Announcement highlights

• Thread.com (formerly Frintro) raised a $1.2M seed round of financing. The seed financing included participation from fbFund and was led by First Round Capital. Others included:
  • Sequoia Capital (Roelof Botha, Partner)
  • Founders Fund (Dave McClure, Investor)
  • Ron Conway (Founding General Partner at SV Angel)
  • David Sacks (CEO at Yammer and Geni)
  • Auren Hoffman (CEO at Rapleaf)
  • Pedro Miguel Martins (Sr. Dir. Corporate Strategy at SAP)
  • Reid Hoffman (Chairman at LinkedIn)
  • Joe Greenstein and Saran Chari (CEO and CTO at Flixster)
  • Shervin Pishevar (CEO at Social Gaming Network)

  Thread.com uses Facebook Connect to create a site for social dating via friendly intros. You can learn more about Thread on the Facebook blog.

• Nutshell Mail raised over $500k in funding. Nutshell Mail uses email to help you manage your social network activity.
• RentMineOnline raised over $300k in funding have been profitable for the past 4-5 months. They combine the success of resident referral programs with the power of your friends on Facebook.
• Sociable raised over $150k in funding. Breakeven by Q4/09, Sociable is building a comprehensive solution for online retailers to drive sales via the power of online friendships.
• WildFire Apps achieved profitability over the summer. Their product lets you create Facebook and social media and promotion campaigns for businesses. They have multiple brand-name customers (Pepsi, Redbull, Zappos to name a few).
• Zimride signed 25-30 academic and corporate customers across the country and formed an exclusive partnership with ZipCar. They are projecting break-even by Q4/09. Zimride helps classmates and coworkers share the ride.
• Two other companies, GroupCard and NetworkedBlogs, will achieve profitability or break-even by end of 2009.

republished from developers.facebook.com

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Dan Olsen (@danolsen) gives a really interesting talk on best practices in making good product decisions: understanding user needs, prioritizing features, UI design optimization, and metrics.  Dan is CEO and founder of YourVersion, “a real-time discovery engine that continuously finds new, relevant content for you based on your specific interests.”

Regardless of what product or service you are providing, the most important thing is that your product meets a customer need that is not well met by existing alternatives. If you accomplish this, both the customer and business sides of your business will be aligned.

Olsen introduces the concept of the problem space versus solution space to help think about product management and design. The best products are very clear about the problem space and then iterate on the solution space. The common error is “living” in the solution space without understanding the problem space.

Dan uses the problem/solution space as a way to think about prioritization where you measure importance of user need (problem space) versus satisfaction with product (solutions space).  The complex thing about prioritization is that you’re doing it across many dimensions at the same time such as customer understanding, functionality, quality, and ease of use. It’s important to have a defined, small scope while knowing what you are NOT doing. If you break everything down using this framework, you can have faster iterations, get quick feedback, and have a more targeted product that better addresses user needs.

Olsen then touches on the design aspects of early stage product management. UI design consists of three elements: Information Architecture, Interaction Design and Visual Design. Visual design is what most people and users react to. The next step is then user testing.  Olsen sets up a good framework to get the most out of user testing. Both these items are discussed in greater detail in the slides.

Olsen spends the last part of the presentation talking about measuring qualitative and quantitative information, when to track metrics, tools to understand user behavior,  and how to think about UI design analytically. Check out the slides and podcast!

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fbFund REV in- house entrepreneur, Andy Stack, shared do’s and don’ts and other tips on IP, employee, and legal issues.

The three most important takeaways I got from Andy were:

1) Don’t forget about this- 83B election. File this within 30 days of stock issuance and it can provide you favorable tax treatment that will save you lots of money.

2) Get your IP assignment protection correctly from the start and make sure you have a good law firm to review.

3) Know when to call in the experts (lawyers) but don’t let a law firm run your business. When faced with a legal gray area, asses the risk yourself and consider the impact of asking for forgiveness instead of asking for permission first.

Intellectual Property

Intellectual property generally includes innovative ideas you develop and code. But when do you patent? When do you copyright? You can’t reasonably copyright every business plan and every document, but try to make many of your documents confidential, and reduce the risk that your work will be passed around. Patent tip: if you have allocated a budget for patents, do multiple US patents as opposed to one international patent. Patent Tip: If you have the money and time, it is worth it to just file the whole utility application instead of a simple provisional application. The effort to detail out the full application early on will pay off; too many times people find that in flushing it out later there are parts not under the scope of the simple provisional they filed.

