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The easiest sale you’ll ever make is to the customer you already have.

Acquiring new users is hard. To close on a sale, you must build enough rapport with your customer that they trust you with their money. This is not always an easy task. It’s especially hard for startups who primarily interact with customers via the web. Going from “strangers” to having a business relationship is one of the hardest things to do.

Paradoxically I see a lot of startups put all of their energy into acquiring new users because they view it as the easiest way to increase profits. This simply isn’t true.

I’ve discovered that the easiest way to increase profits is by focusing on the customers I already have a relationship with and learning how I can make their business even more effective. When the customer already trusts you, it’s very easy to make an honest up-sell that will improve their experience while increasing your profits.

What a good up-sell looks like

A good up-sell provides value to the consumer. I would even go so far as to say that it’s an educational experience. The customer might not even understand what they need and it’s your job to help them figure it out. Even if they don’t end up buying anything, this will establish you as an expert in your field and you will have gained their respect. If the time ever comes when they decide they need the up-sell, you’ll be their go to person.

What a bad up-sell looks like

An up-sell shouldn’t be a removal of an arbitrary limitation. This is an abuse trust. People have strong BS radars and the worst thing you can do is abuse their trust. Never try to convince them to buy something that they don’t need.

Figure out how to properly monetize your current user-base before you try to grow rapidly. Otherwise you’ll be leaving a lot of money on the table.

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

Matt Tanase (a founder of Slicehost) on Rackspace’s decision to kill Slicehost

Earlier this week Rackspace announced that they were discontinuing the Slicehost brand, and existing customers would have to migrate over to their new platform. Many customers were frustrated by this announcement and didn’t understand why they had to change. I had the opportunity to catch up with Matt Tanase, a co-founder of Slicehost, to talk about his thoughts on the announcement.

In this interview Matt gives us a brief history of Slicehost, his thoughts on how Slicehost and Rackspace could have avoided this problem, and what it felt like to hear the news. Towards the end of the interview we also cover Matt’s latest project, Devstructure. You don’t want to miss this interview.

This video is sponsored by:
This is a really great eBook that takes you behind the scenes of some very successful startups. Use discount code “foundryfive” for $5 off. Check it out!

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Co-founder of Disqus explains why they raised a $10 million round.

At 1pm today, Disqus announced that they had closed a $10 million round with North Bridge and Union Square Ventures. Last night I had the opportunity to sit down with Daniel Ha (co-founder of Disqus) to talk about the news. In this interview we cover why Disqus decided to raise additional funds and the future of the platform. I also ask Daniel if Facebook entering the commenting world had any influence on their decision to raise money. Don’t miss this interview.

This video is sponsored by:
This is a really great eBook that takes you behind the scenes of some very successful startups. Use discount code “foundryfive” for $5 off. Check it out!

Details of the Disqus Deal:

Five hundred

With this latest financing, we will be expanding the team, our products, and on building our long-term business. In the last 12 months, Disqus grew at least 500% across all of our core metrics: traffic, users, and communities. In fact, just this past November we announced hitting 200 million uniques/month and we’re now already approaching 500M! We’ve taken our time to carefully build the foundations of our core platform, and it’s allowed us to handle — admittedly with plenty of challenges — the accelerating growth with a small team.

You can read the full press release on their blog.

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Weekly reader question: How can TSF serve the startup community better?

I cannot say enough how much I appreciate The Startup Foundry community. I started TSF three months ago as a side project and it’s morphed into a full time job (almost). This wouldn’t have been possible if it wasn’t for our vibrant startup community and I sincerely thank you for your support.

I’m dedicated to building TSF into a place where entrepreneurs can exchange ideas, learn, and most importantly, grow. I’ve outlined a few thoughts on how to make this happen below.

Future Plans:

1. Increase the amount of startups TSF covers.
2. Increase interviews with interesting people.
3. Instead of one post a day, try to make it closer to 2 or 3.
4. I would like to hire another person to help with startup coverage, but we’re not quite there financially. It’s important to me that TSF can sustain itself.

Please share your thoughts:

I’ve been mulling over these ideas for the last few days and I wanted to hear what the community thought. If you have better ideas please share them. Likewise if you have concerns with what I outlined above, let me know.

Again, thanks for all of your support. TSF has been a blast, and I can’t wait to get to know more of you over the years.

All the best,
Paul Hontz

If you go to a startup event to network, don’t play on your iPhone

If entrepreneurs go to startup events to network why do most people play on their iPhones the entire time?

One of the biggest mistakes I see entrepreneurs make at these events is that they expect something to happen just because they are physically at the event. Just being present won’t get you anywhere.

Entrepreneurs often mistake proximity for action.

