What if Steve Jobs Crowdfunded the iPhone: The Art of Telling Your Product’s Story

There was no better pitch man then Steve Jobs the former CEO of Apple. Back in 2007 he introduced the iPhone at the Macworld Conference & Expo. As one can see from the packed house the air was electric with anticipation. Skip ahead five years. The Pebble smart watch closes a $10 million kickstarter campaign with 68 thousand supporters.

Given crowdfunding’s growing popularity, many if not all product developers must be considering the implications of this strategy. However, in order to use crowfunding as a viable means of raising capital, startups and small business must be great story tellers to take full advantage of this new resource.

What if the master story teller himself had implemented crowdfunding into iPhone’s development? Sure there are a lot of IP issues to consider, but think about the hype it would have produced. Not that it was needed in Apple’s case at this particular moment in time. The company had introduced the iPod a few years prior, effectively re-routing the music industry’s distribution channel through iTunes. In 2007, people were paying attention to any and everything Steve Jobs was saying. But for the rest of us, crowdfunding is a viable means of testing the market’s reaction to our idea before fully manufacturing the product.

It’s worth taking a look at how Steve Jobs introduces this product. For those product developers considering crowdfunding as part of their product development strategy, study this video. Learn.

For the rest of us, whether we are pitching our business idea to investors, customers, or fellow founders, a lot can be learned by how Steve Jobs commands the audience’s attention and only diverts them to the screen when absoulty nesseary.

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How to Leave Your Job, Build A Business, and Still Feed the Kids

Many Americans have great ideas for new companies.  However, it’s hard to know when to stop your day job and dedicate yourself full time to your concept.  Ted Roden, Founder of Fancy Hands, talks about how and when to leave your day job and turn it into your full time occupation. He outlines some specific steps anyone thinking of starting their own company should consider and execute before taking the leap.

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Why are we building Conception Fund? To Disrupt how 85 million Americans invest their collective $30 trillion

Americans have $30 trillion collectively invested in long term equity.  We are the largest collection of individual investors in the world.  85 million individuals and 52.7 million households own equity in our major stock exchanges.

Most of our capital is invested in large publicly traded companies that do little to improve our main streets and commercial centers.  If 1% of that capital were reallocated into America’s 27 million small businesses and startups, $300 billion would be injected into our main streets and commercial centers.

Amy Cortese, author of Locavesting: The Revolution in Local Investing discuses how communities are presently reinvesting their capital to improve their commercial centers.  Check out her blog for more of her insight on this topic.

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Bootstrapped to Seven Figures

It’s every entrepreneur’s dream to ride the wave from idea to a highly profitable business.  That’s why they take the risk that they do.  But the vast majority of startups don’t make it.  In  Noah Kagan’s experience, founder of AppSumo and formerly of Facebook and Mint, 86% of the ideas he tries fail.  That said, he loves trying new things and can’t see himself working for someone else.  This is the life he chose, he fails more than 50% of the time, but when he is right, he runs with it.

Noah joined a number of accomplished entrepreneurs for the 2012 Ramen Camp held at the Microsoft Nerd Center in Cambridge Massachusetts.  The objective for these aces of entrepreneurship was to share some of their tips and trick on how they “bootstrapped” or self funded their way to success.  For this week’s blog post, we figured it would be a good idea to share some of the information.

  1. Hiten Shah (@hnshah) Co-Founder of @KISSmetrics. Previously started @crazyegg and@acs.

Hiten started Crazyegg back in 2006.  It was a simple idea that was highly scalable.  Create an easy to use web analytic tool that allows users to turn web traffic into conversions thereby increasing sales.  Crazyegg creates a heatmap of the webpage to help companies understand where users click and why they do.

