I had the opportunity to sit down with Steve Mock (@steve_mock), Executive or Co-Founder of five venture backed companies. I thought the Bootstrappers Breakfast community might benefit from Steve’s lessons learned. In addition to this Q&A blog post, Steve will be joining the round table discussion as a featured guest speaker on Friday, July 15 at the San Francisco Bootstrappers Breakfast, held at Sandbox Suites. Come join us and ask Steve your own questions.
|Date/Time: July 15th, 2011, 8-9:30 am
Venue: Sandbox Suites, 567 Sutter Street, San Francisco, CA
Q: Can you share a little bit about the start ups you’ve worked for? Maybe touch on the industry each company was in, the problem each company was solving, and whether or not it returned for the investors?
A: Two of the companies were in enterprise software (IP routing software and network control solutions) and the others were in consumer web and services (mobile email, children’s adventure games, online math games). Two were sold at a profit; one is profitable and growing; one failed fabulously; and the other is TBD.
Q: What are your thoughts about having co-founders compared to going at it alone? If so, how do you find the right person?
A: If someone measured the data, I bet most successful start ups have more than one founder. You want to have people with complimentary skill sets. If you are a sales person, grabbing your buddy who is also in sales may not be the best person. Get someone who can bring a different skill set and perspective to the table. The founding team will do most of the work and have to make the tough decisions, especially early on. Ask yourself with each person you consider whether you want to be locked in a room with them if you have to make the most gut wrenching decision in your life, because that is exactly what will happen.
Q: In terms of getting started, how do you reduce the investors’ perception of risk?
A: Instead of phrasing it as reducing risk, I like to think of it as eliminating reasons for investors not to move forward with your deal. In particular, I think you should make as much progress on the non-capital intensive items as you can before you try to raise outside capital. Get all the little stuff out to the way and make the financing the only thing standing between you and moving forward. Build a non-production prototype. Know the competitive landscape like the back of your hand.
Another type of progress:if your business relies on a distribution channel, talk to people in that channel and get their feedback on your idea. Maybe even make a key person like an advisor. Talking with them isn’t capital intensive, so do it. Don’t be in an investor meeting pitching a business that relies on a distribution channel you haven’t spoken to. It gives the investor an easy out not to move forward: “Why don’t you go talk to them and come back…”
Do everything you can do before you meet the investor, so they only missing piece is the capital required to get your business to the next stage.
Q: Of your company that “failed fabulously,” did the team do a postmortem? If so, do you mind sharing what you believed were the reasons why the team did not hit their growth expectations
A: I learned an interesting lesson about partnering on this one. We started as a B2C model. The product sold for $19.95. Our customer acquisition cost ended up between $100-150. It was completely upside down. We involved many SEO, PR, SEM, and social media marketing experts, but couldn’t get the math to work. We then pivoted into a B2B model, in which we managed to do deals with over ten major media and e-commerce companies to distribute our product, thereby completely eliminating our customer acquisition costs.
It looked really good at that point. The problem is Fortune500 companies move really slow.
So, we spent another year or so waiting for the Fortune500 companies to integrate the product into their respective offerings. When they ultimately came back and said the offering didn’t work for them, I was like, wow, I just spent a year of my life waiting for that feedback. Owning your own customer base is much better than being dependent on someone else to get there.
Q: If you could’ve done things differently, what would they be?
A: I think raising much more money would’ve helped. We could’ve done a lot more awareness building for the product category which would have helped both the B2C and B2B models. The timing was really bad. I was actually able to close my financing for that company in December, 2008, right in middle of the financial crisis. I barely raised the money I did. Raising more wasn’t an option for that business at that point in time.
Q: What are the things that worked?
A: The product iteration process was quite good. We spoke to our trial users intensively, got their feedback, baked it into the product and iterated a lot at the beginning. We really built something that people enjoyed and saw value.
Q: What are you up to now?
A: I’m looking for a great team with a great idea, in which I can jump on board and add value. I’m also consulting for two start ups on their fundraising and go-to-market strategy.