you like about the record that you purchased, or what you thought sucked. Ask whatever you want, like “Is Maynard really THAT weird?” or “Which one of Sting’s mansions has the comfiest beds?” or “Are Devo really suburban robots that monitor reality or just a bunch of dads from Ohio?” or “Why don’t the Vandals play more stuff off the first record?” It’s your 5 minutes to yack it up. Talk about whatever you want.
$250 (limited edition of 25)
* Signed CD/DVD and digital download
* Signed drum head and drumsticks
* Go on a lunch date with Josh to PF Changs or The Cheesecake Factory (whatever you’re into)
$500 (limited edition of 15)
* Signed CD/DVD and digital download
* Signed cymbal and sticks
* Meet Josh in Venice, Calif., and go floating together in a sensory-deprivation tank (to be filmed and posted on YouTube)
* Dinner at Sizzler (get your $8.99 steak and “all you can eat” shrimp on)
$1,000 (limited edition of 10)
* Signed CD/DVD and digital download
* Signed cymbal, drum head and drumsticks
* Josh washes your car OR does your laundry … or you can wash his car
* Have dinner with Josh aboard the Queen Mary in Long Beach, Calif.
* Get drunk and cut each other’s hair in the parking lot of the Long Beach courthouse (filmed and posted on YouTube, of course)
$2,500 (limited edition of 5)
* Signed CD/DVD and digital download
* Get a private drum lesson with Josh, or for all you non-drummers, have him give you a back and foot massage (couples welcome)
* Pick any 1 member of the Vandals or Devo (subject to availability) to accompany you and Josh to either the Hollywood Wax Museum or the lunch buffet at the Spearmint Rhino
* Signed DW snare drum
* Take 3 items of your choice out of his closet (first come, first serve)
* Change diapers and make bottles with him for an afternoon (after hitting the strip club)
$5,000 (limited edition of 3)
* Signed CD/DVD and digital download
* Josh writes a song about you and makes it available on iTunes
* Co-direct a video with him for the song about you and throw it up on the YouTubes
* Josh gives you and a friend a private tour of Disneyland
* Get drunk together. If you don’t drink, we can go to my dad’s place and hang out under the “Tuba tree”
* Stone Gossard from Pearl Jam will send you a letter telling you about his favorite song on Since 1972
$10,000 (limited edition of 1)
* Signed CD/DVD and digital download
* Signed DW snare drum from A Perfect Circle’s 2003 tour
* Josh gives you a private drum lesson OR his and hers foot/back massage (couples welcome, discreet parking)
* Twiggy from Marilyn Manson’s band and Josh take you and a guest to Roscoe’s Chicken ‘n’ Waffles in Long Beach for dinner
* Josh takes you and a guest to Club 33 (the super-duper exclusive and private restaurant at Disneyland located above Pirates of the Caribbean) and then hit a couple rides afterward (preferably the Tiki Room, the Haunted Mansion and Tower of Terror)
* At the end of the day at Disneyland, drive away in Josh’s Volvo station wagon. It’s all yours … take it. Just drop him off on your way home, though, please.
$20,000 (limited edition of 1)
* Signed CD/DVD and digital download
* A signed drum from the 2008 Nine Inch Nails tour
* Maynard James Keenan, Mark Mothersbaugh from Devo and Josh take you miniature golfing and then drop you off on the side of the freeway (all filmed and posted on YouTube)
* Josh gives you a tour of Long Beach. See his first apartment, the coffee shop on 2nd Street where his buddy paid Dave Grohl $40 to rip up tile just weeks before joining Nirvana. See the old Vandals rehearsal spot, the liquor store he got busted at using a Fake ID when he was 17 (it was Dave from the Vandals’ old ID). Go check out Snoop Dogg’s high school. For an extra 50 bucks see where Tom and Adrian from No Doubt live. For another $25 he’ll show ya where Eric from NOFX and Brooks from Bad Religion get their hair cut.
