SaaS – Software as a Service

SaaS – Although often mistaken for ‘Sugar and and Spice’ SaaS – in the startup world – actually stands for “Software as a Service”

I like this description below:

Software as a service is also known as on demand software; these are pieces of computer software that are accessed remotely through connected servers. Software like this is either free of charge or subscription-based, eliminating the hassle of purchasing software. The first pieces of software as a service were used in web development, but modern on demand software is used for processing taxes, gaming and word processing. Using software in the cloud offers consumers and developers tremendous advantages, such as faster availability and better marketing potential. (Source: John’s Software as a service)

From the other side of the table, VC Doug Pepper wrote an interesting article on Tech Crunch comparing IPO offerings:  Sexy IPO’s vs SaaS’y IPO’s

Here are a few examples companies:

Salesforce  –  (you can see their explanation of SaaS here)

Bazarvoice

Freshbooks

Mozy

What are your favorite SaaS’y companies?

Elevator Pitch

Elevator Pitch: You’re in the elevator heading up to a sales meeting in a potential clients office when the CEO walks into the elevator… and asks you what you do.  You’ve got 15 floors to explain your company or idea, why you exist, and what value you’re going to bring to their company.  Welcome to the elevator pitch, a succinct 1-2 minute pitch of your idea or business to a potential investor.

This is not an elevator pitch.

Here are some examples of good and bad elevator pitches, via HBR.

So how do you go about building an elevator pitch? Well, this might be a fun place to start, the Harvard Business School Elevator Pitch Builder!

In my experience the best elevator pitches very quickly connect with the person being pitched too by describing the problem to them in a way they can relate to, and then describe why you (or your team) are the best people to solve that problem.  The single best way to get good at pitching?  Practice. Pitch to everyone, and fine tune your pitch along the way.  Think about what you would change if you were going to pitch to an investor vs a potential user vs a potential hire.

Crowdfunding

Crowdfunding: You’re not just raising money, you’re building an audience by leveraging your social capital.

Wikipedia says Crowdfunding is:

the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.^[1][2] Crowd funding is used in support of a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup company funding,^[3] movie^[4] or free software development, inventions development and scientific research.^[5]

What I love about the recent explosion in crowd funding is the incredible diversity of successful types of projects that truly showcase the depth and breadth in which crowdfunding can be applied.

The Oatmeal’s plea to save Tesla’s labratory, raising $1.7 million in 6 weeks.

Caine’s Arcade Scholarship Fund.  A guy makes a great movie about an incredible kid, then crowdfunds his college tuition for him.

Or what would happen if you raised cash with your neighbors to fix the potholes on your block and to put in a new park? That’s the thinking behind crowdfunding urban planning.

Two of the biggest and most popular crowdfunding platforms are kickstarter and indigogo.  They have a lot in common, but there’s one large difference.  When you set up a funding campaign both companies require you to put in a funding goal.  On Kickstarter, if you don’t reach your goal in the allotted time, then you don’t get any of the funding.  On Indigogo, you receive any and all funding, no matter if you reach your goal or not.

So, what are you raising money for?

Entrepreneur

Entrepreneur: You. Yup. You’re thinking about it… go ahead, try it on for size, call yourself an entrepreneur.  How does it feel?

I personally like Howard Stevenson’s 1975 definition of Entrepreneurship (via Wikipedia): “the pursuit of opportunity without regard to resources currently controlled.”

A few more good one-liners from that Wikipedia page:

• 1803: Jean-Baptiste Say: An entrepreneur is an economic agent who unites all means of production- land of one, the labour of another and the capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labour, interest on capital and what remains is his profit. He shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.

• 1934: Schumpeter: Entrepreneurs are innovators who use a process of shattering the status quo of the existing products and services, to set up new products, new services.

• 1961: David McClleland: An entrepreneur is a person with a high need for achievement [N-Ach]. He is energetic and a moderate risk taker.

• 1964: Peter Drucker: An entrepreneur searches for change, responds to it and exploits opportunities. Innovation is a specific tool of an entrepreneur hence an effective entrepreneur converts a source into a resource.

• 1971: Kilby: Emphasizes the role of an imitator entrepreneur who does not innovate but imitates technologies innovated by others. Are very important in developing economies.

• 1975: Albert Shapero: Entrepreneurs take initiative, accept risk of failure and have an internal locus of control.

• 1975: Howard Stevenson: Entrepreneurship is “the pursuit of opportunity without regard to resources currently controlled.”^[1]

• 1983: G. Pinchot: Intrapreneur is an entrepreneur within an already established organization.^{[note 1]}

• 1985: W.B. Gartner: Entrepreneur is a person who started a new business where there was none before.^[2]

People often talk about the Entrepreneurial spirit, and argue about whether or not Entrepreneurs are ‘born’ or ‘made’.  I think it has more to do with how you see yourself.  Are you going to follow your dream, or work on someone else’s?

