[TEC event] 'Start-up King' Mike Cassidy: How to build 4 successful companies in a row

Speed As THE Primary Business Strategy

Mike Cassidy

October 23, 2010 Confidential and Proprietary

Speed Brings Great Advantages

Rapid product rollout/updates makes it extremely difficult for competitors to gain traction against you (2 weeks vs. 18 months)Rapid success builds strong team morale (which leads to more success)Rapid success generates more PR (which leads to more revenue, strategic partnerships, key hires, etc.)Fast growth drives higher company valuations when fundraising or using equity for strategic deals


Typical Start-up Timeline?

Explore ideas

3 months?

Raise money

3 months?

Hire core team & open office

2-3 months?

Build product

12 months?

Initial marketing / awareness-building / early customers

3-6 months?

“Launched” = 23-27 months?


Lightning Speed Start-up Timeline

Explore ideas

2 wks

Raise money

1 day

Hire core team & open office

2 wks

Build product

3 months

“Launched” = 4 months


Example 1: Stylus Innovation

Stylus Innovation: Computer telephony softwareEntrenched competitors

Owned 95% of market with DOS-based tools300 customers/year per competitor

Visual Voice1st Windows based tool, Visual Basic custom control3,000 shipped in 1st yearDominant market player within 6 months of Visual Voice launch

Sold 2 years after launch for $13M (10,000x founders investment)


Example 2: Direct Hit

Direct Hit: Internet search engineEntrenched competitors

Owned 95% of market (AltaVista, Excite, Infoseek, Lycos, Yahoo)Used traditional text-based inverted index algorithms

Direct Hit1st search engine based on tracking user voting (like Digg, YouTube, etc.)Provided search for AOL (ICQ), Microsoft, Lycos, etc.AOL deal within 5 months of company start

Sold 500 days after launch for $500 million


Example 3: Xfire

Xfire: Instant messenger for PC videogamersEntrenched competitors

Owned 95% of market (AIM, Yahoo Messenger, MSN Messenger)Focused on traditional IM (not gaming)

Xfire1st IM to track and connect videogamers Grew virally from 100 users to 3 million in 2 years Dominated market segment within 5 months of “Xfire” start

Sold just over 2 years after launch for $110 million


Example 4: Ruba

Ruba: Recommendation Engine Based on Your Friends’ RecsEntrenched competitors

Facebook, TripAdvisor, Yelp, etc.Ruba

Started focused on recs for services (car mechanic, locksmith, etc.) targeted at momsMorphed to travel recommendations1 million visitors to site before acquisition

Sold less than 2 years after launch to Google

1st Q after acquisition, GOOG up $17B


Speeding Up All Parts of Startup

FundraisingOpening an officeHiringGetting new employees startedProduct developmentBusiness developmentMarketing/PRChanging direction


Fundraising


Speed and Capital

Stylus: $1,500 initial capital; no VCDirect Hit: $1.3M (DFJ) – through launch, HotBot, AOL, Apple spent $400K; through MSN, Lycos spent another $600KXfire: $1M Series ARuba: Only raised Series A, no follow-on rounds before acquisition

Biz school: Single, consistent strategy; not “lowest cost and best customer service,” etc.


Raising VC Money Quickly

What are the best ways to raise VC money quickly?


Four Keys to Raising VC Money Quickly

Raise when conditions in your favor Direct Hit Series A: 1998, portals growing rapidlyDirect Hit Series B: as AOL deal is closingDirect Hit Series C: as MSN/Lycos deals are closingXfire Series C: Social networking “hot”, steep growth curve established

Get all decision makers in room

Synchronize timing of competing VC offers

Bring “if/then” contracts with customers to your VC meeting


Opening an Office


4/21 8:15am pitch DFJ; 4:30pm get term sheet; dev team gives notice at current jobs

4/22 Fly back to Boston

4/23 Negotiate lease on office space; order Dell computers

4/24 Order network software, phone system, office alarm system, DSL, office LAN/phone wiring

4/27 Incorporate, set up bank account, Paychex, desks/chairs

4/28 Source control software, property insurance

4/29 Hardware arrives, set it up

4/30 Set up LAN, phones, desks

5/4 Open office, first day team has been hired, have C++, email, PC, LAN, payroll, etc. (13 days after term sheet received)