Easy to understand, correct?  Well, Hiten ran with it and six years later he has grown this idea into seven figures in annual revenue with four people running the entire operation.   How? Among other points, he kept his idea simple.  Easy to use.   Got the word out by actively blogging and engaging potential users where they converse.   Tested it among his users early, and last but not least, kept his operation lean.  There are four founders to Crazzyegg who split the seven figure annual sales revenue.  As Hiten likes to brag, “Per employee, Crazyegg is more profitable than Apple.”

My paraphrasing of his presentation does him no justice.  Check out his blog for more insight.  He is a funny guy.

  1. Noah Kagan (@noahkagan) Chief “Sumo” at AppSumo, which I guess makes him the CEO.

App Sumo helps professionals discover amazing products and education. It’s #1 e-commerce site for businesses.  Noah said a lot of things during his talk.  For every serious insight, he had 2-3 funny jokes to make, which was refreshing because as he reminded the audience, 86% of what he tries as an entrepreneur, fails.  It’s good to see a guy put his failure into its proper perspective and learn from it.

Noah Started his career at Intel , then Facebook, Mint, Gambit, and now App Sumo.  He is a serial entrepreneur.  Here are a few of the tips he shared.

  1. From idea to operation: be up in running in 30 days.  Try something.
  2. Check out the advice and insight on a blog called 4 Entrepreneurs.
  3. Marketing: Identify your audience, figure out where they are.
  4. Check out these sites to discover where your audience converses:
    1.  Big Boards Daily updated list of the largest message boards and forums on the web, along with interviews of these forums administrators.
    2. Technorati Real-time search for user-generated media (including weblogs) by tag or keyword. Also provides popularity indexes.
  5. Run contest to engage your audience.
  6. Set objectives: use metrics to measure success.
  7. A/B Test are great, only use them if you have more than 10,000 unique visitors a day.

I guess the biggest take away from Noah’s presentation is engage your audience as a means of growing your businesses.

  1. Nicolas Warren (@NicolasWarren) founder of www.perfectfuelchocolate.com

I sat down and had lunch with Nicolas.  The premise of his lunch discussion was how to be 10 people at once.  The most valuable commodities entrepreneurs have are their time and money.  Nicolas takes both restraints very seriously.  In order to maximize both, Nicolas suggested outsourcing some task that can be better done by others.  Some of that outsourcing may occur within the United States (front-end design), while other tasks can be done cheaper and faster offshore (back-end design).  Here are Nicolas’ top three outsourcing websites.

  1. Elance
  2. Odesk
  3. 99Designs

As a general rule, Nicolas employs two contractors to do the same job and picks the best work of the two.  In his experience, the key to a positive outsourcing experience requires 1) Setting clear expectations 2) A clear visual scope of work, and 3) Pay a fair wage.  He suggested going to the State Department’s website to research what a fair wage is in the country your contractor is located.

Ramen Camp 2012.  There is a ton more I could write about, but I am out of time.  It was great meeting the many entrepreneurs and hearing their great ideas.   My hat is off to the team at Greenhorn Connect who organized the event.  Great Job!

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VC: 90% of Startups should not take institutional money. Conception Fund: Is Crowdfunded Capital Ok?

By Co-Founder Arthur Hardy-Doubleday

Last Tuesday, the Boston office of McCarter & English, LLP held a Venture Capitalist (“VC”) Roundtable.  Whenever VCs chooses to speak about their approach, I listen.  VCs are charged with seeking out startups that will realize a 5x return in a limited time period.  It’s high risk, but when they hit, they HIT!  For example VC firm Andreessen Horowitz  invested $250,000 in Instagram that is worth $78 million two years later.  Check out Ben Horowitz (founding Partner at Andressen Horowitz) blog post on this investment.

The stories of startups experiencing skyrocketing growth which creates immense wealth for its early stage investors are far and few between.  However, if one reads TechCrunch or Betabeat, one might get the impression that venture capital is the new asset class that can do no wrong.  It seems like every day these webzines publish news about a startup realizing incredible growth and therefore commanding a large valuation.

