The Best VC Meetings are Debates not Sales

August 25, 2009

nixon kennedyThis is part of my blog series “Pitching a VC.”

I’ve sat through a lot of VC pitches and having been CEO of an enterprise software firm for many years I’ve also sat through many customer meetings with sales teams.

There is one classic mistake that I see across both types of meetings – “the tell & sell”  presentation.  This involves a person who leads a PowerPoint presentation in which the presenter feels more comfortable racing through pre-practiced slides and rattling off charts & bullet points than having a discussion.

The presenter comes out of the meeting proud at having gotten through all 30 slides (and maybe even a demo) with a bunch of smiling faces and nodding heads and no discussion.  After the sales meetings I would ask the exec afterward, “how do you think it went?” and always be surprised when they’d say, “great, I think they really liked it.  They seemed to agree with everything I said.”

In our internal sales training sessions I would always teach our young sales execs that this seemingly good meeting was probably not as good as they thought.  People are much more likely to buy into you as a person and us as a firm when they’ve been involved in a discussion with you about their problems, your solutions, who else has been using your product, etc.  They might even like to challenge some of your assumptions.

The advice I gave to my sales execs is the same advice I would give to you:  smiling, nodding heads are normally not a great sign.  In the best case they might prefer to ask you questions but you didn’t prompt them and they’re being polite (although this is less likely in VC who are not known for being wallflowers!).

The VC might have tried a few times to prompt a discussion and you didn’t take the cue but instead reverted back to slides.  This happens often and I bet most presenters never realize it.  Most worryingly, many times it means that they have decided that they are not interested in your product (or investing in your company) so why bother having a debate / discussion with you.

It is easier for them to finish up 45 minutes, politely shake your hand and say, “we’ll get back to you”  once they’ve had a chance to “noodle on it.”  Ever heard that?  Far better that you noodle with them.  I believe that the best meetings are debates.  The following are some tips for the discussion style VC meeting

UPDATE: My initial post talked more about a debate than a discussion.  David commmented here that the problem with my phrasing it as a debate is that I don’t want to encourage any entrepreneurs to think that they should try to “win” the discussion by proving they are right (as you might do in a debate).  So I’m softening my message to “discussion.”  See note at the end of the post for a funny story on this.

Tips in a discussion led VC Meeting

questions1. Tee up your slides to prompt questions – The best way to avoid racing through your slides in a tell & sell style is to tee up your slides to prompt questions.  We used to do this in our sales slides.  After walking through the “problem statement” slide, the build on the bottom of the slide would always say, “Have you experienced similar issues in your company?”

It was just a way to remind the sales rep to create a dialogue.  If you get nervous in meetings or have a hard time remembering to stop you can simply build the prompt into your slides.

2. Stop often and seek feedback on direction – In addition to asking questions to prompt a debate you should always check for feedback from the VC.  Examples are “would you like me to go into more details about how we calculated the market size?”, “would you like me to tell you more about the team members who aren’t here,” or “would you like me to jump into a product demo now or tell you more about our market first?”  Be careful not to jump into a long-winded discussion on any topic without seeking cues from your audience on whether they’d like to go deeper on the topic or move on.  I think this is one of the single biggest mistakes that presenters make.

3. Be careful about the way you ask questions – I’ve sat through many meetings with groups of people where the presenter would say something like, “Do you know what REST is?” or “You know the company Constant Contact, right?”  Questions like this in a crowd often elicit “yes” answers even when people haven’t heard of the technology or company.  Most people in general don’t want to admit in front of peers that they haven’t heard of something that they think they should know.  If your presentation requires an explanation of RSS vs. ATOM always best to say, “let me quickly state how RSS and ATOM are different.  I know you might be aware of the differences but let me quickly cover it and if you want me to go deeper I’d be happy to.”  If the VC knows the difference TRUST ME they’ll tell you.

