Don’t yell at waitresses. You look like a jerk and it blows investments.

“$40k for 15% equity” Cooed the smooth talking angel investor. “We will take over the world together and I will make both of us very rich”.

It was a cold dreary day and as “Entrepreneur X” sipped his coffee, he contemplated selling a stake in his company to the smoothest talking angel investor he ever had the pleasure of meeting.

The percentage looked fine, the terms were great, but something didn’t feel right.

As Entrepreneur X gazed out the window, mindfully mulling over the decision, the waitress came back and refilled their mugs. The investor took a sip and began screaming at the waitress. Apparently she accidentally gave the investor decaf instead of regular. The child-like behavior of the investor brought Entrepreneur X crashing back to reality. If the investor cracked that easily over coffee, how was he going to handle things if shit hit the fan with his venture?

“Entrepreneur X” immediately stood up and apologized for “his friend”, left a huge tip (my favorite part of this story), and walked away. He ended up bootstrapping the startup himself.

Taking an investor onboard is a lot like being married. It’s something that can be fantastic, it can improve your quality of life, and it can be a great source of encouragement if you “find the one”. On the other hand if you settle for someone because it’s easy, it can be hell.

My question for TSF readers is “Have you ever had to turn down funding”?

Please Stay in touch!

You can follow us on Twitter @startupfoundry. I would love for you to share your stories in the comments, or get in touch with me personally at paul@thestartupfoundry.com.

Great ideas aren’t forged in a vacuum. Remember to learn along the way.


Often times it’s easy for me to get focused on “the next big thing” and it’s difficult to meditate on past experiences. Entrepanuers need to be forward thinkers, but great ideas aren’t forged in a vacuum. Paradoxically, we need to reconcile these two competing lines of thinking.

Growing up, I was a PC fanatic. I built all of my own computers, I worked an I.T. job, and I did some light consulting on the side. In 2007 my needs changed. I was moving to South Africa for 6 months and I needed a laptop that I could do heavy video work on. I picked up a 15 inch MacBook Pro, Final Cut Pro, and a couple external harddrives I could use for a scratch disk. I unboxed all of my equipment on the kitchen table and began to install all 40 gigs of Final Cut Pro. My nieces were visiting and were quietly playing in the other room.

I got up to grab a water across the room and play time suddenly shifted to the kitchen. In slow motion I watched my Niece race around the kitchen table (where my laptop was) and she came face to face with a freshly unboxed MacBook Pro. Instead of tripping over the cord and pulling my laptop to an early demise, the cord simply popped free and my laptop sat on the table unscathed.

I can thank MagSafe for saving me several thousand dollars. For those of you not familiar with MagSafe, I have embedded a video below. Notice how the MagSafe connector stays in place unless it force comes from an angle (for example, a running child).

Fast forward to Apple’s unveiling of the iPad 2. Introduced alongside the new iPad was an accessory called the “Smart Cover”. It’s really cool tech that allows you to add or remove a case. It can also be used to double as a stand.

Apple has been working on the iPad 2 for over a year but work began on the smart cover when they started experimenting with magnets for MagSafe. Apple was able to leverage it’s past learning with magnets into future thinking products. The past is a great source of inspiration for the future.

What past experience can your startup leverage?

Please Stay in Touch!

You can follow us on Twitter @startupfoundry.

Make your Startup ridiculously easy to write about. Put Together a Great Press Pack

I’ve looked at close to 500 startups in the last month and a half that were looking for coverage and I thought I’d share some insight on what separated the good startup pitches from the great ones. I boiled it down to 5 things with the overarching theme being “Make yourself ridiculously easy to write about”.

5 things you need to have in a press pack

1. One sentence description of your startup. Place this at the beginning of the email. This gives context for the rest of your pitch.

2. A Story. It’s all about crafting a narrative. Stories are easy to remember and can help make the main points of your pitch stick. Just be sure you respect the readers time and don’t be too verbose.

3. Logo with background as a transparent PNG. Because you goal is to make it as easy as possible to write about your startup, it’s very important you include your logo with a transparent background so news sites can quickly make your logo fit in with their own branding.

4. Video. If you have a 2 minute video showing off how to use your product, be sure to include it (and make sure they can embed it in their post if they choose to write about you).

5. Numbers – When a startup leaves out numbers I assume it’s because the numbers suck and you’re trying to sound bigger then what you really are. If you’ve just started out and the only people using it are your friends and family, tell us. There is no shame in that. People love rooting for the underdog.

What has worked for you?

If you have any more advice for putting together an awesome “Press Pack”, please share them in the comments!

Stay in touch.

For more startup news and advice, follow us on twitter @startupfoundry.

