Nice.

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Exactly one year ago today was my first full-time day working on Contently, the marketplace for freelance journalists and publishers who want them. I was sitting in my 300 square foot apartment in Manhattan – in the kitchen, because that was where my workstation fit – setting up email accounts and fixing up a demo video explaining what exactly my new startup was.

My longtime friend Joe Coleman had been talking to me for months about this prototype site he had been building, and how it was potentially a bigger idea than his current, 2.5 million member online business. My Philly-based hacking compadre, Dave Goldberg, was on the other end of my Skype window telling me he was “in,” while I was telling Joe in the other window that I was canceling all of my freelance gigs as of that day.

Tonight I’m sitting in my only slightly larger Manhattan apartment 2 blocks over; it’s 12:20 am, and I just finished a day of 4 meetings, 2 blog posts, a revision on a guest story I wrote for Poynter, a dentist appointment, a functional spec for our next phase of development, and about 100 emails.

Today was pretty mild, in startup terms.

In the past year, we took Joe’s dream of helping anyone become a publisher and fused it with my dream of empowering journalists to build meaningful freelance careers. We went from 3 guys in our apartments to 6 full time employees in New York, 1 in Boston, 1 in L.A., and 2 dudes somewhere in Romania (and/or Barcelona, I’m not sure where they are these days…).

We went from credit cards and canned chili for breakfast to annual revenues in the 7 digits. I took my excellent credit score down to somewhere on the scale between red and orange by maxing out 4 credit cards (which I’m still working on). We probably worked an average of 80-90 hours a week. Which is only 12 hours a day if you think about it. 14 if you take Sundays off…

We did TechStars (awesome), raised money from investors for the first time in our lives (awesome), fired people (not awesome), debated (frequently), and stayed up all night thinking about the business more times than is healthy. We brought our idea from a seedling to a sapling, and formed the vision of the massive forest it will one day grow into.

And we learned a LOT. How to grow a team. How to deal with investors. How to pitch Fortune 100 companies your 8-month-old startup. How to say “no” to features you really care about. How to let ego go in favor of your cofounder’s idea. How to fight your best friends tooth and nail on your own ideas when necessary. How to make time for important people in the middle of your 90-hour week.

But tonight as I sit here recounting what happened in the last 365 days, all I can think of is how we’ve got so far yet to go. And how tomorrow I have to bang out another spec, another 100 emails, and so on.

I turned down a stable job – with regular hours – as an editor at a major magazine, so I could run a startup. I can’t imagine how much less exhausted I’d be today if I had taken that job.

But I’m so glad to be doing what I’m doing now instead.

Happy Birthday Contently

Happy birthday, Contently!

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Guess I know what my next career is if the whole entrepreneurship thing doesn’t work out…

Demo Day Urtak

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“It doesn’t have flash!”

“Who’s going to buy a computer that sounds like a feminine hygiene product?”

X million iPads later, everyone is now a copycat.

I recently saw a talk by Youngme Moon, Chair of the MBA program at Harvard, where she talked about embracing the negatives and how being different can, counterintuitively, create extreme loyalty.

Mini Cooper, for example, embraces its diminutive size, and people love it so much they get Mini Cooper tattoos. Twitter embraces its character limitations, and it topples totalitarian governments. Google embraces the fact that you can’t even change the font on its ads, and those ads fuel a $100 billion business.

If any of those companies had listened to the early critics who said, “It’s too small,” or “That’s dumb,” they wouldn’t be the runaway successes they are today.

That’s why “The Customer Is Always Right” is bunk. Moon explains:

“As a manager, the knee-jerk reaction to seeing the weakest area of your business is to try to become more well-rounded. Most brands do this, so everyone in the market starts becoming the same. If you are competing in a crowded market it’s unlikely that the way you’re going to achieve true differentiation through well-roundedness. In a crowded market, differentiation almost always comes from lopsidedness.”

If someone told you he was a brain surgeon, and pediatrician, and a plastic surgeon, you’d be skeptical that he was a good doctor at all. By nature, we expect true experts to be lopsided.

And that’s why it’s not only just OK to embrace the negatives in your ideas, but it’s genius to emphasize them.

Haters are going to hate. You’ll never win them all over by adding the features they want or changing your idea into the familiar one they clamor for.

“What makes great original ideas so fragile at birth is not that they seem so bold, it’s that they are so indistinguishable from crazy stupid ideas,” Moon says.

If you saw the movie Inception, you know that the ending stopped short of when you were expecting it to. The genius in that ending was that it was different than the cozy wrap up or the obvious twist. And some people hated it. But they didn’t stop talking about it for months.

Which is exactly what they wanted.

Embracing the negatives

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"Confidence, Cohen!"

Early stage tech investors love saying they invest in teams, not ideas. “People are the most important factor,” they say.