4. Don’t be defensive – Don’t view any question by a VC as an affront to you.  I know that they could have worded it more politely and in a less condescended tone, but view the question as an opportunity to have a great discussion.  View the question as engagement!  Remember that a VC doesn’t always care that you have “the right” answer provided that you have a high quality thought process.

parliamentHaving a discussion is a great way to build rapport with the person asking the question.  It’s OK to say things like, “I could see why you might think that Google would go into our market.  It’s a valid concern and we worry about it, too.  Here’s why I think Google won’t initially be a threat to us and how we would respond if they entered our market …”. So the next time you get a zinger from a VC – be thankful.

5. Answering with a question – Another suggestion is the “answer a question with a question” technique.  First, you must actually answer the question that was asked with you before you ask a question back.  It’s really annoying in any meeting when you answer a question directly with a question.  But it’s OK at the end of your statement and it’s a great way to get people talking.

Example:

VC, “Do you really think that customers will pay $5,000 / month for your product when there are free versions of X,Y,Z on the market?

You, “We’re not too worried about the free products because they target a lower-end segment than we’re targeting.  We tested the $5k price point with a handful of customers and they didn’t seem price sensitive … From your experience do you think $5k price point will likely be an issue for us?”

6. Don’t be afraid to say “I don’t know” – I don’t think any VC is looking for the entrepreneur who knows everything.  In a way I think most VC’s want to see that you’re mentally flexible, sufficiently humble and not afraid to admit when you’re wrong or don’t know something.  For many difficult or unknowable questions don’t be afraid to say “I don’t know.”  Some obvious things that are not acceptable for the don’t know answers: “how will you spend the $2 million once you raise it?”, “Who are your competitors” or “Who do you need to hire first after fund raising.”  You’d be surprised how many people don’t answer these questions confidently.

7. Get back  with an answer – There are two great things about saying you don’t know the answer to a difficult question.  The first is that you have a chance to ask, “do you have any views on the topic?” and thus hit the goal of getting the VC talking.  Even more importantly you have the ability to say, “that’s a great question.  I’m not actually sure what the answer is.  I’ll look into it and get back to you.”  It gives you an opportunity to email the VC after the meeting with more information and the potential to continue the dialog.

UPDATE:  We once had a company present to us in a full partner meeting.  The presenting team had a partner champion at GRP that was advocating the deal so we were positively predisposed to seeing the pitch.  It mid 2008 and one of my partners asked what they were going to do about costs given the recession.  The COO of the company said that he had read some economic council’s forecasts and technically we weren’t in a recession.  My partner shot back with data of his own.  A real debate ensued.  It wasn’t pretty.  I kept wondering, “why would this guy want to have a debate over a topic like this that had no relevance to proving whether his business idea was sound?”  In the end we didn’t invest.  A large determinant was this gentleman’s lack of EQ in this situation.


WTF is Traction? A 6-Step Relationship Guide to VC

August 8, 2009

iStock_000009170146XSmallThis is part of my ongoing series “Pitching a VC” – the outline is here.

You’ve pitched several angels and VC’s.  Everybody seems to like you but nobody seems to be getting out their checkbooks.  Most of them are telling you that they just need to see a bit of traction before they’d be prepared to invest.

Your friends and advisers tell you that this means you need revenue because in this economy VC’s will only fund businesses with revenue.  Unfortunately your advisers are wrong.

The “more traction” feedback is a very typical scenario is a down market economy like the one we’re in.  Investors are giving you a version of the “soft no,” which basically means that they’re not prepared to invest now.

So if it’s not necessarily revenue that’s preventing an investment, then WTF is traction?  Unfortunately there is no real objective measure.  Traction can simply mean showing that you’re making progress with customers, product development, channel partners, initial revenue as a proof point, attracting well-known angel investors, winning industry awards / recognition.  It is code word for “I’m not ready to invest for whatever reason … I need more proof.”

Now there are some firms that have strict rules about not funding pre-revenue companies – that’s different.  But many Series A firms tell people they have a “revenue rule” and then you look at their portfolio and see many exceptions.

Traction really is about building a relationship with a VC over time and showing them that you can move the ball forward.  Many entrepreneurs make the mistake of thinking that funding is something you do in “funding season,” some mythical  2-month period when you’re ready with a great Powerpoint deck and you hit up all of the VC’s at the same time so that you can quickly raise money and get back to the job of building a business.