Marketing Reddit: Have an Awesome Product and Tie it to a Fantastic Brand

Alexis Ohanian, a co-founder of Reddit, sat down with me to talk about how Reddit handled it’s marketing when it was still a startup. Alexis also give several marketing tips for entrepreneurs who are just getting started.

[Editors Note: This is part 2 of my interview with Alexis. To watch the first part, checkout The first 6 months of Reddit (YC 05): “Entrepreneurship is a bipolar existence”]

7 takeaways from the video

1. The Reddit alien came from a doodle in marketing class. Always be looking for inspiration.

2. If you have a great product and great service, tie it to an awesome brand. This will help you become memorable.

3. When people tattoo your logo on themselves, you’re doing something right

4. Great branding can’t save something that’s not good enough, so making sure you’re product rocks is the first priority.

5. Decent branding without a lot of cash: If you don’t have a network of designers, checkout a site like 99designs (but “shake the friend tree” for artists before you go this route).

6. You can’t succeed if you don’t actually start. Don’t be afraid to fail.

7. If something fails, no one will know about it because no one used it. Stopped letting fear paralyze you and built cool stuff.

For up to minute startup news, follow us on Twitter @startupfoundry.

31 days, 120,000 hits, and $462 in revenue. The Startup Foundry’s story.


In our first month online The Startup Foundry had 120,000 page views, grew to over a thousand followers on twitter, and generated $462 in advertising revenue. I thought I would share the backstory and some lessons we learned along the way in hopes that it might be useful for other startups.

The Back Story.

The idea for TSF came to me while I was building my other startup, CodeSketch. I love talking and writing about startups but I live in West Michigan and the startup scene is rather small. I wanted to connect with other entrepreneurs that were building really cool things across the world and I saw The Startup Foundry as a vehicle to make that happen. TSF is a completely moonlit project.

Lessons learned:

1. Once you have identified a need, DO SOMETHING immediately.
•Don’t wait for other people to help you. Jump in and do it yourself. You can end up spending more time trying to convince other people to join you then just doing the work yourself.

•If you’re waiting to have everything completely polished, you’ve waited to long.

•Be borderline obsessed. I’m so incredibly hungry to make TSF the best place for entrepreneurs and founders on the web. Don’t lose focus.

2. Be the first to admit you suck at something, then work your ass off to fix it.
•When we first launched the site the comments were easier to read then the articles. Every startup is going to make stupid mistakes that seem blatantly obvious in retrospect. Don’t let this scare you.

•Our videos interviews were terribly produced (our guests had fantastic content though). If you watch my first interview that I published with Andrew Warner, you almost feel sorry for me I did such a poor job. I’m still not quite to the level I want to be at yet but I’m working at it and I’m getting better.

Your goal is to not suck twice.

3. Be proud of your accomplishments, but not cocky.
•In the grand scheme of things we are a tiny site, but this is a tiny site I’m incredibly proud of. I love waking up each morning to an inbox stuffed with fantastic startup news that I have the privilege to dig through. It is truly humbling to have guys like Andrew Warner, Tim O’Reilly, and Alexis Ohanian give you a half hour of their time. I love that I have the privilege to do this and I don’t take it for granted.

•I’ve talked to some entrepreneurs that are almost afraid to take credit for their success. Luck is an admittedly huge role in success but take credit for showing up to work everyday. Many people fizzle out in the day to day grind. Take pride in your accomplishments (even if your accomplishment is that you’re still moving an inch at a time).

The Future.

After seeing the initial traction, I’m going to start shifting more of my time to The Startup Foundry and try to turn it into a powerhouse of startup news. I would love to see TSF grow into a full time job (complete with a full time salary), but we’re not there quite yet. I’m sure we are going to make more mistakes down the road but I promise that we will iterate quickly, and try to serve this community as best as we can. If you have any questions for me, feel free to ask them in the comments. I’ll try to answer them all. If you have an awesome startup, I want to hear about it, so send us a tip!

For more startup news, follow us on Twitter @startupfoundry.

The first 6 months of Reddit (YC 05): “Entrepreneurship is a bipolar existence”

A co-founder of Reddit, Alexis Ohanian, sat down with me to talk about the first six months of Reddit. We talked about his experience in YCombinator, meetings with Google and Yahoo, and the highs and lows of being an entrepreneur. This is a great interview and you don’t want to miss it!

Highlights of this video:

1. Initially the Reddit team was rejected by YCombinator. Paul Graham then followed up with them via a phone call and said “as long as you ditch your original idea, you can come be a part of YCombinator”. This is a great reminder that investors often care more about the team then they do the product.

