The Startup Guide to Hollywood

Matt Sandler is a musician, entrepreneur and founder of Chromatik, a mobile startup enabling musicians to practice, learn, and share their favorite music.

I wanted to replace Macaulay Culkin in Home Alone 3.

My mom’s best friend Rochelle worked at MGM and jokingly said that I should audition for the latest Home Alone movie in ‘95. I was 8 years old. I took her seriously and got a’practicing.

In the end, Rochelle wouldn’t let me audition. She didn’t want to help in the downfall of a child actor. Not to mention, I was (and still am) awfully awkward on screen.

I’ve been intrigued by the entertainment industry ever since. That led me to playing music professionally, before jumping in the tech world. I’ve bridged the two for the last 8 years, from Chromatik and CitizenNet to KROQ 106.7FM and Capitol Records.

As I got deeper into technology, it became clearer that those two worlds didn’t see eye to eye.

“A lot of people in LA feel as though the [Silicon] Valley guys are pirates and don’t respect content. In the Valley, they feel like people coming from Hollywood are litigious and archaic. There’s truth on both sides — but now they both need each other.” – Troy Carter, Atom Factory

Many smart folks have written about Hollywood vs. Silicon Valley. Separated by only a 50 minute plane flight, the two cultures are diametrically opposed at times. Oil and water. Night and day. Lamb and tuna fish.

But none speak tactically about how tech startups should approach working with Hollywood.

Just as with Sand Hill Road, there is a method to the madness. The better you know the landscape, the better you’ll play the game. So we’re going to dig into:

  • Part 1 – Who to work with in entertainment?
  • Part 2 – Celebrities 101
  • Part 3 – Selling to entertainment companies
  • Part 4 – A 3 minute introduction to content deals
  • Part 5 – Is it worth working with Hollywood?

WHO TO WORK WITH IN ENTERTAINMENT

entourage

Let’s start with getting a lay of the land.

Who’s been there, done that in Hollywood? Who can help you navigate the scene? What influencers are involved with startups? What investors “get” Hollywood?

With influencers and entertainment executives living in the public eye, there’s unprecedented levels of access today. But Hollywood is tricky. It’s still largely about who you know to help get deals done. And people wear multiple hats – agents are also investors, lawyers are also entrepreneurs, and celebrities sometimes want to be an actor slash model. Not the other way around.

fabio

Here’s a look at who you should be working with:

(As a quick aside, this list is far from comprehensive and not ranked in any way. My apologies in advance to anyone I missed because I’m an idiot. Please ping me at@mattdsandler with folks that should be on this list.)

AGENTS

Agencies are typically the first touchpoint for startups in the entertainment world. They are huge organizations that broker deals for talent they represent. Lots of cooks in the kitchen. And while agents are some of the most powerful individuals in the entertainment industry, they are middlemen. Agents don’t always have close relationships with talent (a la management), and they certainly don’t have green-light ability. But agencies work with, invest in, and incubate startups frequently. So it’s a great starting place.

  • ICM Partners – Keyvan Peymani
  • Creative Artists Agency – Michael Yanover, Esther Nordlinger, Sam Kokin
  • William Morris Endeavor – Ari Emanuel, Dan Porter, Marc Geiger, Molly Matthiesson, Charles King, Chris Jacquemin, Jason Lublin, Avi Gandhi, Beau Bryant
  • United Talent Agency – David Spingarn, Brent Weinstein, Robyn Ward, Greg Goodfried, Milana Rabkin, Oren Rosenbaum , Kendall Ostrow
  • Paradigm – Lawrence Antoine
  • The Windish Agency – Tom Windish, Rob Bonstein

LAWYERS

Finding a great entertainment lawyer can help make or break your company. If you’re poking around the entertainment scene, you’re going to want to get deals done. To strategize and execute on a deal, you want someone on your side who has worked similar successful deals before. Remember, when it comes to dealmaking, the worst day in tech is still usually better than the best day in entertainment (Tim Ferriss).