* Spend the night aboard the Queen Mary and take the “Ghosts and Legends” tour. (Separate rooms … no spooning.)
* Josh writes 2 songs about you and both are made available on iTunes and appear on his next record (you can sing back up on ‘em, clap, play the drums, triangle, whatever)
* Drum lesson OR foot and back massage (once again … couples welcome and discreet parking available)
* Pick any 3 items out of Josh’s closet
$75,000 (limited edition of 1)
* Signed CD/DVD and digital download
* Go on tour with Josh for a few days
* Have Josh write, record and release a 5-song EP about you and your life story
* Take home any of his drum sets (only one, but you can choose which one)
* Take shrooms and cruise Hollywood in Danny from Tool’s Lamborghini OR play quarters and then hop on the Ouija board for a while
* Josh will join your band for a month … play shows, record, party with groupies, etc.
* If you don’t have a band he’ll be your personal assistant for a month (4-day work weeks, 10 am to 4 pm)
* Take a limo down to Tijuana and he’ll show you how it’s done (what that means exactly we can’t legally get into here)
* If you don’t live in Southern California (but are a U.S. resident) he’ll come to you and be your personal assistant/cabana boy for 2 weeks
* Take a flying trapeze lesson with Josh and Robin from NIN, go back to Robins place afterwards and his wife will make you raw lasagna
A great story. A purple cow. Phenomenal design. A Free Prize Inside. An army of customer evangelists. Scarcity.
Pretty phenomenal marketing from a 70 year old who has never heard of Seth Godin.
Don Canney has a superpower. He makes the best fillet knife in the world.
Don is an avid fisherman who has a home on beautiful Leech Lake in northern Minnesota. It isn’t unusual for Don to have filleted hundreds of fish after a day of fishing.
Years ago, Don noticed that his fillet knives got dull very quickly from the initial cut behind the gill. When making this cut you are cutting down into the scales that protect the body of the fish from the razor sharp teeth of other predator fish. With a nod and a wink to Mr. Charles Darwin, Don set out to redesign the traditional fillet knife.
Don used his education in metallurgy and material science to design a high carbon/semi-stainless alloy steel that is then hardened and tempered to Don’s specifications. The blade is extremely thin and flexible but the most unique and effective feature of this knife is really what sets it apart. The top is a sharp hook and top two inches of the backside of the knife is razor sharp.
Don didn’t just redesign a knife, he redesigned the process of filleting a fish.
Don’s Leech Lake knives are not only beautiful and extremely durable, they work unlike any other fillet knife in the world. When a Leech Lake knife owner meets a fellow fisherman, it is impossible not to show and talk about the knife.
You can’t buy Don’s knives on Amazon. Don prefers to sell his knives personally, one by one at the many sport shows he attends every year. This gives Don the ability to hand engrave the blade, “Made especially for your name – year of purchase“.
Also, each knife comes with a nice leather sheath in which Don puts one standard size Band-Aid. Even though he warns people, everyone forgets and cuts themselves on the sharp upper side of the knife.
With a flexible, paper thin blade, many owners are worried about sharpening it themselves. After reminding you that it should only need sharpening once every couple years, Don offers to sharpen it for free, either at any of the sport shows or by mailing it to him. People that attend sport shows usually go every year, so after using your knife for a year, you go back to Don’s booth and buy a couple more for friends or family.
You can buy a basic fillet knife for $12 almost anywhere. Don’s amazing, hand-built knives cost $90 and are worth every penny. You get a lot more than a knife.
My Dad visited with Don at the Minneapolis Sport Show yesterday like he does every year. Don is getting older and he doesn’t do as many shows as he used to but he was still there, affable as ever, selling new knives and sharpening old ones, adding small but important personal touches that also help owners continue to tell his story.
When you were 7 years old, you were a poet (until someone said you weren’t).
When you were 12 years old, you were an entrepreneur with your lemonade stand (until someone said you weren’t).
