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Author: Kenshin Fujiwara

Difference Between Co-founder and Founding Member

This is my definition. Co-founder is someone who can understand your vision and give well-thought-out opinions that sometimes conflict with yours but help the startup differentiate itself from others in many ways.

On the other hand, a founding member is much more like operator who only believes in a vision thrown by the founder(s) and executes the tasks that are only relevant to his/her professional field.

The first thing you as entrepreneur have to do before formulating a startup is to find co-founders, not founding members. If you think you already have co-founders, think of above criteria and ask yourself a question “Do I really have a co-founder?”

If you find yourself making all strategic decisions alone or finding your prospective partners being not up to the mark where you cannot get the level of feedback you were expecting, you don’t have a real co-founder.

Your prospective partners might be able to give you lots of ideas and opinions, but these are so instant that you already thought of once or already have the answers.

I wouldn’t say it’s easy to find a co-founder who has ready-made ability to excel your level of thinking. However, I believe this is super important and very critical to the company’s success in the future.

What if you find yourself having only founding members? There are three ways to solve this. 1) Educate your founding members to become co-founders. 2) Look for someone else. 3) Dismiss your startup and start with other idea that is easier for people to understand.

At my recent startup I’m not following the latter two approaches yet. Instead, I’m sharing with my team members lots of information, sometimes too much, that I find useful on a daily basis. These information include updates from the competitors, new startups doing similar things, investor’s comment on industry trends, etc.

Someone might argue that giving too much information only introduces a chaos or creates an impression of the founder being not able to decide anything. I think that’s wrong because the environment surrounding a startup changes constantly and people in startup have to adjust them to new environment very quickly by consuming whatever information relevant to them. Otherwise, they will lose.

Startup Weekend is a great place to meet aspiring entrepreneurs and passionate people with startup mindset. Perhaps, at the same you have to realize that not all of them are qualified to be real co-founders especially at the moment you meet them for the first time.

Whether or not they can become real co-founder is completely up to you.

How to Practice Your Pitch

TechStars published few days ago a great post about practicing your pitch to the prospective investors. Here is a quick summary of what I learnt from Next Big Sound’s pitch.

  1. Show that you have industry experience.
    Co-founder & CEO Alex White worked at Universal Records, the world’s biggest music company.
  2. Show that you experienced the same problem.
    Alex showed his frustration by putting hands on his head.
  3. A bit humor.
    “# of girls in backstage” made the audience laugh a bit.
  4. Start demo after 1 minute.
    No more talking. Jump into to actual product demo.
  5. Talk about the problem details.
    Alex showed his product can produce better result than $4,000 worth industry report, which brings a bit ‘wow’ factor to his pitch.
  6. Talk about your vision not just your product.
  7. Don’t talk about the features you are going to implement in the future.
    While there are many startups talking about their future milestones, Alex did not mention the things he is going to do when his startup gets some investment in the future.
  8. Show that you are targeting a big market.
    “It’s going to be difficult for the record labels to business without us (Next Big Sound)” gives the audience a very strong impression that they are following a big market and going to be the game changer.
  9. Don’t talk about your competitors.
    Simply investors are not interested in hearing the name of your competitors. They are interested in how you differentiated yourself from others.
  10. Introduce your team members (with a bit humor)
    “It’s cheap to keep us alive” = “We don’t need lots of investment to make this happen.” is excellent way of introducing your team members while giving an impression that you understand a ramen noodle startup model.
  11. Show your customers.
    Needless to say, this is the best way to gain your credibility.

Also interesting is that according to TechStars CEO David Cohen, Next Big Sound had a different product idea when they joined the program. This is another indication that TechStars is making the investment in people (I say people, not a single person) but not in ideas. I believe this is true to the most accelerator programs such as Y Combinator and 500 Startups.

Lastly, huge congrats to the folks at Next Big Sound who secured $1M seed funding after this pitch and the following $6.5M series A funding in January.

http://www.youtube.com/watch?v=RAKJcWYAvW4

Children of Steve Jobs

Children of Steve Jobs, a Japanese documentary program aired by NHK last week, had an unexpected content to me.

The program mainly focused on the students who attended the commencement at Stanford University and listened to Steve Jobs’ speech in 2005. While I thought the program woud be about how these students are proceeding with their dream after 6 years and how they are becoming successful today, I realized right after the introduction the focus of program was completely opposite.

