Dave Hochman, Author - Tips for Starting a Startup

About Dave Hochman

A veteran PR consultant to many successful startups, Dave Hochman is the owner of DJH Marketing Communications, a PR and content marketing firm in Red Bank, NJ. Please go to www.djhmarcom.com and @davehochman on Twitter. Dave may be reached at djhochman@djhmarcom.com

How to Master the “Competitors” Slide in Your Pitch Deck – Q&A with Wayne Embree

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When that all-important “who are your competitors” slide comes up in the pitch deck, too many founders tend to reply with not-quite-coherent, or even outright not-believable answers. In order to examine this question, ‘who are your competitors?’ I recently interviewed Wayne Embree, an experienced seed-stage investor. Based in Columbus, Ohio, Wayne has been involved in over 200 investments, including sitting on over 50 boards and taking more than 60 businesses through exits.

Dave Hochman: Why do so many founders fall short when it comes to handling this question?

Wayne: It starts with this idea so many founders start off with this premise that they actually don’t have any competitors. And then the general response to that is, “then you have no market. I think people are afraid of bringing up competitors from the perspective that it somehow diminishes their business….as opposed to giving it credit. They need to be thinking about, you know, competitors, as validating a market.

Dave: What advice would you offer to a founder with a good idea but fails to recognize the importance of acknowledging the competitive landscape? “we don’t have any competitors.”, right?

Wayne: Really go and really dive in and figure it out. Do the research and fully understand the marketplace, the competitors, and how they’re going to win. It’s also usually a good sign if a founder has researched the characteristics and capabilities of the chief executives and management teams from the competitors. Really go into the details of the companies in the competitive set.

Dave: has there ever been a situation where “we don’t have any competitors” was an actual viable response, that actually belonged on a slide deck?

Wayne Embree
Executive Vice President, Investments & Venture Acceleration, Rev1 Ventures

Wayne: No. Because the marketplace you’re usually trying to serve has an existing way of dealing with a problem. Even the first person developing a wheel had competition, which was the sledge. Honestly, I cannot think of a single case where there wasn’t at least a status quo that represented competition. And the second biggest fail is discounting or even not considering the status quo.

Dave: would you say that founders in recent years have been more or less competitor aware… any trends? What are you seeing out there when you see the slide?

Wayne: Apologies for the sarcasm but we have this thing called the internet. And even though as most people know not everything on the internet is true, you could at least, you know, Google your industry that you’re in. We had people pitch us who didn’t even Google the name they picked for their company and didn’t know it was already taken. It’s an extreme example… but not too far off.

Dave: hard to imagine that a company seeking funding that would be able to get a meeting with a VC firm would come in that unprepared or unaware.

Wayne: it happens more often than people think. And in some cases, they’ll go so far as to skip over their research on the venture firm, and so fail to learn that the venture firm they’re meeting with has actually funded their biggest competitor. The reality is that part of competitor analysis is ‘how well do you know your business, your market, your customers’ and so, if you spend any time at all with your prospective customers, which you should, they will tell who all your competitors are.

Dave: what’s the worst ‘our competitors’ slide you’ve ever seen?

Wayne: I think the worst was just a complete disregard for that. I mean, there was no slide. And when asked about the competitors, it was clear that the company had not even thought about that they might have competitors. They just weren’t interested in having that conversation. And so, yeah that would be the worst one, when there’s just no recognition of competition at all.

Dave: So, some advice. What is one key element that founders should consider adding when they sit down to craft that slide?

Wayne: So, my perspective is that the best way to project a competitor’s slide is the feature-function-value” matrix. Show you have a really solid understanding your feature set. Cheaper-faster-better or not features. It’s about being able to articulate what is it that is really going to make the customer value your product over somebody else. So, having that voice of the customers, is the key features and you know a value equation, on that matrix. Also, need to focus both on the incumbents AND any other startups that are in the marketplace

Wayne Embrey can be found at https://www.rev1ventures.com/blog/author/wembree/

Why Venture Debt and Why Now? Q&A with Alkarim Jivraj

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For founders looking for funding sources, venture debt is emerging as an alternative to traditional venture capital rounds. I recently interviewed Alkarim Jivraj, the CEO of Espresso Capital, to get the basics. Based in Toronto, Mr. Jivraj has been involved in technology investment banking, venture capital, and venture debt for over 20 years, during which period he has advised or invested in over 200 companies.