When you got your first job and your second and your third, you were a salesman. You sold yourself.
So we’ve established that you’re an artist, a poet, an entrepreneur and a successful salesman. The world needs you! What are you waiting for?
In sales, the perception of your prospect is always true.
If they think you are spamming them, you are.
If they think you are sleazy, you are.
If they think you are pressuring them, you are.
But there is good news…
If they think you are accommodating, you are.
If they think you are authentic, you are.
If they think you are patient, you are.
If your intent isn’t pure, the words you use to sell won’t matter. If your intent is perfect, your words don’t have to be.
A simply phenomenal article from Jason Calcanis…sage advice from an expert who has been there and back.
Location: Mahalo HQ, Santa Monica
Date/Time: February 26th 2009 6:25pm
Rock out To This While Reading: Don’t Stop Believing
Forward To: Startups that are hitting the wall
A lot of CEOs with less than 12 months of capital left have been
asking me for advice about what to do, given the massive economic
turmoil we’re facing. I thought I would take the time put these
various conversations into one email to help those who are “up against
it,” as we say in Brooklyn.
Now, sprinting to the startup precipice is one of the most horrible
and exhilarating experiences you can have as an entrepreneur.
The exhaustion sinks in as you slam on the brakes. You dig in your
heels and watch the dirt and pebbles fly off the cliff as your left
foot dangles down in the ravine, with your right foot desperately
trying to save you. Your momentum could–if the wind kicks in–send
you straight down to your death. Heck, even the two inches of earth
under your right foot could give way and send you to your death. Or,
you could slip and fall on a magic carpet that will take you to the
OK, that last part is made up. You’re probably screwed and you know it.
This email is intended for startup companies with less than 12 months
of cash in the bank, who know in their hearts that their VCs have lost
faith, and that Google, Yahoo or Microsoft aren’t going to pick them
up on a magic M&A carpet ride.
This is the email I’d like you to forward to your friends who are
running startups that could go under in 2009.
I’ve been to the precipice and faced the fall a couple of times. I’ve
learned a couple of things from the experience. I can tell you that
the first time it happens, you’re terrified, because everything you’ve
done–all the effort and dreams–will probably be lost (like tears in
The second time it happens, you’re deeply concerned, but know it ain’t
over until you’re splattered on the boulders below.
The third time it happens, you smile and say “let’s get it on!”
You see, there are two types of entrepreneurs in this world: real ones
and the folks who play entrepreneurs for some portion of their lives.
From a distance, most folks can’t tell who’s who. In up times, when
the market is flush with cheap money and unexplained exits (Bebo,
anyone?), everyone looks brilliant.
It’s only when the tide goes out that you know who’s naked. (Who said
that? I hear it on CNBC every other week now).
The differences between the two types of entrepreneurs become clear
when the fan and the manure meet. The faux entrepreneurs run for cover
rather than dealing with the storm. They go back to their plush,
somewhat mindless jobs as VPs at mega-companies, while the real
entrepreneurs suit up and clean up the mess.
We’re going to find out who the real entrepreneurs are in 2009 because
they are going to spend another 12 months, on top of the last six,
cleaning up the mess. It will be two years of total pain, so before we
go any further you gotta make the decision if you’re in or you’re out.
In or out?
Here is a really easy way to figure out if you can deal with the mess
in front of you. How many of the following can you deal with:
1. Laying off half your staff.
2. Laying off half your staff again three months later.
3. Spending 20 hours a week on the phone being yelled at and
threatened while trying to renegotiate a dozen contracts–like your
T1, phone system, rent, equipment leases, etc.
4. Having an investor scream at you and tell you that they will ruin
you, your career and that “you’ll never raise money again, you mother
5. Laying off half your staff for a third time.
6. Getting served a half-dozen lawsuits, courtesy of the folks who you
tried to renegotiate with in point number three who wouldn’t deal.
7. Having one of the people you’re renegotiating with come to your
office every week and ask for their check in person.
