How To Make It as a
First-Time Entrepreneur

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

How do you know if your startup idea is the next next big thing?

It’s easy. It isn’t.

Most Great Companies Started With Bad Ideas

Most great companies started off with very different ideas that were either not very good or impractical. Very rarely does a startup actually start with the idea that makes them the next big thing.

Here are just a few examples of successful companies that had very different and troubled initial ideas:

• Initial idea: Allow groups of people to band together to accomplish a goal called ThePoint
  • Eventually: Groupon
• Initial idea: HTML5 supported location-based service
  • Eventually: Instagram
• Initial idea: Web-based massively multiplayer online game called Game Neverending
  • Eventually: Flickr
• Initial idea: Compare two people’s pictures and rate which one was more attractive
  • Eventually: Facebook
• Initial idea: People to share photos and get grouped based on locations in an app called Color
  • Eventually: To be determined

At Yipit, our initial idea was a local search site focused on furniture in New York. Today, we are the leading aggregator of daily deals like Groupon, LivingSocial and the 485 others.

What Does This Mean For You?

When you stop expecting that your startup idea has to be the next big thing, you can draw some valuable conclusions:

• Stop waiting for the perfect idea. The perfect idea isn’t coming. You just have to pick a problem you are passionate about and start working on it. Over time, you will evolve your startup into the next big thing
• Your idea isn’t the real value, it’s you. The value lies in your ability to learn from potential customers, iterate based on those learnings. Those iterations will determine whether or not your startup will be successful, not the initial idea
• Don’t worry that your first idea will fall flat. It falls flat for almost everyone. Your idea is based on so many assumptions, it’s bound to be full of issues. Figure out what’s wrong and fix it.
• Get your prototype out there as soon as you can. Don’t spend six months releasing your first prototype. It’s going to fall flat. Instead, get a prototype into the hands of your potential customers as soon as you can. You need to learn as quickly as possible what’s wrong with the idea so you can fix it.
• Don’t write a business plan. Within a month, your business plan will be irrelevant. Instead of spending that time writing a business plan, spend it getting your prototype into customers hands.

Your initial startup idea isn’t the next big thing and that’s okay. Just get out there and start working on a big problem that you’re passionate about and you may eventually turn it into the next big thing.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Your launch will have very little to do with your startup’s eventual success and you probably spend way too much time worrying about it.

That being said, a successful launch can be used to gain thousands of early users if you did your job right when they show up. It won’t make or break your startup, but it will help.

There’s great advice out there on how to pitch a tech blogger. My favorite is this post by Mark Hendrickson, a former TechCrunch blogger.

However, it can also be helpful to look at actual examples of pitches that worked. So, I’m including here two tech pitches that Jim Moran, my co-founder, and I submitted to TechCrunch for two projects we worked on before Yipit.

A Little Background

Before we launched Yipit, we worked on two side projects called 140it and UnHub. We built both in a weekend and were looking to get some broader exposure for them.

The problem was that we didn’t have an “in”. It’s always best to get a warm intro to a blogger from an investor or friend. We just didn’t have it.

So, we decided to try TechCrunch’s startup submission form which didn’t look promising. I pictured the other side as an endless stream of terrible pitches that TechCrunch authors dreaded and probably didn’t look at.

Less than an hour after submitting 140it via their form, we get out this email from TechCrunch writer Jason Kincaid:

Hi Vinicius, looks cool, am trying it now and writing up a post.   Please lift the password in around 20 minutes or so (let me know once you have).

Thanks,
Jason

It was up on TechCrunch shortly after and thousands of people tried out the site, got the bookmarklet, tweeted about it, and started using it. While we never intended to turn 140it into a business, it was a great experience and gave us the confidence to keep pushing forward.

Months later, TechCrunch also covered UnHub.com, another weekend project of ours. Again, we applied via their submission form.

Key Tactics

I’ve included both TechCrunch pitches below but wanted to highlight the key tactics we used in our submission:

• Tell a Story. For UnHub, we reference the much talked about new Skittles corporate website had just launched as a decentralized experience. UnHub was a way for anyone to create that Skittle experience.
• Ride Current Trend. For 140it, in 2009, lots of people were building Twitter tools to “fill holes”.
• Reference Blogger’s Previous Posts. For both UnHub and 140it, you’ll see that we picked out a previous TechCrunch post where the author had made a point that was consistent with the project we were pitching.
• Exclusivity. TechCrunch would much rather cover a new startup that hasn’t been covered before. So, we password protected both 140it and UnHub and told them we wanted them to cover our project first.
• Concise. Do not go off and write huge essays. Get to the point of what your startup does right away.
• Humility. With both 140it and UnHub, we were careful to admit the simplicity of the project.
• Admit competitors. You have competitors, admit them. The blogger will have to look them up if you don’t. That means they will have to do more work reducing the chances they cover your startup.
• Give them assets. If the site is private, give them beta invites. Create a demo video so they can add it to their post about you (we did that for both 140it and UnHub). They don’t have to be professionally done. Just record yourself using the site with a voiceover. If it makes sense, create an example account on behalf of the blogger as we did with UnHub for Michael Arrington. Throw in some screenshots if you don’t have a demo.