If you’re not genuinely interested in meeting new people your time would be better spent building your business instead of pseudo-networking. In my interview with Gary Vaynerchuk, Gary reminds us that people have insanely high B.S. radars.

A lot of good can come from networking events if you are an active participant. Entrepreneurship is very much a “pay it forward” community. Most people want to see you succeed. However, it’s a two way street. If you’re not interested in someone else, why should they care about you and your company? Be polite and curious. It will take you a long way.

What else have you found to be helpful when attending conferences?

P.S. Live tweeting the conference (hash-tag) doesn’t make you an active participant.

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

I’m giving away 20 autographed copies of Guy Kawasaki’s book, Enchantment

Guy Kawasaki’s latest book, Enchantment, has had a profound impact on me. I want every entrepreneur to read this book. In fact, I believe in this book so much that I’ve spent just under $300 of my own money to purchase 20 copies for TSF readers. During my interview with Guy, I asked if he would be willing to send out autographed covers to the winners and he graciously accepted.

What the winners get:

An autographed copy of Guy’s latest book, Enchantment.

How to enter:

You can enter the contest in three different ways.
Option 1. Tweet our a link to this post by hitting the Tweet button by the title.
Option 2. “Like” The Startup Foundry on Facebook
Option 3. “Like” this article on Facebook.
Option 4. Leave a comment on this article.

If you do all four, you will quadruple your chances of winning.


I will select the winners a week from today (May 6) and ship the books out on Monday.

Be sure you checkout the interview Guy Kawasaki on startup metrics, mistakes, and enchantment too!

Readers: thank you for all of your support with TSF. I’ve really enjoyed our community. – Paul Hontz

Guy Kawasaki on startup metrics, mistakes, and enchantment

Guy Kawasaki knows his stuff. Before Guy became a VC, he was Apple’s original marketing evangelist. I had the opportunity to interview Guy via email and we talked about startup metrics and common mistakes entrepreneurs make.

Guy’s books have been instrumental in my growth as an entrepreneur. I believe his book is so valuable that I bought 20 copies of Enchantment (his latest book) with my own money to give away to TSF readers. Check it out after the interview.

What was the most profound influence on your life?

The most profound business influence was working in the Macintosh Division at Apple from 1983-1987. Those were the “wonder years” of my life when we were trying to make history with a new kind of computer. I hope that everyone has a chance to work for a leader like Steve Jobs on a project like Macintosh at least once in their life. 

Could you share a story of how a startup you were personally involved with overcame adversity ?

Most startups that are successful has overcome adversity. Starting a company is just plain hard–it’s hard to figure out what product or service to create, hard to actually create it, hard to get other employees to believe in it (this is called “enchantment!”), hard to get customers to adopt it (also “enchantment”), hard to cross the chasm from from early adopters to main street, hard to scale up, and then it’s hard to hand off your baby to people who can run a large organization. And this happens to only the lucky ones!

This is the process that most successful startups go thru. It’s not easy or clean. It’s a tough, messy business. If it were easy and clean, more people would do it and succeed at it. 

When you’re investing in startups, what is the metric you place the most value on?

There are three basic theories. First, some investors say they invest in people. The problem with this theory is that it’s impossible to know if the people are really good when you have to make the investment. Second, some investors say they invest in companies in large markets. The challenge here is the most successful companies usually create a market, rather than serve and existing one. Third, some investors say they invest in cool products or services. The tricky part is that most products or services are not done at the point of investment, and even if they are at least working, you really don’t know if people will adopt them. 

Entrepreneurs should dedicate themselves to reducing all three unknowns and challenges, and there’s a very simple way to do this: prototype a product and get it to market. If you’re right/lucky, then you can show that there is/will be a large market, that people like your product, and that you must be good guys/gals because you’ve come so far on so little money. 

Fortunately, you can do a lot more these days with a little money because tools are Open Source, people are cheap/free during a recession, Twitter and Facebook make marketing cheap, you can get cheap infrastructure in the cloud, and you don’t need office space because your team can be anywhere in the world with a good Internet connection.

Was there a mistake you made repeatedly with startups that you eventually learned from?

I used to believe the company’s “conservative sales forecast.” I’ve never seen a company come close to its conservative, worst-case forecast. In fact, now I take a company’s forecast and add one year to the delivery date and divide by 100 as an estimate of what will actually happen. 

Startups make this mistake because they do a top-down analysis like this: there are 300 million Americans, one in four owns a dog, ergo 75 million dogs, each dog eats two cans of dog food per day, ergo 150 million cans are consumed per day. How hard can it be to get, worst case, 1% of this market or !.5 million cans per day? 

