The Trojan Horse into smart homes is Voice

The fight has been underway for some time by hardware and platform companies to get into homes for more data, more control, and more share of wallet. The attack vectors have been things like home entertainment systems (think Xbox or Playstation), smart appliances, smart TVs, IoT (think smart light bulbs), and now voice assistants (Amazon, Google, Apple).

For the first time after getting the following email from Amazon announcing Alexa calling, directly following the launch of the Amazon Echo Show, I think Amazon has a real shot and pulling ahead in this race.

The below image helps explain why — they are connected your address book to the hardware system that you maybe use with a few other devices and your music service.

Email from Amazon announcing Alexa calling

You see, the real Trojan horse (voice, get it?) is putting a handy device that is novel and cool, that has marginal utility and building on it piece by piece.

Every week I get another email from Amazon announcing a new skill that does something on the Alexa. The novelty and wow factor make the Amazon Alexa appear exactly as it should at first glance — a toy.

A few choice reactions after seeing an Amazon Alexa for the first time (I was an early adopter)

“That’s dumb” — a friend who how never seen it before

“I’m not using that” — friends before I hooked up Phillips Hue to it.

“Do we need it in the middle of the living room” — my wife before I integrated Spotify

With the smart upgrade Amazon now has an incredible missing link that closes the loop on many levels — my address book and contact list (good news they added call blocking). Now Amazon can know who I am connected to, who I communicate with most often, and who I spend my time talking to.

Convinced this is genius yet? Or are you totally creeped out?

A few voice devices trying to capture the home market in a Kit I created

The reason I think Amazon is a tech titan ready to take out so many startups are moves like this. How many have tried to link up a social network + hardware device + purchase ability all in one? Who has a chance against Amazon?

Now with an Amazon Echo Video + my address book + my order history = the time for owning homes is upon us.

I thought some time ago that the trojan horse to home automation was the Amazon Dash buttons but I was wrong. The adoption of integrated buttons into washing machines for Tide never materialized. The world of other buttons showing up to control my home never came out. Instead and hardware device that is perfect for Father’s Day, now has the added capability to be useful everyday.

This move feels like the beginning of the ecosystem that became Prime Shipping and Prime Video.

Prime Video as an add on was a no brainer to “test and try” for Prime customers. Now however you have people signing up for Amazon Video and testing Prime! This has to be the greatest trick Amazon has ever pulled…until now.

My hypothesis around this is that Amazon is aiming to be the central entertainment and commerce hub we were promised in the late 90s.

Anyone remember the AT&T You Will campaign?

Nobody could pull this off until now because there was no utility. Back then it felt like trying to sell the first fax machines — sure one day when everyone has one I’ll get one too. The Networks effects of voice hardware are finally kicking in.

They did it by getting a marginally helpful voice controlled hub connected with everything you love then sprinkling in features you can’t live without.

In my thinking on Team, Time, and Tech — Amazon have nailed all three and my prediction is Amazon is trying own the “Home as a Platform” or “Home OS”.

Playing catch up here are Microsoft, Google and a distant Apple.

Expa Labs   2017 Companies

We started Expa Labs to help founders build and ship new ideas. By providing fundamental help in starting and structuring their company, providing office space, funding, and advising, we take a very hands on approach. We do this by working with a smaller group of companies.

Building off of our learnings from 2016, we expanded the program to better suit the needs of entrepreneurs. Just like a startup, Expa continues to iterate on making our program better for the creation and scaling of companies. After reviewing over 1,000 companies and meeting with less than 5% for final interviews, we are happy to start the 2017 program working with an incredible group of founders. Earlier today we announced this at Expa.com.

  • Interseller: Make contact with new prospects
  • Merlin Guides: Magically Simple Employee Training
  • NextGig: Actionable information about companies in your professional network
  • Sleeperbot: Messaging for sports fans
  • SuperHi: Learn to code and create websites from scratch with our online 8-week course
  • A stealth neural training company

(PS — if you are looking for great companies to join, take a look at each companies above to see where openings are available.)

With the lede out of the way, I wanted to share more about the process our team went through to review and select the Expa Labs 2017 companies. I also want to share my own learnings and how they will impact me going forward.

This year we received ~1,000 applications, spoke to countless teams in person, by phone, and email, and invited 36 teams to interview with us in person. The fundamental question guiding our decision process was: can we help this company be successful? Beyond funding, what can we do to work with this team to make a meaningful 10X difference in the trajectory of their early start? We don’t believe in just writing a check, but rather working closely with founders who we can help, that are coachable, to build and ship great products. In some cases, we gained enough conviction to move forward, and in others we did not.

One of the main things I struggle with (and expect I always will) is turning teams down. It is never easy to say no, but I feel it’s always better to give a clear answer rather than string a team along. Sometimes it has nothing to do with the team or the business, but rather entirely on the potential investor. In the case of Expa, it is usually a combination of things that may include:

  • Competitive to one of our Expa Studio companies
  • Competitive to one of our stealth studio companies
  • Competitive to another investment
  • We don’t have enough domain expertise to truly help the founders
  • We cannot make a 10X difference for the founders/company in the first 6 months (as mentioned above)
  • We are just wrong

On the final point I want to recognize that with ~1,000 applications we might simply miss something great. The default answer in the early stage investing business is “no” and this shouldn’t deter you from building your vision. Anyone who ever says otherwise isn’t being realistic because many great things don’t appear that way at the earliest stages. I hope for all applicants this process was a good experience, and as I have said before, a helpful part of the early stage journey.