Dave Hochman: What exactly is Venture Debt?

Alkarim Jivraj: Venture debt is exactly as it sounds: a term loan or line of credit used by startups and early-stage companies to fund their growth. Basically, venture debt is a less-known and less-utilized option for founders and CEOs of startup and early-stage companies to raise cash. The key distinguishing factor between venture debt and traditional venture capital is that with debt, founders and CEOs don’t have to give up control of their business to get the funding they need.

DH: How does it work?

AJ: In essence, venture debt functions similar to a bank loan, but it is available to startup companies that don’t necessarily have positive enough cash flow or significant assets to use as collateral to qualify for a more traditional bank loan.

DH: How does it differ from a bank loan?

AJ: Where banks may have a set-in-stone criteria used for qualifying borrowers, venture debt providers have the flexibility required to evaluate businesses on a case by case basis, looking at factors like the founders themselves, the product, and their go-to-market strategy. Unlike the banks, venture debt providers are able to look beyond simply the sales numbers to identify a future winner.

DH: How does it differ from a traditional venture capital investment?

AJ: When you give up an equity stake in your company, the more money you make, the more you have to give away to your investors. Using venture debt, you pay back what you borrowed plus interest – typically in the mid-teens – but in the long term, keep more of your hard-earned profits.

DH: How else does venture debt benefit founders?

AJ: As a general rule, companies tend to do better over the long term when founders maintain more ownership and control over their company. Venture debt allows entrepreneurs to retain this control and to grow their businesses without dilution, board seats, or personal guarantees.

Venture debt allows founders to retain both economic and strategic control over their company longer than if they were to fund with equity alone. When paired with private equity for seed A and B rounds, with venture debt comprising roughly one third of total funding for both rounds, pre-seed investors would retain an estimated 52 percent ownership versus 40 percent if the funding was comprised of equity alone.

DH: What are some common misperceptions people have about venture debt?

AJ: For first-time entrepreneurs, it can be easy to conflate views of venture debt with views about personal debt. They look at interest rates on credit card debt and see venture debt as the equivalent to living beyond your means and borrowing more than you can’t pay back. But, venture debt is essentially a replacement for equity which typically ends up costing two or three times as much in the long run.

Content Marketing for Startups ~ Do’s & Don’ts

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Content marketing is not by any means a new communications method or channel. Organizations of all kinds have been distributing their messages in various story forms throughout recorded history.

However, the increasing prominence of content marketing among corporations is relatively recent. This is due to the fact that when it comes to content marketing, the abundance of digitally based creation and distribution platforms available has lead to the removal of many previously existing barriers to entry.

While this development is as positive for startups as it is for any type of company, organization or person, it doesn’t mean that content marketing is necessarily any easier to master. In fact, executing a content marketing strategy effectively is a big challenge for startups. While a solid content marketing program can be a deciding factor in signing that crucial LOE and/or reaching the next funding stage, a poorly conceived one that sends the world the wrong messages can hobble a venture’s chances.

After consulting with some of the most well respected content marketing professionals who conveyed some practical advice on the topic, we learned the following tips:

Start early. You don’t need to wait until you have a product to launch a content marketing program;
Consider multiple delivery mediums. Whatever fits into your team’s capabilities and beyond;
Don’t fixate on writing;
Look for content and SEO synergies.

For this article, we interviewed the following people:

Joe Pulizzi Content Marketing for Startups ~ Do’s & Don’ts

Joe Pulizzi, Founder, Content Marketing Institute

Ann Handley Content Marketing for Startups ~ Do’s & Don’ts

Ann Handley, Chief Content Officer, MarketingProfs

Dave Toole, Content Marketing for Startups ~ Do’s & Don’ts

Dave Toole, CEO, MEDIAmobz

One of the major objectives of content marketing, according to the Content Marketing Institute, is “driving profitable customer action.” It seems fair to then question why startups…who may be far from identifying their customer bases, let alone profitable actions…should pursue content marketing at the early stages?

Joe Pulizzi, Founder, Content Marketing Institute: “Content marketing is especially important to startups because the content creation and distribution can play a huge role in helping to define the customer base. Look at what Hubspot did from the very beginning, as they developed their content around inbound and attracted thousands of prospective clients, who then became customers. Content marketing gives you time to build relationships with prospective customers and build a loyal following, even before the product may be ready.