Instead companies should do a bottom-up analysis. How much traffic can you get to your dog food website per day? Let’s say 5,000. How many will buy a case of dog food from you? Let’s say 1% or 50. How many cans are in a case? Let’s say 20. So it looks like you might sell 1,000 cans a day. The truth is that your sales will be a lot closer to 1,000 cans/day than 1.5 million cans/day.

What should a company do to enchant it’s customers?

It’s simple. The three pillars of enchantment are likability, trustworthiness, and quality. In a nutshell, you should aspire to the likability of Richard Branson (he got down on his knees and started polishing my shoes when I told him that I don’t fly on Virgin), the trustworthiness of Zappos, and the quality of Apple. High standards, I admit, but at least you know the goal. This is the right starting point, and you’ve got to start somewhere.

Startup Myth: A good product is all you need to be successful

Having a good product won’t make your startup successful.

Listen to this unfortunate story I recently heard. Entrepreneur X and his team spent months building a “perfect” app. They poured over every line of code and aligned every pixel. They kept their heads down and worked hard. The project wrapped up and they pushed it live. On the precipice of launch day they hired temporary help to handle all of the buzz they were sure they were about to receive.

When the startup launched the next day, sales were completely flat. This company bought into the myth that a good product is all you need to build a successful business.

A good product is simply not enough. It’s an ingredient but it’s not the whole cake. Multiple things need to happen asynchronously with development to maximize your products launch. This is why having a hustling co-founder is so important. Let the engineers focus on building platforms and let the hustler focus on these things.


Marketing begins well before the product launches. If you want a good example of a marketing plan, checkout Mint’s Original Marketing Plan (circa 2007). This is a fantastic place to start.


Who is your product for? You need to tell your products story in a way that makes sense to your target market. Your narrative isn’t a bolted on feature, it’s the heart of your product. Your narrative should effect everything from design decisions, to customer support, to which features you implement.

P.S. If your target market is “everyone”, you need to focus.


You need to be continuously talking to your customers. Find out what makes them excited about your product. Discover their pain points. Doing this makes it easy to line up customers before you even launch. It’s a mutually beneficial relationship. I can not overstate the importance of relationships in business.

Your turn: What else does a hustler need to do to help his startup succeed?

For more startup news, please follow us on Twitter @startupfoundry or like us on Facebook.

The thinking behind Mint’s original marketing plan with Noah Kagan

Noah Kagan created the original marketing plan for Mint in 2007 (which you can see here). I posted the document on TSF and the response was overwhelming. Numerous readers called the document “pure gold” for startups looking to improve their marketing efforts.

I decided to ask Noah to come on the show so he could explain the “why” behind the document. I wanted to get inside his head so startups could learn from him. Enjoy the half hour interview.

Noah has since moved on from Mint to AppSumo. AppSumo has been a great sponsor for TSF and they’re good at what they do (Deals for geeks). Check them out.

Be sure you take a look at Mint’s Original Marketing Plan (circa 2007) in another tab so you can follow along!

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

Data without intelligence is dangerously misleading. Focus on the right users.

Startups love numbers. Data is king in the A/B testing world. Numbers allow entrepreneurs to quickly quantitative decisions with hard data. In this data-driven world it’s easy to forget that data without intelligence is dangerously misleading.

For example:

Back during World War II, the RAF lost a lot of planes to German anti-aircraft fire. So they decided to armor them up. But where to put the armor? The obvious answer was to look at planes that returned from missions, count up all the bullet holes in various places, and then put extra armor in the areas that attracted the most fire.

Obvious but wrong. As Hungarian-born mathematician Abraham Wald explained at the time, if a plane makes it back safely even though it has, say, a bunch of bullet holes in its wings, it means that bullet holes in the wings aren’t very dangerous. What you really want to do is armor up the areas that, on average, don’t have any bullet holes. Why? Because planes with bullet holes in those places never made it back. That’s why you don’t see any bullet holes there on the ones that do return.

From Kevin Drum’s article on

I see a lot of startups focus solely on increasing the number of users they have. I’ve received pitches from startups that say things like “Over 5,000 users have already signed up!”, and I’ll say “That’s fantastic but how many people are actively using your service?”. Total users are just bullet holes in the wing.

The right way to view total users

Looking at total users is a useful way to determine demand for an idea. If you haven’t launched yet and you already have over 1,000 users sign up, you can start gauging the market. Total users can help you quantify a market but it’s a poor way to measure the health of your startup.

Focusing on the right users.

User engagement is the metric you need to measure to understand if people like your execution. After you launch it’s not about how many users signed up, it’s about how often they interact with your product. The users who use your site three times a day are exponentially more important than the ones who check it once a month.

Focus on increasing user engagement. It’s a better indicator of the health of your startup.

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Hi, I'm Paul Hontz.

I'm a YC alumn and I love startups. I created TSF to highlight companies I find interesting. You can learn more about me here.

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