8. Having the same media outlet that once claimed you were the next
Barry Diller write that you’re a fraud.
9. Not getting a good night’s sleep for six months.
10. Having dozens of paying clients default on their bills.
11. Having staffers who you really need to double down and focus walk
out the door after you helped make their careers.
12. Have the people who begged you for a meeting at the peak not even
return your emails or phone calls.
If you can’t deal with these 12 situations, then you’re out. It’s time
to refresh your resume, tell your board you resign, sublet your place
and go to Thailand. Go sit on the beach and lick your wounds for $40 a
day (all-in) like the fauxtrepreneur you are. You suck. I hate you.
You’re smart enough to cut your loses in a way I could never
If you think you can handle most of the horror above, well, then you’re in.
How do I know this?
Those 12 things–and more–happened to me for over a year when Silicon
Alley Reporter, my first business, got whipsawed by the dotcom bust.
We went from $11.6m in revenue one year to $600k the next. From 70
full-time people to 12. From a 20,000 square foot office to subletting
ten desks at a PR firm.
Personally, I went from being on top of the world, with appearances on
Charlie Rose, 60 Minutes, CNN, and Fox News, to being savaged in the
press as a fraud who got lucky and who no one would ever hear from
My office used to get 100-200 phone calls a day and I had two
assistants. Six months later, I answered my own phone–on the rare
occasions it would ring. When it did, it was either my mom calling to
check in on me or a vendor calling to yell at me.
It was the worst year of my life, but it made me who I am today. I’ve
never talked about the tailspin that my business went into, and how I
barely managed to land the plane, but I get the sense that there are a
lot of twenty-somethings about to experience the same thing, and
perhaps my lessons could help.
I’m not going to tell the story. (That would take 80,000 words, a hard
cover and the right publisher), but I’m gonna share some of the
Let’s get to work.
The Good News
If you’re a real entrepreneur, you’re still reading. If you’re a faux
entrepreneur, you’re writing your resignation letter, considering
which beach to surf and how long to grow your beard. God bless you
fauxtrepreneurs, because you’re gonna have a much nicer 2009 than the
real entrepreneurs who are “up against it.”
Of course, a year from now, the real entrepreneurs will be
battle-scarred beasts who are capable of taking big bold risks, and
you’ll still be crying about what could have been with your last
business while attending back-to-back meetings about nothing at BigCo.
Not that I’m judgmental of fauxtrepreneurs who create noise, distract
investors from the real workhorses, suck at their jobs and take no
real risk in their lives.
No, on the contrary, I love you fauxtrepreneurs, because you create
the foundation upon which real entrepreneurs stand. At the start of my
career, it wasn’t east to stand out, but by the time I’d done two or
three businesses and become a fixture in the technology industry, I
had figured it out: Longevity is a big part of credibility. I met
Esther Dyson, Fred Wilson, John Brockman, Jerry Colonna, Mark Cuban,
Ted Leonsis, Seth Godin and countless other luminaries between 1994
Well, it’s a dozen years later and they still take my calls and
respond to my emails.
Longevity is credibility.
Oh yeah, I almost forgot the good news: People’s reputations are made
in the bad times more than the good times.
Even if you’re 100% sure your company is going to crash in the next
six months, you’ll learn more from staying on board than you will from
running. You’ll also earn the respect of your peers and you’ll learn
exactly how people break down and lose their cool. You’ll see how
certain VCs screw entrepreneurs, you’ll see entrepreneurs screw VCS
and you’ll watch the lawyers and landlords collect their vig the
Most of all, you’ll realize who you are and who your real friends are.
So what’s the sitch?
You need to figure out your runway immediately. This is really easy to
calculate: you look at how much cash you burn every month and divide
that into how much cash you have in the bank. Your accountant can do
this for you or you can simply look at your P&L and bank statement.