  • Hertz, Lichtenstein, and Young – Ken Hertz
  • Davis Media Law – Glenn Davis
  • Cooley – Jennifer Massey
  • Myman, Greenspan, Fineman, Fox, Rosenberg, and Light – Eric Greenspan
  • GISPC – Joe Brenner
  • HJTHNWRR&K – Walter Teller
  • Eric Galen

ENTREPRENEURS

Some entrepreneurs have a magic touch with entertainment and media. They navigate the industry seamlessly and bring exponential benefits to their startups through creative deal-making, strategy, and product leadership. I’ve been lucky enough to know a few of these folks, and it’s not just hype. These are some entrepreneurs who have successfully fought the good fights.

  • Brian Lee – The Honest Co, ShoeDazzle, LegalZoom
  • Peter Gotcher – Digidesign, Pandora, Dolby, Jaunt
  • John Maloney – Circa, Tumblr
  • Sean Parker – Facebook, Spotify, Napster
  • Ian Rogers – Beats Music, Topspin
  • Jason Kilar – Hulu, Vessel
  • Ynon Kreiz – Maker Studios, Endemol
  • Chris Ovitz – workpop, Scopely, Viddy
  • George Strompolos – Fullscreen, YouTube
  • Miles Beckett – EQAL, lonelygirl15
  • Ara Katz – Jello Labs, Beachmint
  • Steve Raymond – Big Frame, Flux, Musicmatch
  • Allen DeBevoise – Machinima
  • Brian Norgard and Dan Gould – Chill, Ad.ly, Newroo
  • Jack Conte – Patreon, Pomplamoose
  • Tom Ryan – Pluto.tv, Threadless, Smule

TALENT

Talent is purposefully the most difficult group to access. They have blockers and tacklers, and their time is spent on many disparate creative projects. But if excited about your startup, these folks can move mountains for you.

  • Ashton Kutcher – A Grade Investments, Katalyst
  • Ellen Degeneres – The Ellen Degeneres Show, eleveneleven
  • Ryan Seacrest – Seacrest Productions
  • Robert Downey Jr – Downey Ventures
  • Chris Hardwick – Nerdist Industries
  • D.A. Wallach – Chester French, Spotify
  • Rachel Zoe – Zoe Media Group
  • Nas – Musician, Queensbridge Venture Partners
  • Tyra Banks – Fierce Capital
  • Adrian Grenier – SHFT, Wreckroom
  • Trevor Skeet – DJ Skeet, Spotify

BONUS – Who Represents Whom?

Want to get in touch with an influencer’s representatives? Here are a few quick ways to find the information you’re looking for:

For actors, directors, and screenwriters

Check out IMDBPro or StudioSystem. They have more information than you could imagine.

For musicians and other influencers

Check out the “Contact” page on their website. Surprisingly, they show some (if not all) the necessary information for you to reach out to their representatives.

Bruno Contact

But as always, warm introductions are the best path!

INVESTORS

It takes a special breed of investor to “get” Hollywood. Especially when you combine that with investing in early stage startups. Either these investors have been in the trenches themselves, or they’ve done enough deals around LA and NYC to know how the industry works. These are the go-to firms, if you need capital and help navigating Hollywood.

  • Lowercase Capital – Matt Mazzeo and Chris Sacca
  • Greycroft – Dana Settle and Mark Terbeek
  • Science – Mike Jones, Peter Pham, and Jason Rapp
  • Atom Factory – Troy Carter, Ty Stiklorius, and Katerina Markov
  • Upfront Ventures – Mark Suster and Greg Bettinelli
  • Plus Capital – Adam Lilling
  • Launchpad LA – Sam Teller
  • Broadway Video Ventures – David Birnbaum
  • Sherpa Ventures – Shervin Pishevar
  • MESA – Jamie Kantrowitz
  • Queensbridge Venture Partners – Anthony Saleh
  • The Chernin Group – Jesse Jacobs, Jason Bergsman, and Scott Bromley
  • Rustic Canyon Partners – Nate Redmond and David Travers
  • SV Angel – David Lee and Ron Conway
  • Amplify.LA – Paul Bricault, Richard Wolpert, and Jeff Solomon
  • YouTube – Jane Hu
  • Velos Partners – James Bailey and Raj Ganguly