Fund raising is an ongoing process and not an event on a workplan.  You need to build a relationship with investors over a long period of time.  That is how you convince VC’s that you’re gaining “traction.”

6 Steps to Building a Relationship with VC’s and Solving the Traction Problem:

alec baldwin1. Always be Pitching (line stolen from my favorite scene in one of my all-time favorite movies. At 3:15 here if you’re interested).  Go see a few select VCs before you’re even ready for institutional money.  Tell them about what you’re up to in your business, show them your product or prototype, tell them your strategy, talk about the deals you’re working on and seek feedback.

If you wait until you’re “ready” to fund you’re too late.  Funding is about developing a relationship over time.  Most of us wouldn’t get married on the first weekend we met someone in Vegas.  And most VC’s wouldn’t fund the first time we meet you.  Given that many VC’s base their decision on the team, the longer they have to get to know you the better.

2. Over deliver – The people who get funded are the people who actually get things done.  They tell you that they’re working on biz dev deals with distribution partners and they get the deals signed.  They tell you they’re going to ship product and they do.  They get their widgets embedded or their products piloted.  They hire key staff.  They get positive product reviews on TechCrunch, GigaOm or Paidcontent.org.  They make progress.  You need to over deliver and communicate back with VC’s showing the progress you’ve made.

radarScreen-7194853. Keep on the radar screen – I know the VC’s seemed to love you when they met you.  The problem is that they see hundreds of pitches and they often don’t proactively step back and think about the companies that seemed promising but they weren’t ready to pull the trigger.

You should send “update emails” that are very short but highlight some of the achievements you made with the intro saying, “since you showed interest in my company I just wanted to provide you a brief update on our progress.” This is important because it keeps you at the top of the stack in their memory.  It’s marketing 101 for tech companies in terms of how you market to customers.  You have buyers who are ready now and those that aren’t.  Sales owns the former, the latter get marketing emails so you’ll be top of your prospects’ minds.  VC’s are the same.

4. Find ways of helping the VC – If as an entrepreneur you get to know other interesting entrepreneurs / companies it is a good technique to send intro’s the the VC and ask if they’re interested in meeting the company.  I usually recommend that you send the companies Powerpoint deck and ask the VC if they’re interested but don’t necessarily copy the company on the email until the VC says he/she is interested.  If they’re not at a minimum you’ve shown that you’re thinking of them and you’ve stayed on their radar screen.  It’s not required but I have seen this technique be used effectively by entrepreneurs.

5. Schedule a follow up meeting. Contact the VC again when you’ve signed a few more big deals. In your email to the VC tell them about the additional progress you’ve made and ask for a short, 30-minute session to update them on the business.  Don’t take no for an answer.  Show some chutzpah.  But be polite.

You might find that you get a “we’re really not interested” response.  That’s OK – at least you’ll know to cross them off the list.  When you do get a follow up meeting tell them about your new revenue model, ask to show your new demo, talk about the progress you’ve made and what has turned out differently then expected.  Update them on your fund raising progress.  Seek more input from them.

Stick to your 30 minutes so you build the trust that every time you come back you don’t abuse your time commitment.  Leave them wanting more.   Don’t come back with fake progress.  If the businesses isn’t getting “traction” then probably best not to come back with a bad impression.  Your time is better spent actually making progress.

lather6. Rinse and repeat – When you do raise a round, start immediately building the relationship with VC’s who do B rounds.  Some of the masters at this VC relationship business are Jason Nazar  (DocStoc), Jon Bischke (EduFire) and Ophir Tanz / Ari Mir (GumGum).  In the latter case, every time I saw them they had moved the ball forward and evolved their strategy.  After more than a year of updates I pulled the trigger and invested.

We all build relationships over time.  Doing an investment is more permanent then marriage – there are no divorces for irreconcilable differences.  I know that in a booming market people fund quickly.  And I know many stories of Benchmark or similar investors writing term sheets after the first meeting.  But I also read stories about people winning the lottery.  Neither is the norm.