Once you know how many months you’ve got left, you’ve got to do the
hard work of trying to extend it by at least 1/4. This means cutting
staff, negotiating with your landlord and cutting any and all
recurring bills. You then need to look at your revenue streams and
figure out if you can double them. In most cases, if you do these two
simple things, you will have increased your runway by 50-100%. If you
double your runway, your chances of figuring out what your business
actually is will go up exponentially.
You also need to do a monthly P&L review with your management team.
Look at every single recurring cost you have and figure out how to cut
it. In an up market, this level of obsessiveness is often wasteful,
because you’re in a race to take market-share. In the case of MySpace
vs. Friendster vs. Facebook all having unlimited funds for a period of
time, this makes total sense. Why worry about $100,000 in server costs
if you’re racing to see who gets bought for a billion dollars first?
However, this is not that time. You have to change your style. There
are times to hit the gas and there are times to conserve your gas.
Look at it this way: Getting the most market-share and running out of
cash is the equivalent of getting to the moon first without the
ability to get back to Earth. Congratulations, you won the race… and
now you’re dead!
My primary business right now, Mahalo.com, is lucky to have raise a
large amount of capital and is going to fairly easily make it to
profitability based on our growth curve, runway, modest spend and
significant traffic (we’re at 5.6m unique visitors over the last 30
We couldn’t be in a stronger position.
However, even we recently did a deep review at Mahalo and were able to
cut 30% of our costs in under 60 days. The company is still growing
just as fast, and in fact we’re actually more efficient. There is
something strange about that: 25-person companies seem to get more
done than 40-person companies in my experience (other CEOs have told
me the same thing).
Perhaps it’s because after you trim down you have the most efficient
folks left, or maybe we’re all more focused because we don’t have to
communicate what’s going on to as many people? Does anyone know if
there is any research on optimal team size for startups? I’d be
interested to hear what the studies say. Anyway, we made the hard
decisions and that extended our runway by a year. That means Mahalo
will be here in 2013 if we make every single wrong decision and we’re
asleep at the wheel. Of course, we’re focused like lasers on getting
to profitability and developing a really helpful service. If we can’t
figure this business out by 2013 or 2014 then, well, either we really
suck or there is no solution to combining search and knowledge
exchange (of course we know search and knowledge exchanges can and
have worked–so we’re bullish).
Also, when your company goes through this kind of economic boot camp,
I think you get stronger. You understand which parts of your business
are working the best and which ones are, well, not working at all. We
had one area of our business that was two percent of our spending
making 30% of our revenue. You figure these things out when you start
cutting. It’s a sick and sad process to be sure, but Darwin is your
friend at a startup.
Put your VCs to the test
If you’re running out of money, you’ve got three choices: cut costs,
make money or raise capital. We’re going to get into cutting costs and
making money below in a minute, but I’m a big fan of testing your
investors. When the market is crushed, most VCs get realistic, greedy
or paralyzed. You’ve got to figure out where you stand with your
current investors as quickly as possible, and the quickest way to do
that is to ask them for more money.
Let’s say you’re burning $200k a month and you have a million dollars
in the bank. Go to your VCs and say something like the following:
“John, we’re going to run out of cash in five months. I’ve developed a
cost-cutting and revenue-generating plan that I believe will extend
our runway to 10 months. I’d like to present it to you and your
partners tomorrow for a half-hour with the goal of doing an ‘A+ round’
of one million dollars. I truly believe in this business and I’m
willing to do a flat-round, bust my ass for the next two years and
come out of this recession on top.”
Now your VC is probably going to start asking questions–as they
should. They may try and push off the discussion of the “A+ round.”