ENTERTAINMENT COMPANIES

Most major entertainment companies — record labels, movie studios, etc — are banks these days. They finance creative projects in their domain, and (sometimes) help with distribution. Entertainment companies usually appoint an internal team to work with emerging technology startups. And, in turn, this team vets startups and helps route them to the relevant people in the organization.

  • David Min – Disney, Strategic Innovation
  • Ethan Applen – Warner Bros, Global Business Development
  • Hardie Tankersley – Fox Broadcasting, Digital Products, Platforms, and Innovation
  • Rob Wells and Carlos Adame – Universal Music Group, Global Business Development

STARTUPS

We’re not talking folks like Netflix or Spotify. Rather, these are pre-IPO companies built in the last few years, who have proven that they can make things happen in Hollywood.

WHY WORK WITH HOLLYWOOD

lego

Now that we have the lay of the land – why does your company need to work with the entertainment industry?

Similar to the Silicon Valley “scene,” Hollywood can twist and turn you with parties, pseudo-celebrities, and more. Know what you want from the equation, or prepare to waste a lot of time in limbo.

Without solving for every scenario, below are three of the most common startup reasons to go to Hollywood:

1. We want a celebrity to drive our marketing.

2. We can help entertainment companies sell, market, or track their products more effectively.

3. We need content — movies, TV shows, music — to fulfill our product vision.

Let’s explore each reason further.

CELEBRITIES 101

celeb

YOUR APPROACH WITH CELEBRITIES

Good Approach – Finding talent to add fuel to the fire with a scaling business.

Say you have an online arm butter business. Gyms around the country buy your products, and you’re looking at $2.2mm in sales this year. Fantastic!

But now you’re thinking about how to grow even bigger. Wouldn’t Dwayne “The Rock” Johnson be the perfect endorsement? Your startup could get access to a bigger audience, with The Rock’s help. You would have access to new promotion channels and likely increased brand association with his involvement.

This is a perfect case to try to work with a celebrity. You have a real business that you’re looking to grow. The talent-product fit is exceptional. And if you construct the deal correctly, there is potential value on both sides.

Hollywood understands marketing. It’s in the air. And when used effectively, that prowess can pay enormous dividends for your startup.

Common Mistake – Talent as a main distribution strategy.

Just because a celebrity is involved, it doesn’t mean that people will buy your product. Or better said, celebrity cannot supplant product-market fit.

No celebrity can make or break your business independently. Bringing on talent can mean significant overhead and expectations, both internally and externally. Everyone wants to use their time judiciously, and that means not putting the cart before the horse.

CONSTRUCTING A CELEBRITY DEAL

Almost every consumer tech company tries some form of influencer marketing. Many folks think that celebrity endorsement is the highest form of word-of-mouth marketing. Heck, there are even great companies who sell influencer tweets (Ad.ly), YouTube promos (FameBit), and more.

But as any reasonable entrepreneur could assume, working with influencers can be complicated. There are different levels of engagement, compensation structures, and influencer responsibilities. It all depends on what you’re looking to do.

Assuming everything’s equal, here’s a rundown on the hierarchy of common startup-influencer interactions:

1. Organic influencer use.
2. Influencer co-founder to add creative input, leverage personal network, and more.
3. Influencer invests in startup, on the same terms as all other investors.
4. Influencer invests in startup, on different terms than all other investors.
5. Influencer endorses startup product for payment.
6. Influencer endorses startup product for equity.

Let’s take a deeper look…

1. Organic influencer use.

You’re in pretty good shape if you’ve organically developed a product that influencers use, value, and adore. Influencers spread the word about your company without compensation. You’re getting the best of the influencer world, without having to pony up cash or equity. Examples includeSoundcloudPatreon, and Slideshare.