Below are the two pitches we submitted.

140it TechCrunch Pitch

Company Name: 140it
Website: http://140it.com
Submitted: January 26, 2009 at 11:55 AM PST

Description: 140it helps twitter users reduce their tweets to less than 140 characters.  It abbreviates words, converts company names to their StockTwits ticker and shortens URL’s using bit.ly.  Its intended use is as a bookmarklet so that the user can use 140it without ever having to leave Twitter.  Please see our demo video at http://140it.com (The password for the video is 140.)

Note:  http://140it.com is currently password protected.  The login credentials are:
username: friends
password: 140

Additional Info: This was a weekend project for us and we aren’t trying to make money off of it.  We just wanted to give back to the Twitter community.

We were inspired by a recent Arrington post where he said:  “this is the way to fix Twitter, directly via the user interface, not from a third party site that users will forget to go to.”

We built 140it to work as a bookmarklet so that the user would never have to go to our site.   We also made it a bookmarklet so that it would work on all browsers including Chrome which has become our de-facto browser.

Also, we would love to get 140it to as many people as would like it and are thus happy to have TechCrunch be the first to reveal the project.

Competitors: Twonvert: http://www.twonvert.com/
TweetShrink: http://tweetshrink.com/

But, unlike our competitors, we made our utility work as a bookmarklet.  We also convert company names to their StockTwits tickers and shorten URL’s using the bit.ly API.
Tags: twitter, utility, bookmarklet

 

UnHub TechCrunch Pitch

Company Name: UnHub
Website: http://unhub.com
Submitted: March 6, 2009 at 11:16 AM PST

Description: We were really excited about the new Skittles website, so we made a way for anybody to have one. Your UnHub URL allows others to navigate your profiles, photostreams, channels, etc with a persistent bar at the top of their screen. When we saw the Skittles’ website on Monday, we thought its user interface would work well for individuals who wanted to showoff their web presence; and, three days later, we are releasing UnHub.

Your UnHub URL makes a lot of sense for the “Web” entry on your Twitter page. As an example, we made one for Michael Arrington:http://unhub.com/MichaelArrington and we also made one for Josie’s Restaurant here in New York:  http://unhub.com/josies

Overall, we wanted UnHub to be a dead simple, lightweight way to display your “decentralized me” to others.   On that topic, we enjoyed your post (http://www.techcrunch.com/2008/03/30/friendfeed-the-centralized-me-and-data-portability/) and some earlier discussions by Robert O’Brien, Loic Le Meur, et al.

Additional Info: We don’t think UnHub is technologically remarkable in any way (iframes have been around for a long time). That said, we’re excited about it for the same reason we were impressed with Skittles: it could be a new way for companies and individuals to showcase their online presence.

In addition to individuals using UnHub, we also think businesses should take a page out of Skittles’ book. UnHub is a simple (and free) way for them to start.  A restaurant’s UnHub could include a link to their current web page, but also to a google map of their location (for directions), yelp profile (for reviews), menupages (menu), opentable (reservation) and seamlessweb (ordering online).  Seehttp://unhub.com/josies

Soon we’ll allow people to replace their UnHub URL with a custom domain name, which should make the experience more personal. We’ll also start delivering analytics.

Also, Twitter has temporarily disallowed iframes, so we’re redirecting to Tweetree for now.

As far as our backgrounds, please check our new unhub pages:  http://unhub.com/vacanti and http://unhub.com/jdmoran

The site is password protected, so please use the following login information:
http://unhub.com
username: techcrunch
password: techcrunch

We had a great experience with techcrunch announcing our twitter tool 140it and would be thrilled to have you guys announce UnHub.

Competitors: Social network aggregators, and there are some great ones like Chi.mp, Power.com and Friendfeed, pull in content from other sources to a single profile page. However, our goal is to “stay out of the way” of dedicated sites that specialize in a single aspect of your web presence (e.g., Flickr for photos, Youtube for videos, etc.). We’d never be able to replicate the functionality of these specialty sites, nor effectively marry their diverse user experiences. That’s why we don’t have an UnHub profile page, just a persistent bar that sits on top of the ordinary browsing experience.