Employee issues

Try to minimize paperwork, but aim for two employee contracts; you can have one comprehensive contract for the employees that are fully immersed in the product and service, while a second lighter consulting contract would suffice for employees working at a contracting level maybe doing PR or finance or anything not core to the IP of the company. Minimizing non-employee shareholders in the company is also a smart move. An early stage startup will often have contractors or employees that only work with the company for a short time; mitigate annoyances by thinking early about your cap table and establish a cliff at which to start giving employees equity. Stock tip- Get Restricted Stock Purchase Agreement if you can (it’s the more tax favorable way to go).

Working with law firms

You don’t have to work with just one law firm. Consider working with a different firm for your trademarks and patents. Be on the lookout for startup-flexible law firms. You want lawyers that will explain the risk and let you run your company. It’s also crucial that you understand and minimize costs. Know the rates of each team member. Prepare what you want to talk about before you even pick up the phone with your lawyers. Finally, look to see what you can do on your own. For instance, get contract templates early on from your law firm. Then make modifications on your own.

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Dan Arkind is the CEO & founder of JobScore, a free applicant tracking system and resume database for small companies.  Dan has been helping to build startup teams for 15 years. He recently stopped by FBfund to offer some tips and tricks to optimize startup hiring. Here are a few key takeaways (hire hacks):

• It’s great if you can hire people that you know and trust from your network, but it’s not scalable. The hard part, and the true test of successful startups, is the ability to attract amazing people that you don’t know

• Recognize that hiring, fundamentally, is a sales process. Arkind affirms: “You have to sell before you assess. Half of a startup’s early sales activity is interviewing and hiring people. It’s the entrepreneur’s responsibility to turn every interviewee into an advocate for the company. Job one is not to figure out if someone is good – it’s to get them fired up and get them to tell other people about what you are doing.”

• Spend 80% of your time on your story. The easiest and best way to build a candidate pipeline is to have a very short, repeatable compelling story. If you do this right, each person you meet with becomes a mini-recruiter because when they leave they are out telling your story and getting other people excited.

• Just as every company has a story, every position has a story. When pitching specific jobs, it’s not about the laundry list of things you want someone to know. Job descriptions should get people excited, explaining discrete cool things you are going to pay someone to learn — and how they’ll be able to make a meaningful impact by joining your company.

• Ask for advice, not referrals. It’s best if you call people you know and describe a problem you are having and ask for help (which will prompt them to refer you to awesome people who solve problems) than to call them and ask if they know anyone looking for a job (which will prompt them to refer you people who are unemployed).

• Hiring is incredibly time consuming.  Once your story is working, write it down and ask people to read it before they speak with you.

Listen to the podcast below and flip through Dan’s slides to learn more!

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There is only one chance to make a first impression! A domain is the first thing that users will see and learn about your business.

As much as possible, Krutal suggests to have a domain that pertains to the business. The best traffic is direct traffic. Make it as easy as possible for searches to land on your site. Other quick domain tips: look for older domains, get sites that ends in .com, avoid names that are hard to spell, and use hyphens only when key words are questionable.

Doing some domain homework should include researching domain history, measuring customer response early on (before even acquiring the domain), and weighing alternatives.

In the negotiation and acquisition stage, Krutal recommends honing negotiation skills buy doing mock bids on domain sites like namepros. That way, when it comes time to really buy a domain, there is a smaller margin for error to getting what you want.

In approaching a seller, Krutal says to try and understand the domain owner’s background and their industry experience. Building a positive relationship early will become important during acquisition time and beyond.

If the startup is serious about the domain it really wants,  it’s not a good idea to put down a low-ball, non-serious offer when negotiating a bid price. At this stage, its important to use a comprehensive approach to put down an aggressive, realistic offer, based on some of Krutal’s tips mentioned here and in the podcast.

After acquiring a domain, there are a couple payment options.  Paying in cash is the most common method, but there’s also the option of giving equity, and leasing the domain. A good rule of thumb is to use an escrow service for domains over a grand. Lastly, read and understand domain transfer principles.

Krutal dishes out plenty more tips on how to find, negotiate,  snap up, and test the best domains in the podcast.

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Sean Ellis, founder and principal at 12in6, discusses what he calls the “Fail Zone” for startups. All the risks and challenges are front-loaded, so essentially a startup will face the critical hurdles that will determine its success or failure, in the first year.

Ellis uses the “Startup Pyramid” model to explain his bottom-up approach in tackling early stage decisions and challenges.

Product/Market fit is at the base of the pyramid. Does the company have a strong product/market fit? Ask the question, “Is the product a “must-have have or a nice-to-have?” Does the value proposition then attract the right users? Is there a commitment to the conversion process and the initial user experience? The economics model, optimization strategy and scalability plan, should enter the picture only after there is a clear, strong definition of the product and market.

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Rob Fan from Sharethrough talked about how to rapidly prototype a product and kickstart a startup using the lean startup methodology.