Time well spent

Many folks asked me “How can you justify going through that many applications and spending all that time?” and I have a very easy answer: it is exactly what I want to be doing. Yes, it takes time that could be spent actively working with existing companies but ultimately it will help them in the long run.

There is a great WaitButWhy post about how you spend your time (take a minute to read through that) that really got me thinking about how I spent my time earlier this year. It outlines a “lifetime” in weeks, months, and years and encourages folks to fill in the blank template provided.

Here is what WBW came up with:

And they provide a handy template so I decided to do a basic one of my own:

How I want to spend my time in green

One of the best parts about this process has been seeing how it aligns with my own goals of helping and coaching early stage founders and companies. My time so far has been spent as an operator, an investor, and now a hybrid of the two. I realized this blend fits my own long term goal become a great advisor to companies.

From an investing perspective I also wanted to breakdown some of this time:

Of the 1,000 applications and I can filter them down into three categories:

  • 1/3 probably not a fit
  • 1/3 probably not a venture scale opportunity
  • 1/3 probably a great company

Using some back of the napkin math, I came up with what I believe are what a top tier VC firm/Partner could see in a year which is about 86 great companies.

(there are 365 days in a year, with about 260 working days, and perhaps they could see 3 amazing pitches per week (that’s a lot!) that are investable, which means they see 86 venture scale incredible companies in a given year. This is balanced against companies that are not a fit or not venture scale.)

Therefore, using the math above, I compressed about 3–4 years of pitches into this period (333 great companies/86 per year = 3.8 years to see that many companies). This is obviously not perfect. I imagine, over the course of a 3+ year period, I would be able to replicate what we accomplished over the last few months. This entire process helped me continue to develop my own pattern recognition.

Each application provided a video pitch, written overview and detailed answers to questions. Going through applications fulfilled our commitment to treat the people who spent time and energy putting these materials together with respect. Personally I wish I had more time to provide individual feedback for every applicant, but that simply doesn’t scale.

In the end we are thrilled to have found some amazing companies to join the Expa family, who are already hard at work with our Partners and the team. I can’t wait to see what these founders build and launch in the coming months and I am excited to work with each of them.

Coachability

Let’s get the fun part out of the way: the word coachability auto corrects to “coach ability” or “coach-ability” but I like it combined so I am running with it.

I mentioned that this attribute is now towards the top of my list in what I look for in entrepreneurs in my lessons learned for Expa Labs 2016 and I wanted to elaborate more on why. You see when I sat down to really think about what to look for and research what has worked with a founding team, I made up a list of what appears to be the (almost cliched) list of traits. These traits are things like: execution abilities, category expertise, leadership, technical abilities, ability to hire and retain great teams, clear vision, etc… What I underestimated when working so closely with entrepreneurs every day is how much being coachable mattered.

This was exemplified when a team we were working with at Expa Labs took a bunch of feedback (some harsh criticisms too) and incorporated and summarized what happened into their own roadmap. Their vision and mission stayed true, and they were not influenced out of anything they knew they already wanted to build. However, they were able to take feedback, talk through how and why they made decisions, and understand where we were coming from. It’s hard to take feedback, especially when it is something that you built. The best part was that they came back and delineated all the thoughts down together and stated what they heard and what they were going to do about it. They carved out parts they didn’t agree with, explained how some parts were wrong and had a plan to do what was next. The best part? This was unprompted by us.

One problem that others have brought up when I share this trait is that it could be seen as a weakness. I disagree and find that [strong views loosely held] is a great way of describing the ideal personality. Perhaps the other factor in play is that this may not work for all because the Expa Labs program is 6 months of in-person help, advising and coaching. This may not be the right trait for a founder that is working hard on a problem in their own space.

One reason I write up a lot of my thoughts since I started writing is to ask for help when I need it. The hardest part of searching for this trait is identifying questions that can help judge someone’s coachability. To date, I have a few, but I am interested in learning more. The best outcome is that I can have an in-person session with a team, hopefully, get excited about the idea and give feedback and see what happens. Unfortunately, that doesn’t scale very well and there isn’t much time for that. Instead, I use my previous pattern recognition across the written responses and videos in the applications.

This is one of the reasons that Expa Labs hosts a select number of events for applicants. These have been beneficial to dig into an idea, meet folks, and generally just spend more time together. If you are interested fill out an application at Expa.com/labs. For the most part trying to figure out if a team/company can use our kind of help is the main goal. I am also first to admit that this type of program may not be right for everyone.

Back to coachability — I do not have it all figured out 🙂 Since evolving my own thesis for early stage founders for 2017 you will have to look back on the Expa Labs companies started  in 2016 to judge whether or not this system worked. One interesting point someone brought up to me is that while true performance can be measured against the IRR of the capital we deploy, there are more nuanced paths to success that a place like Expa offers such as career paths for people, Expa Studio companies that can yield interesting opportunities for founders and of course the experience itself which can help people.