“But,” they’ll concede, “traction is also the most important…. And actually! The size of the opportunity is also the most important factor in deciding if a tech company is investment-worthy.”

Cynics will tell you this is all rubbish, and that the most important factor in raising money is buzz, or perhaps luck. “How else did Kohort raise $3 million pre-product, with a team with no previous exits?”* the cynical entrepreneur will say. “Onswipe got a sick valuation, and all they had is vaporware!”**

I’ve been an Internet entrepreneur since 1998, but my current company (Contently) is the first business I’ve raised venture capital for. Fundraising strategy makes your head spin. It’s a new game, for sure.

But in my limited time as a venture-funded entrepreneur, I’ve realized that the number one factor in raising investment is not team, traction, buzz, opportunity, or luck.

It’s confidence.

Eric Paley of Founder Collective said to me the other day, “Every new round of funding for a company is a transfer of conviction.” It’s about getting investors to be as convicted as you are of the chance that your venture is going to be worth a billion dollars.

Angel investor and TechStars hauncho Dave Tisch put it another way, when speaking of Union Square Ventures’ cadre of “hot” startups. “Fred doesn’t fund ideas,” Tisch said. “If you look at his portfolio you’ll see he just funds passionate freaks.”

Onswipe raised $5 million with essentially a software prototype because its CEO, Jason Baptiste, is a human fireball of confidence. His company got buzz because he convinced people the opportunity was big, and he was able to create traction because he talked a big game and was completely, convincingly, almost infuriatingly passionate about what Onswipe was creating.

I’m convinced that Mark Davis – founder of Kohort and one of the first people to help me get my bearings in the New York tech scene when I moved here – raised millions of dollars for his pre-launch secret project due to no other factor than his inextinguishable confidence that his company will take over the world.

Perhaps particularly relevant right now is the case of Groupme. Jared and Steve said, “We can build a social media product all our friends will use, and we can build it faster than anyone says we can.” Obviously they were able to back up what they said, but their attitude of “no one can tell us what we can’t do” clearly helped them as they went on to raise $10m and then sell their company to Microsoft not even a year later.

I remember sitting with Jared at Ace Hotel a little over a year ago when he said, “Yeah, we’ll raise some money. It won’t be too hard.” And for him, it wasn’t.

Of course, being confident doesn’t necessarily mean you have a good business. And being confident doesn’t mean you’ll raise money on a bad business idea.

But, all things being equal, if you want to talk rich dudes into giving you way more money than you’ve ever had in your life, confidence will be the differentiating factor between raising money and not.

If I were asked to put together a training course on fundraising, I would recommend the syllabus include eye contact, creative writing, and theater, mixed with some courses on research and validating business hypotheses, so you can perceive when an idea is worthy of your confidence. Nightly homework would be reading back entries of VentureHacks, Chris Dixon, and “How to Win Friends and Influence People.”

And then I’d take the top 5% of the class and invest in all of them.

So I guess in a roundabout way it really does come down to people. Well played, investors. Well played.

Confidence Urtak

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But our friend and investor, Eric Paley, said something interesting the other day that struck me: “Building stuff isn’t always the cheapest way to test [a hypothesis].”

We tend to get in this mindset that we’ll just “bust out a feature and test it” with our customers, see if it works, and then iterate or throw it away. The “build minimum viable product, test, and repeat” can be fast and effective, but sometimes it’s a complete waste of cycles.

Why not hack your test first?

Vin Vacanti, founder of Yipit, likes talking about hacking the product development cycle by doing completely unscalable things to prove hypotheses fast. He said he and his cofounders gave themselves literally a couple of days to prove whether or not Yipit would work, and to do so, they woke up at 4am to manually collect data they would have built a robot to do.

By doing the dirty work themselves for a couple of days, they were able to prove that people wanted what they were “selling”, and that justified the time and expense of building software to do that data collection.

Josh Kopelman, Managing Director of First Round Capital, recently gave a talk at my office about an electronics buyback company called TechForward. In the beginning “they had a ton of unknowns,” Kopelman recalled. “What’s the right pricing? Will people buy it? Will stores accept it?” In order to figure out the answers needed to create enterprise value in their business, they needed to do some tests. But as a small company with limited resources, they had to be scrappy with their tests, building as little infrastructure as possible to prove or disprove their theories.

So, rather than trying to run big, costly campaigns with the BestBuys of the world, they tested their buyback program with seven small electronics stores, saying the stores could keep all the profit. All TechForward wanted to know from them was how many laptops they sold, and how many guaranteed buybacks they sold. In a short amount of time they found out that people bought the guaranteed buyback three times more than they did extended warranties. They also figured out that as long as the buyback guarantee was 3x what the buyback cost, people were willing to pay for it.

