Startups chasing startups – check these boxes first.

Two of my mentors and colleagues, Bernd Meier and Nick Efthymiou, passed away a few years back. Aggressive cancer claimed both of them quickly, and I am sad they are not here today.  To sit beside them at the time, as well as Steve Humphreys, Robert Schneider, and Ed Macbeth in the same business…wow I didn’t even know what I had.

I was in my late 20s, and business trips meant heading out to The Beltway with the coolest sales guy we had.  We’d kill it in our meeting with a Federal systems integrator, and close out the night doing donuts with our rental car while we tested the e-brake.  Fun times.  I was on the hockey stick pay scale as a quickly growing product manager in the Valley.  I had my pre-IPO stock options.  I was with a global company traveling the world.

What I didn’t realize at the time is that these men were teaching me things that I would carry forever.  I was learning how to build a business.  Build a real business because we were selling to real customers.  We were a startup designing and selling products to big fish out there (Dell, Northrop Grumman, Sun Microsystems, Microsoft, DOD, SanDisk, Hitachi, CableLabs, etc.).  Our partnerships were done the same.  We only spent time with those partners in our ecosystem that helped us get better access and closeness with the customer who would pay us.  We mapped out the ecosystem.   We knew the partners we need to work closely with.  We determined the win-win.  There was a goal in mind — to deliver something of value to our customer together.   We didn’t waste time talking with partners who just wanted to talk with us.  We weren’t allowed to sit down and have meetings to “find out how we can work together”.   We sat down with a purpose.   We were careful in being a small company and parntering with another small company — because we knew ourselves and what we were capable of, but we didn’t really know what was driving them.

Since that time I’ve worked at bigger companies and forgotten what it was like to be small.  Now at StockTwits, I’ve come full circle back to small (and growing fast).  Only “small” in that we have a small team.  We are focused.  We are quick.  Our future is getting clearer.  We have an absolute kickass team that Howard Lindzon has build.

This being said, two times in the past two months I’ve slipped from my roots and not gone “big” with partners.  I’ve relied on smaller companies for key components to my solution, and I’ve had poor results.  I slipped.  I thought since they wanted to do it, they actually COULD do it.  I let my vetting process down.  I got excited about time to market. I didn’t map out the ecosystem well enough from a product perspective.   Then next thing you know it doesn’t work, or it’s not as advertised, or they shifted focus because their business model dictated it.   Now I’ve wasted precious engineering time and resource…not to mention just wasted their time as people.

This morning Howard Lindzon passed me this tweet:

 

 

The tweet linked to this well written article about Twitter (a startup we all know) and how they continue to shift the techtonic plates underneath their platform – impacting tiny little startups trying to find their way.  It sucks to be those startups.  At the same time, I go back to Bernd and Nick and think about who I am relying and depending on to build my business.  Yikes, relying on a startup that doesn’t yet have it’s business model, to build my business that doesn’t yet have a true business model?

StockTwits started on Twitter, but built its own Twitter.  StockTwits invented the freaking $ sign that powers every single stock conversation on Twitter.  We are not reliant on Twitter.  We have since found a few ways to build our business.  We are talking to bigger and bigger companies everyday.  Companies that have the following criteria that we in the startup world should check as we engage our precious time, ideas, and venture capital:

1) Do they have their own conference calling line (that says, “Welcome to IBM conference calling” when you join), and a corporate web conference solution.  If so, then you are pretty sure you are dealing with the real deal.

2) Do they have paying customers?  Lots of customers?  Multiple lines of business?  If so, then they are likely generating revenue, move slower, and if you think how you can solve problems for them, they will take you places.

3) Are they willing to pay you?  If they are.  Then that is a good thing right?   They may ask you to do things that deviate slightly (not dramatically) from your roadmap, but if you price it right it could take you places.  Heck you think you know where you are going today, but you really don’t.

My advice is to be very careful before you hitch your brilliant idea on top of another startup.  Do you know them well?  Do you know the integrity of the senior management team?  How has the company behaved with partners in the past?   If you aren’t comfortable, then find another sandbox.  One that meets the three points above.  Come back to that sexy startup another day.  If they are any good, they will some day no longer be a startup, they will be successful.  They will need new things because they are too slow, and that will be your time to help them – and your business.

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