Also, you can include any site in your UnHub (e.g., your company website that was built 10 years ago or your Halo 3 player profile), not just those sites up to speed with Data Portability. Aggregators are great at bringing content into a single place, but UnHub is about sharing multiple places at once.

In theory, another competitor is blogs: some folks devote a lot of energy on their blogs and think of them as their primary web presence. They can designate their blog as “home” on UnHub, so when people follow their UnHub URL their blog will appear – in addition to a persistent navigation bar with which to explore their other locations (Twitter, Yelp, Flickr, etc). Blog widgets / links serve a similar linking purpose, though if a visitor clicks to a blogger’s Flickr stream, it’s unlikely the visitor will go back and check out other sites the blogger has invested in.
Tags: socialnetworkaggregator, sharing, identity, lifestream, socialnetworknavigator

Hope you find these two pitches helpful. If people have examples of other pitches that worked, let me know below in the comments.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

So, you have a startup idea. It’s going to be big.

You can see it now. Millions of people using your service. You’ve already figured out your mobile strategy. You know the neighboring sectors you’ll expand to first. Your read-write API will hail the transition of your company into a platform company. You’re going to change the world.

The only problem is that your vision is based on having hundreds of thousands, if not millions, of happy users and, currently, you have zero happy users.

If your startup plan is directly based on this vision, you will struggle.

You need a different plan; a plan that doesn’t assume millions of happy users.

You need a first 1,000 users plan. This isn’t just about getting 1,000 users to try out your service. This is a plan about keeping those users.

Unfortunately, looking at how successful startups are currently executing (Facebook, Yelp, Foursquare) doesn’t help because their growth plans are based on the fact that they already have millions of users.

You have to look at their history.

• Focus on a Niche. By focusing on a small geographical area, a vertical or smaller group of people, it will be easier to build up a meaningful user base in that niche.
  • Groupon just focused on local deals in Chicago, Foursquare was primarily in New York, Facebook was available just at Harvard College, Yelp launched in San Francisco
  • StackOverflow started with Tech Q&A before they launched StackExchange
• Become a Super User. You should shamelessly become the biggest user of your own service. If your service requires user generated content, you should be supplying 10x what every other user is supplying. You need to do this long enough to kickstart everyone else on the site.
  • Dennis and Naveen, the founders Foursquare, must have added 1,000 tips in New York. Every time I checked-in, I got a tip from one of them. Obviously, they couldn’t do that for the whole world. But, as an early user in New York, I had a great experience
  • Yelp’s founders made all of their friends also become super users
  • Scott Heiferman, co-founder of Meetup, started the largest and most succesful meetup himself (New York Tech Meetup)
• Wow Users. Your goal is to get 1,000 happy users and that means you can do some things that won’t work for users after 1,000
  • Flickr used to email every user that signed-up to find out what their experience was like
  • At Yipit, we personally over-responded to every customer service and unsubscribe (one of those got us featured on CNN)
  • Yelp threw ridiculous parties for their first users. They still throw them today for their best users but not for all users
  • Even though Foursquare is more about tips and friend-finding, it added a game layer of points and badges so that the early users could use the app even though their friends weren’t on it yet
• Get Their Social Graph. If you only have a 1000 users but they are all friends, that’s enough to get those friends happy
  • By focusing on just Harvard college, Facebook’s first 1,000 users knew each other and didn’t care that there weren’t 50,000 people using the service
• Manually Create Marketplaces. If you’re a marketplace startup where you need both sides to come together, you should think about picking one of the sides and manually create it while you encourage the other side to show up
  • Groupon started as a platform for getting people together for group benefits. But, they had success, when they manually created the group benefit by negotiating deals with local businesses and only asked that people sign-up for their email list

The common theme in all of these recommendations is to not be afraid to do some things that won’t scale past the first 1,000 users or aren’t part of your eventual vision.

On your way to millions of users, don’t forget you have to get 1,000 happy users first.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Getting feedback on early versions of your prototype is crucial to a startup’s success. You’ll learn more the first day a user tries out your product than the previous 2 months you’ve spent thinking about it.

But, aside from getting user feedback, we really benefited from getting the chance to show Yipit to experienced entrepreneurs and investors.

We would often come back from those meetings and make major changes to our initial prototype plans.

But, it’s hard, especially as a first-time entrepreneur, to get their attention. Their time is their most valuable asset and they can’t meet with everyone.

Plus, even if they do meet with you, it doesn’t mean they will spend real time thinking about your product — the kind of time it usually takes to yield breakthrough product and marketing ideas.