Ann Handley, Chief Content Officer, MarketingProfs: “Inbound and content marketing is simply the most efficient way of driving awareness and interest in your start-up, and in starting a dialogue with your audience. If you have unlimited resources to spend on marketing, then maybe you don’t need to worry about content. But most companies I know don’t have that luxury.

Dave Toole, CEO, MEDIAmobz: “Content marketing provides a way to understand what communications resonate with prospects and a fast and iterative method of tightening up one’s understanding of the market needs. Of course, it also should increase conversion rates, as email still accounts for 80% of on-line communications.”

DO: Start Early

Consider the following scenario: the founders are all brilliant technologists, with great ideas to share, albeit with collectively less-than-impressive writing ability. From a tactical perspective, would you advise them to try to develop a style and write anyway, or simply focus the content effort around creating visual representations of quantitative data (i.e. infographs, charts, etc.)?

AH: “Content” isn’t just ‘writing.’ Consider a podcast, or a video series, or something else entirely. Charlie King is a well-known golf pro because of his well-known video series – he has something to say, he just chose the right vehicle to carry his message. Of course, I’d argue that the technologist with embarrassingly bad writing skills CAN become a better writer – with a little grit and some basic understanding of what makes for good content, in fact, that’s why I published the book Everybody Writes, because I believe we are all capable of better writing.

DT: “The overall role of marketing itself should be to use content to translate the brilliant ideas and thought leadership from the technology leaders. These days, there are plenty of resources that can help that brilliant technologist to convey their message; video stands out when conveying the personality of the people that stand behind a brand.”

JP: “I think that’s moving too far ahead in the process. First, we want to figure out what the story would be. What’s our sweet spot and what is a content area that we can be the leading informational experts on a subject? Then, we can define what the platform or mediums should be. It could be a video series or podcast series; it doesn’t necessarily need to be a written blog. That said, there are many founders out there who have written hundreds of blog posts and authored best-selling books, and they did so with the help of freelance writers. So, if the startup doesn’t have good writers, it shouldn’t be a stopping point.”

DON’T: Limit the Types of Mediums Used

As Google continues to focus more and more on finding and delivering quality content in search results, how can startups use this to their advantage when it comes to their content?

AH: “It sounds obvious, maybe: focus on quality content as a cornerstone of your marketing. It’s not just Google that wants that… it’s your customers.”

JP: “It’s not rocket science. Consistent, relevant content delivered on a platform that Google can access has been a winning formula for some time. The biggest key to success is to figure out where you can actually become the LEADING informational expert instead of duplicating other companies where it will take longer to break through.”

DT: “They are aggressively recruiting cloud applications and have offered much to those that want to leverage their tools. Keep in mind Google+ still is one of the more B2B-oriented social engagement points, let alone SEO, and don’t forget video is one of the top weighted variables when it comes to optimizing content marketing.”

DO: Consider SEO and Content Marketing Together

It is supposed to take some time to build an audience for content, and while we grasp the potential value content marketing adds, the reality is that startups are usually locked into a perpetually tight race against the calendar – how can this be reconciled? Should content be relegated until it can be done the right way?

JP: “The startup can begin the content marketing process before the product is ready. Yes, it takes time. If the startup wants to build a loyal audience in three months, they can forget it. Anything worth having takes time. But in 9-12 months can a loyal audience be developed? Absolutely. Of course, there are more and more exceptions to this (look at the podcast Serial and how fast that took off). And, it takes a while to find your voice with your content…so relegating it will delay this discovery process as well.”

AH: “There is no ‘right way.’ The important thing is to create a reliable schedule – and stick to it. You don’t need to publish daily. But you do need to publish reliably. Give your audience a chance to anticipate you, just like my parents used to anticipate the Boston Globe in the driveway every morning before 7 AM. You don’t need to be the Globe – the point is that you need to create a schedule.”

DT: “Not necessarily relegated, but acknowledge that it is a slow and lonely on-ramp for many. In fact, marketing technology provider Marketo says it can take over a year to translate and get inertia. Allocate at a rate that doesn’t put too much on this but enables you to get going.”