6 Tips for Using the @ sign in Twitter

August 4, 2009

email symbol blueThere is much confusion on how to use the Twitter @ sign – even amongst daily Twitter users.  So as part of my ongoing series Twitter Insights, I wanted to cover how the @ actually works (even experienced users may be surprised by some of the points)

The basics:

1. When you use the @username (e.g. @msuster for me) the message you write appears in my @msuster inbox on Twitter.com and on any of the desktop or mobile clients.  Great. 

2. This is a good way to call something out to my attention since it is narrower than just broadcasting hoping that I might see the message

3. It is also a sign of attribution when you retweet a message by another user (e.g. RT @msuster).  People also use it in other obvious ways including suggesting users to follow such as #FollowFriday @msuster

4. You can send an @ message to anybody – whether or not they follow you.  You can only “d” people (direct message) who follow you.

5. I am currently not overwhelmed with people who @ message me so I read all of mine.  Usually in a timely manner.  But if the person you @ has tons of followers (think Robert Scoble, Michael Arrington or any celebrities who use Twitter) don’t assume they’ll see your messages

More advanced:

1. This is important … If you send somebody a message and you START it with an @name then the only people who will see your message are people who follow you and people who follow the person you replied to.  Most people don’t seem to know this.  For example, if you follow me but not @deblanda an I send her a message starting with an @ then you won’t see it at all.  Anyone who follows both of us will see the message.  If you precede the message by anything, even a dash and a space like, “- @deblanda nice to see you” then everybody will see it.

When does this come into play?  Sometimes I’ll see people who want to make people aware of a blog posting.  They’ll say “@msuster provides great insight into VC valuation discussions – see http://bit.ly/C5t6O” .  They might have 2,000 followers.  I have 1,200.  Only the small subset who follow both of us, say 100, will see the message.  

So if you’re really responding to somebody and you don’t want all your followers to see it (but you don’t necessarily want to send a private message via DM or you can’t because they don’t follow you) then start with an @.  Otherwise make sure it has text in front of it.

2.  Equally important to know … If you reply to a message as above and therefore assume that only a small subset of followers will see the message – you need to be aware that anybody can proactively look at the message by clicking on your Twitter name and seeing all of your posts.   If you truly want it to be private stick to DM or email (or better yet … telephone!)

Did I miss any idiosyncracies?  Make sure to add them to the comments.


Did Twitter Kill the Blogger Star?

August 3, 2009

Video_Killed_the_Radio_Star_single_coverWhen Twitter first became popular with niche crowds in 2007 it seemed to take hold initially with bloggers.  People had been steadily blogging for 2-3 years and this crowd seemed to bifurcate.

On the one hand were the blogs that “blew up” and became real businesses like TechCrunch, GigaOm or TalkingPointsMemo.  On the other hand were  everybody else including those that tried to make a full time of it like Robert Scoble as well as those that did it as a side job like VCs, CEO’s and start-up entrepreneurs.

So Twitter was initially billed at a “micro-blogging” platform.  It seemed to save all of the bloggers from coming home at the end of the day from whichever conference they were attending and have to turn in long-form content like a journalist.  Suddenly it was about very frequent commentary in a bite-sized format.  Whew.  Now we could all sleep more.  Or could we?

So with the metoric rise of Twitter now forecast at 45 million as of August 3rd, 2009 (and rising fast), has Twitter Killed the Blogger Star?

I would argue it’s the exact opposite.  I believe that Twitter has sparked a resurgance in blogging.  Here is some anecdotal evidence:

1. Shel Israel, famous tech blogger from Wave 1.0 started blogging again outlined here

robert-scoble_h2. Robert Scoble has also started blogging again as outlined in the link in point 1.  The same article refers to several other people who are coming back to blogging: Liza at Maui Blog and the futurist Chris Saad.

3. Bill Gurley, a well known VC from Benchmark Capital, seemed to have a 2-year hiatus from blogging and has now picked up the pace

4. My LA VC colleague Peter Lee of Baroda Ventures has started a blog about VC

5. I have started blogging again having taken a hiatus since 2007 (actually, I was initially embargoed by Salesforce.com who didn’t want me blogging after they acquired my company).