While my primary goal with Expa Labs is to help build amazing companies, a close second is helping the people that run them. For that reason, I am spending my time identifying those that are most coachable.

Expa Labs – Some Lessons Learned

With the first group of Expa Labs companies moving on to the next phase in their development and the application period for the next Expa Labs group now open, I wanted to take a step back to share some of the lessons I learned from working with each of the companies in our first group. The platform and learnings Expa has built by launching companies over the past three years was foundation on which Expa Labs was built. We didn’t set out to create “another” incubator program — we wanted to make something more entrepreneur-friendly, that valued company creation over all else. We didn’t want to rely on what others had done, instead coming up with a set of Founder First Principles gathered from interviews, discussions, and founder conversations with people who have created products, managed teams, been through programs and more.

When Expa announced our new $100M fund in March, 2016, it was to continue our mission of creating new companies, but also use our learnings to form the Expa Labs program. Starting from only a mention in the NYTimes to companies funded and starting work two months later is a testament to the work ethic of my colleagues at Expa. A lot of naysayers and folks said creating and putting into motion a program like this wasn’t possible, but we did it. And though Expa Labs will evolve over time, I am very proud of what we accomplished in the first version of our program.

Now that the inaugural program is over and I’ve had some time to reflect on the experience, I wanted to share some lessons learned;

“Coachability” Matters

Before the Expa Labs experience, the founder attributes I would most often cite almost sound cliche´ at this point; technical abilities, executional excellence, vision, ability to attract world class talent, etc…. What I didn’t have on my list was “coachable.” Though some might argue this isn’t necessarily a trait to look for, I think it’s essential. I worked with teams who, from the beginning, showed they could take feedback well and incorporate it into their thinking. There is a fine line between “I’m right” and “here are some facts” and teams that are coachable can make a big difference. They also know how to filter feedback from lots of people to make an informed, data-driven decision. Their vision may be directionally right — but tactically wrong — and it takes a strong team to change the course.

Ship it earlier

There’s an old expression that says “If you are not embarrassed by your first version you didn’t launch early enough” and it’s absolutely true. Shipping early provides many good lessons. Nobody knows what will happen — despite the loudest pontificators. Launching also quiets the naysayers — nothing speaks louder than actions. This lesson comes into play because whether you are a B2C company or a B2B enterprise company. Nothing gives you better feedback and usage patterns like a live production environment with real customers. Even if you have 10 beta users, it’s better than sitting around inside with limited info and lots of ideas.

Startup knowledge looks like an equalizer

Remember those old stereo equalizers that controlled all the audio settings? Startup knowledge is a lot like that — some entrepreneurs are very high in certain areas while others are very low. As head of Expa Labs, my job is to get everyone to at least a level set — so folks can tackle most problems with information and knowledge to create a solution. It is amazing how much information is out there about starting up a company, entrepreneurship, and almost any topic around starting a business — and yet the knowledge gap is large. Some founders are well informed about the details surrounding financing terms and definitions, while others are new to the topics. Others have deep technical knowledge about building and scaling systems, but have little to no information around hiring and HR policies. Nobody can be expected to know everything about every topic and that is where Expa comes in: We provide resources, experience, and a level set of knowledge in the areas where gaps might exist. My goal is to either fill in the knowledge gaps where I can, or pair founders with the right people.

Plans Change

I can’t say this any more directly: plans change. It reminds me of the famous Mike Tyson quote: ”everybody has a plan until they get punched in the face” and it’s true. The two types of plan changes I struggle with (but shouldn’t) are when a timeline changes and when a product launch changes the plan. Both are totally reasonable, should be expected, and yet remain difficult. For me the lesson is go with the flow a little more and let things change. Change, after all, is the only constant when building a company.

Fundraising is hard

Ok so this isn’t a lesson I discovered or needed to learn, but it’s a good reminder. Naveen Selvadurai, one of the Partners at Expa, has a great expression for founders; “it’s only going to get harder” which is funny and true. From the moment a team is funded they should be focusing on how to keep the business alive with the only thing that can guarantee it — cash in the bank. At the end of the Expa Labs program we also send out a “first look” to the LPs of Expa, which is a way for them to see the progress and status of each company and have the option to reach out if they want to get more involved or invest directly. There are no guarantees but it’s a great way to use the Expa network.

Learning never stops

I truly learned something new from every team, and I hope they learned from me. My applied knowledge from experiences and situations made sense, but I also added to my own toolkit as each company launched/built/iterated/shipped during their time in Expa Labs. I realized many things of my career convictions are now in flux — for example what worked in sales in 2014 may not be the case for 2016.

The end of a program isn’t “The End”

In conclusion I want to say thank you to the Expa Labs 2016 teams; DoveTale, Listen, Radar (NY) and NINAYO, Promote, and Chalet. I loved working (and still working!) with all of you. While the program is “officially” over, it’s only the beginning for you, with some difficult, frustrating, absolutely fun and satisfying moments ahead of you. You are now a part of the Expa family, and I am excited about what the future holds for each of your companies.