So, how do you get their attention? Well, it seems like one answer is to get into TechStars.

TechStars Mentors

This is my first year helping out with TechStars as a mentor and they have been emphasizing that what makes TechStars different from other programs is their impressive list of mentors.

At first, I was definitely skeptical that the list of mentors was just that, a list.

I’ve come to see that the program, spearheaded by David Tisch, does a fantastic job of getting mentors involved.

They organize one-on-one meetings with the various companies in the program and get mentors to pick a specific startup to actively mentor.

I fully realized the power of the program when I get an email from one of the startups asking for feedback on their prototype.

I opened the email and the “to” field blew me away.

When I had sent a similar email about the first version of our prototype, it was to five college friends, my brother and my mom. His “to” field included:

• Fred Wilson, partner at Union Square Ventures
• Andy Smith, co-founder of Daily Burn
• Michael Galpert, co-founder of Aviary
• Rachel Sklar, Editor at Large of Mediate
• Josh Stylman, co-founder of Reprise Media
• Nate Westheimer, NYTM organizer and formerly head of product at AnyClip
• Eric Friedman of Foursquare and former associate at Union Square Ventures
• Amish Jani, founder and managing directory of FirstMark Capital
• Matt Galligan, co-founder of SimpleGeo
• Jeremie Miller, inventor of Jabber

Seriously?! That’s a ridiculous list of people to send over your initial prototype.

Aside from getting great feedback from them (both on the product and vision), if some of them start using the product in ernest, they could bring many more additional users.

I wish we could have sent Yipit to a list like that.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

The good news is that it’s easier than you think to get 1,000 people to try your site.

The bad news is that it’s really hard to get those people to turn into users, users that create an account, users that come back repeatedly and users that tell their friends about your site.

This post is about how to get 1,000 people to try your site so you can find out what isn’t working, iterate and keep trying to build a site that people, other than your mom, actually come back to. I’ll write a future post on how to retain those users.

Get Yourself a Domain Name and a Splash Page

You should set up your splash page today. Not tomorrow, today. In terms of the domain name, it’s okay if you don’t love your domain name; you can change it later though it’s always easier to pick a good one from the start.

Once you get your domain name, you should use a service like unbounce to create a simple splash page. You don’t need a programming background to create this page.

The goal of the splash page is to collect email addresses from visitors. How do you do that? The splash page tells a user very clearly what problem your site will solve for them. If the user submit their email address, you’ll give them early access to the site when it’s ready. For Yipit, the splash page said: “Get All the Best Daily Deals in Your City”. For Tumblr, it’s “The Easiest Way To Blog”.

Those email addresses become your early test users. When your prototype is ready to be tested, you’ll email a portion of these users and get them to test-drive your prototype. You’ll iterate and invite more users from your list till the product works.

Now, how do you get people to visit your splash page?

How To Drive People to Your Splash Page

There is no shortage of ways to get people to your splash page. The following are things we at Yipit did and things we’ve seen our friends do:

• Add Link to Your Email Signature. Seems obvious, but most people don’t do this. You should have your value proposition at the bottom of your email with a link to your splash page. For us, it was: “Get All the Best Daily Deals in Your City: http://yipit.com”
• Add Link to All Your Web Profiles. Add a link to your splash page on your Facebook, Linkedin, Twitter and every other account you have. Now you might see why it helps to be a high profile social media user.
• Create a Demo Video. Even if your prototype isn’t ready, create a demo video of what your prototype will be doing. Dropbox did this and their video appeared at the top of Digg giving them 100,000 email addresses wanting access to their site. You can also add this video to your splash page to help increase conversion of people submitting their email addresses
• Be Full Entrepreneur. When I went to tech events, friend’s drinks, family gatherings, I would pitch everyone on Yipit. Painful, yes. But, it got me good at pitching Yipit and those people would go home and sign-up to check it out.
• TechCrunch and other tech blogs. It will be hard to get press for your site if you can’t give the blogger a prototype to use. But, if you do have a working prototype, this the easiest way to get people to your splash page. For all three of our projects, 140it.com, UnHub.com and Yipit.com, we were able to get TechCrunch to write about us just by submitting it to through their news submission form. If you can give the bloggers some beta codes for their readers, that makes it more likely they’ll write about your site. Just make sure you’re ready for it. If you have a very good demo video, they might be willing to write about you without the prototype.
• HackerNews. HackerNews is a great community of entrepreneurs who are willing to give you good advice on your startup. You need to have a working prototype and let them look at the site directly, though. Here’s some great advice on how to submit to HackerNews.
• Facebook Ads and Google Adwords. This is actually really hard and often pretty expensive. We were never able to really pull this off despite several attempts.
• Start a company blog. The blog should be focused on providing helpful advice on the problem you are helping consumers solve. Kissmetrics, a startup focused on helping websites with analytics, runs an excellent blog on helping startups think through user acquisition. This strategy involves a lot of work so only do it if you have a really good idea for the content you want to create and think that users will appreciate it.

