The Price of Success

“Nothing in the world is worth having or worth doing unless it means effort, pain, difficulty…”

Theodore Roosevelt

If you were to read nothing past this first sentence, at least walk away with this: success takes hard work, sacrifice and dedication.

While pain may not be a requirement to doing certain things, we do agree that success should be difficult to achieve and should require some effort. This extends to building a company. In fact, it is amplified by building a company! Yet, for some unknown reason, people sometimes forget this.

Consider this blog post as a reminder. Building a company is not easy; otherwise everyone would be doing it. If your company is struggling, you should be too. You should be doing everything in your power to achieve success. Whether that means eating ramen for a whole month, downsizing the size of your staff or clocking in extra hours. We want to see you work!

Success takes sacrifices. While we aren’t advocating throwing away your personal life for the sake of business, we recommend seriously evaluating your priorities.

 -Steve Hogan, Managing Partner, Tech-Rx

AngelList Fires Back On SEC

You may have noticed AngelList’s call to action against the latest SEC JOBS Act ruling. AngelList agrees with our initial assessment of the ruling but read on for their deeper analysis of how the law will affect startups. AngelList proposes that the JOBS Act will defeat their original goal of public fundraising for startups. Reason being that the new rules will be so difficult to follow that startups will solely raise money privately. And with so many startups fundraising privately, they are lowering their chances of raising any money at all. Or they could always find the cash somewhere that is not tracked by the SEC, but does it really need to get to that point? We agree with AngelList that the JOBS Act will result in unintended consequence such as spelling out the failure of thousands of startups – as a result, further stunting American job growth. We agree that what is called for in the JOBS Act is simply unfeasible. We agree with AngelList’s proposed ideas on how to go about investment tracking. The SEC is looking for feedback on potential consequences of their proposed rules. Share your opinion now as there are only 9 days left to comment! What do you think could be possible negative consequences as a result of the JOBS Act? Share your comments here. -Nikki Griggs, Business and Marketing Associate, Tech-Rx

Pivot Du Jour

Unless you are perfect, or a psychic, a pivot is a necessity of business. Let’s face it. Things happen. Whether it be marketing to the wrong customer base, adjusting the revenue model or reacting to a new competitor; businesses need to pivot. While it is essential to pivot from time to time; it is hazardous for companies to fall into the rookie mistake of the Pivot Du Jour. The Pivot Du Jour, which translates to the Pivot of the Day, can kill your business. There is a certain art to a pivot. Most of the time, it is not accomplished easily. Pivoting solves one issue but tends to open a Pandora’s box of new problems. Now if a company were to continue on this path of pivoting every time they ran into a problem, not only would they have new issue after new issue, but they would never get anything done! In fact, when a company is turning to the pivot as a solution too often, it may bring to question the execution abilities of the team. At the end of the day, it is about accomplishments to move the company forward. While a pivot is movement, it is horizontal rather than forward. Success takes time and perseverance. While we think it is necessary to change direction when plans are not panning out, we recommend staying grounded in experience and vision. Effective pivoting is a shift in strategy, not a change of vision. In essence, learn from the past while looking toward the future. What do you think about the impact and necessity of the pivot? Even better, do you know anyone suffering from Pivot Du Jour? – Nikki Griggs, Business and Marketing Associate, Tech-Rx

Join our Team!

We are looking for two new team members to join us at Tech-Rx! If you know anyone who you think would be a good fit as a Managing Partner or a Business Analyst, send them our way.

While Steve is the current Managing Partner, we are looking for an additional Managing Partner to help run the organization.  Think of this position as the “number two” role at Tech-Rx.  As a key executive in an early-stage startup, buying into our vision here at Tech-Rx is key. Know someone with a keen understanding of the startup world from a business, finance, and strategy perspective? We would love to chat with them about Tech-Rx.