So what gives?  Here’s my view:

– When Twitter started gaining hyper traction in early 2009 many people signed up and/or returned to use it again having had failed attempts at getting excited by Twitter in 2007 (I am in the latter category)

– With an onslaught of new users everybody was scrambling to figure out whom to follow

– It quickly became clear that Twitter had a built-in popularity contest.  How many users followed you was (gasp) publicly available

– Initially people would follow people who already had a lot of followers.  Why?  Because Twitter used to list the pictures on the right side of the page by people who followed you with the most followers.  Therefore, the more followers you had the more you would accumulate.  They were critisized this and began to randomize them.

– Initially people thought that all you had to do was give funny Tweets and people would follow you.

140_characters

– Over time it emerged that the currency of the Twitter world was links and people began creating mad links to anything: NYTimes stories, TechCrunch stories, funny videos, anything.

– As many tech and VC professionals becan to realize that Twitter wasn’t just a fad they realized that links to other people’s websites was like free lead gen for somebody else’s brand.  If you wanted to build up your own profile on Twitter and in the Internet economy you needed to have something original and interesting to say yourself.

– And guess what?  It ain’t that easy to say interesting things in 140 characters!  (photo credit: here) Thus, Twitter reinvigorated the Blogger Star.  And I’m loving the renaissance.  I’m enjoying reading all the new content created in the tech / VC industries.  I’m enjoying the creative process of getting my own personal thoughts down in writing.

And I’m enjoying being part of the two-way conversation again as I was from 2005-2007.  Thank you, Twitter.


Twiistup 6 Highlights

August 3, 2009
ExpenseBay Wins Showoff

ExpenseBay Wins Showoff

Twiistup 6 has come to an end.  It proved to be a great transitional year.  Out is the “cocktail only” Twiistup and in is the new format of a conference that should take its rightful place on the national technology calendar.  I believe that Twiistup is now a platform from which to grow and highlight what is uniquely LA.  We are a city unique in merging the world’s best content with digital media and technology expertise.  Much of this was highlighted at Twiistup.

LA not only produced the obvious – MySpace – but also created the whole category of sponsored search (Overture), AdSense (Applied Semantics), Local Search (City Search), comparison shopping (PriceGrabber, Shopzilla) and lead generation (LowerMyBills).  In SoCal we are also leaders in affiliate marketing (Commission Junction), Internet video (Hulu) and bringing local businesses online (ReachLocal).  We are also home to DemandMedia (Richard Rosenblatt) and Mahalo (Jason Calacanis).

We have accomplished much yet have much work to do.  There are now a second generation of entrepreneurs and companies that have learned from their last successes and are producing great new companies like TopSpin Media, Sometrics and GumGum.

For highlighting what is uniquely LA, for adhering to a strict quality standard for speakers and for building this great platform for the future Francisco Dao (aka “The Man”) should feel proud of what he has accomplished.  As should Eric Sikola and ExpenseBay who won the “Showoff” judges competition (Photos featured here taken by (cc) Kenneth Yeung – http://www.thelettertwo.com).  Twiistup 6 featured 12 showoff companies as the opening act of a 2-day conference.  From this crowd of 12 I believe you’ll see 4-5 companies with the potential to rise to prominence.

Andy Sack, Dave McClure, Brad Feld & Jason Nazar (photo by Jolie Odell)

Andy Sack, Dave McClure, Brad Feld & Jason Nazar (photo by Jolie Odell)

We had an excellent opening panel on early-stage investing with Dave McClure (Founders Fund – NorCal), Brad Feld (Foundry Group, Boulder) and Andy Sack (Founders Co-Op, Seattle).  The panel was hosted by Jason Nazar who brought his usual frenetic energy.   My favorite line from this panel: Feld, “If LA companies still have a chip on your shoulders about not being in Silicon Valley, I have one message for you – get over it!” And of course there was the F-bomb count that Cathy Brooks and I were keeping on Dave … by the end of the panel we had counted 8.

There was the usual cogent presentation by Brian Solis on the future of PR in which he implored us to get beyond the echo chamber of Silicon Valley and Techmeme and focus on staying on the radar screen of real America.  In today’s “attention deficit” economy you need PR more than ever and this doesn’t come through press releases but rather a continued, authentic conversation.”