2. Alexis also talks about how Reddit was able to get new users by creating fake accounts to simulate an active community.

3. Alexis talks about a meeting they had with Yahoo, but he felt that the meeting sucked because Yahoo was more interested in the traffic they were generating then the actual mission of the site.

4. Met with Google, and things went really well. This was a huge boost of confidence for the Reddit team as “some very smart people at Google were interested in our product”.

5. Alexis also reminisces about doing “digital grunt work”. Alexis attributes a lot of Reddit’s success to doing things that aren’t glamorous. Great reminder that entrepreneurship is all about “the hustle”.

6. Entrepreneurship is a Bipolar existence. Sometimes you feel like you’re building an online empire, and other days you feel like a nobody. This is completely normal.

7. A tip that Alexis shared for other startups was to “celebrate quick and easy wins” (especially in the first 6 months). This helps to build momentum, and establishes comradery on your team.

Please follow us on Twitter for up to the minute startup news @startupfoundry.

O’Reilly: When something is commoditized, an adjacent thing becomes valuable

Summary of the video:
1. In this video Tim talks about what “Web 2.0” means. (How he views the internet as an operating system).

2. Tim realized that software was becoming a commodity. He saw the same thing play out earlier with hardware in the IBM era. When something is commoditized, an adjacent thing becomes valuable. In the IBM era when hardware was commoditized, software became very valuable (and Microsoft won).

3. The web is a platform. The example Tim gave was Napster. Napster worked by indexing the songs you already had on your computer, not from a pre-determined master list. This was a huge shift in thinking about what the web could be about.

4. Tim encourages entrepreneurs to not “paint by numbers” when it comes to solving problems. Just because one company was successful doesn’t mean you should clone their product.

Be sure to checkout part 1 of this interview where Tim talks about how he Bootstrapped O’Reilly Media with “happy accidents”

For more startup news, follow us on Twitter @startupfoundry.

We’re giving away $6,620 worth of goods and services to 2 Lean Startups

When you’re building a lean startup, you walk a tightrope between pinching every penny that you can and making sure your team has the best tools available. We feel your pain and we want to help! We’ve decided that we are going to lend a hand and give away $6,620 worth of goods and services to 2 startups. How are we able to make this happen? The answer is our newest sponsor AppSumo, is really cool. AppSumo provides “Daily deals for web geeks” and we’ve partnered up to help a couple of startups get off the ground.

How to Enter:

1. Follow us on Twitter @startupfoundry,
2. Help spread the word by tweeting a link to this article.
3. Register for AppSumo (These guys take email seriously, and they will never spam you).

What we’re giving away:

When will the winner be announced?

We will contact the 2 winners on Friday the 18th.

Good Luck!

I would love to hear how your startup would benefit from these tools in the comments.

P.S. Make sure you say “Thanks” to @noahkagan (from AppSumo) for making this giveaway possible!

The Music Venture Capital Business Model (Or a New Perspective)


This is a guest post written by Wesley Verhoeve. He is an entrepreneur and artist manager, and loves to write about where business and music intersect. For more articles by Wesley please visit his website at WesleyVerhoeve.com

As the music business evolves and moves beyond the antiquated copyright exploitation model, it makes increasing amounts of sense to further explore the thoughts I’ve shared on the parallels between the future of our business and the current ways of the venture capital/tech start-up world. Every artist (the creative)and their manager (the business person, and together with the artist the product developer) should consider themselves creative entrepreneurs, not much different from the small team of Dave (the graphic designer/artist), Jason (the product developer) and Spencer(the business guy) at online portfolio start-up Carbonmade.

How It Works In The Current Tech Start-Up Business

In a simplified version of the start-up world the scenario goes as follows: a small team of creatives and business people create a product (an app, a web service, site, etc.) and bring it to market in a Beta form, while continuously improving and providing updates. They might initially be self-funded and bootstrapping, or they could be funded with the help of one or more Angel Investors. If the product catches on with a small group of passionate early adopters, and there is potential for a much wider base of users, the team might seek out additional investors to be able to shoot for this larger market. These second level investors could be Venture Capitalists(VCs) , who differ from Angels mostly in the scale of finances they can provide (bigger), the additional knowledge they can share to help speed up growth, and the support network they can provide. The original start-up shares ownership in the company with both rounds of investors. The investors are either looking for an exit (a sale of the start-up to a large company like Google), or sustained profits over time.