DON’T: Lose Patience

Building a bit on the previous DON’T, why not create and syndicate a high volume of content that can drive a lot of traffic, even if the conversion rates are low?

DT: “This is of personal preference, but consider that there was more content created in the last 2 days than in the history of the planet. That means there is plenty to grab from, though savvy buyers are looking for more content that actually adds value to their time in front of this content, so we need to respect that and make it original.”

AH: “I wouldn’t worry about the size of the audience. It’s more important to build and nurture an audience that relies on you.”

JP: “Just focus on the methods to build ongoing, loyal subscribers, regardless of conversion rates. If conversion is a big concern (building subscribers), then focus on amazing, downloadable giveaways that require email addresses (to build the database)”

DON’T: Look for Shortcuts

We asked our experts to provide some preferably recent examples/anecdotes of successful content marketing from a tech startup….

JP: “Copyblogger is now one of the fastest growing SaaS companies, and built that through their 200k+ subscribers. Of course, there is Hubspot, and other marketing automation companies like Marketo. BookBub and Buffer are also amazing examples of this. One of the best examples was Mint.com, who was bought out by Intuit.”

AH: “Lattice Engines does a great job. So does Open View Venture Partners – they aren’t a tech company, but they advise and fund those in the tech startup space. Probably my favorite example is Crowd Mics, because they tell their story in a simple yet powerful way. The best content is useful, inspired, and empathic to the needs of your audience. ”

DT: “Slack used content marketing to engage get feedback and rapidly build their business. We have clients that have now made this part of their culture. They go to an event and can predict the flow of content against the stages in the sales funnel and measure content budget down to sales conversions at the bottom of the funnel. More and more are recognizing that this is not only for attracting new clients but keeping those that you have worked so hard to bring on board, or even keeping your in house talent engaged with a sense of importance through content.”

DO: Look for Good Examples

Why Israeli Founders are Drawn to New York City

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According to a report issued in January 2016 by the IVC Research Center and KPMG Israel, 18 new venture capital funds closed capital in 2015, and four VC funds raised more than $100 million each, 59% of total capital. The Israeli business community enjoys a worldwide reputation for technology innovation and entrepreneurialism vigor — one that is very much disproportionate to its small size and population (just under 8 million, in a country about the size of New Jersey.)

It isn’t possible for Israel’s small domestic market to support all these startups as they scale, so it makes sense that most of the country’s technology startups almost immediately start to look abroad for new markets to enter, financial resources, and management talent that may not be available in Israel.

Various interests in China and India are working to attract Israeli startups, as are more traditional destinations like Australia, South Africa, and the EU. In North America, cities and regions with strong tech startup communities and established Israeli expat networks like Los Angeles, Toronto, Miami, and New York, are all obvious destinations.

Eyal Bino, 40, a New Yorker by way of Tel Aviv, came to the US to play college basketball after serving in the IDF’s Unit 8200 group (military intelligence.) After graduation, Bino stayed in NYC to work as a media producer and, after working business development for an education technology company both in Israel and New York, he launched ICONYC labs, based in NYC, a unique acceleration program to support early-stage Israeli tech startups scale and become successful global companies.

Many cities and regions across North America offer vibrant entrepreneurial communities and healthy technology ecosystems. The question is, why are so many early-stage Israeli founders naturally attracted to New York City? One of the main ideas behind ICONYC is that it gives New York-based VCs the ability to tap into Israeli innovation that they otherwise would not likely gain any exposure to. “They can tap into these great Israeli-based start-ups…at a lower evaluation than they would if the same company was based in New York,” says Bino.

Cultural Connections

From a cultural perspective, in many ways, Israelis often resemble the “typical” New Yorker. According to Bino, “Israelis and New Yorkers both operate in a state of permanent restlessness, where we want to make stuff happen and make it happen fast,” he continued: “also, it takes a lot of very hard work to build a company in New York, and Israelis are already known for being tremendously hard workers.” There also happens to be a very well-established community of Israeli-Americans in the New York City metro area, which offers a very valuable support network.

New York City vs. California

“There’s something about the ‘I want to change the world’ culture in Silicon Valley that is a little bit unnatural for Israelis, who tend to be more focused on building a company and growing revenue” says Bino. Sky-high valuations are also more prevalent in on the West Coast.