In the afternoon we had a corker of panel.  Quincy Jones III, Ian Rogers and Chamillionaire were all on the same panel facilitated by Brian Zisk.  I have seen Ian Rogers speak before and when he does he usually has the audience on the edge of their seats.  Ian is so knowledgeable about the evolution of the digital music business and speaks with a Howard Roark like truth about where it needs to go.  My favorite Rogers line was, “musicians of the future will be entrepreneurs and not employees [of labels].”  He obviously believes this since he has become CEO of TopSpin Media – a firm designed to do just that.

Mark Suster, QD3, Brian Solis, Chamillionaire, Ian Rogers, Bryan Zisk

Mark Suster, QD3, Brian Solis, Chamillionaire, Ian Rogers, Brian Zisk

But in this case Chamillionaire stole the show.  He displayed a deep mastering of the power of the Internet, direct marketing and Twitter to manage his business.  He talked about the need to give personal access to fans and remain authentic while still leaving some room for mystique.  He talked about artists needing to retain rights for their website and digital content like ringtones.  He got this VC talking so effusively about his entrepreneurial instincts that my wife accused me of having a “man crush.”  (I don’t) I think this guy has the chance to be the Digital Puffy if he can amass a team to help young artists own & manage their digital careers. [photo credit to Brian Solis]

The evening cocktail party was an 80’s theme and lived up to the traditional Twiistup fame with an open bar, elaborate costumes, Hollywood lighting and poker games until 4 in the morning.  Having been out until 3am at the cocktail party the night before I called it quits at 12:30am or as Neil Patel told me, “OK, married men should go home now” though something tells me he may not remember this quote ;-)  … (Percival cocktail photo by (cc) Kenneth Yeung – http://www.thelettertwo.com)

pervicalsThe late night didn’t make for a productive start to the morning but by the time Sean Percival got on stage to host the panel with Chris Brogan, Micah Baldwin (who started #FollowFriday) and Ben Huh (ICanHazCheeseburger) there was a great discussion on what it takes to be an Uber-blogger and social networker.  I think I could summarize the hour by saying, “don’t be a douche.”  And we heard Sean’s rant of the moment about how he hates being shaken down for DM’s by friends asking for RT’s and how he’s tired of DM Spam in general.

After this was my panel (co-hosted by Christian Gammill who had to leave mid-way to race off to Hawaii to get engaged and by Tony Adam), with Mike Jones (COO of MySpace), David Sacks (founder of Geni and Yammer) and Jamie Montgomery (CEO of tech investment bank Montgomery & Co).  The tone of the panel was set by David’s announcement that he was relocating to Silicon Valley (and dragging Geni & Yammer with him).  A debate ensued in which the consensus was, “to build the next Google or Salesforce.com you probably need to be in Silicon Valley but that SoCal had produced many great companies that made a tremendous amount of money and that would likely continue.”

The closing event was the filming of a live version of Jason Calacanis’ “This Week in Start-Ups” (appropriately named TWiST – episode is here).  He started off the session of breaking news of the most important product announcement of his life to date – the pregnancy of his wife with his baby daughter.  He then led us through a series of discussions about the most relevant topics of the day along with Chris Tolles, the CEO of Topix.  Jason’s cutting wit and insightful commentary made for entertaining listening on topics ranging from the Microsoft / Yahoo! search deal (“will go down calacanisas one of the worst deals in history”) to the skewering Jason gave to his competitor Nick Denton (of Gawker fame) when he stole his most productive employee.

Anyway, to close my Twiistup 6 Summary post I will borrow from the wisdom of my forefathers, “next year in … Santa Monica.”  No doubt the platform that Francisco built will take Twiistup 7 to a whole different level.  Now back to work – we’ve got a venue to get booked.


Businesses Must Manage the Twitter Conversation

August 2, 2009

HiResThis post is part of my ongoing series Twitter 101 for all those that still “don’t get” Twitter.  I’m now moving from the 101 basics into the business applications.  I think we all know by now that a conversation is happening on Twitter and that this extends to talking about brands.

