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Should Startups Focus on Profitability or Not?

Should Startups Focus on Profitability or Not?
There are certain topics that even some of the best journalists can’t fully grok. One of them is profitability. I find it amusing when a journalist writes an article about a prominent startup (either privately held or preparing for an IPO) and decries that, “They’re not even profitable!” I mention journalists here because they perpetuate the myth that focusing on profits is ALWAYS the right answer and then I hear many entrepreneurs (and certainly many “normals”) repeating the same mantra. There is a healthy tension between profits & growth. If you hire 6 sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business for 4-6 months. I know this seems obvious but I promise you that even smart people forget this when talking about profitability. Hiring more people isn’t always the right answer. Exec Summary: Most companies (98+%) in the world (even tech startups) should be very profit focused. Um, no, Related:  Start-ups & EntrepreneurshipBoard Observers Weekly - March 4th, 2014

» Guide pour présenter votre Business Plan de Startup  (Ce post sera mis à jour en fonction des retours de mes lecteurs, n’hésitez pas à en laisser en commentaire) Depuis le lancement de Kima Ventures avec Xavier Niel en février 2010, nous avons reçu via notre site plusieurs milliers de business plans en provenance du monde entier. La grande majorité des business plans sont reçus via notre site internet, lui-même relié à notre base de données de startups. Nous avons investi dans plus de 130 startups (une partie apparait sur notre site) dans 18 pays, de la Chine au Nicaragua en passant par le Pakistan, Israël, la Norvége ou la Suisse. Lire des business plans peut être une activité agréable mais, pour que cela soit vrai, il faut que celui-ci réponde clairement aux questions que se pose un investisseur sans développer de détails inutiles. Pas la peine donc de présenter l’évolution de la taille du marché du e-commerce au cours des 10 dernières années quand vous présentez un dossier de vente de pin’s sur Internet Parlons donc contenu désormais.

The Social Conglomerate When news of the Facebook/WhatsApp deal broke, a lot of people gave me credit for being prescient: after all, I had just written 1,568 words on why messaging was mobile’s killer app. WhatsApp, though, was all but absent from the article, meriting but a single mention, and in parenthesis at that! Viber does have strong user numbers, claiming 280 million registered users and 100 million monthly active users, and that is certainly a big part of the battle, but the creation of a meaningful platform is a significant next step that Viber (and WhatsApp) has not taken. A platform is about multi-sided markets; LINE and WeChat are so valuable because they not only have the users, but also advertisers, commerce sites, and developers. Thus, while I’m skeptical of Rakuten and Viber, for LINE and WeChat the sky is the limit. Thus the reason for the exclusion: I believe that business models matter, and while WhatsApp had the users, I’d heard enough about their (admirable!) The Age of Conglomerates

How To Get A Job At A Startup If You Have No Skills Editor’s note: This guest post is by Justin Kan, cofounder of Justin.tv and TwitchTV. You can follow him on Twitter and read his blog. Recently I had a conversation with a friend of mine who was interested in doing product management at a startup. He was working as a consultant, but wanted to join a company like foursquare as a PM. The risk that each party takes has to be equal. Sometimes these young people watch The Social Network or read stories about other Millennials founding companies with no experience and think they should be able to join a startup with little domain background. This is a fallacy, however. So what should you do if you want a career switch to a job at a startup you don’t have any experience in? Instead, I’d recommend a couple things. Second, consider applying for a job in an area you have experience in, and then once you’re in, work your way into the area where you want to be. Lastly, try to give yourself some experience. Image credit: Shutterstock/IKO

A six-step framework to make strategic decisions Any number of challenges can arise during a startup’s initial years. Some of these changes could be major and may require rethinking strategy. Competitors enter your target market. New products are released into your market which undercut yours. Customer acquisition costs rise dramatically. If faced with these questions, it’s hard to know where to begin or how to structure an analysis to reach an answer. McKinsey uses a 6 step process to frame the process of answering these strategic questions which is profiled in this month’s Harvard Business Review. Case: A new competitor emerges to compete with a startup Frame the strategic choices as mutually exclusive options. By definition strategy is critical to companies.

Don't give bullshit advice I chatted with a young guy last night about his new startup idea. He's got a vision for a social commerce app with a few cool spins on it. As I listened to him, I was thinking about how I had heard this exact pitch half a dozen times before. I also knew I had a lot to offer him in terms of help. Do you think it's a good idea? This is the question he had been so excited to ask. I have no fucking idea. When a new entrepreneur comes to you for advice, remember this little tidbit. Don't give bullshit advice. The danger of providing concept feedback goes even deeper. One of my favorite investors once explained how he looks for the next big thing. The big ideas, the ones that change the world, they have the potential for strong business fundamentals AND they are unfairly unpopular. When you tell an entrepreneur that you don't think his idea will work, there's a good chance you're right. A few ways you can help an entrepreneur: Clarify Hypotheses Advise on Process Make Introductions Provide Support

The Market Size Fallacy The Market Size Fallacy November 10, 2011 I once showed a company to an investor for an investment we were syndicating. This investor loved the team and thought the solution they were building was compelling. Similarly, I remember years ago when I was looking at the series A investment in a company called Lumos Labs. His answer was so simple, and at the time, I kind of dismissed it as the view of an angel investor who didn’t really “think like a VC”. VC’s pass because of “Market Size” all the time. The problem with the market size feedback is that entrepreneurs end up being stuck. The investors just don’t believe that you can simply sell lots and lots of games. If this is the case, then there is actually hope! Parting thought #1 – funny enough – in the first example above, the investor actually asked to be kept in the loop for the next round of financing. Go figure.

Startup Tools Startup Tools 1. Startup Tools Click Here 2. 3. 4. 5. 6. Startup Tools Getting Started Why the Lean Startup Changes Everything – Harvard Business ReviewThe Lean LaunchPad Online Class – FREEHow to Build a Web Startup – Lean Launchpad EditionHow to Create a $1M Web Business – Noah KaganWeb Fundamentals – Google developersQuickMVP – test your ideasFoundersSuite – Startup Mgmt SoftwareThe U.S. Lists of Tools from Others Groups Startup Weekend – Launch a Startup in 54 hoursThe Lean Startup Machine – Launch a Startup in 48 hoursStartup Monthly – Launch a Startup in a monthStartup Grind – community looking to be educated, and network with the smartest startup mindsLean Startup Circle – Google Group for startup adviceWomen 2.0 – Launch a startup for womenMeetup – Meet people you’re interested inTop Startup Conferences (North America) Find a Co-Founder Developer Bootcamps Programing Bootcamp Finder – Thinkful Tools from Steve: Lean Startup/Business Model Canvas/Customer Development Tools Surveys Reddit

The Apple Tesla Connection: Fun and Reason With Numbers Apple acquiring Tesla would make for juicy headlines but would also be very dangerous. There are more sensible ways for the two companies to make money together. Apple has never suffered from a lack of advice. As long as I can remember — 33 years in my case — words of wisdom have rained down upon the company, and yet the company stubbornly insists on following its own compass instead of treading a suggested path. (Actually, that’s not entirely true. Now that Jobs is no longer with us and Apple’s growth has slowed, the advice rain is more intense than ever… and the pageviews netwalkers are begging for traffic. The visionary sheep point to the titanic deals that other tech giants can’t seem to resist: Google buys Nest for $3.3B; Facebook acquires WhatsApp for $16B (or $19B, depending on what and how you count). Lately, we’ve been hearing suggestions that Apple ought to buy Tesla. Indeed, Adrian Perica, Apple’s head of acquisitions, met Tesla’s CEO Elon Musk last Spring. –JLG@mondaynote.com

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