I seem to be drawn to small, hi-tech companies that show a lot of promise.  I’ve been lucky at picking several to work for that have done well.   Of the last four companies I joined, two were acquired and two went IPO.  If you have an entrepreneurial spirit and want to feel what it’s like to be a part of a huge success, you undoubtedly will want to increase your chance of success by choosing a company wisely.   Otherwise you are wasting valuable time and opportunity cost.  But how do you choose the right company to work for?

After scratching an entrepreneurial itch and finally starting my own company last year, I recently decided to accept a go-to-market role at what I anticipate will be number 5 of 5 successful hi-tech companies.  The company I joined is RGB Networks, and I run product marketing and management for the software business unit created from a smaller company RGB acquired called Ripcode.  Since I just started at RGB and the hiring process is fresh in my mind, I thought it would be a good example of criteria that can be used to evaluate a company’s chances for success.

First and foremost, you don’t really get to choose any company to work for.  They have to want to hire you.  Either they need to come find you, or you need to find them and convince them to hire you.  In my case, I knew someone at the company and they reached out about a position the company was looking to fill, and that’s how it all started.  But possible opportunities come along all the time, and you can’t take every one.  If you are looking, you may be evaluating two or three at the same time.  You need to evaluate each opportunity carefully while concurrently demonstrating how you would be a valuable hire for the company.  Ideally both you and the company should be convincing each other why it’s good for you to join.  If it’s just one way, likely it won’t work out in the long run.

1)      Value proposition.  The biggest criterion that has served me well is evaluating a company’s product value proposition.  I recently wrote about this from an investor perspective when looking at a company to invest in; and it is equally important when evaluating a company to work for.  In my opinion, value proposition is paramount.  In RGB’s case, after taking a close look at the market opportunity and what RGB Networks provides, this part was a no brainer.

RGB builds big iron for video streaming in cable networks, IPTV networks, mobile networks, and anywhere else someone wants to view video.  Delivering video is incredibly complex, partly because the industry and technical requirements are constantly evolving.  Video and audio codecs, transport protocols, set top boxes, servers, video players – everything is changing which makes it hard for operators to keep up.  Couple that with the fact that operators and content providers are teaming up at an incredible rate to offer new ways to deliver content.  Every day for the last week I have heard AT&T U-verse radio advertisements offering to stream television programs to my mobile phone.  Just today the Financial Times announced Google will be offering Pay-Per-View Hollywood movies on YouTube.  And three weeks ago Mashable reported that NetFlix is going to offer content to Android and iPhones.

The biggest problem with delivering video content to all of these devices is that there is not one standard.  In the days when only your cable TV provider was handling your Standard Definition and High Definition video content, it was a lot easier because they controlled the end point – the set top box (STB).  Now with devices like iPhones, iPads, and Droid phones, IPTV portals like Hulu, and competing streaming protocols from Microsoft, Apple and Adobe – it’s a crazy mixed up world.

Now enter RGB Networks.  RGB makes life easier for all of the operator networks, by building hardware infrastructure that can scale video streaming at an order of magnitude over the competition, offered in a flexible architecture (chassis, blades with ASICs and FPGAs, hardware and software solutions).  RGB is the one-stop shop for any cable, telco, mobile, or Over the Top (OTT) provider.

2)      The strength of the management team.  Right after the value prop, the biggest thing to consider when looking at a company is the management team.  This is why I was so happy to see who is leading RGB.  The CEO Jef Graham is the former CEO of Peribit and sold Peribit to Juniper for $337 million where he became an EVP.  The CTO Yuval Fisher is an industry icon in IP video, and has an uncanny market sense in addition to being extremely technical.  The VP Engineering, Charles Corbalis, has an incredible track record including a VP/GM at Cisco after Cisco’s acquisition of Stratacom where he was the founding VP Engineering.  (For those of us that were CCIEs at the time, the Stratacom ATM/Frame Relay devices were the cool toy to play with.)

And the list goes on.  Suffice it to say that if you have a strong management team, and everyone has respect for each other and plays nice, then you have a huge competitive advantage.

3)      Company culture. If you are on the go-to-market (GTM) side of a company, especially in product marketing and product management, culture is critical.  Not only the traditional sense of company culture, but also how a company conceives of and develops products.  Does the product team work in an Agile/Scrum methodology?  Is customer development (Four Steps to the Epiphany) encouraged?  Will people embrace a Minimum Viable Product (Lean Startup) strategy?  The greatest competitive advantage of a smaller company is being agile and responsive to market changes.  If you get a sense that a small company isn’t acting like one, that’s a problem.