Some final tips and notes:

• Your list will get stale. The longer you wait to invite people to your prototype, the smaller the percentage that will respond to your invite email. You can try to keep the list active by sending them occasional updates on the product.
• I recommend you give the users a survey after they submit their email address where you collect information from them regarding what they are hoping your site will accomplish for them. I have heard good things about surveymonkey
• Encourage users to tweet, share on facebook, or email your site to their friends. One way people have done this successfully is to promise the user earlier access to the prototype if they invite 3 friends.

Now that you know how to get people to your site, I’ll write a future post on what you need to do to make sure those 1,000 people actually stay on your site.

If you have employed any other techniques that have worked well, comment below and I’ll add them to the list.

Like working with big data sets?

We’re aggressively expanding YipitData and looking for:

• Data analysts (consultants, financial analysts)
• Data product managers (technical and can work with analysts and engineers to build a system)
• Data engineers (can build complicated systems to collect and process very large data sets)

Email me personally and we’ll meet up! I’m at vacanti at gmail dot com

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

As a current or aspiring entrepreneur, you should be meeting with a ton of people (potential customers, investors, biz dev partners, employees, journalists).

You will often get introduced via email or you are cold-emailing them.

You are probably excited to meet with them and correctly assume that they are busier than you.  So, like the nice person you are, you want to be as flexible as possible.

And, that’s when you make the mistake of saying: “I’m pretty free the next two weeks, let me know when works for you.”

You may think you are being nice and flexible; but, you’re actually frustrating them.

What you actually just said: “Hey, why don’t you spend some time going through your schedule, pick out some times that work and email them to me. I’ll then sit back and pick one that I like.”

If you really want to be respectful of their time (and you should), your goal is to have them do as little work as possible to get the meeting arranged.

Eric Friedman made some good suggestions on how to most effectively set up an appointment and I’ll reiterate them here with some additional tips based on my experience.

You should do this from the very first communication to reduce the back and forth.

Suggest Possible Times

Go through your calendar and suggest possible days and times that work for you. For instance, I do the following:

The following dates/times (EST) work for me:

Monday, 1/24: 11am – 12pm EST; 2pm – 3pm EST

Tuesday, 1/25: 2pm – 4pm EST

Friday, 1/28: 10am – 12pm EST; 2pm – 4pm EST

Some additional tips:

• The more time slots you suggest the better
• Make sure you specify your time zone (people will assume they are in your timezone)
• The busier the person is, the farther out your suggested time slots should be

Suggest Meeting Location or Phone Number

If it’s a phone call, I always say: “My number is 212-555-0001 but I”m happy to call you.” If you’re trying to set up a meeting with several people, you should get a free conference call number and include the dial-in information.

If it’s an in-person meeting, you should suggest going to their office (confirm their office address in the email) or picking two coffee shops or restaurants (if it’s a breakfast or lunch meeting) that are near their office.

If you do all of the following, not only will the meeting get quickly arranged but, by making it less frustrating for the person you are emailing, it also increases the chances of getting the meeting set up in the first place.

Update: Great comments over at hacker news including another reason to do this is that it suggests you respect your time. I know that sounds like a bad excuse but, unfortunately, appearances do matter.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Goldman Sachs CEO

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

It has recently been reported that Goldman is investing $500 million in Facebook at a lofty $50 billion valuation.

After several small sales on SecondMarket at a $50 billion valuation, TechCrunch’s MG Siegler stated that “With this investment, that valuation has just been validated.”

He’s wrong. It’s not a fair market valuation. Goldman actually values Facebook at way less than $50 billion.

Why? Goldman will make hundreds of million dollars in fees from their new relationship with Facebook.

In many ways, this isn’t a financial investment in Facebook, it’s a strategic investment by Goldman.

Hundreds of Millions of Dollars in Fees

Goldman will get a ton of extra benefits from cementing this relationship with Facebook. Some are even suggesting that fees Goldman will generate from Facebook eventually could pay for the whole investment.