To me this embodies both entrepreneurship, and the entrepreneurial spirit: Caine’s Arcade

So, are you an entrepreneur?

*Pro Tip: Close your eyes and spell the title of this post.  If you can’t, please re-read this post.

Business Plan

Business Plan:  If you make a plan, you’re much more likely to act on that plan.

A great example of this was seen with the Obama campaign’s work in getting people out to vote for the 2012 election.  Help them make a plan, and they’re much more likely to act on that plan and vote.

I like to think of making a business plan in the same way.  The simple act of making the plan vastly increases the probability that you’ll execute on that plan.  So get the pen out and start planning.

According to Wikipedia:

A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

Often times it is suggested to write a 3-5 year business plan.  In my experience however, and especially if you’re bootstrapping your startup, be careful not to plan too far ahead.  You need to have an idea of where you want your company to be in 5 years, but don’t spend all your time making uneducated projections.  If you don’t have a single customer, don’t make assumptions about what it will take to get 1 million customers.  The reality is you have no clue.

If you’re in the initial stages, focus more on what it’s going to take to get off the ground, to get the first customers, to get your idea in front of people.  Don’t forget to plan next week before you plan world domination 5 years down the road.

Or as TechCrunch put’s it, Ditch the Biz Plan, Buy a Lottery Ticket

Burn Rate

Burn Rate: A term often associated with Runway, or… holy #%$! how fast are you spending cash you’re not making back!?

When you start a company, you usually start with some initial capital, be that from your own bank account, a freinds and family round, or even an angel round.  As you develop your business, your product, or your service, you’ll be spending money along the way.  The rate at which you spend that money before making it back off of your product or service is your burn rate.

 The rate at which a new company uses up its venture capital to finance overhead before generating positive cash flow from operations. In other words, it’s a measure of negative cash flow.

(source Investopedia)

So how do you control your burn rate?  Well, let me give you a quick racecar analogy:  Often times when people want to make their car faster around a track the first thing they want to do is make the car faster by pimping out the motor.  Wrong.  If you have a limited budget and you want to get around a track faster… invest in brakes.  Stronger brakes means you can carry your speed for longer, you spend less time slowing down, and you can keep your momentum higher.  You will get around the track faster.

So the first thing to do to control your burn rate, isn’t to raise more money… it’s to spend less and to increase the visibility into your spending. Try to keep the momentum, keep it constant – don’t binge and purge.  You’ll be able to better predict how much time you have left on what you have and how to apply that to decisions you have to make!

Check this out for some tips on controlling that burn.

Angel Investor

Angel Investor: Ohhh, yeah baby… now we’re getting to the good stuff.  Basically an Angel Investor allows you to quit your day job, and to stop eating Ramen noodles three times a day.  You might even be able to move out of the basement, and into a rad little windowless spot near Applebee’s!

For this definition, we’ll first waltz over the Wall Street Journal since they know a thing or two about ca$h money:

If you’re a cash-strapped entrepreneur looking for an infusion of capital, you may be curious about angel investors. Very few start-ups will receive an investment from an angel—in 2007, fewer than sixty thousand companies received angel funding, a relatively small figure considering more than ten times that many businesses are started each year. But for the right small business, this type of capital can fill the gap between that money you’ve gotten from friends and family and the venture capital that you hope to secure down the road.

So if you’re like me, and you don’t spend your weekends at the yacht club, or chit chatting on the back 9, where on earth do you meet these people?  Well, AngelList might be a good place to start. That is, after all “where startups meet investors”

Check out a few more tips, tricks and resources on Angel Investment here, here, and here.

Startup

Startup: The word’s Latin root lies in the ancient word ‘lottery‘ or ‘powerball lottery jackpot‘, meaning, that which is statistically unobtainable, yet convincingly plausible when at a gas station (read: computer lab) buying beef jerky at 3am.

If you’re in school, or as they say these days, University, this is quite possibly the most sought-after career choice, and since Zuck did it, you can too!  There’s gold in them hills kids, just remember it’s never to late to live in your parents basement and dream of becoming famous on TechCrunch.

Oh, it’s also the backbone of America, the heartbeat of innovation, and the bright star in a sky full of investment bankers.  Unless it’s an investment banking startup, in which case, ugh.

No really though, you can start a company, and while you’re doing that -but before you become profitable, or while you’re spending someone else’s money – you can call it a startup.

update: I just read a fantastic little article titled: “Fake it ’til you make it – 10 of the most dangerous pieces of startup advice”  in it the author, Adam Fletcher has some hilarious and practical advice on, well, taking advice while you’re starting a company.  Definitely worth the read.  I also love the way he defines a startup:

A startup, particularly the lean startup methodology, is a reaction to ambiguity. That’s kind of what a startup is, right? It’s a vehicle for the systematic testing of hunches. Would people be willing to pay for this? How much? Google Ads? Affiliate program? A/B test website copy? And so on and so on. The best startups are the most analytical in the designing and testing of their hunches.

Cheers!