4)      The investors. Having tier-one investors is obviously a good thing.   RGB’s investors include Accel, IVP and Kleiner.  You should look for companies that don’t have too much investment, or too little, for what they are building.  Hardware products take more capital.  Software and services not so much. Strategic investments from industry related companies can be very helpful.

5)      Revenue trend. Investors like to say “the trend is your friend” when looking at a public company’s investment potential.  The same can be said for looking at a company to join.  When I joined Inktomi for example, the company was in the middle of what became 14 quarters in a row of 30% quarter-over-quarter growth.

6)      Company size. In my opinion, smaller is better.  Most companies I join usually have between 50-200 people when I come aboard, which seems to be a good range.  Fewer than 50 and the company is likely not that far along yet and the future is more in doubt.  Greater than 200 and it’s hard for one individual to make a big impact day one.

7)      Opportunity to leverage and extend your strengths. I come from a technical background (network engineering), have run a regional sales organization, led teams in product management and marketing, and recently ran my own web-based business where I learned a great deal about search engine optimization (SEO) and online lead generation.  I love to learn new things, as probably do a lot of entrepreneurial-minded folks.   If a potential company gives you the opportunity to grow, that’s a great thing.

If the majority of these seven criteria apply to a company you are considering, you have found a winner.  If you are fortunate enough to be in a key go-to-market role, then you get to help build the company’s success.  Having that possibility in your own hands is a gift and makes every day exciting.

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Almost any company you start will require some level of creative design.  It could be your website logo, web layout, business card design, stationery, or a brochure.

In the past, you would need to find a contract creative designer that hopefully would work cheaply.  But today you have some other really good options.

Websites have sprung up that offer outsourced creative work to be done on “spec”.  Sites like crowdSPRING and 99designs are duking it out for customer mindshare.

Let’s say you need a logo, or a website design, powerpoint template, etc.  As a buyer you simply post a project, timeframe, and name a price you are willing to pay.   Then the clock starts ticking, eBay style.  By default you would allow a week for submissions.  Along the way you would rate and comment on those submissions, until you find the perfect one.  At the end of the week, you award the project to the best submission.  Sound simple?

Spec work isn’t without it’s critics.  Some would say that doing work this way commoditizes the efforts of designers.  This may be true, as you can get really good logo designs for less than $400.   But the benefits for the buyer are many, including lots of choice and different perspectives.  Typically a contract creative designer might give you four or five choices if you are lucky, and that’s just from one creative person.  With 99designs or crowdSPRING you could easily have more than 100 choices from two dozen creatives.

The market will decide if there is a place for these types of companies, but so far the answer seems to be a resounding yes.  For small businesses, this is an excellent new way to tackle what was once a difficult obstacle – creative help in branding your business.

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No matter what business you are starting as an entrepreneur, you will benefit from having a compelling website and making it easy for people to find.  For the latter, you need Search Engine Optimization (SEO).

Nobody truly understands how the search engine algorithms work their magic, but there are several smart folks that know a lot.  SEO experts are plentiful and it’s a billion dollar industry.  Good experts are hard to find, and great experts are harder.  They are also expensive, which can be a limiting factor for an entrepreneur.

Luckily, there is also a plethora of information about SEO techniques out there.  It takes a while to wade through the sometimes conflicting information while also figuring out what is outdated or just plain wrong.  But if you put in the effort, you will soon learn the trends in the SEO industry and what works.

There are three basic things you need to know when learning SEO.  For more detail, you can download my “Hands on SEO” presentation from Slideshare.

1)       Keyword research. Before you do anything else, even before you create a website, you should research keywords that people will search on to find your site.  There are a few types of keywords that represent the different types of searches people will do – Information, Shopping, and Purchasing keywords.  You should include different types of keywords on your website.

2)      On page SEO. You will need to optimize many things on your website to make it appealing for search engines to index your pages.  Meta title and description, alt text for images, heading tags, etc.

3)      Off page SEO (Linkbuilding). Once you have completed steps one and two, and only once you have completed steps one and two, you need to start building links to your website.  These links are often referred to as backlinks.  Every one of these links should use anchor text of a keyword that you want to get good rankings for in the search engines.

If you are not in a highly competitive industry, you may be able to rank well for some of your top keywords in a matter of 3-4 months.  If you are in a competitive industry, it could take many more months.

All of this you can do yourself with a little education and elbow grease.  Some of it you may want to outsource to one of a few cost effective offshore SEO resources.