If you factor in how much those fees are worth, you’ll can get a sense of what Goldman actually valued Facebook:

• $1.5 billion special purpose vehicle. As part of the deal Goldman gets to create a $1.5 billion special purpose vehicle to allow private wealth management clients to invest in Facebook with a 4% placement fee.
  • Value to Goldman: $60 million to $135 million. 4% placement fee is $60 million; 5% of profits, assuming Facebook valuation increases to $75 billion, that’s $37 million; at a $100 billion valuation, that’s $75 million
• IPO and Corporate Banking Fees. Deal positions Goldman nicely to lead their eventual IPO and be their preferred investment banker on all large financial transactions including debt raises, acquisitions
  • Value to Goldman: $100 million to $300 million. IPO fees (6% of offering) alone can be $100 million. Then you get secondary offerings, debt raises, acquisition advisory and all other financial transactions
• Private Wealth Management for Mark Zuckerberg. Positions Goldman nicely to manage the private wealth of Mark Zuckerberg and the hundreds of newly millionaire Facebook employees
  • Value to Goldman: $30 million per year. Assuming 1% fee, on now $12 billion of value to Mark Zuckerberg, this could potentially lead to $120 million.  However, since most of the money is tied up in Facebook stock, it won’t all be actively managed.

The above valuations are highly speculative and don’t take into account costs associated with generating those revenues, the chance that Goldman doesn’t end up getting all of the business above or the fact that Goldman was likely to lead the IPO already.

That being said, it’s aslo likely that Goldman will generate more benefits than I’ve outlined above.

Goldman Actually Valuing Facebook at Way Less Than $50 Billion

Considering that Goldman is only investing $375 million and assuming Goldman will generate $100 million of value, it implies Goldman valued Facebook at $36 billion, not $50 billion.  At $250 million of value, it implies a $16 billion valuation.

And, of course, it’s also likely that all of the fees pay for the whole investment thus saying nothing about Facebook’s valuation.

In other words, this was a strategic investment in Facebook, not a financial one.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Family, friends, journalists, potential investors and palm readers will tell your idea is brilliant or foolish but they don’t really know. Very few ideas are clearly amazing. The success of most ideas is very much unclear.

So, how can you find out if your startup idea is good or bad?

Fortunately, there are people out there who can definitively tell if your idea is good or bad. They are brutal, selfish and don’t really know what they want. But, if you put a version of your startup idea in front of them, they’ll either use it or quickly lose interest.

Those people are your potential users. The people whose problem you’re solving and they alone, through their action or inaction, will tell you if your startup idea is good or bad.

The problem is that it takes months to get a working prototype ready. Well, not if you are ready to take a few shortcuts.

The Idea

In late January of this year, we had noticed two things:  people loved Groupon and there were, at that point, around 15 competing daily deal services of which 7 had launched in the last 30 days.

The problem we identified was two-fold: people didn’t want to sign-up for all these new deal services getting 15 emails a day and didn’t want to keep getting deals that weren’t relevant to them (e.g., guys didn’t want spa deals).

We wanted to create a product that would allow users to tell us what kind of deal categories they wanted (restaurants, not spas), every day we would grab all of these new daily deals announced in their market, filter the deals based on the user’s preferences and email the best ones in just one email.

How We Tested It

We could have sat around for a few months asking people what they thought, writing a business plan, modeling out what it would like in five years, thinking about where our headquarters would be, and other irrelevant things.

Or, we could create a very simple prototype as fast as possible. We could see if potential users would sign-up. And, if they did, whether they would open our daily emails, click on the deals or just unsubscribe from our emails.

Building a Prototype in Three Days

We had a long list of features we wanted for Yipit but we cut everything except for the bare minimum:

• Landing page to sign-up
• Page to collect category preferences
• Page to recommend Yipit to others
• Page where you could see all of the deals in our system

In retrospect, we could have done without creating the page where a user could browse all of the current deals.

On the back-end, we needed:

• Script that would send out a daily email with the deals that matched their preferences
• Crawler to grab all the deals from the various sites and put them in our database

All of the above is actually very easy to build.  The only problematic one was the crawler to grab the deals from the various third-party sites.  Each site was different, the urls were weird, duplicate deals would be a problem and categorizing the deals accurately is a hard problem to solve. We quickly realized the crawler was going to take us weeks to build poorly and months to build correctly.

But, what we concluded was that the whether we could build the crawler wasn’t a risk. We could; it would just take time. The real risk was that people didn’t want to use our service.

The Shortcut

So, we said, screw it, we’re not building a crawler. We’re just going to do the deal entry manually and eventually build the crawler if people actually liked our new service.