We have officially opened up applications for Expa Labs, and planning on more than doubling the size of the program. We have also introduced a new investment tier $250,000 for 10% equity along with the previous $500,000 for 20% equity. Applications are now open through March 31st 2017.

In addition to expanding the size of the program, we are now open to accepting companies from anywhere, that can work in the US. This means if you are in a city outside of one of our core locations, you can apply and potentially get into the program and work from where you are located.

With our offices in NY and SF, and now a Partner operating out of Vancouver our goals of growth and working with more entrepreneurs from more places is happening. If you are interested in learning more please checkout Expa Labs.

Hardware as a SaaS business (HaaS?)

With CES in full swing, I have been thinking more about hardware businesses that have a SaaS component for ongoing revenue and support. I have personally experienced this with a Dropcam (now part of the whole Google Home system so technically a Nest Cam) that was an initial hardware purchase($199.99) with a $9.99 non-required component to get a 7 day history of content the camera collects. This is a great example of a hardware sale that probably happened at a nominal profit (maybe loss?) that is definitely now “in the green” because of my 2+ years subscription. The simple math is that $9.99 x 24 = $239.76 which has cleared the price I paid for the device. I forgot the original source of my purchase, but there was certainly a low CaC for them.

The latest I saw today was the Norton Core which is a device from Symantec that is a home router that has a $99/year SaaS security service. In a world plagued by malware and networked devices being taken over, this is primed to prey on the fears of IoT owners. It is unclear to me how it protects those devices.

I see this as becoming the norm, as more connected devices have a support requirement that goes beyond the purchase from a shelf/ecom store. With OTA updates happening in cars, firmware updates being required, and a list of other requirements to keep connected devices up to date, it is clear that companies need this revenue stream to sustain this support. Embracing this outcome vs. shunning the inevitable “smart” everything. Just see Internet of Shit for some hilarious tweets. I take a positive approach which is; how can this business model affect small startups entering this space, and what can we learn from building businesses this way? Can hardware costs come down to $0? Can a locked in monthly SaaS fee cover the business model needs of a new startup to compete with a large hardware co? Does this introduce a new business model for crowdfunding a product? Time will tell.

Other examples include things like a FitBit which has a physical cost, then an upgrade to “pro” with a monthly subscription underneath. Loss leading hardware products have always been around but seeing a proliferation of options and scenarios brings me back to the early 2000’s where folks were giving away computers/laptops for the option of a monthly subscription fee + advertising on top of it. I have always appreciated this model — even if it resulted in some of the biggest failures of the dot com era. Anyone remember eMachines?

Good examples of this include networked cameras, wifi routers, smart watches, phones (financing or data contracts), readers/tablets, and more. What am I missing?

The biggest issue is bringing a product to market, getting initial sales, and getting folks over the penny gap of a monthly subscription. Not an easy feat, but if you can do it and have low CaC and high LTV it makes for a great blended business model of Hardware + SaaS (HaaS).

Turning coffee into Bitcoin

I few months ago I had to lower my coffee consumption and was struggling to find the best way to “force” myself to do so. Nothing major prompted the change, but wanted a catalyst to really stop. I have been following Bitcoin and other cryptocurrency for awhile, and thought I would use this as a way to get more. In looking at all my options I figured out a way to turn coffee into Bitcoin…sort of.

To really motivate myself I figured I would lower my costs by stopping purchasing coffee every day (easy!) but then divert funds into purchasing Bitcoin dollar cost averaging into the currency (hard!). This prompted me to start looking for a recurring purchase into a cryptocurrency that was liquid and growing and quickly settled on BTC. They say that using Bitcoin is key to its success and by purchase more and forcing a use case, I can help the overall ecosystem better. Having more will create usage, which will create value in the network, which will drive more use and hopefully the ecosystem as a whole.

Enter Coinbase (they have a referral program!) which is a great solution for setting up a reoccurring payment buy in platform. Below is what I setup to

The trick to dollar cost averaging into more Bitcoin was setting up a simple reoccurring transaction every week. This would prevent me from making a few coffee purchases (let’s be honest — about 1 in some places in NYC) and built my BTC balance. While not the most economical approach, Coinbase has their fee structure, it has really worked. I have been doing this for the past 6–9 months and it has worked well. Inadvertently I have lowered my spending habits too, being in less stores and coffee shops which evens out the fees a bit.

The question of course is where to store things, and I may wait for another post for that. In the interim BTC/USD has been trending in the right direction — although technically I shouldn’t care as I am now better equipped to weather a downturn.

While I am not quite there yet, I was partly inspired by my friend Steve

I think it is entirely possible that the value generated from purchases will yield a result, I think it’s far more likely that I will spend it first thus helping the ecosystem as a whole.

I have always been a tinkerer, and to really understand something you need to use it — this project has given me a great solution to coffee consumption and a BTC balance to spend on things.

Making an amazing introduction via email (via John Exley)

John Exley takes relationships seriously. We have been friends for a number of years and after his latest email intro I wanted to share how he does it.

handshake

With the permission of Mike Falb and John, I wanted to share the following exchange that recently took place.  I have never seen someone as thorough or thoughtful about an intro and John does this *EVERY* time.  He abides by the double opt-in on both sides and then follows up with a masterpiece like this.