It was a reality show of Stanford graduates who lost his job at Goldman Sachs because of financial crisis, who walks down the street with a “hire me” sign on him everyday, who went back to India in exchange for helping own country and family by giving up a promised position at Google, who started own business as a journalist after being fired.

I understand it’s arguable to call it that way, but the program was just about “No more American dream” and the content was devastating to me. We are seeing global crisis right now. America is facing nearly 9% unemployment rate, which roughly results in 1 out of 10 people having no job.

Silicon Vally is still the place for all tech entrepreneurs to offer lots of opportunities that no other places on the earth can’t compete. Stanford University is still the driving force behind Silicon Vally and people graduated from the university were thought to be all successful. However, this show reminds me of being successful from someone else’s perspective is not always equal to being successul in his/her own life value.

If working at Goldman Sachs and Google gives you a ‘dot’ which leads to your valuable connection in the future as Steve Jobs said during commencement, just go for it. If you are doing it just because everyone will think you are successful, please don’t. Life is too short to play that kind of worthless game.

Call for New Logo Design

Our startup project Coworkify is now looking for new logo design. We’ve held a contest at 99designs and we had more than a hundred logos submitted in 4 days.

Cost we paid was $295 including various transaction fees and cut for platform holder. It’s just $3 for each design. Although quality of every logo varies a lot, it’s still huge time saving to us. If we were to produce a hundred logos by ourselves, it would have costed us more.

During product building phase of startup an entrepreneur must focus on one thing, which is to build a product in the most efficient way in a short period of time. At this phase he should not spend time on building a great team for future growth. All of his energy has to go into a product and people who can produce it.

For those who are willing to outsource some creative work I recommend that you take a look at 99designs, Hatchwise, Bootb, Prizes.

Don’t Be Fooled by TechCrunch

Ryuichi Nishida, a writer at TechCrunch Japan, published this great post (in Japanese) warning the domestic entrepreneurs about taking the words directly out of TechCrunch without understanding fondamental differences between Japan and Silicon Valley.

In his post he mentioned the below points often mistaken by the aspiring entrepreneurs so he gave thoughtful advises to them.

1) Far less acquisition activity in Japan (hence it is not a practical exit option.)
2) Convertible Notes should be treated as debt. They have greater benefits for investors, not for entrepreneurs in general.
3) No need to copy Silicon Valley businesses because you as a domestic entrepreneur don’t have to.

While I agree with all three points, I also saw countless number of domestic entrepreneurs in the past trying to apply the things that are only valid in the Valley. These entrepreneurs almost always have a great vision in the beginning just like ones in the Valley, but they will soon or later realize their businesses won’t go anywhere due to lack of available exits. This is particularly true if the business has no revenue stream.

In the Valley not all startups have revenue stream. Perhaps they still do successful exit mostly through acquisition by the larger business entities or sometimes by their direct/indirect competitors. I often brought up GroupMe as an example of recent startup which did very successful exit without making a dime in revenue. This kind of exit is only applicable to the startups based out of the Valley or by the acquirers based in the same area.

Now taking a look at our startup project Coworkify we are currently building the entire service in English. If we were to incorporate with some exit strategy in short period of time, we will choose the places other than Japan. Why? It’s because of the above points mentioned by Mr. Nishida.

Although we believe our service is unique and definitely needed by the certain amount of people, it doesn’t mean we can follow the same path as those startups in the Valley. If we want to do things like a Valley startup, we have to become a real Valley startup. Otherwise, what you read at TechCrunch has nothing to do with your startup.

Lastly, Mr. Nishida concluded his post by saying the domestic entrepreneurs should focus on the kind of services that solve a real problem instead of producing gourmet, fashion, social apps that already exist. Needless to say, we are focusing on the former.

Having The Right Team At The Right Time

Fred Wilson wrote this great post few days ago about the management team at the first stage of startup, what he calls Product Building stage.

Although number of team members and co-founders may vary depending on scale of your product, I personally had to go through the similar process recently and reduced our team size from 9 to 4 people as a result.

A couple of weeks ago I heard from someone who attended the previous Startup Weekend saying that our team was just too large so that we won’t make it to the presentation on the last day of the event. I initially had same feeling but somehow we managed it while letting everyone join our team without questioning anything about his/her skills and without caring about overlapping between people.

Now that our project is at Product Building stage where everyone in the team must have certain skills and responsibilities not overlapping with each other. For this particular reason I had to make a tough decision to say “sorry, we will come back to you when we are at a certain phase in the future.”