Downside Potential:

You have limited potential downside in this scenario. You live or die by the product, so focus there.

Typical Deal Structure:

Send swag, love, and respond to feature requests!

2. Influencer co-founder to add creative input, leverage personal network, and more.

In rare (read: very rare) circumstances, it makes sense to build a company alongside an influencer. The product-influencer fit needs to be exceptional, the influencer needs to commit to her responsibilities for the coming years, and the economics need to make sense for everyone involved. Compelling examples including The Honest Co (Jessica Alba), Crowdrise (Edward Norton), and Funny Or Die (Will Ferrell).

Downside Potential:

Startups are hard, man. Make sure the influencer reads Ben Horowitz’s “The Hard Thing About Hard Things” and thinks seriously about whether a startup is something she can dedicate herself to for the foreseeable future. As with any co-founder, you run the risk of the individual losing interest, not pulling her weight, or worse. And when that co-founder is an influencer, she is likely a major component of your company’s story arc for marketing, hiring, fundraising, etc. You run tremendous signaling risks if the influencer isn’t engaged and has a large equity stake.

Typical Deal Structure:

It’s co-founder status. If three founders, then 33% each, ideally vesting over 4 years. In some cases, there are deviations because of time constraints, cash considerations, or other factors.

3. Influencer invests in startup, on the same terms as all other investors.

The influencer digs your startup and wants to get involved. Instead of asking for equity or cash to get involved, she wants some skin in the game to share in the upside and align with the company team/investors. Great news. You can include her in the upcoming round of financing alongside the rest of your investors. Some recent examples include Wash.io (Ashton Kutcher, Nas, Scooter Braun), Shots (Justin Bieber, Floyd Mayweather, Omar Epps), Gobbler(John Legend, Jared Leto), and Chromatik (Bruno Mars, Overbrook Entertainment).

Downside Potential:

Just like any investor, an influencer (or business partner acting on behalf of an influencer) can behave badly.

Typical Deal Structure:

Influencers come in around $25,000 – $100,000 in check size, with rare exceptions. Also note that if an influencer invests, her business partner(s) may want to write a check too. You’ll be expected to make room in the round.

4. Influencer invests in startup, on different terms than all other investors.

Similar to the above, but the influencer would like additional compensation for the value she plans to bring to the table in marketing, promotion, and more.

Downside Potential:

This is where things get tricky. First, you run the risk of the influencer not delivering on her “additional value.” But secondly, shareholders don’t love the concept of someone getting a sweetened deal, especially when there’s questionable enterprise value coming from the influencer. Be prepared for some pushback.

Typical Deal Structure:

The best way to structure these deals is in two steps: (1) Have the influencer invest in the same vehicle as other investors; (2) Grant a milestone-based advisory role. That way, the cash investment is on the same terms as all investors, while any additional equity comes as a direct result of the influencer hitting pre-determined milestones for the company.

5. Influencer endorses startup product for payment.

These deals typically come together from a startup approaching an influencer with an opportunity to get involved. The influencer likes the product, and then the agent/manager works through an “endorsement deal.” Endorsement deals mean major bucks to influencers. YouTube stars pay rent with product endorsement money. Athletes regularly make more money off the field than on it. And popular musicians play on instruments and gear provided by companies of their choosing.

Downside Potential:

These deals are pretty low-touch. Don’t expect anything from the deal, except what you specifically carve out as the agreement deliverables. Influencers will do the bare minimum necessary to fulfill their obligations. Not out of malice, their time and attention is just spread very thin.

Not to mention, you’re spending money on an influencer without guaranteed ROI. This is a great way to burn cash quickly, if you haven’t considered the economics appropriately.

Typical Deal Structure:

These deals vary, depending on specific deliverables. Compensation can range from a few thousand dollars (social media obligations) through millions of dollars (think Beats Music – Ellen Degeneres relationship).