The Business Analyst position offers a one-of-a-kind opportunity to explore the startup world from a business, finance, and strategy perspective. It is a great opportunity to build experience as Tech-Rx provides deep exposure to what actually has and has not worked for companies – not just their lofty hopes and aspirations.

We are always interested in hearing from those that share our vision that “All innovations, big and small, propel society forward” and our mission “To boost the rate of innovation by rescuing endangered technology.” -Nikki Griggs, Business and Marketing Associate, Tech-Rx  

It's not B2B, it's not B2C, the problem is it's G2G

We look at a lot of early-stage mobile and internet companies.

Companies with really cool technology. Companies with really cool technology and lots of users. Companies with really cool technology and lots of users, that are failing. Companies with really cool technology and lots of users, that are failing and almost out of money. Companies with really cool technology and lots of users, that are failing and almost out of money……

because none of their users will pay for their product!  

These entrepreneurs tell us “that’s because we focused on B2C aka. the “consumer market” when we should have been focused on B2B aka the “business market,” or vice versa. or whatever.  On closer examination we find that, besides adopting the Freemicide model, in itself a death-wish, they have unknowingly, or perhaps naively, focused on G2G –  the Geek-to-Geek Market.  Their MLVP (Minimum Less-than-Viable Product), rather than attracting legions from their intended target market, has instead found a flock of interested early-adopters (Geeks) who will put up with almost any kind of roadblock or pothole to try a product.  Many of them become faithful users (while not paying a dime for the service).  Soon growth slows and stops and the founders decide that “if we shift our focus on the {fill in the blank} market, we can charge money (almost always deciding on $9.95 per month) and will most certainly succeed.”  They “pivot,” trying to sell their G2G product in the B2C marketplace, burning precious time and money, and producing dismal results.  The simple truth is that their current product is simply too-geeky for the average user to adopt.

There have been online storage providers since prehistoric times (the mid-90s).  Yet none of them were very successful and most have died a painful death – painful for them and also for their G users.  Along comes Dropbox which, in a very short time, dominates the consumer (and small business) on-line storage business.  Why? Because, while they recognized the value of G users, they also understood that the population of G users is relatively small.  They focused their efforts on a larger market – every web user in the universe – and built their product so that it was simple enough that anyone who could fog a mirror and could log on to the web was able use their service. They beat the odds of their freemium model, garnering a gazillion users, enough of whom wanted the paid version for them to succeed — all because they did not focus on the G2G market.

Moral:  Don’t decide that you are wildly successful because you have x thousands of users.  You might have captured 100% of the (non-paying) G market.  Instead, focus on a much larger market – C and/or B – and make your product sufficiently simple to use that anyone can buy it and use it.  Recognize G2G for what it is – simply a data point on your path to success and not an end in itself.

— Steve Hogan

Freemium is Freemicide

Why do we see so many entrepreneurs adopting the Freemium business model? Giving away their base product for free to anyone who wants it and hoping that users will ultimately pay for a more-full-featured premium version – almost always at the low, low price of only $9.95 per month?  Do they have a business death wish?  Or did they fail to answer this question?  Whatever the answer, they ultimately find that —

Freemium is Freemicide

No one will pay for an upgrade to a product unless it materially increases the value to the buyer.  And in most cases, the free product already meets the user’s needs.  There is absolutely no compelling reason to upgrade.  Of course, there will always be exceptions i.e. Dropbox.  However, we believe a better model is —

Try it.  You’ll like it.

You will make more money if you give your product away for a free-trial period and then require payment, even if it is only $0.99 or even $0.49 per month.  Set the price below the pain threshold and capture revenue from your early adopters.  However, recognize that they are probably Geeks, and that you must capture populous packs of princes, proles and peasants to be truly successful – and maybe even charge them $1.99 per month after a 2 month free period.  There is a reason why drug dealers will give you free samples for a week or two.  Assuming that your product actually fills a need, once your users are hooked, they will be delighted to pay you.  Worst case scenario – you find out that no one wants your product before you blow your kid’s college savings.

— Steve Hogan