Screenshot 2016-07-11 17.33.42

After checking with myself and Mike first John made the following intro and WOW, what an email! (the double opt-in #respect)

Let’s break down why this is a qualify email introduction. For clarity, below is the play-by-play;

Hi Mike:
I can imagine you’re racing a bit in between meetings in LA right now, so I’ll get straight to the intro:

Diving right in and saving everyone’s time — appreciated!

MIKE:
Mike, please meet Eric Friedman (AngelList: https://angel.co/ericfriedman; Twitter: https://twitter.com/EricFriedman ; LinkedIn: https://www.linkedin.com/in/ericgfriedman ; Blog: https://www.ericgfriedman.com/). Eric is the General Manager of Expa Labs, an incubator in Soho backed by $100MM that is investing $500k each in its first six companies (TechCrunch story here). Previously, Eric was the Global Senior Director of Sales and Revenue Operations for Foursquare. Eric graduated from George Washington University in 2004 with a degree in Marketing.

I was introduced to Eric by my former roommate, Brian Watson, four years ago at a USV holiday party (Eric was actually the first Analyst for USV). Eric is a great guy and I like to think of him as the “Chief Domain Officer”, given his unique gift of acquiring rare domain names. I trust Eric deeply and vouch for him with everything I have.

CONTEXT. IS. KING. Where to even begin?!?!

First of all, John took the time to link up all of my profiles and made Mike’s job super easy to click around and learn more. He gave great context on what I am up to now and my background (he even got the details right!). Going so far as to include jobs and education its a great summary intro.

Second, John gives great context on how we know each other. Well beyond the typical intro, he cites our mutual connection and gives props for my side business doing domain consulting (ha!). Then he is explicit with his trust and vouching — rare! (PS John I feel the same)

ERIC:
Eric, please meet Mike Falb (AngelList: https://angel.co/mikefalb; Twitter: https://twitter.com/MikeFalb; LinkedIn: https://www.linkedin.com/in/mikefalb). Mike is an Associate at KEC Ventures, an early stage venture firm here in NYC. Previously, Mike was the Co-Founder & COO of Tunetap, a crowdfunding platform for musicians to raise money for their concerts. Mike graduated from Cornell University in 2014 with a degree in Hotel Administration.

I was introduced to Mike by Julian Moncada from Lerer Ventures a few weeks ago (April 30th). Mike and I have spent considerable time together since, connecting across our mutual obsessions for consumer Internet, culture, and working with emerging artists. I trust Mike and am happy to vouch for him.

John does the same thing for Mike’s background, providing deep context and links to back up where I can find out more info. Previous job history and what Mike was doing and studying help complete my picture of him before we even meet in person.

PURPOSE OF INTRO:
Mike, Eric is gearing up to help Kit (an Expa Studio company) raise their next round. Given your focus on consumer investing at KEC, I recommended you and KEC as a potential strong fit. Eric was psyched to discuss Kit and its momentum with you. Eric, I caught up with Mike about the company and he was immediately excited at the prospect of meeting with you and the team there.

Saving us both SO MUCH TIME, John explains the reason for the intro — Kit.com — an Expa Studio company that could benefit from a jam session with someone like Mike. The links here are not just company home pages, but thats actually a link to the latest TechCrunch article explaining what Expa is all about.

We basically saved ourselves a ton of time and energy getting to the meat and potatoes of a meeting from all the heavy lifting John did for us.

Being able to parse all this material on the go, via mobile, prior to even responding was incredibly valuable. I am very thankful that John does this and I have never seen anything close to it before in my life.

Thanks gentlemen, let me know if I can be helpful further here….
Best,
John

Finally, he means it. You know that after an email like this if either of us reach out you have a trust bridge that has been built that things are going to get done. A lot of people use this phrase — but in Johns case I actually believe it.

Not everyone can make intros like this and not everyone should, but after getting this note I am thankful he took the time and wanted to share with the world.

Now back to your regularly schedule one line emails 🙂

 

Product Hunt – Part of Your Launch Plan

I submitted Ando today to Product Hunt, which is a new restaurant that is delivery only co-founded by David Chang (from Momofuku)  and Hooman Radfar. Check it out Ando on Product Hunt for a special combo for those in NYC.

Ando

Since I have been submitting products for awhile now (10! see below), I thought I would share my thoughts as I have been a fan since the beginning.  I went through my old emails and it seems that Product Hunt came onto my radar when it started.  I remember signing up and giving some feedback to Ryan Hoover, who is incredible at interacting with his community.

Product Hunt

Given that Product Hunt has provided so much value to me, I wanted to share my thoughts on how it should be included in a launch plan if you are launching something new.  I am very thankful to the PH community for always asking great questions, submitting great feedback, and being open to participating in things I submit.

What is Product Hunt?

Product Hunt is a great way to share something special with a focussed community that is very active and helpful.  I typically lean towards tech oriented products and services, but they are doing a great job of building a platform to support many different categories. There is a focus on getting participation from the creators, or Makers, of products which gets real questions and answers – something missing from a lot of other places.

Why Product Hunt?