6. Influencer endorses startup product for equity.

Similar “endorsement deal” construct as above, but instead of cash considerations, the influencer has agreed to accept equity in the company as compensation.

Downside Potential:

This is the riskiest of all startup-influencer relationships. Influencers rarely value equity the way you do, which immediately misaligns company and influencer expectations. The influencer feels like she’s doing free-ish work for the company, while the company feels like they’re giving the influencer an arm and a leg. She believes deliverables should be minimal, and you believe deliverables should be huge. You can see where this has potential to go sideways, if you do not develop joint expectations upfront.

Typical Deal Structure:

Influencers rarely value equity the way you do, so you’re likely going to have to pony up more equity than you’d like to complete the deal. Again, the deal varies greatly, depending on the deliverables you’re looking for. But generally you’ll have an upfront option grant, with additional stock options vesting over time or by specific milestones.

BONUS – Social Stats Hack

Let me be clear — no single influencer will make your business instantly successful via social media. Success requires product-market fit, many customer acquisition paths, and much more.

Said another way, no single influencer has enough social media power to generate scalable, recurring revenue for your business in an instant.

An influencer tweet or Facebook post will not make or break your company. Sure, they can send you some great traffic. But it’s just a bump that comes and goes.

To illustrate, let’s dig into some stats.

Ever wonder how much traffic a single social media post sends? Did you know that you can grab CTR statistics via bit.ly?

Just copy and paste any bit.ly link into your browser’s address bar, and then add a “+” to the end of the URL. Voila!

Let’s imagine that you’re a food-related startup looking for an influencer. You’d like to work with a Food Network Star like Alton Brown, Guy Fieri, or Giada De Laurentiis to help promote your brand, but you’re still trying to wrap your head around possible impact of a Facebook campaign…

Giada De Laurentiis

Giada
  • Facebook Likes – 601k
  • Facebook Link and Post Link
  • Post Engagement – 4,206 likes / 38 shares / 84 comments
Giada Bit.ly
  • Bit.ly Stats
  • Post CTR – 1,207 clicks (743 directly from official Facebook link)

Guy Fieri

Guy
  • Facebook Likes – 451k
  • Facebook Link and Post Link
  • Post Engagement – 6,867 likes / 2,423 shares / 203 comments
Guy Bitly
  • Bit.ly Stats
  • Post CTR – 5,177 clicks (2,859 directly from official Facebook link)

Alton Brown

Alton 1
  • Facebook Likes – 613k
  • Facebook Link and Post Link
  • Post Engagement – 4.379 likes / 747 shares / 162 comments
Alton Bitly
  • Bit.ly Stats
  • Post CTR – 25,773 clicks (12,146 directly from official Facebook link)

My man Alton Brown smokes Guy and Giada in CTR, while Guy leads in social engagement.

Sure, it’s just one Facebook post. You could go investigate their reach on Twitter, Pinterest, YouTube, and more. But the point being — you now have the tool (bit.ly+ trick) to analyze trends around influencer reach and potential customer acquisition capabilities per social media channel.

The examples above aren’t the biggest stars on the planet. They’re no Kim Kardashian, The Rock, or Justin Bieber. But the general principle holds that a single influencer will not make or break your company by sheer social media brute force. Be tactical about how you engage an influencer and be reasonable about how you value social media elements of influencer campaigns.

Considerations:

  • Is your product-influencer fit right? Does the influencer truly buy into your vision? Or are they just working for cash and/or equity considerations? As my friend Joey Flores of Earbits put to to me – “Do they care? It’s the people who care about you and your vision that put the time in. You have to hold out for an influencer that feels that way about your company.”
  • Make sure that the ends justify the means. Namely, is the deal compensation justified for the expected campaign return on investment?
  • Is the timing right? How can you use everyone’s efforts to drive the biggest results?

SELLING TO ENTERTAINMENT COMPANIES

Deal

YOUR APPROACH WITH ENTERTAINMENT COMPANIES

Good Approach – Entertainment companies could buy your products.