Twitter is the new CRM (customer relationship management) channel.  The volume of Tweets is enormous and growing at a rapid pace so tools are emerging to help brands manage this information.

In an earlier post I spoke about the asymmetric nature of Twitter vs. Facebook.  It turns out that this difference has a huge impact on the business applicability of Twitter that nobody could have anticipated.  On Facebook (and nearly all social networks that preceded it) the relationship was always reciprocal – if I accept your invitation to follow me then I have to follow you.  The default setting and behavior on Facebook has been “private” and therefore you need permission to follow my status updates.  It is a closed, two-way relationship between users in which brands are not invited into the discussion.

Twitter, by contrast, started as an open platform where people let anybody see what they were writing.  Many of the initial commentators (at least when I signed up for Twitter in April 2007) seemed to talk about it as a “microblogging” platform where people like Robert Scoble were free to tell quick thoughts about what was going on in the world in real time vs. waiting to come home and spend an hour publishing their thoughts for the day in a blog post.  My intuition is that this is why when Twitter initially took off (around the time of SxSW in 2007) it was an open “publish to the world” platform and the trend continued.  People write their thoughts knowing that anybody else can see them.

So why is this important for businesses?  Businesses online are able to monitor the conversations that happen about their company, their competitors and their industry like they have never before been able to.  It’s almost like they’ve been given the right to wiretapwiretap our conversations and know what we’re telling our friens about them.

Brands in the Facebook world have had to resort to setting up “Fan Pages” and trying to get users to follow them.  They could then publish information and it would go in the “stream” of information when you were logged into Facebook.

Below are the CRM steps brands are taking in the Twitter world to monitor our conversations.  Tools (covered at the end of the post) are emerging to help us to automate this process given the sheer volume of Tweets we must now monitor.

1. Monitor the conversation – The first thing that businesses need to know is what is even being said about them.  Are people giving you feature requests, complaining about your service or comparing you to the competition?  Are they recommending you to friends or telling people how badly you suck?

2. Capture the data – the currency of online direct marketing prior to Twitter was the email address.  If a brand had your email address and permission from you to send occasional messages to you then you could effectively market new products or services.  The currency of the real-time web is, for now, your Twitter address.  Companies can capture this information if they notice you Tweet about them.  If you’re not capturing the names of people who are talking about you on the real-time web you’re missing out on CRM opportunities (direct marketing, customer support, 2-way conversations, monitoring future conversations).

3. Assess the tone – The second thing a brand needs to be able to do is to automate the process of assessing the tone of Tweets about them.  While not 100% accurate, software tools use specialized dictionaries to help semantically determine the meaning of your Tweet and rate them as positive, negative or neutral.  If you’re a smaller company you can obviously do this manually but at a minimum you need to know whether people are positive or negative.

4. Determine authority – If you’re a small business you might want to build relationships and take action on any Tweet about your company but when you’re a large company like Apple you obviously can’t respond to everybody but you also can’t just ignore everybody and pretend the conversation isn’t taking place in this public forum.  Apple must be overwhelmed by people who hate the iPhone service because the AT&T Network is so bad.

noiphoneBut when Michael Arrington announces that he’s giving up his iPhone because he’s pissed off with the network and with your blocking Google Voice then you sure better know.  There are different ways to determine “authority” that are being debated now.  Some people believe it’s as simple as looking at how many followers you have.  But the problem is that some people just go and follow a bunch of people so that many people will follow them back.  This probably isn’t a good authority measure in my opinion.  Following 7,000 people who follow you back doesn’t mean those people actually listen to you.

Other people see authority as the ratio of followers to people you follow (e.g. if 10,000 follow Michael Arrington and he follows 200 back then he probably has good authority on at least something).  Finally, some people are arguing that the number of people who “retweet” (RT) your posts should be a measure of authority because it means that your followers value what you say.  Whatever the answer is or becomes measuring authority is an important tool for brands.