“NYC VCs, on the other hand, are more about the bottom line, and they tend to prefer funding events based on realistic valuation rather than sheer perception, and that approach is very attractive to the more pragmatic style that is characteristic of Israeli founders.”

Many Israeii startups that move to New York City do so because they complement its existing base of industry, something that obviously makes sense in terms of prospecting for business partnerships and overall prospects for growth.

“Many Israeli startups are leading advances, particularly in the realm of video and ad tech, so the prevalence of existing companies, brands and agencies that are in the media and marketing sectors make New York an ideal place for them to set up shop here,” said Chaim Haas, a long-time NY-based PR professional who has worked with numerous Israeli startups over the past two decades.

Another factor which Bino says matters dramatically is the 7-hour time NYC/Tel Aviv time difference vs. the 10-hour CA/Tel Aviv time difference. “One can wake up in the morning and actually talk to the tech team back in Israel, vs. if you’re in the Valley, the 10-hour difference makes that a lot more complicated.”

“Also, if you think about it, for startups focused on direct sales to other businesses, there is a real productivity ‘edge’ to being in NYC,” added Arie Abecassis, co-founder and partner, ICONYC labs. “Imagine how many NYC sales meetings you can do in the course of a day by walking to meetings, rather than being in a car?”

Challenges

This approach isn’t without its challenges, however. One of the most significant barriers Israeli founders have to deal with in New York lies in communications issues.

Israelis are used to a loose and informal communication style, which, unfortunately, does not always translate in the US business environment. This is not to say that a “language barrier” presents a problem. In fact, as far as fluency goes, educated Israelis are reliably adept with English (starting in 3rd grade) and many speak multiple languages in addition to Hebrew and English (i.e. Arabic, Russian, Spanish and French.)

The issue lies instead with Israeli founders, and how many of them seem to struggle with the idea that, no matter how impressive their underlying technology may be, they are not going to have successful meetings in New York if they cannot present a structured and well-organized company narrative. If an Israeli founder struggles to provide answers to typical questions during a pitch (i.e. who are your customers, who exactly are the competitors, what problems will it solve, how is it relevant to the targeted markets) it can lead to negative results.

“Israelis are gregarious, and don’t really like to communicate in soundbites,” says Bino.

In an environment where VCs are flooded with information, the ability to deliver a clear and compelling company narrative is more important than ever, which is why Bino males sure that “every founder we work with at ICONYC understands the importance of structured storytelling.

Silicon Alley – Then and Now

Author Dave Hochman 2 Comments

Working in tech PR in New York City during the booming-then-crashing late 1990s/early 2000s, one definitely experienced a strong sense of place. “Silicon Alley – Then and Now” describes a unique and influential New York-based start-up economy powered by the cultural and financial cross currents between the worlds of technology, media, and advertising.

This article will examine from a sociological perspective (rather than a technology-based or financial-based one) the tech startup environment in NYC today, as contrasted with the era of the late 1990s. To that end, we spoke with Bob Johnston, who leads the New York Venture Capital Association (NYVCA), which serves as a united voice for New York’s venture capital and entrepreneurial ecosystem.

The Exit Strategy

David Hochman: The most commonly desired liquidity event for the Silicon Alley startups of the late 90s was an IPO. What would you say the most common exit today is? And why?

Bob Johnston: Great question. I guess I’d start by breaking down commonly desired exits into the most common exits versus the most desired exits. The two most common exits in the NYC start-up world taking place in the last few years are 1) private acquisition and 2) Acqui-hire –which is, ‘hey we want your people’, and we’ll give you a steady paycheck, which we’re seeing especially with earlier stage startups. The acqui-hire might involve stock and the promise of a steady income, and that’s different than the more commonly desired outcome, but also better than going under.

As far as most desired exits these days, we are seeing a solid trend over the past 6-12 months where later-stage startups are preparing for IPOs. There is some resistance towards that sentiment on the part of their board members {if not necessarily the founders} who were down on the public markets for a period. Ultimately, it depends on who one talks to – the founders, or one of the investors….or one of the board members. The economics of a venture fund can be mysterious and depends on where they are in the life cycle of the fund. For example, if they’ve got four years to do their investing and they’re on year 3, they’ll likely be a lot more conservative in that final year of investing but may want to have a really powerful exit.