We created a simple admin page where a deal could be entered in (title, picture, price, etc.). We then hired a part-time person who would wake up every morning, go to the 20 daily deal sites and manually type the deals into our system and assign them to categories like restaurants, massage, spa, etc.  Crazy? Yes. Scalable? Probably not. Did it matter? No.

Finding Out If Our Idea Was Bad

Three days later, we were ready to put our prototype in front of potential users. Much to our delight, people started signing-up and started getting and clicking on our email. They were implicitly telling us they liked our idea! (I’ll write a future post on how to get these early users but basically you get them wherever you can. You don’t need that many to know if your idea is good or bad).

If people hadn’t signed-up or hadn’t clicked on our emails, we would have found out right away that there was something wrong with our idea. But, that would have been okay because we hadn’t spent months on it; just a few days.

How to Find Out if Your Idea is Good or Bad

My main pieces of advice are:

• Build a very simple prototype for your idea and get it in front of potential users. You’ll learn more the day you talk to your first user than the months you’ve spent pontificating
• Don’t be afraid to do things manually at first like we did
• Build a landing page with screenshots that describe your future product and see if people will sign-up for your invite list. Dropbox did that before they had a product and signed-up 100K people.  Clearly, they were solving a problem people had!
• Cut every feature except for the core feature.  Seriously, you don’t need any of those extra features.
• 95% of startups are able to have a prototype built in less than two weeks.
• Don’t write a business plan.

It’s very likely your idea is bad. Find that out as soon as possible so you can evolve it to a better idea.

Like working with big data sets?

We’re aggressively expanding YipitData and looking for:

• Data analysts (consultants, financial analysts)
• Data product managers (technical and can work with analysts and engineers to build a system)
• Data engineers (can build complicated systems to collect and process very large data sets)

Email me personally and we’ll meet up! I’m at vacanti at gmail dot com

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

From a PR perspective, I like to think of the internet as an ocean full of schools of fish. There’s the TechCrunch school, the NY Times school, Lifehacker school, HackerNews school and thousands of others.

When one of these services feature your startup, their respective school of fish will suddenly and dramatically swim directly towards your startup. And, as fast as they come, they will swim by you even faster.

You are a fisherman, your startup is your net and your goal is to catch as many of these fish as possible.

If your net (your startup) isn’t well-built and ready for them, the fish will swim right by you and they’ll never come back. It’s tragic and a huge blown opportunity. It happens to so many startups and you can see it in their traffic.

But, some startups have built a good net and they overnight acquire thousands of new happy users.

Here’s how we made sure Yipit, a daily deal aggregator, had a good, strong net to catch as many of these potential users as possible.

“Net” Strategy Depends on Your Stage

Startups are generally in one of the following four stages.

• Stage 0: Visitors Come But Leave
  • They might click around but they don’t activate into a real user. For Yipit, that means they don’t subscribe for our daily email
• Stage 1: Visitors Sign-Up But Don’t Come Back
  • A visitor will like your site enough to create an account but they con’t come back. For Yipit, they pick their city and provide us their email but don’t open / click on our emails.
• Stage 2: Visitors are Retained
  • Not only does a visitor sign-up, but they are coming back regularly. For Yipit, they either come back to the site to see new deals or, for most of them, they receive our email recommendations.
• Stage 3: Visitors Refer Others
  • They either like your service so much they tell their friends or the service itself encourages them to refer others. We didn’t have a great way to track referrals though we could see it with google searches for “yipit” and direct navigation.

Stage 0 and Stage 1: Create Splash Page

Most startups are in stage 0 or stage 1. You should not be actively seeking PR.

Before Yipit pivoted to focus on just aggregating daily deals, we were at stage 1. Users signed-up for our service but they weren’t clicking on our emails, they weren’t using the deals we were recommending and they weren’t referring others.

So, we would direct new visitors to a splash page where they would sign-up for our waiting list. We would then invite them to the site and see if they signed-up and came back. When they didn’t, we would offer them $10 to get on the phone and explain why they didn’t like it.

We got visitors to Yipit in a bunch of different ways: meet people, google ads, facebook ads, some current users would refer new users, friends, people googling us. The fortunate thing is that you don’t need that many users to figure out what’s wrong with the service.

Every startup in stage 0 or stage 1 should build this splash page today. It’s a great source of early test users and, more importantly, you get their emails so you can follow up with them.

I recommend you use Unbounce to build it.  You don’t have to have any technical background to do it.  We didn’t use it because it wasn’t around but would use it today.