This is not easy thing to say, especially to the people who were around us for a while as team members. However, at the same time it is true that overlapped skills and responsibilities in such a small team will create unnecessary communication effort and lots of frictions between team members which only you can resolve most of the time.

As a startup leader you don’t want to spend your time talking to team members just to make sure they don’t overlap each other. You want to focus on building a great product. If you find yourself spending too much time on communicating team members, maybe you’d better start thinking of solving the root cause of your problem.

Here is our current team structure and role of each person. 1) Frontend and backend developer (which is me) 2) UI/UX specialist 3) PR/Marketing 4) Business development and overall strategy. I’m hoping we won’t have to reduce number of people at least until product launch at DEMO.

Being a Startup Leader and Hacker

This is one of the difficulties I’ve been encountering over the past 9 years since my first startup.

As a person who worked at high profile companies like this one and this one as well as a bunch of smaller startups I’ve learnt what makes companies successful in the long run. They never compromise on things they produce. They pay highest attention to every details in their products and services. Apple and Steve Jobs are no different so they became successful.

I’m a huge believer of iterate-as-people-use-your-product approach and I think it’s still the best way for startups to quickly adjust themselves to the demand from people. However, it doesn’t mean I’m okay with releasing a product that is being compromised and letting our users give feedback based on it. The amount of track records I’ve build over a decade simply didn’t allow it to happen so far.

For example, today I was working on trying to fix position of a header in the mobile app for our Startup Weekend project. I was reading this technical article from Twitter and at the end of the day I got it right in my own way. For those who ever developed web app for Mobile Safari you know it’s not a problem that has straightforward solution. Does it matter to me? The answer is yes. Does it matter to our users? The answer is absolutely yes.

I like startups like Quora, Asana, Path not just because these companies are founded by ex-Facebook folks. It’s also because they pay highest attention to every details even to things you won’t recognize unless you have the same mindset as they do. Are they ordinary startups with limited time and resources? The answer is yes. Are they unique and differentiated from others. The answer is absolutely yes.

I’m a startup leader but at the same time I’m a professional web developer who read Hacker News once in a while. I cannot agree with people trying to connivence me not to pay attention to details while promising me that they will work on these details later. From my experience one thing for sure is that these types of people NEVER work on the details even if they find time to do so.

There is a famous saying in Japanese. 神は細部に宿る (pronounced as kami wa saibu ni yadoru) means “God dwells in the details.” If you look at a Japanese sword KATANA, you will find enormous amount of attention paid to smallest details although its level of perfection is almost second to none in the same category. People believe that God dwells in these swords only if they are built perfectly.

In the digital age where we live in today there is nothing you can’t copy technically if it were created digitally. If there were such a thing that can’t be copied, maybe It is a thing you find in the details and perhaps philosophy behind it. In other words, if you don’t have that kind of mindset, what you produce will look no different from others because God is not there.

5 Tips to Verify Your Idea

As a person who makes a decision on regular basis I always try to verify my idea whenever possible using various methods. Some people say that sharing your idea and getting feedback too early just makes it difficult to foresee the right direction. I totally agree with that, but just in case you have enough knowledges and experiences about the subject that you are going to make a decision.

Here are 5 tips I often use before making any decision. These tips are helpful but not always applicable since there are many situations where you have to make a decision without asking anyone. But knowing these tips sometimes saves you from going wrong direction and some of these tips weren’t simply available until recently.

1) Use Facebook poll feature

For example, we are currently conducting a poll on Facebook to decide new brand name for our prize winning project. To be more precise, we are letting people choose a domain name for our service. I wouldn’t say there is no risk involved with disclosing your potential domain names especially when they are not secured and not purchased by you. However, in return you will receive a fair amount of reactions from people in your social graph about what they think it should be. This kind of quick survey wasn’t possible few years ago.

2) Post a question on Quora

Quora used to be a tech related Q&A site but now it is used for wide range of topics and discussions. Some people use Quora just to get the answers to a specific question. Others use it as a marketing tool to see if there is any potential or interest in the audiences they are targeting. Again, sharing your thoughts in open space like Quora cannot be free from risks. But most often you will receive very insightful feedback from the knowledgeable people.

3) Run a contest on Prizes

Prizes is the website where you can create a contest and get ideas from people. The website was originally created by the Slide team, whose company under the same Slide was acquired by Google in 2010. People use Prizes to get the ideas about a brand name, a logo, and even a name for their newborn baby. Use of Prizes does not exactly verify your idea, but rather helps you gather more options for you to choose from. You could’ve achieve the same thing using Elance or oDesk by outsourcing it to someone else. However, Prizes made it easier.