I have found that having PH a part of your launch plan is very helpful for a few reasons;

  1. Forces you to get organized – you need to iron out things like descriptions, one line explanations, how you will handle FAQs, and overall vision.
  2. Forcing function for launch – I always tell folks to launch things on Tuesdays away from other big events (think WWDC) and this gives you a launch date which is great for teams to rally around.
  3. Feedback – The community is great and you will get a TON of great questions and comments from all kinds of folks.
  4. Attention/PR – Obviously, but down on my list as I don’t think its the main reason to participate.  This gets you on the radar of people who write about your app or products category and helps tell the market about what you are working on.

When should you post on Product Hunt?

As the saying goes “If you are not embarrassed by the first version of your product, you’ve launched too late.”

hoffquote

Once you are ready to have a public beta and get real feedback, its time to share it with the world.  I alway recommend posting first thing in the morning, the earlier the better, so you can check it off your list and get onto other things.

Who should post on Product Hunt?

The “Makers” of the product, service, feature, app, or “thing”.  This doesn’t always mean the founders.  Some of my favorite posts are from people that are not the “CEO” or “Co-Founder” of a product.  Obviously near and dear to my heart because I worked there for so long was the comment from one of my good friends Jonathan Crowley, now head of product at Foursquare about big changes in Swarm.

How should you post on Product Hunt?

Posting on PH should be a part of your Launch Checklist.  If have spent time with Naveen Selvadurai (partner at Expa) he will talk to you about the importance of checklists and probably hand you a copy of The Checklist Manifesto.

By making PH a part of the checklist you will get things organized and completed the right way.  This is certainly an entirely separate post, but the gist of it is to have a list and make sure you have an owner and a timeline.  Thinking that you can throw something together is not the right approach.  Rather, its a great way to coordinate sharing what you are working with alongside things like an official blog post on your own site, coordinating with any social media accounts you may have, and if you can outside press and embargoes.

Screenshot 2016-07-10 20.50.46

Finally, I wanted to share that although some of these projects have been my own, I am especially proud of seeing friends and companies I advise launch on this platform as it has been so valuable.  From meeting prospective hires and investors, to connecting with competitors and others who have tried similar things in the past the community is incredible.

Finally, I thought I would share what I have posted which is also a fun walk down memory lane…

  1. Skillshare for iOS (my friend Mike’s company – he didn’t know I was submitting!)
  2. Casual Spectator
  3. LRN
  4. Input
  5. Metabase (Expa Studio)
  6. Kit (Expa Studio)
  7. Abovo42
  8. Spatula
  9. Current (Expa Studio)
  10. Ando

 

 

 

 

 

An Advisor Equity and Advisor Pool Breakdown

I have been sharing the below with folks via email and privately, but realized I should do so publicly**.

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(also a huge shout out to Ben Alden, GC at, Betterment for contributing heavily, and encouraging me to post – go follow him on Medium @BenAlden)

Regarding some of the plans I have seen work well — I am going to give you two answers; one wearing my advisor hat for the company, and one wearing my non advisor hat.

As an advisor looking out for the company;

You should look to get 2–4 competent advisors that can shore up on areas that complement you well. Think about the things you DON’T know. This is the classic “hire people smarter than you” which is harder said than done. Typically these folks get between .01-.25% for regular advisors, .25-.50% for mid range to expert advisors who are willing to spend the time, .50–1.0% for very special circumstances where you have someone that is deeply involved with the company and you might want to recruit later.

Example;

Advisor 1 = 0.25%
Advisor 2 = 0.25%
Advisor 3 = 0.25%
Total = 0.75% for 3 advisors that vest as you see fit to help you over the next 1–4 years (more on vesting below)

This leaves plenty of room for a final 4th advisor for .25%

Bigger/better advisors who get more equity have things like; excellent domain expertise to help you avoid pitfalls, deep connections within the industry to help with the intros, partnerships, and more.  I try to recommend people bring on advisors that can 10X a business.

Big strategic advisors are the folks that add credibility to your co. and provide everything above, but have expertise and knowledge that you can’t find anywhere else. Think former CEO of the biggest player in your space, former lead exec. from a 10 year old co. in your space that is a public company — that sort of thing.

Advisors refer to these percentages as “basis points” such as “25 basis points” which equals 0.25%. You might already know this but just in case you hear it, wanted you to know.

As a potential advisor looking to get involved with the company;

MORE EQUITY! Lots of people here build up their portfolios by asking for 1%-5% to advise and I think that’s crazy. People claim to be incredible, but you don’t know until you work with them. Tread cautiously here. I have seen what I call “predatory advisors” come in and really mess up a cap table by promising big intros and sales contracts only to disappear after the first 6-12 months.

The funny thing about these moves is that it ends up being bad all around, even though the advisor thinks they are getting a great deal.  I have seen cap tables with these folks and investors question who they are, why/how it happened, and how someone who doesn’t work as an FTE own so much.

Here are the questions I like to see founders ask potential advisors;

1. How much time do you have for this company on a weekly, monthly, quarterly basis?
2. Do you currently work with companies that are competitive or could conflict with my business?
3. How many companies do you advise today?
4. What would your current companies you advise say about you?
5. Could I speak with one of them?
6. What do you hope to gain out of this time and energy you spend?
7. What/when/how is the best time to reach you if we need something? (this one is great as its telling about how your time will go)

Much of these questions are based around time and engagement.  A standing call or meeting with an advisor is great, but when you really need them will they be there for you?