Some tips for the splash page:

• Have one concise, huge phrase that explains what problem your startup is addressing. For Tumblr, it’s “The Easiest Way To Blog”. For Yipit, it was “All the Best Daily Deals In Your City“
• The email sign-up form should be on the splash page
• You should A/B test it with different messages
• Have an image or video that explains what the service will do
• See About.Me’s splash page, it’s awesome. Not only do you sign-up for their waitinglist, but you reserve your username. So smart.
• Dropbox had 100,000 users just off of their splash page

Stage 2 and Stage 3:  Ready For PR “Launch”

Based on our all our conversations with users, we pivoted to focusing on aggregating daily deals in February of this year.

Right away, we knew we were in stage 2. Our early users liked the new service, we liked it, they were buying deals, they were telling friends. We were ready to launch.

We made a PR push and got TechCrunch, Wired and a few other companies to cover our launch. When those users came, we converted them into our first five thousand users.

The only caveat for not launching in stage 2 is if you can quickly do a few things that will dramatically increase your referral rate (like integrating with Twitter or Facebook). If that’s the case, implement the low hanging fruit before launching since it can potentially double / triple the impact of your PR efforts.

Had we grown impatient and tried to launch before we were at stage 2, we would have crash and burned after launch.

(For more on the stages of a startup, I recommend Dave McClure’s amazing Startup Metrics for Pirates.)

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

Naming your startup sounds fun and awesome.

Let’s say you have a music sharing idea, so you’re going to grab music.com.  Wait, that’s probably too obvious. I’ll be creative. Let me try sharemusic.com. Oh, taken. How about Musicster.com, taken. Songster, taken. Songly, taken. Beaster, taken. Uh, oh. That’s when you realize something we’ve all at one point realized, EVERYTHING sensible is taken.

Before you know it, instead of spending time getting your prototype out, you’ve spent way too many days on instant domain search, thesaurus.com, polling friends, telling yourself you’re not going to spend anymore time on it, wondering if a .net domain is all that bad, telling yourself google was a terrible domain name so you shouldn’t care that much, trying to reach someone in Russia who owns the domain you want, finding a domain that’s actually available, buying all 10 spelling variations, realizing 5 minutes and $50 later that you don’t actually like the domain.

We went through all of the above when trying to name Yipit and we came up with a long list of terrible names and these were the ones we actually bought: streetcake, frankencity, 1gotham, citybat, noocher, zaxme. Ugh.

Needless to say, we were very unhappy with our final list and, even worse, we had spent way too much time on it.

So, after the fifth time we had told ourselves we weren’t going to spend any more time on it, we decided to come up with a different strategy.

Bottoms Up Approach to Finding a Domain

We wanted something short and we decided we wanted the domain to end in “it”.  We figured people say  “google it”, and we hoped that one day, if we got popular enough, we could make it easier on people by having the “it” as part of the name. I will be both very happy and very sad if, one day, I hear someone say “yipit it”.

So, I wrote a simple python script to generate every [consonant][vowel][consonant]it.com.  With 21 consonants and 5 vowels, that resulted in 2,205 possible domains.

Obviously, I wasn’t going to look those up individually. Fortunately, godaddy has a bulk uploader that lets you check 500 domains at the time. (If someone knows of a better bulk upload checker, comment below!)

Of the 2,205 domain combinations, around 400 (in May 2008) were available. As you can expect, the ones that were available had Q’s in them with no accompanying U’s and other horrible formations.  It was disappointing. The available domains were terrible but, amongst the trash, we spotted the needle in the haystack: yipit.com.

The best part, it took us just 30 minutes to find our domain!

We both liked it and asked a few friends and family what they thought.  They all really liked it. I couldn’t believe our domain search was over. Yipit was our new company name.

(Hilariously, that same week, we had asked a creative friend of ours to come up with names and she had come up with 20 fun names one of which was “yipit”.)

How to Come Up With Your Own Script

Good available domains are like needles in the haystack. They are really hard to find by trial and error but this scripting technique combined with the bulk checker, lets you get to those needles fast. I recommend you do the following:

• Come up with a prefix or suffix that you like.  For us it was “it”, maybe for you it’s “get” or “un” or “ster” or “me”.  It doesn’t have to be a real prefix or suffix, it could be a suffix like “mo”
• Write a script or use excel, to generate combinations of your prefix / suffix with two / three letter combinations or actual lists of words
• Run them through godaddy bulk uploader and see if a great domain falls out

Hopefully this will help you find your domain and get back to doing what actually matters, building your prototype.

I went back today and ran the script again. I checked all the combinations through the godaddy bulk uploader tool to see which ones were still available and put the available domains in this google doc. The pickings are slim.  My favorite one is Vopit though it sounds a little bit like vomit.

(If anyone else tried a similar approach to naming their startup, let us know below in the comments!)

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.