Startups

There are typical ways to approach sales, but Kawasaki has three other ideas. These include the unintended users, allowing test drives, and the suck down theory - chances are the CEO is not going to be the one buying your product, but rather the people at lower levels.

A successful product is easy for everyone to use, immediately. Flatten the learning curve, never ask someone to do something you would not, and recruit evangelists to spread your message.

In addition to handling the legal work, lawyers help companies get off the ground by making introductions for founders of start-ups to potential investors, mentors, and accountants. They also help negotiate licenses, execute customer contracts, public offerings, and mergers, sit in on board meetings, and give advice.

Mandelbaum is optimistic about the opportunities in the market today based on her assessment of holiday parties, which she believes are a valuable indicator of market climate.

Though Fluidigm is essentially a tool company, which is not very glamorous, says Worthington, they were successful in raising funding because they were a real, functioning company that already had customers and were able to prove a real market. Worthington recommends not wasting time with venture capitalists that are not immediately enthusiastic about the company. Once they make up their mind against the company, there is no use pursuing it. On the other hand, when there is that mutual connection, pursue the VC relentlessly.

After bringing together the best team, raising money in tough environments, and establishing and living by core values, says Worthington, Fluidigm focused on launching the product. The product development went much faster than anyone could have hoped and soon they had a product with many important features, including an immediate economic benefit to the customers, he notes.

Winblad talks about how VCs are generally optimistic about market uptake, so in due diligence it is important to assess whether the customers are real or imaginary. The source of most bad investments is misjudging the market risk from competitors or timing, she says.

Winblad talks about how VCs spend a lot of time with the leaders of major technology companies to find out what they are looking for. It is important to talk to consumers early rather than late, she notes. Today's leaders are technologically-savvy, know what they need, and are willing to tell you if you ask, she adds.

Winblad explains that very few Series A investments were done in 2002. However, a lot more were done in 2003 and will be done in 2004, she says. The reasons for the decline since 2000 include: restart dollars were competing with the A round dollars; corporate investors disappeared (excpet Intel); and individual investing declined. Additionally, during this era, VCs were doing deals individually, creating twice as many A round deals and putting only one person on the board. Now, A round deals are syndicated to provide more coaching, she adds.

Winblad talks about how the market is driven by consumers who want connectivity across devices, customizable products, and fair prices. Communication and collaboration are key to delivering the product the consumers want, she notes. The pricing structure cannot just be made up -- a company must demonstrate they can deliver undeniable short-term return on investment to the customer in order to justify the price.

According to Winblad, the intellectual capital in your company and the coaching it gets is more important than money. There is a high bar for hiring employees. Most companies die of self-inflicted wounds rather than from competition or lack of opportunity, she says.

The founders acknowledge that they were very lucky in that their first venture investor was from a man who was also a technologist. He understood the vision for the product and was able to assist the founders in solving technical problems, as well as entrepreneurial problems, which proved valuable in the growth of the venture.

The Danger product encompasses three major pieces of technology: the hardware, the operating system and graphical user interface, and the backend service. The founders drew upon their experiences at Apple and WebTV to know what to develop in-house and what to outsource. Looking back, they are not sure how it all came together and how they got it done, but it was a huge accomplishment when the product shipped.

Launching the product with T-Mobile helped get the product out on the market and got others interested in the technology, making it easier for Danger to acquire other partners. Still, it was important for Danger not to be seen as a outsource development shop of T-Mobile and so they took steps to maintain control.

Danger has developed a low-cost combination device that functions as a phone, and is internet and email compatible, that is marketed to the young and hip. The business model is built around the services sold to wireless carriers so they are able to sell the devices cheaply and then make money on the back end.

At the beginning, the product was an 'internet sponge' that could absorb information from a computer and be carried around on a keychain. As time went on, the idea went through lots of changes to become what the Hiptop is today. Hershenson describes the formation of the product as a critical mass process: enough stuff (people, money, time) gets scrunched together until the product comes out like a giant release of energy.

The product concept was always to build a low-cost device, but what this meant changed greatly as the founders continued to develop more features. The nature of this device morphed from an internet sponge into the much more complex synergized communicator.

The Hiptop founders designed the product in the way that was the most appealing to them. They had strong convictions about what the product should look like and the things it should do, which were not necessarily the same ideas the carriers had. However, the innovative design won them over.

The success and genius of the Hiptop brand is arguably in its marketing. Danger actually gave carriers the choice of whether to use the Hiptop name and artwork or whether to use their own. Out of 9 carriers, T-Mobile is the only one to have used their own name and, therefore, the Hiptop brand has become valuable.

Danger's first customer was Voice Stream, which later was acquired by T-Mobile International. Voice Stream was a small company looking for something innovative to differentiate themselves from the competition. They found that innovation in Hiptop. Danger initially treated them as a partner rather than a customer. The two companies provided valuable services to each other and the deal solidified Danger's business plan. Since Hiptop was still in development at the time of the deal, Voice Stream was able to contribute to the product design, including giving it voice capabilities, which was not in the original design.

Wirt answers the question: Will there be convergence of PDAs and automobiles in the future? Most likely, he says. Car companies are very interested in adopting the newest technology and are currently working on ideas for integrating the two devices.

Customers generally are not very good at knowing what they want for the next big product, says Wirt, but they are good at making suggestions for incremental improvements. The next big thing has to come from the product developers, but then has to be refined based on customer feedback.

Wirt explains that computers have become so cheap and common that they can now be found in countless devices. He was able to count 14 computers in his kitchen alone. Optical drives are another example of a device that was once very expensive, but has now become a standard technology and its use and application has greatly expanded.

Though some types of convergence devices become extremely popular, says Wirt, others never catch on. In certain cases, it is clear why the convergence device has never caught on (like a washer-dryer combo), and in others it is not so clear (like why people never use the built-in calculators on their cell phones), he adds.