Your job is to stand firm and say something to the effect of:
“Well, we’re both vested in this business and I’d like to take the
time to present to you guys this week and get a response from you
either way within five days. I know it’s a compressed time frame, but
we’re living in extraordinary times, and if you guys don’t believe in
the business the way I do, I can accept that and make other
At that point, you say nothing. Silence is the greatest negotiating
tactic ever created–use it. Your VC right now will be thinking the
a) “This guy/gal’s a real killer and I wish all my CEOs were this
focused. At the very least, I should hear them out.”
b) “This guy/gal has another opportunity, so I’m gonna have to deal
with this train wreck myself–that will suck.”
c) “This business is a dog and I shouldn’t have invested in it. Since
they’re asking for the truth, I might as well give it to them.”
d) “I’m an idiot and I can’t make decisions. Let me push this out a
couple of weeks and make this person’s life hell while I
That last part is not what the person would actually say, but that’s
basically the translation of “let me think about it.”
Now, in cases a, b, and c you’re in good shape. You’re gonna either
get your meeting and money or you’re gonna get told you’re not getting
any more funding. Situation D is what you don’t want. If you’re
running out of provisions in the middle of the Atlantic, your best bet
is to go either East or West–not in a circle.
VCs and investors will sometimes send entrepreneurs in circles, either
inadvertently or as leverage. Sometimes VCs are juggling a lot of
balls and can’t focus. Sometimes they’re inexperienced and/or they
have issues that don’t concern your business, like their limited
partners, their partners or their divorce settlements. Sometimes
they’re cutthroat and know that, when you’re down to your last two or
three payrolls, they can extract a 2-3x liquidation preference out of
It’s your job to force the issue now–don’t wait.
Heck, even if you have a year’s worth of runway, you should probably
do this kind of thing so your VCs know you’re the real deal and so you
know where you stand with them.
Put your staff to the test
If you’re down to six months of cash, you’re gonna have to cut the
bottom 1/3rd of your staff, if not half. This sucks, but there is no
choice. You’re gonna also have to cut salaries. So, here are some
suggestions on how to do this:
1. Get rid of the non-core staff. Look in places like PR, marketing,
and admin to cut. See if you can put some of these folks on part-time.
2. Look at the salaries of your current staff vs. market and look for
ways to cut the high-priced ones who you can get cheaper at the
current market. I know this sounds cutthroat, but remember, this is
advice for folks going out of business in six months. Another way to
run this test is to ask yourself “Would I hire this person for this
3. Go to each member of the team who is over-paid by today’s market
rate and tell them that you’re probably going to be cutting their
salary and that you’re increasing their options. Ask them how they
feel about it. Some people can take a pay cut, others can’t–you don’t
know until you ask.
I’m really against cutting people’s pay above cutting position because
you want the people remaining in your organization to be happy. Of
course, sometimes that’s just not realistic. Many CEOs overpay in a
hot market because they feel they have to, and those folks are the
ones who really need to take this hard action now.
Put your landlord to the test
Call your landlord and ask them to get a cup of coffee. Do this in
person. Let them know that it’s 50-50 you’re going out of business and
that you need their help in the form of four months free rent,
starting today, the ability to sublet some space (if you don’t have
that right already) and to keep the rent at the same rate you already
have. Tell them you feel horrible about this, and you wouldn’t ask
them to do this if it wasn’t urgent, but you didn’t want to drop the
bomb on them five months from now when there were no more options.
Remember, silence is your friend. Tell your story and see what they
say. I did this at one point and not only got free rent, I got 50% of
our letter of credit freed up. It was a win-win. Trust me, your
landlord is probably facing a LOT of fallout right now… better to
get half than nothing.
Put your vendors to the test
Since you’ve probably got webhosting, CDNs, equipment leases, and
other recurring charges on your credit cards, cancel those cards
immediately. Call up each vendor and tell them you need six months
free while you figure out your status, and if they can’t do it, ask
for suggestions. Then call each of their competitors and let them know
that you are willing to switch over for the first six months free. If
you get one of four vendors to do this you just saved 25%–I bet you
can get two or three.
Vendors would rather eat some profits for six months than lose your
business. If they can’t support you in your time of need, then you
should find someone who will. There is a LOT of competition out there
and you can negotiate harder than you probably think you can. Tell
vendors you’re willing to switch if they give you six months free and
see what they say. We’ve had folks offer us a *year* of free service
to switch (of course, that’s an exception, not the rule).