5. Take action – Obviously when Michael Arrington is writing something scathing about your product you want to pay attention and take action.  This is most likely done outside of the automated processes that you can manage on Twitter and probably warrants a phone call.  But there are lots of actions that businesses large and small can automate on Twitter.  As a starting point if you’re captured the data from step 2 you might choose to follow that particular user.  I noticed when I sent out Tweets about the Beastie Boys or the Philadelphia Phillies I got Twitter Follows immediately.

Over time these brands may choose to send out @ messages to me or DM messages to me in the way that people send out direct marketing emails now.  But we need to wait for the equivalent of “opt-in” to develop on Twitter because without this brands need to be careful about not coming across as Spammy.

There are also steps brands can begin to take today to manage Twitter followers with the most authority.  If you’re a brand and you’ve determined the 10 most influential people who write positive things about your company or products then wouldn’t it be nice to provide these people with toolsets for their blogs or webpages to help better promote your brands since you know they influential in your community?  Actions based on a user authority is an emerging area where I believe the tools are nascent today but you’ll likely see more emphasis on this in the future.  I see many early-stage businesses pitching me today talking about solving this need.

So the following list is not exhaustive (if I’ve missed some please feel free to add in the comments section), but here are some emerging companies who are providing tools for brands to monitor, assess and take action on Twitter feeds: PeopleBrowsr, Social Approach, HootSuite, CoTweet, EasyTweets.


Beware of Gym Salesman VC

July 29, 2009

gym salesmanThe post is part of a series called “Pitching a VC” – the outlines is here.

You’ve been trying to raise VC for months.  You’ve obviously talked with several funds to hedge your bets.  You finally get your first term sheet.  Time to celebrate!

But wait.  What?  They’re giving me 48 hours to sign the term sheet or it expires?  WTF?  What about all the other VC’s I’m talking with?  I can’t get them to close in 48 hours.  But I have a bird in the hand.  Will they really pull the term sheet if I don’t sign?

OK.  First, every term sheet has an expiration date in it.  That’s normal and no reason for alarm.  A VC isn’t going to give you an unlimited offer to stay on the table as you shop the terms around town.  But there is a difference between a term sheet with an expiration date and a VC that puts pressure on you to sign and alludes to pulling if you don’t close by the date.

The various excuses they will give you are:

  • I can’t leave an offer “hanging out there”
  • I don’t want you to shop my deal
  • If I’ve made you an offer and you don’t KNOW you want to work with me maybe there’s a problem here
  • Whatever …

Please read this disclaimer here before following any of my advice.   You need to make your own mind up regarding an offer and I accept no liability for your basing your decision on my point of view.

So here’s my view: it’s total bullshit.  Any VC that would try to turn the screws on you to try and pressure a decision is not the kind of VC you want to work with.  If they use these tactics when they “love you” imagine the tactics when you’re not performing as well as you would have liked.

It’s one thing if this term sheet is the only game in town.  You might NEED to take it.  But I like to say that “VC is more permanent than marriage.  At least in a marriage if you’re unhappy you can get divorced.”  Not so, VC.  So why should you be pressured to make a quick decision.  It’s unlikely that you’ve even had time to do due diligence calls on this VC – you wouldn’t be so presumptuous as to do this pre term sheet.

The only reason some VCs use these tactics is the same reason a gym salesman only offers you a discount if you sign up today.  Once you’re out of the gym they’re afraid someone else will get a hold of you and you won’t sign with them.  And you know damn well that when you come back to the gym tomorrow and ask for the deal that was only valid yesterday they’ll still give it to you.

One more reminder to read my disclaimer ;-) , but I highly doubt that any VC who submits a term sheet to you would really pull it because you politely ask for a reasonable extension to their deadline.  They’ve done all the work.  They’ve had the big debates at the partners’ meeting.  You partner sponsor is excited.  And lose it because you need 2 weeks rather than 1?  Really?

Don’t mistake eagerness for pressure.  I can understand a VC who tries to close you the way you would try to close a customer deal.  It’s OK for them to push for closure but if you politely request more time they should really be understanding.  And if there are threats, implied consequences for taking time to think about it or do due diligence then I’d give that VC a really hard think.  Caveat Emptor.

Next post I’ll talk about how to handle this awkward period of time when your first term sheet is in and you’re waiting for a few more potential ones.