Month: December 2009

This time of year, many venture backed startups have created or are putting together their operating plan for 2010.

Few suggestions for early stage/pre revenue companies:

0. Keep it simple.

1. Start with the ending. What do you want to accomplish by the end of next year and why?

2. Set quarterly objectives

Quarterly objectives help your board identify what’s going well and not well at the company. Are the goals realistic? Are we understaffed? Do we have the right people in the company? Does the company execute well? Is the product on track?

Some early stage companies are hesitant to create quarterly objectives. I know it can be challenging for a few reasons: (a) some entrepreneurs are worried that they will look bad if they miss their objectives and (b) startups have to be flexible at times and priorities may need to change

Here’s how to deal with these concerns. First, take the time to pick your investors wisely. The best ones will help you and your company be successful. The worst investors suffer absentee landlord syndrome which is a nightmare.

It’s also essential to have an open communication style and culture amongst your board members. Don’t wait until the board meeting to propose a big change in the plan or priorities. Early stage investors and board members understand that things will change. That’s part of the deal so don’t sweat it.

3. Operating Budget

For early stage/pre revenue companies, i suggest that you operate the business assuming you are going to miss your 2010 revenue forecast entirely or significantly. You can always spend more if revenue (or user engagement) grows nicely. But cutting is painful at best.

4. Fund raising

If you need to raise additional capital in 2010, assume you will need 4-5 months to raise money. Clearly there are exceptions but for most companies that is the general rule. Get some feedback from your existing investors what they want to see to support the next round.

5. Tell your board how they can help you. Give them assignments and hold them accountable. This is a two way street.

When you look at the current mobile app stores, you can touch and feel a wide range of compelling applications. And the number of apps is growing by the day.

Some are developed by large companies. Some are developed by venture backed startups. Many (most) are developed by 1 or 2 engineers.

My favorite apps are on my iPhone are built by companies with less than 10 employees at the moment. I didn’t fix it that way – it just happened.

The key is that developers can build simple apps and sophisticated apps. It’s entirely up to the developer.

Record labels need to take a page or two out of the current app store model.

In all of the major app stores that exist today (Apple, Google, Blackberry, Palm), the app store owner doesn’t ask for any up front fees, up front licenses, wacky terms like most favored nations (MFN), or complicated rev share fees from the developer. The terms are simple and straight foward. A simple revenue share where the developer gets most of the economics. That’s why it works.

The app store then developers aggregation, reviews, filters and distribution.

If someone wants to create a killer web service or mobile app with music content, well you know the drill.  The complexities are endless. First, you have to do deals with labels and publishers. Then each record label has a complicated process to get a deal across the finished line. I know of some startups that have spent 18months to get a label deal done. Oy.

It has to be simple. I’d love a self service model where the developer agrees to standard terms and a rev share fee structure that allows even the single hacker to build something great (without up front fees, fear of litigation, or pysho-expensive contract negotiations.)

Then we can imagine a viable role for labels and will see an explosive developer creativity and innovation (and venture funding as well). Artists need to get paid more from this new model and the labels will just have to live with it. Because it in this “app store model” the developer is creating a ton of value.

And that will be a good thing for everyone.