By Roy Goldenberg
Globes, Tel Aviv, Israel.
It isn’t easy founding a start-up, even for a great idea. Four top investors and entrepreneurs offer some tips for beginners.
MyHeritage Ltd. founder and CEO Gilad Japhet. The genealogy social network, which has raised $49 million, was chosen as the most promising start-up by “Globes” in 2013.
1. Do your best to finance your company yourself until you are able to obtain traction from customers. It will be worth it. You will get more interest from investors and a much better valuation so your investment will pay off.
2. Always check and perform due diligence on the investment partner before raising funds. Not just from business side but also personality side. You may think the money is important and the personality isn’t, but then you may find that you are stuck with someone unpleasant for the rest of your journey. Kickstarter and the likes are great sources of funding, check if they are applicable to your business.
3. Growth is the drug of the Internet. Companies that are growing fast are excused if they are not profitable or do not even have revenues. Challenge yourself to ensure that your product/business is going to generate sustained strong growth for years. If you think the answer is negative, consider changing your plans. It is not always necessary to think prematurely about monetization and cash flow, which is liable to affect the distribution of the product and limit the business’s growth potential.
4. Grant stock options to ALL your employees. Everyone should be motivated to make the business a success.
Lool Ventures founding partner Avichay Nissenbaum. He has signed off on two exits, with the sale of SmartTeam and Yedda. He previously served as a VP at AOL Inc. (Nasdaq: AOL) and manager of AOL Israel Ltd.
1. Know how to tell your story in a clear, crisp, and engaging manner. Will your mom understand it?, a friend ?, your employees?, your potential customers? People have very brief attention span today — your story needs to come across in a short, dynamic way. Your narrative should relate to the user of your product, talk about product values and benefits rather than technology and features.
2. A start-up’s journey is like a rollercoaster — a lot of ups and downs. It is therefore necessary to build a team of winners and not whiners. You need people with conviction that can continue forward even in tough times. Build a team that complements you
3. Always seek people that know more than you on the subject matter. Focus on defining the KPIs (Key Performance Indicators) that drive your business and maximizing them: the number of active users; the number of deals; the number of paying customers, and so forth, depending on the kind of product or service you are offering. Achieving KPI success is important because it proves that there is a need for your product and that it is “world class.” This success also demonstrates that you able to communicate your story to your target audience and that your technology works and scales.
Rhodium Ventures founder and CEO Daniel Recanati. Rhodium has invested in scores of start-ups to date, including face.com, which was sold to Facebook Inc. (Nasdaq: FB), and HopStop, which was sold to Apple Inc. (Nasdaq: AAPL).
1. Believe in yourself, seek advice as much as necessary, and do not hesitate to think big and long term.
2. Meticulously pick your partners for the road, whether they are other entrepreneurs, employees, or investors.
3. Try to reach your target market as soon as possible in order to know the new trends in the environment and to find customers and sites for pilots.
Urban Compass Ltd. co-founder and executive chairman Dr. Ori Allon. Urban Compass has developed a technology platform to change the global real estate market. It has raised $33 million at a company value of $150 million. Allon previously founded and sold companies to Google Inc. (Nasdaq: GOOG) and Twitter Inc. (NYSE: TWTR).
1. Entrepreneurs do not need to try and solve very specific problems, but should think big and try and solve big problems that will affect a great many people. If you start there, it is fine to subsequently focus on something specific, but the company’s vision and the entrepreneurs are doing should be big, not a niche.
2. When seeking seed financing, you should go for the smart money, and not the big money. There are investors who might help boost the company value, but will not necessarily help you down the road. There are funds that help with networking and ties, business development, provide a base for the products pilot, and so on. It is also worthwhile considering strategic partners, which might not make the largest financial offer, but will give you added value later.
3. It is not enough to build a good and amazing app and put it on AppStore. There is no magic charm to make people start using the app. People develop very good things, but no one hears about them. Sometimes, companies do not succeed not because of the product, but because they fail in user acquisition. It is therefore necessary to think about how to win users; do not imagine that they will come to you.