Every Day, Every Hour, Every Minute Counts


Hiring


Think Speed in Everything You Do

Experience level:Stylus: 4 sr. product managers (5+ years) -> CEO, VP Eng, VP Mkt, VP SalesDirect Hit: 5th product manager ->VP Eng; 10 year dev; 15 year devXfire: 10 year dev; 10 year dev; 10 year devRuba: 10 year dev (Google tech lead for Chrome); 10 year dev

Known talent:Stylus: 13 out of first 15 had worked with beforeDirect Hit: 12 out of first 15 had worked with beforeXfire: 2 out of first 3 top devs came from absolutely trusted sourceRuba: 4 out of first 4 had worked with or came from trusted source

Close:Group huddle during last interviewerOffer letter ready before interviewee arrivesMake offer on same day


Getting New Employees Started


Speed Starts the First Day a New Hire Arrives

What do YOU do when a new employee comes on board?


Speed Starts the First Day a New Hire Arrives

Before the first dayGive her material to read the day she accepts the jobGive mundane “first day” paperwork before arriving

First dayAbsolutely have desk, phone, email account, etc., set up in advanceAbsolutely have goals/projects/deliverables written down; give to new hire immediately

Set tone for speed


Product Development


Which Is Faster?

A. Incremental development. Build 1 module/feature at a time and then launch. Add features as you go. Figure out over time what features users want and then try to add them.

OR

B. Spec your product CAREFULLY. Make sure you do great customer research! Hit the market with a rich, compelling product because you only get ONE first impression. If the product is lame, people will never come back.


Journey of a Thousand Miles Begins with a Single Step

Stylus InnovationVisual Voice 1.0 let people build a 2-line IVR systemAdded digital 32-line capability within 6 months (plus fax, a dozen other features)3.5 months from “go” to launch

Direct HitPatented algorithm included two dozens variables (time spent at a URL, related searches, time of year)Launched with small subset of this feature set3.5 months from “go” to launch

XfireLaunched with 2 features: presence detection and 1-click joinAdded a new feature every 2 weeks 1st year and every 3 weeks 2nd year3.5 months from “go” to launch

RubaLaunched first version 3.5 months after company startChanged course and launched new product 2.5 months later


Business Development


Biz Dev Deals – Fast or Never

“Probability of a deal ever closing declines by 10% each day it doesn’t close”

Use calendars/maps with “limited supply”Sponsorships for July, Aug, and Oct already sold…Map of USA with certain regions already controlled by competitors


Marketing/PR


Fastest Way To Get the Word Out?

PR is faster than MarketingStylus

No marketing budgetEditorial in CT Mag (including cover)

Direct HitNo marketing budget (until Q4 ’99)Cover of Industry Standard

XfireNo marketing budget Extensive coverage in Fortune, CNN, GameDaily, Forbes, WSJ, USA Today, Marketwatch, Wired, Red Herring, SJ Mercury, etc.

RubaNo marketing budget Quickly ramped to 10,000 Twitter followers/Facebook fansGot promoted by NTA (National Travel Agent association)


Changing Direction


If Something Is Broken, Fix It - Immediately

Stylus InnovationOriginal name = “Dial-a-Fish”Changing the way Americans shop for groceries, with $1500 in capitalDecision to change to Visual Voice took less than 2 weeksOnce decided, 100% of company effort immediately shifted

XfireOriginal name = “Ultimate Arena”Play to win $$Decision to change to Xfire took less than 2 weeksOnce decided, majority of company effort immediately shifted

RubaOriginal name = “FriendsTips” then “Kudo”Decision to change to Ruba took less than 1 monthOnce decided, 100% of company effort immediately shifted


Direct Hit: $500 million in 500 days

4/98 Series A ($1.3M on $2.6M pre)

5/98 Opened doors

6/98 HotBot deal

8/98 Launch Direct Hit service on HotBot

9/98 AOL deal, Apple deal

10/98 Series B ($2M on $23M pre)

Q1 99 HotBot goes from Most Popular button to Default Results

Q2 99 Lycos deal, Microsoft deal

Q3 99 Series C ($26M on $100M pre)

Q4 99 Launch destination website

1/00 Sold for $500M

[TEC event] 'Start-up King' Mike Cassidy: How to build 4 successful companies in a row

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