4) Ask your advisors

Although I never happen to be a member of Y Combinator or 500 Startups, I heard that the first thing you as an entrepreneur participating those programs are asked is to close advisory round of investment. Advisory round of investment basically means finding the angel investors who have decent experiences in the same field you are conducting your business and having these people as advisory members in your startup by receiving relatively small amount of investment from them. These people are there to help you in many ways, and they are particularly helpful when shaping your idea. This is strongly recommended.

5) Ask your team members

This is the last but not least option you can take. Your team members are always willing to give you a thoughtful feedback about your idea even if none of them has the same amount of entrepreneurial experiences as you. Don’t underestimate the inputs from your team members because they are often considered as the most valuable users who are passionate about your service or product. I always listen to them whenever they have something to say.

That’s all. I understand some of them are fundamental to those experienced entrepreneurs. However, I have seen many aspiring entrepreneurs being afraid of putting their ideas in front of people and ended up with spending countless hours or days thinking alone. At the end of the day ideas are just ideas. Execution is what drives a startup. So don’t be afraid.

Importance of Securing Your Right Leg

When you build a startup, you think of a market where you will conduct business in the future.

Some entrepreneurs choose the existing market established by other companies and frequently it’s already a bit congested. Others choose to cultivate one by themselves so that there is no one else to compete, which I believe rarely the case especially for the Internet related businesses.

Whether you choose the existing market or not, you will have to find an entry point where you think your startup can outperform others from the beginning and later stick one of your legs there.

This leg is thought to be particularly important not just in the beginning but also when your startup decides to pivot years later if not months. Without securing a leg, there is a good change that the startup will fall when it actually tries to pivot. This often means leaving the entire users, lack of tractions, or simply a company going nowhere.

I’ve seen many entrepreneurs ended up with this situation and I know from my experience this is the case to many startups that could not survive. If your both legs are detached from the ground, anything you do is pretty much same as pushing a yarn in the air. You will get no reaction regardless of what you do.

This is why identifying the right entry point is very crucial to all startups because that entry point eventually becomes the place where you will decide to stick your right leg later. Many entrepreneurs tend to follow the market established by some pioneer companies and they soon find out there is no place left to secure their leg. Photo sharing, social commerce, all sorts of social games are good examples these days.

I don’t mean following trend is necessarily a bad thing. But it becomes difficult to find the right entry point if you follow it. My advise is as discussed earlier to focus on actual needs but not just problems. And you have to be super passionate about the problem you are trying to solve. I believe this is the only way for aspiring entrepreneurs to find the right entry point that leads to securing their leg.

Venture Finance Intro

When I co-founded my first startup, I had almost zero knowledge about venture financing but I’ve gained a lot of knowledge about it for past 5 years.

So what is venture financing anyway? For those who read TechCrunch, Mashable or any other tech news websites you’ve certainly heard of a phrase like “Company X raised Y million dollars from VC firms A, B and C.” You are seeing it as the result of company that executed some kind of venture financing.

While it’s obvious to anyone above phrase indicates a company in question did raise some amount of money from investors, many things behind the scene that made the deal happen are still unknown to most people.

Let’s take an example of valuation. Valuation is the value of company and it is often used to determine what percentage of your company you want to give away for how much money when taking investment from someone. If the valuation is $10M and you are getting $2M investment, basically you are giving away 20% of your company.

However, in venture financing world a word valuation really means two things, namely pre-money valuation and post-money valuation. A former is the value of company before the event of investment and a latter is the value of company after it.

These two things sound similar but their outcomes are very different so an experienced entrepreneur always ask his investor a question “Do you mean post-money valuation?” in order to make sure the investor is referring to the value of company after the event of investment, not before it.

This is just one of the fundamental things you as an entrepreneur have to be knowledgeable about when raising money and we are just scratching its surface here. If you want to gain these kinds of knowledges and understand how venture financing works, I would recommend that you read a book called Venture Deals written by Brad Feld and Jason Mendelson.

I also recommend that you read both authros’ blog websites. Not only their blog articles are valuable to those aspiring entrepreneurs but also the comments from other entrepreneurs are considered to be pure gems. I’m personally a big fan of both authors and their websites.

This book is still valuable even if you decide to bootstrap your own startup so get it and read it.