How It Could Work In The Future Music Business

When we translate this to the music industry we can draw some parallels. An artist and their manager start developing products together. They record demos/singles/EPs, produce a stage show and play small concerts, create artwork for branding and marketing, build a website (each of which are products!), and release them to friends/family/early adopters. This could be self-funded, or in part funded with smaller amounts of money from wonderfully nice family members, friends or through a service like Kickstarter or Pledge Music. In exchange the investors become small stake-holders in the career of the start-up team of artist and manager. (Note the difference from typical Kickstarter campaigns which are more like fancy pre-sales for the future product.)

With each product release, like a single, we build our customer base (or we could say fan base, but that’s so 2001), and as we learn from their feedback we adjust. Please note that I am not suggesting to change the art to fit an audience, but rather that we adapt the business elements(how do we offer the products, at which price point, through which channels, etc.).

As the start-up team bootstraps their way to an increased customer base, we add more members to the team to facilitate more growth and increased revenue. A booking agent can help us improve distribution of our live show product, visual artists can help us create more effective branding and marketing materials, an attorney can help us secure better deals, etc. These are contractors for the most part, and won’t take ownership.

An indie label or marketing firm might come on board in a second round of investments, and those could be considered bigger Angels, or even VCs depending on the level of investment/commitment. In exchange for a share of the profit they add value through additional manpower/skills, an increased network of supporters, additional funding, and services (royalty accounting, legal, distribution, synch pitching).

If the music is of a certain popular mass-appeal nature, an artist/music start-up can engage in a third round of investments. This time it would involve major investors (major labels). In exchange for a more substantial amount of money than a previous investor they acquire an additional chunk of equity (a co-release with the indie), or they can buy the angel’s piece of equity (upstream deal, master ownership). They can also offer additional services as part of the deal including radio support, mainstream media pr, etc.

The original start-up team won’t be looking for an exit, but a continuous stream of profits based on the different revenues streams that are developed. Angels could look for an exit in subsequent investment rounds (uncle Bob wants his money back and has no ambition to permanently operate in the music business!), and our version of VCs will look for partial ownership and continuous profit streams through catalog.

The Benefits

The benefits of this model over the current ways of the industry are obvious and plentiful.

  • Artists maintain creative control and (partial) ownership of their creations.
  • Investors gain ownership in all profit streams, but only in exchange for quantifiable contributions to the process.
  • Early investors (including managers who put in sweat equity) who have stood the most risk and exhibited the most vision, stand to benefit at greater rates than those who jump on the bandwagon later. This will stimulate a new wave of artist development, rather than the current wave of lazy “wait-and-see” A&R behavior.
  • The financial aspects of an artists career would gain incredible amounts of transparency, and accounting would be simplified.
  • The quality of music would arguably benefit from the increased artistic influence of artists and their trusted advisors (producers, indies), the decreased artistic influence of suits, and greater diversity.
  • Roles would be delineated much more clearly and people would focus on their strengths. Stay in your lane.
  • Major Labels get to remake themselves and focus on their strengths
  • Indie labels and new style management/label hybrids are better positioned to take back their rightful place as quality gatekeepers and this benefits our customers by freeing them from the clutter that has is so rampant in the world of music discovery.
  • The increased sphere of societal influence will belong to the creators, and not the financiers.
  • Job creation would take place in the music business as entire Major Label departments would spin off into a cottage industry of providers for start-ups and investors.
  • Opportunities for music industry people to act shady are reduced, and the opportunity for artists to waste a ton of money is as well. A fairness doctrine.

A Few Things We’ll Need To Make This Happen

  • An uncluttered way for Angels to find artist start-ups seeking investments (a curated myspace meets kickstarter?).
  • A template legal and financial structure that protects investors and artists alike. And subsequently, music attorneys that can practice “real law”, and not just weird mystery theater entertainment law.
  • A set of proper and relevant business analytics and post-Soundscan metrics that matter, both for artists and Angels, and a dashboard in which we can clearly track them.
  • A new perspective, vision and a willingness to let go of the broken system we operate under at the moment. This will be easy for new artists, but hard and scary for those artists still making money right now under the old system.

 

We’re giving away 10 copies of SyncPad for iOS ($9.99 value)

You may have seen our earlier coverage of SyncPad in our post yesterday titled “Talk to your real customers, not your imaginary ones. The SyncPad story.“.

We ran the promotion on our story yesterday, but we felt it would be best to mention it in a separate post to give it the attention it deserves.

We are giving away 10 copies of the iPhone and iPad versions (5 copies each). If you would like a chance to win a copy, leave a comment and tweet out a link to this article. An easy way to do that is by a simple ReTweet.

We will pick the winners in the next couple of days. SyncPad for iPad is available for $9.99 on the App Store or $4.99 for the iPhone version.

For up to the minute startup news, follow us on twitter @startupfoundry.