The best thing about learning SEO is a sense of accomplishment when you are able to move the needle and bring more traffic to the site through your own efforts.   Additionally, when it is time to bring in that SEO expert, you will be able to interview and hire them confidently, with the knowledge to at least call bullshit on something they tell you.  That’s important, because you can spend thousands of dollars with the wrong SEO “expert” and not get good results.  You don’t want to waste your time and money like that.

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In my last post I took the position that venture capitalists need to give more weight to a company’s customer value proposition than the strength of the management team.  Admittedly it can be difficult and time consuming to determine a strong value proposition that real customers will spend real money on.  A value proposition must answer the customer question “what’s in it for me?”  (WIIFM)

The first thing to remember is that a customer will base buying decisions on emotion rather than logic.  Most advertisers will attest to that fact, and a very interesting new research project released last month by Raj Raghunathan and Szu-Chi Huang at the University of Texas supports this.  People subconsciously have an emotional reason for making all decisions, including purchasing decisions, and then use logical reasons to support their decision.

This is extremely important to understand when determining a strong value proposition, because if your product or service doesn’t fulfill an emotional need, it absolutely won’t be purchased.

Emotional Value Proposition

Emotional needs are quite varied and include ego gratification, professional advancement, better health, avoiding embarrassment, pride of accomplishment, and many more.   The emotional value proposition isn’t necessarily obvious and often goes unstated, both by the customer and the company.  Emotions are feelings, and feelings, whether good or bad, tend to make people feel vulnerable when exposing them.  Therefore the customer may not want to talk about the emotional need.

For example, when selling software or hardware to IT professionals, sometimes a good emotional need to fill is the need to play with a cool new technology.   Or you could also be selling a product that relieves a lot of pain.  When I worked at TippingPoint, one of the top emotional needs the Intrusion Prevention System (IPS) served was giving IT staffs their after-hours and weekends back when recovering from malware outbreaks like spyware.  If you have ever accidently gotten spyware on your computer and had the extensive and laborious chore to remove the spyware, you know what I mean.  It is truly an emotional toll that it takes on you.  By blocking the bad stuff from ever getting on an organization’s servers and desktops, it literally was a huge emotional relief to these customers.

Once you establish that the product can really tap into a usually unstated emotional need, you must have solid logical reasons for a customer to want to buy your product.

Logical Value Proposition

There are three key logical reasons that can be used by a customer to support a purchase decision of a product.  The product needs to do at least one of these things really well, and ideally it should do at least two of these things.

1)      Save time. A product or service should save the customer a minimum of 50% of the time it normally takes to complete a task.  Best if it can save over 90%.  That’s a winner.

2)      Save money.  The product or service should provide significant savings.  The actual savings can vary a lot based on the industry.  Sometimes a 1% savings is considered huge.  Other times you need to have 50% savings or more.

3)      Make money. Particularly if you aren’t saving money, you need to make money with a quick ROI.  A couple examples of a money making product are a third-party component of another product, or a private label product or service offering.

Alternatives to your Product

What alternatives does the customer have to your product?  The number one alternative is usually doing nothing.  For many products, this can be a tough alternative to overcome.

To fully assess alternatives you have to look closely at competitors, including indirect competitors.

With all this in mind, let’s look at an example, the Apple iPad.

Real World Example – Apple iPad

Nothing has set the tech world on fire as of late as much as the introduction of the Apple iPad.  The iPad definitely gets the checkbox for satisfying emotional needs.   I’m not an iPad customer yet, but I want to be.  That tells me something.   People with iPads get longing stares at coffee shops and lunch hangouts.   Wannabes come up and want to see it and talk to them about it.  Granted that will change soon but it definitely says something about the desire factor.

And of course, the iPad satisfies a logical need because it is a computing device like a laptop or an iPhone.  Could you get by with your laptop or your iPhone if you have one?  Sure you can.  But do you still want an iPad?  Sure you do.  Because if you buy one you are declaring yourself one of the cool kids.

Summary

When I look at a company’s potential value proposition for customers, I start by looking at what the emotional and logical reasons a customer would want to buy the product.  I really try to get in the customer’s head.  Then I look at the competitors, indirect competitors, and the overall market to get a sense for where I think this company is positioned.   It’s good to have competitors because that means there is a market for your product.  If you are inventing both a product and a market, that’s an uphill battle and turns every sale into an evangelical sale.  You don’t want that.

As an investor, you want to have a solid market analysis for a product during your due diligence to determine whether the value proposition is real and tangible.   In the end, you need extensive data to support your decision.  As you can probably now guess, yes, your ultimate decision to invest is going to be based on emotion rather than logic.