Put yourself to the test
If you’re going to ask so much of your staff, investors and vendors,
you obviously have to take a hit yourself. Go to your VCs and ask them
to participate in the next round–the A+ round. Tell them you know
it’s not a lot but you want to put in $5 or $10k in the round as a
show of support. This will result in them saying it’s not necessary.
After that, tell them you’ll sell your car and take a bike to work and
put $20k into the business if you can get that for your car. Make sure
your staff doesn’t take a bigger cut than you do in salary if you’re
doing salary cuts.
Even if it’s just ceremonial, it means a lot to make cuts. I’ve
stopped traveling as much to conferences even though they cost me
little to nothing (normally people pay me to speak or at least pay for
my travel). Of course, don’t cut traveling if you’re going to
conferences where you might find clients or investors (which is why I
travel half the time!)
Put your product to the test
As Mark Cuban told me over and over again, “Sales solves everything.”
If you can’t sell your product, it’s not a product–it’s a hobby. Take
your consumer service and sell it as a software package to someone. Go
on the sales calls yourself. During the final year of Silicon Alley
Reporter I made cold calls and set up lunches to sell folks on our new
product, Venture Reporter (the rebranded Silicon Alley Reporter). It
works. When people see the CEO making sales calls, they respect the
company and take it seriously. When the VCs and staffers see you doing
this, they get inspired.
Put a whiteboard up and count any stat you can: sales calls made,
meetings scheduled, contracts sent and sales closed. Give your team
something to think about other than just the bottom line, because you
might have to celebrate the little victories before getting the check
in the door. Celebrate getting the meeting. Celebrate sending a pitch
What to do if it’s over
If you’re going to hit the wall, you should do so with three or four
months of capital left in the bank. You should cut down to your core
staff and tell them “we have 120 days of cash left and we’re going to
try to land the plane safely. If you want to leave at any point during
the 120 days you’ll get the reference of a lifetime from me. If you
help us land the plane safely I think we’ll all be better off because
Then make a plan to do one of the following:
a) sell the business
b) close the business
c) sell the assets of the business
There’s a little bit of overlap up there, since sometimes you close
the business and sell the assets, or you sell the assets and leave a
shell behind. The point is, don’t wait until you have a month left. Do
it when you have 120 days left. If you signal to everyone it’s over,
you’ll have done the honorable thing for your employees, by giving
them the maximum time to have a safe landing, and for your investors,
by allowing them to roll the business or its assets into another
The worst thing to do is to delay this process. I’ve gotten down to
this point exactly, but when I was at break-even at my first business,
we looked for a buyer, because I didn’t think we had much chance of
making it on our own in the 2001-2002 market. I could have been wrong
about that in retrospect, but either way, I’m glad I got out because
it set me up for Weblogs, Inc.
And that is the final lesson: when one door closes, three more open
up. When you shut down your business properly, you will have a clean
slate and renewed energy to take on your next project. You might even
get the investors to give you the company with the 90 days worth of
capital left to start your next project with a recapitalized
Remember that there is no shame in failure but there are honorable and
dishonorable failures. If you’re going to lose the game, remember that
it’s just that: a game. There will be another and another and another
yet to play. Don’t lose your cool and don’t get depressed. Just get
yourself back up, dust yourself off and get back in the game. The
precursor to success is almost always failure.
[ To the 17 folks who made it to the bottom: If you’re struggling with
failure right now, if your business is failing and you don’t think you
can go on, remember that at the very least you’ve been lucky enough to
take your shot. That’s more than most people get. You’re going to be
much stronger for getting through the heartbreak of a failed business.
Also, you’ve always got me–your pal Jason–if you need a shoulder to
cry on. I’m only an email, tweet or IM away jason@calacanis or
jasoncalacanis on skype/twitter/AIM. ]