Now that you have a potential advisor lined up, how should you engage the relationship?

Good lawyers will tell you the best contractual relationships are those in which you never have to look back at the contract once it’s signed. The relationship is strong, both sides know their roles and goals, and neither side has to resort to external mechanisms (e.g., contracts, courts) to force desired behavior. The world isn’t a perfect place, though, and sometimes it makes sense to add a little more contractual protection.
It is always recommended to spend time with someone before bringing them on as an advisor.  I refer to the close confidants of a company as a “kitchen cabinet“, and always feel like you should be able to break bread with an advisor in your own home/kitchen.

What tools exist to protect both sides of an advisor relationship?

Vesting Schedules

Advisors typically ask to vest in equal installments over 48 months. However, I have seen many derivatives of schedules and you have to find a timeline that works best for you.
Another schedule is to use a traditional FTE grant; 4 year vesting with a 1 year cliff.  This is the standard 25% of the grant vesting on the one year anniversary of the grant date, with the remaining 75% vesting in equal installments monthly over the next three years. Another innovative approach is to change the cliff to something shorter such as six months.
This gives the advisor an incentive to add enough value that you want to keep them on the team for at least a year; anything less, and they’ve earned nothing. This requires a lot of trust: the advisor in your good faith and the advisor in his/her ability to add value.
Note that an advisor may reasonably push back on a request like this, however: they don’t want to potentially work for free.

Setting The Option Strike Price Above Fair Market Value

Remember when I talked about getting an advisor that can 10X a business? This is putting them on the line to actually deliver for you.

A little bit of background first on options: In order to issue options, your company must have a valid 409A valuation setting the fair market value (“FMV”) of a share of common stock. You cannot issue options at a strike price below FMV without incurring serious tax repercussions. So what most companies do is get FMV from a 409A valuation and use that for their strike price. Companies are not prohibited, however, from issuing options with a strike price greater than FMV.
So why would you do this? Say your current 409A puts your FMV at $0.25/share of common stock, and you’re negotiating with an advisor who’s promising to 4x your company value (beware of promises like this in any event…). You can offer the advisor options with a $1.00 strike price. Unless your company actually 4x’s in value, those $1.00 options will be of no value. Why would an advisor pay $1.00 to exercise an option for a share worth less than $1.00?
This is flexible: you could issue a number of options with the current FMV, and some with a heightened FMV to provide an additional incentive to hit certain targets.

Letting your Advisor Go

Hopefully you are setup for success, but in the event it doesn’t work out it is best to be prepared. This is why vesting makes so much sense.  If things go south after two years, you have 50% of the unvested shares to revert back to the Company.
For example, if you give an advisor 0.4% grant, and they work for you for one year before you decide to part ways, your company won’t be out the full 0.4%. Rather, an advisor in this circumstance would likely have only vested in 1/4 of that amount, with the unvested 3/4 returning to the company. Playing out the math they will walk away with 0.1% of your company, and the remaining 0.3% will revert back.
All of this is one way of saying that the initial grant you provide isn’t set in stone. If a relationship isn’t working out, you can terminate it or renegotiate to mitigate costs.
If an advisor is confident they can add value (and you have a reputation as a fair dealer), these aren’t unreasonable asks. That said, while these tools may get you to a better place directionally, you can see they’re far from perfect. For example, if you set an advisor’s strike price greater than FMV, what happens if FMV rises for reasons completely aside from an advisor’s efforts? At the end of the day, there’s simply no replacement for a good relationship, and that’s what you want to spend your time–not in more nuanced contract negotiations.

**LAWYERLY DISCLAIMER: This is not legal advice. Before embarking down this path, please check with your outside counsel, Board of Directors, and equity plan and financing documents etc… before making moves. Every company’s plan is different, and just like a contract isn’t a substitute for a good relationship, a blog post isn’t a substitute for legal counsel.

Founder First Principles — Creating Expa Labs

sky-space-dark-galaxy

I have spent the last few months helping to create and launch the Expa Labs program. The first group of Expa Labs companies started last week, and I am excited to have them in our offices building. They are incredible founders, with amazing backgrounds, working on great ideas.

To understand how we got to this point its worth taking a step back and looking at the foundation this program was built upon, as well as understand why we build Labs in the first place.

To be able to create this program from the beginning was a main driver for me to move into my new role, and a challenge I have always wanted to tackle.

From the original post at Expa.com

Expa is a startup studio that works with founders to develop and launch new products. After 10 years of designing and building consumer services, Garrett and the Expa team have identified many techniques that help create successful companies. This experience has been integrated into a platform to help founders increase their startup’s chance of success.

Expa Studio has created an incredible framework for founders to build, scale and launch companies, and using this for outside founders is a natural evolution. We wanted to take what we have learned building inside, and leverage the same platform for founders. The Expa Labs program was built using this same system, and I am excited to deliver on the initial vision of helping more founders. It has been great working with the existing team at Expa and leveraging the work that has been done to date.