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The most essential task for an entrepreneur or business strategist is to plan the Go-to-Market (GTM) strategy.   A GTM strategy defined by Larry Friedman is:

“A game plan for reaching and serving the right customers, in the right markets, through the right channels, with the right products and the right value proposition.” (Italic emphasis his)

That’s a mouthful, and in my opinion, more or less correct.  One might argue that the “right” market is not as important as simply finding “a” market.  Or that of course a “right” product will have a “right” value proposition.  Nevertheless, the focal point of the definition is that a Go-to-Market strategy is a game plan.  You need to strategize to develop this plan.

But how does a person effectively strategize?

This is where many entrepreneurs seem to get brain freeze.  We get lost in data gathering.  Or we get locked on an idea and can’t let go even when data tells us otherwise.   A couple great resources on how to effectively develop this game plan are “Four Steps to the Epiphany” by Steve Blank and “If You Build It, Will They Come?” by Rob Adams.

But according to Andy (me), here are the main things to remember about how to strategize.

1)      Develop a hypothesis. Right away, you want to develop a hypothesis on what customers need and what you can build to satisfy that need.  Maybe you had a spark of genius, overheard a conversation, or saw something in the news that gave you a really good idea.  You need to be open minded to changing, refining and potentially abandoning this hypothesis.  In other words, fast fail.  (Admittedly cliche but please excuse for brevity.)

2)      Gather market data. To borrow some italic emphasis from Larry Friedman, this should be the right data.  It’s easy to get sucked into the Internet vortex and wind up with analysis paralysis.  For an effective GTM strategy you need two buckets of information, and each bucket is important.

a)      Primary research. Interviews with customers and potential customers.  Primary research will tell you specifically what your customers want and how much they are willing to pay.  If it doesn’t get you this information, you haven’t done it correctly.   Rob Adams covers this part of market analysis well.

b)      Secondary research. Industry reports, articles, surveys and the like.  Secondary research will give you an idea of trends, market size, and competition.

3)      Check out your competition. You need to do a deep dive on competitor’s websites, press, personnel, revenue, and everything else you can unearth.  This is a crucial part of the process and can help you decide whether this is a market worth pursuing, and if it is, how are you going to be better than the competition?

4)      Think. Ok, this one may be obvious to folks but it’s really important.  You really need to stop, assess what you have learned, and think.  Go somewhere other than your office.  A park or relatively quiet coffee shop can be good.  For me, taking my dog for a run works really well.

5)      Sell. If you are an entrepreneur marshaling investors or development resources, you need to be able to sell your Go-to-Market strategy.   In a larger organization, you need to sell to other departmental stakeholders.  You need people to believe in what you are doing, and you also need to get their input.  They may have some really smart feedback that enhances your thinking and your plan.

6)      Lather, rinse, repeat. As necessary.

There is more to an effective GTM strategy than this list of six steps, but first you need to know how to strategize.  And for me, this is a good way to do it.

What do you do?

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I’ve had several people recently ask for marketing advice for their startup venture. One of the things I typically want to figure out before we even get started is who the target customer is.  I ask  “who is going to buy what, and how much will they pay?”

It’s a three part question and requires an answer to all three parts.  It’s amazing how varied the responses are to this basic question.  Such as “I don’t know”, “good question”, or “we have lots of target customers”.  To the latter I ask them to name their top three target customers.  Sometimes I get blank stares.

Invariably the responses expose weaknesses in the entrepreneur’s go-to-market strategy.  Usually the weakness is… they don’t have one.  Or its “I’m building this really cool widget and then people will come buy it”.  Really?

Lots has been written on the need to do customer development and build an MVP, so I won’t go into that.  As an entrepreneur you should be able to at least hypothesize:

1) Who might buy your product,

2) why they want it,

3) what their other choices are (including doing nothing),

4) how much they might pay you for it.

You need to answer these questions and then go test-market it.  Ask 10 people you know that might be target customers for their feedback.  Ask them if you had it for them to purchase today, would they.  Put them on the spot.  Ask them to give you a $0 Purchase Order, a preorder, or a down payment as a commitment.   In other words, see if they are willing to put some skin in the game, not just nod their head so you will go away.

Peter Drucker’s adage is never truer than when figuring out who your customer is.  ““The single most important thing to remember about any enterprise is that there are no results inside its walls.”    As an entrepreneur you need to get out of the office and talk to customers.  Or potential customers.  Early and often.

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