The founders always have a dream of a BIG sale. Whereas back in the late ‘90s, it was all about the IPO – to the point where if an exit involved a private sale, it was not perceived to be a massive success.

David Hochman: So from where you sit, you see the typical NYC startup founders of today still always have that dream of IPO or “Big Sale” liquidity event – just like their late ‘90s predecessors?

Bob Johnston: Definitely. And there are a few I’ve seen as well that merge and grow so it’s kind of ‘growth through merger.’ We’ve seen a handful of those deals, and we may in fact see them a lot more because there has been so much activity around seed-stage fundings recently.

Location Matters

Dave Hochman: Silicon Alley’ in the ‘90s was the Flatiron neighborhood, maybe some parts of TriBeCa as well, and now its really the entire city, with thriving tech startups in every borough, if not every neighborhood in every borough. I want to know what your perspective is on what really enabled this to happen, and why is that better (or not)?

Bob Johnston: The spreading out of “Silicon Alley” signifies the growth and maturity of the tech industry, so that’s a good thing. The tech industry was super young here in the late ‘90s, and now it’s 15 years later. Sure, there were a bunch of those years in between then and now there was sort of a lull, but there were cycles and people learning. I don’t think the entrepreneurs are smarter than they were 15 years ago but I do think learning important lessons – watching others, watching friends start businesses, reading, learning, studying – you’re going to get better.

Most of the bedrock industries in the city from healthcare, financial services, media, retail, fashion, and so on, all have a ‘tech layer,’ which is an entrepreneurial layer on top of the those established traditional industries. And it’s that tech layer in each of those bedrock industries that’s vibrant and drawing talent from the established companies all across the city and launching these great tech startups. So to answer your question, definitely better, because even if there is a bursting bubble or something, those industries are completely solid. Particularly the startups within those industries- totally solid. The bottom won’t fall out because there is a different kind of maturity and there is some really good thinking around structuring your investments and structuring your talent.

What’s Next?

Dave Hochman: Do you want to mention any specific industry sectors that characterize the current crop of NYC tech startups? You mentioned several; can you highlight two or three?

Bob Johnston: Clearly adtech, there are a TON of local companies in that space. Fashion is really interesting. What I would look for in the next year or two is an increase in investments in devices, therapeutics, mobile – related to digital health and bio. I think that health and bio is an underserved sector in NYC. Investors are actively looking to plant money in healthcare startups around here. I think less so in adtech over the next several years. I don’t think I would want to be a founder trying to get out of the gate right now in adtech. There are pockets of adtech that are going to get funded if they have something interesting. But it’s pretty hard to get properly funded. How much more innovation can we do on the ad unit? It’s basically a race to the bottom.

Lessons Learned

Dave Hochman: What are the big lessons, you think, that the current crop of founders have actually learned?

Bob Johnston: I think the big lesson is to put risk where it ought to be. If you think about the risk equation, one can mitigate risks upfront, and then have a better long-term shot at success. I don’t think that the notion of mitigating risk was top-of-mind in the late ‘90s. I think in the late ‘90s it was ‘growth, growth, growth.’ How many eyeballs you got? Whereas by contrast, today’s entrepreneurs are very focused on mitigating risk right out of the gate. The other side of that coin is obtaining proper growth and setting expectations with your investors. These days, it’s okay to have a frank conversation with your investors on growth. It doesn’t have to be ‘hockey stick’ growth but it needs to be on a glide path to really good growth

Dave Hochman: Why can’t or won’t this situation end up like Silicon Alley 1.0 i.e. crashing on the rocks? You pretty much answered this already, but if there is anything you want to add….

Bob Johnston: Yes, like I said earlier, today’s founders aren’t necessarily smarter or dumber than they were years ago — I just think enough time has gone by which has given them the ability to study others. So, when they start, they really have thought through how to make money and how to build an organization, which is a much more pragmatic way of doing it. Maybe they’re more pragmatic and less visionary. You need to have a vision if you’re an entrepreneur, but the NYC tech startups today are pretty pragmatic when it comes to the nuts and bolts of running the business. That was sort of less so in the late ‘90s.

How to Master the “Competitors” Slide in Your Pitch Deck – Q&A with Wayne Embree

Why Venture Debt and Why Now? Q&A with Alkarim Jivraj