The truth is nearly 90% of all venture back companies fail to live up to their growth expectations or worse fail all together.  At the roundtable, one VC shared that of the twenty startups a West Coast VC firm invested seed capital into, one or two will get more funding in the form of a Series A.    That means at best only 10% of VC seeded startups make it past the early stage.  If a VC firm passes on further investment, a company must either self-sustain on existing traction or fold.

This same VC shared his own insight into startup capital.  To paraphrase he said, “90% of startups should not take institutional money.”  What he was referring to is many VC firms create funds.  These funds are a collection of capital from many different sources that together create a pool of money that the VC firm then invests into a number of startups.  For example, California Public Employees’ Retirement System (“CalPERS”), a retirement fund with $240 billion invested in various asset classes will contribute to a VC fund as a means of diversifying its own portfolio and possibly realizing outside returns such as the Instagram story.  When CalPERS invests its capital, that capital is considered “institutional money.”  When it invests in a VC fund which then invests into a startup, that startup is now taking institutional money.

The VC had a number of reasons for stating 90% of startups should not take institutional money.  His main point was, when a startup takes institutional money, it’s like running up the credit card.  That money is being invested with the expectations that the value of that investment will grow. It’s not free money.  On average a VC invests in a startup with the expectation that its investment will grow by five times over a period of nine years.   If I understood this VC’s point correctly, if a startup cannot articulate how it will achieve this goal, it probably should not seek VC capital.

Where VC Capital is not Applicable, Equity Crowdfunding is.

A Startup may not be right for venture capital, but that does not mean outside capital in the form of equity cannot help that startup grow.  Take for example Bootstrapp Compost.  Bootstrapp Compost is Greater Boston’s only year-round kitchen scrap pickup service. They use bikes, trains, hand trucks, and the occasional vehicle to collect and transport compostable material from houses, apartments, dorms, co-ops, and condos. That waste is then taken to local farms where it can be composted thereby enriching the soil and keeping reusable material out of landfills.  Great idea!

Should this team accept VC money?  Hells no!  Why?  It would be hard (not impossible) to foresee a 5x return on a limited time horizon.  Does that mean Bootstrapp Compost should only “bootstrap” or self-fund during its early stage growth.  No.  The team has other options.

Bootstrapp Compost is a perfect example of a local company that could raise capital through equity crowdfunding in-order to grow operations.  Why?

Self-funding growth limits a company to how much capital the principal or principals have.  If they have a lot of capital, great, but if they are like the majority of us, they have limited capital.  If their only means of growing the company is through existing revenue and limited capital from the principals, the company may be missing opportunities to grow because of limited working capital.

There are many examples of companies using crowdfunding to grow.  The most recent one would be the Pebble smart watch.  The team raised nearly $9 million and presold it product to over 58,000 customers.  Bootstrapp Compost could use the same approach to grow its own company.   While it might not raise as much money as the Pebble team, it could grow its customer base and raise outside capital through making an equity crowdfunding offer.

Bootstrap would receive debt free working capital in exchange for equity.  Investors may be incentivized to buy shares by Bootstrapp offering discounts on its subscription service.  In addition to increasing its working capital, Bootstrapp would also grow its customer base and increase brand awareness.

Investors would be helping a local company grow.  Additionally, as the company grows, their equity investment would increase in value.  One might refer to this type of investment as local-vesting, a means by which a community invests in local enterprises to improve the community and the economy.  The investors in this case, would not be seeking a 5X return like VCs.  Rather, investors would be looking for Bootstrap Compost to grow its geographic coverage, help the region decrease in carbon footprint, and create more jobs.  Eventually, if the company grew large enough, the investors could sell their equity to other willing investors who would want to see Bootstrap continue to flourish.

Not every startup fits the investment criteria of venture capital.  In fact, according to some, 90% don’t.  But that does not mean these startups should not accept outside money.  There are compelling cases for many startups to raise early stage seed money through crowdfunding.  Where VC money may not see opportunity, the crowd sees plenty.

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