Fan introduces the lean startup methodology as the model to run a startup. Eric Ries also discussed this methodology that focuses on customer development, continuous deployment, minimum viable product, and actionable metrics.

A key takeaway is that product development and customer development should happen in tandem. As you develop a product, release build cycles on set regular intervals and concurrently implement a feedback loop to receive customer feedback. Customer development should work as a driver for product development and also to organize and formalize inputs. Fan echoes what previous presenters like Dave McClure have stressed; It is a waste of time to build product and add features without understanding your customers. Fan also makes the point that failure is okay within this model, because you fail fast, learn fast, and move on.

Super interesting talk that lays down the basics about the lean startup methodology and how to rapidly prototype.

http://fbfund.com/media/Wk4_RapidPrototyping.mp3[/podcast]

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Dan Greenberg from Sharethrough drew on his experiences to talk about revenue models and using time wisely in an early stage startup.

Dan supported the emphasis at fbFundREV of releasing many iterations, testing often, and learning quickly.  Originally Facebook app developers, Dan and his team were able  to quickly and cheaply test different concepts, revenue models, and optimization strategies.   Using lessons learned from their Facebook app experience on innovative revenue models and viral growth strategies, they founded Sharethrough, a tech-driven social marketing platform that helps app developers make money by integrating shareable media from brands on their social apps and sites.

View more presentations from fbFund REV.

Dan’s key insight is that the goal for most early stage companies should be to focus on building the product, not on optimizing to get the most money out of current traffic.   Without a successful product and active users, a finely-tuned revenue model doesn’t amount to much.  In the long run, decisions that drive product growth and user engagement are what will drive more users, more user engagement, and ultimately more money.   Dan uses the 80-20 rule to talk about how to split up time; in most cases, you can optimize your current revenue to 80% of its potential using 20% of your time.

Dan discussed some existing revenue models for social apps, that are useful to startups considering  new models or testing out different ones.

Virtual Currency (let your users give you money)
Gambit, Sometrics, Offerpal, SuperRewards

Video Integrations (make money when your users watch videos)
Sharethrough*, RockYou, VideoEgg
* Sharethrough helps developers make money by syndicating media through social apps. It’s a new and incremental revenue opportunity, because developers can leave their current ads running and it doesn’t affect other monetization strategies.

In-App Interstitials (integrate an ad impression as part of the flow)
Sharethrough, Cubics, Do it yourself

Brand Takeovers (pimp out your whole app with a brand campaign)
Appsavvy, Direct relationships
You need to segment your audience and have a well-defined niche in order for brands and marketers to come to you with targeted, branded ad campaigns.
Marketers want contextual and social relevance, more than targeting.

Sponsored Content
Viximo, AdNectar

Or……….Invent Your Own!.

Dan explains the models in more depth on the podcast and in the slides!

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Dave McClure of Founders Fund (who also runs fbFund) talks about startup metrics for product marketing and product management, emphasizing the importance of a measurable feedback loop that startups use to iterate.

Dave prefaces his talk by stating that the most important thing about web businesses and web 2.0 businesses is that you can collect usage metrics in real time. The hard part part however, is then being able to make decisions with this data. It is important to understand how to collect and use these metrics, and thus important to develop a decision-making framework for product development and product marketing. The framework should be based on goals that are measured through discrete customer or company events that have either customer or business value, ideally looking for happy medium of value to both the customer and business.

Dave suggests that one of the biggest mistakes many startups make is equating progress with adding more features (see Eric Ries). Engaging and activating more users is less related to the number of features and more related to the user experience at a basic visual level with text, images, colors, call-to-action buttons, and the overall size and placement of these elements. Often startups underestimate the value of user experience at the early customer acquisition and activation level, when it is crucial.  Subsequently, investing in user experience resources early is key and the impact can be significant. The actual quality of features is more important at the macroeconomic, customer retention stage.

Events should be measured in a simple discrete way and Dave uses the acronym AARRR (hence the pirate reference) to introduce five main steps or ways in which to bucket the events you are measuring. The goal is to create a feedback loop that makes the metrics you gather drive a decision process for product features/marketing efforts.

Here are the 5 main steps to AARRR:

Acquisition: The various ways you acquire users/customers, via the distribution channels that bring them to your product or service (paid or organic search, social media & social networks, apps & widgets, traditional PR, affiliates, etc).

Activation: The “happy” first experience where users take some kind of activation step (click on a link, provide an email address, buy something).

Retention: Creating repeat and regular visits from your users (weekly emails, blog posts, periodic notifications).

Referral: Users tell other people about your service (viral loop, forward email to a friend, send a link).

Revenue: Users conduct some monetization behavior, either direct (e-commerce, subscriptions) or indirect (advertising).

The podcast and slides go into depth on each of the five steps and how to measure different customer events. Check them out!

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