Since the program didn’t exist before, I wanted to share how we approached building it, and share some of my thoughts along the way.

I started building the program thinking about first principles. There are plenty of other startup programs that exist, and I didn’t want to compare and contrast them. Rather I want to focus on the things that I believed to be the Founder First Principles so that we could create something entirely focussed on the people in the program. If you are not familiar with the topic, here is a quick video that explains nicely the thinking behind this method;

The first task was to come up with Founder First Principles which I defined as;

  1. Capital: Investment in the business to conduct business
  2. Talent: Bringing in the right talent into a company
  3. Office space: A place to conduct business and come to work to collaborate
  4. Feedback: Getting early user and customer feedback from people outside the office
  5. Network: A group of peers to brainstorm, conspire, partner, help, collaborate and vent to
  6. Advisors: Individuals that can 10X a part of the business that a founder or employee cannot
  7. Future Funding: Access to materials and people that can help in raising outside capital
  8. Frameworks of Success: Access to frameworks that have worked in the past, but not set in stone (there is no formula!)

I spent a long time thinking about this list, and going through what Expa could offer. I came up with the following;

  1. Capital: Expa will capitalize each business with $500K
  2. Talent: We will attract top talent leveraging the platform/success built to date with people, products, and companies
  3. Office Space: Expa will provide office space in NY and SF to companies to work alongside other founders
  4. Feedback: Expa will provide office hours, 1:1 time, and feedback when need with key individuals within the organization
  5. Network: Expa will provide a bi-weekly breakfast with individuals that can help Expa Labs companies + share materials with our limited partners at the end of the program
  6. Advisors: Expa will leverage its own advisor network for the breakfast series, announce the companies on our channels, and introduce folks who have interests
  7. Future Funding: Expa will send out a “first look” to the limited partners who have invested in Expa (something they are very excited about) before the end of the program
  8. Frameworks of Success: Expa will provide guidance and coaching (that’s me!) + leverage the team, and lean on the frameworks we have seen work in other Expa Studio companies.

Given this list, and reviewing it now, I am reminded that there is no magic formula for startups — an important reminder when looking for the answer.

Although many of these seem obvious, creating this list and working with all the stakeholders to create this program was an amazing opportunity.

I tried to imagine myself in the shoes of an entrepreneur reading through the Expa Labs website for the first time and thinking about the future of my company and where I wanted to spend time. I thought about what kind of people I wanted to work around and what would motivate me every day to be energized to go to work. I thought about the difficulties facing most founders, and what things I could provide that would make the process a little bit easier for Labs companies. I thought about the crossroads that many founders come to, and the best ways to provide the right advice at the right time. In doing so we created what you see today at Expa.com/Labs.

Throughout the creation process it was great to leverage the smart brainpower within Expa, not only from the partners, but also the incredible team they have assembled over the past 3 years.

I also sat down with founders who have been through every stage of the lifecycle of a business. I sat with folks who never raised a dime of outside capital, and got their thoughts on the early days of their companies life. I met with founders who have been through accelerator and incubator programs, and listened to their feedback. I spoke with CEOs who have raised millions of dollars in venture capital, and pried into what they would do different today if they could “start from scratch”. The most fun question to ask this group was simply; “if you were doing this again today, what would you do differently?”. Variations of this question made these founders gush about ideas and brainstorming about how they get started.

Everyone has their own unique origin story and, because of that, there’s no singular/perfect formula. Hearing from real people was my Customer Development Process for Labs, and it felt good to “get outside the building” and talk to prospective “customers”.

Once the program details were setup, I created a simple 15-question form for companies to share there vision with us. We received ~500 applications, which included answers and videos from founders — to which I reviewed them all. This not only was a great way to see and hear from prospective Labs companies, but also to gain insight and further sharpen my own pattern recognition into what is happening in the market today. I am in awe of the incredible caliber of the applications I reviewed and the entrepreneurs I got a chance to speak with. After reviewing and combing through applications, with a huge amount of help from Roberto Sanabria, we worked our way down to a group of finalists. We invited a small group of companies to SF for a final interview, and spent time with each going through their business and trying to understand what they wanted to build. The exercise was a logistical challenge, but something that was worthwhile in the end, as I got great feedback from most folks who went through the process.

We recently announced the first 6 Expa Labs companies and I am excited for the next six months. I would say that the main driver of such a small number of companies was the amount of time and energy we wanted to spend with each team.

Thinking about school is the closest analogue I can come up with; a classic example where a group that wants to learn (students) from a select few (teachers/professors/experts) — the ratio matters most. Even the best schools in the world take the ratio of students to teachers to heart, and in crafting a new program I wanted to do the same. I can’t predict what will happen in the future, but it will certainly make the framework of Expa Labs that much better for a bigger group in the future.

With this first group already in the office and focussed on building and shipping, I am thinking about the future and how we will do. We are certainly not going to get everything right at first, which is why we are constantly going to test and evaluate and measure how we are doing. Both from a logistical and tactical standpoint, to a pattern recognition and return on investment standpoint.

Although the Labs program has begun, there’s still a lot of work to be done — including taking time to reflect on the process and make it better for the next iteration. I am looking forward to working with this first group, and opening up applications again in the future if you are interested.