“It was a hack to collect data,” Kopelman said. After TechForward received some validation in what they were doing and figured out the right price points for their product, they canceled their agreements with these stores and went out to the big electronics retailers and pitched TechForward as a profit center.

Thinking about our own product and our desire to test different use cases among customer segments we think could be very lucrative, this advice make perfect sense. Why spend a week building a feature when you could draw it on computer paper and ask a dozen customers if they’d use it? Why not do what a good reporter would do and jot down all the questions you’d want to know, then hunt people down and ask them for the answers?

To some extent, I fully believe in using your gut to decide what features will be clever or psychologically sticky, despite what early feedback might indicate. And I love building stuff. It’s exciting.

But on the other hand, saving yourself from the agony of banging out a product you’ll never sell is pretty awesome.

Hypothesis Hacks Q&A

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Photo by Olly via Shutterstock

I’ve been told by several investors that since our startup is in that rare segment of early stage tech companies that already makes revenue, we’ll be judged hard on revenue when raising more money, even though at the same time companies with no business model will be able to raise just as much (or more) money on a promise. And many of those pre-revenue companies will have an easier time doing it.

That doesn’t quite seem fair.

Two investors I respect very much recently helped dispel the gloom from the reality of this injustice: our own investor, Eric Paley of Founder Collective, and Union Square Ventures’ Fred Wilson.

Eric told us in a board meeting that having revenues to benchmark against may seem like it makes it harder to sell early stage investors, but it also gives you leverage in negotiating with investors. For example, when we get ready to raise our next round of funding, we’ll be making enough money to be able to walk away and maintain a great, if smaller than it potentially could be with more venture capital, business. And we’d own a huge percentage of it. As my Business Strategy professor in undergrad used to say, “Whoever has the most options in a negotiation, wins.”

That in itself is comforting, and it will help us when raising money. But when it comes to building a business with billion-dollar potential, you still have to sell the dream – regardless of how you’re doing revenue-wise – or you’ll get nothing.

Fred said, “Investors that are sold only by numbers are always going to be that way. If you’re both aligned around the dream, it will always be about ‘how can we get there.’”

Basically, if investors believe in what you’re doing, they’ll be ok when the numbers have their inevitable hiccups. “Find investors who think what you’re doing is exciting,” Fred continued. “Numbers can help prove you can execute, but shouldn’t be front and center.”

So, ironically, despite being able to brag about million-dollar run-rates or sexy reference clients, the startup with revenue needs to sell the big dream and downplay the numbers as simply proof the team can make stuff happen.

In other words: take over decabillion-dollar industries while disrupting advertising and journalism? Yes we can!

Selling The Dream Q&A

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This got me thinking about my own startup pitch and how I constantly fret about articulating it well and conveying the correct message. As with any aspect of a startup, my pitch is constantly evolving as I’m testing out new approaches, optimizing, and adjusting back when things don’t resonate.

That’s all great, but when you’re in front of an audience or an investor, the time for practice should be over. Like an Adwords headline, you need to optimize. every. word.

Yesterday, Fred Wilson came and spoke to a group of startups at our office, titling his remarks, “How To Simplify Your Pitch.” He advocated a “less is more” mentality when it comes to pitching, and as it usually goes when The Fred drops knowledge, everyone shut up and listened.

He told the story of SoundCloud, a Berlin-born music hosting startup that pitched him two years ago. The SoundCloud founders initially gave Fred a long spiel and a demo of their array of tools for musicians, and later officially pitched his partners at their office. He barely understood what they did. Dropbox or something or other for musicians?

Basically, they didn’t stand out at all.

Then last summer, SoundCloud’s CEO pitched Fred again. This time he showed Fred a single powerpoint slide. The slide showed a bunch of well-known web services and the medium they dominate: Video = Youtube; Status Updates = Twitter; Long Form = Wordpress; Flickr = Photos; Audio = ?. In the “Audio = ?” section, they inserted SoundCloud.

In an instant, Fred knew what they did, and he was sold.

“Don’t complicate the story with facts,” Fred advised. “Get one sexy idea rattling around in the heads of the investors.”

It took Fred’s own venture fund 4 weeks to take their slide deck they showed their investors down from a zillion slides to just 6, but after that, he raised his whole fund on that one slide deck.

If you can do yours in just one slide, even better.

Fred Wilson’s 3 Key Ingredients To An Investment-worthy Company
1. A big vision that can fit on one slide
2. Genuine chemistry between the founders and the investors
3. A track record of success (in this startup or previously)

Simplify Your Startup Pitch Q&A

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And so, with all that work behind me, I decided to pit some local New York tech geeks head to head and see what happened:

Rockstar founders

Prolific blogger/investors

Outspoken first time entrepreneurs

Investors you see everywhere

Red-heads

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