When compared to most major corporations, entertainment companies are pretty ahead of the curve. Especially in marketing/advertising technology, social platforms, next-generation content distribution systems, and more.

Many startups find significant traction in selling to or working with entertainment companies. There are new movies, albums, and TV shows debuting every week — entertainment companies have products to sell and dollars to spend.

Common Mistake – You’re going to “put {insert your Hollywood company of choice} out of business.”

You’d be surprised how many Silicon Valley folks come down for meetings in Hollywood with that pitch. Just stop. You’re reinforcing stereotypes. If you want to try to put Hollywood out of business, go do it.

MAKING THE SALE

Selling your product in the entertainment industry can take two pretty clear paths — (1) B2B sales to entertainment companies; and (2) co-branded or white-label consumer tech.

1. B2B Sales to Entertainment Companies

The B2B sales process is an art unto itself. This post is long enough, we won’t talk through the intricacies of B2B sales. However, the interesting opportunity in the entertainment space is that product cycles are much quicker than most other industries, thus lending itself nicely to trying new products without much risk or overhead.

For instance, say you’ve developed a new social media analytics platform specializing in analysis of Instagram, Vine, and SnapChat. You could approach a film company, perhaps Sony Pictures, with the your pitch and a demo cycle around an upcoming movie marketing campaign. The opportunity has limited downside for Sony, potentially high impact for you, and gives you an opportunity to show what your platform can do in primetime. It’s great trial by fire.

Examples:

  • Next Big Sound – Started by selling directly to record labels, including Sony Music and Universal.
  • MobileRoadie – Started by selling directly to influencers, including Madonna and Adele.
  • CitizenNet – Started by selling directly to entertainment companies, including Live Nation and Summit Entertainment.

Considerations:

  • Is the product providing meaningful value for the entertainment company to introduce into its workflow?
  • How do you price your product? Per month? Per project?
  • Most entertainment products are in the limelight. Meaning, entertainment companies require serious “uptime” guarantees and 24/7 client support. Is the product ready? Who on your team is going to be the point person day-to-day?

2. Co-branded or White-label Consumer Tech

Hollywood develops fantastic brands that people know and love. Brands sell. Your startup wants to sell products or grow a community. Hence, co-branding or white-labeling your product with a brand ain’t such a bad idea, in certain circumstances.

For example, you see these products all over the iOS App Store:

Obviously there’s upside for both parties here. For the entertainment brand, they vastly reduce product risk in working with a technology company. And on the startup side, you’re leveraging the entertainment company’s brand and audience to help propel revenue and users.

Generally, these deals result in a technology license or revenue share agreement:

  • Technology License Agreement – Fee paid by the entertainment company, for license to use the technology developed by the startup.
  • Revenue Share Agreement – The entertainment company and the startup split the net revenue, based on a certain percentage (50/50, 70/30, etc) set forth in the agreement.

Considerations:

  • Who owns the technology IP going forward?
  •  Does the agreement allow you to service multiple entertainment properties?
  • What does this agreement “get” your company? Revenue? Notoriety? Users? It’s likely going to be a massive undertaking, make sure you know what you want out of the equation.

A 3 MINUTE INTRODUCTION TO CONTENT DEALS

Content

YOUR APPROACH TO CONTENT DEALS

Good Approach – You want to execute content deals.

Hollywood understands content deals. There are teams dedicated to content licensing in every major entertainment company. It’s their job to find new ways to make money with their creative IP.

Premium content is difficult to access though. As a startup, you need to prove a few things:

1. Your product has a real value proposition to users and/or content owners.

2. Your product has potential to generate real revenues for content owners.

3. You have the ability to monitor and report accurate content usage statistics.

4. You have enough cash to manage significant (relative to your vertical) minimum guarantees.

Even then, there are politics to navigate. You need the right introductions, the right deal strategy, and the right pressure points to get anything done. Otherwise the negotiation will be on the content owners’ terms and timeline — which is something that doesn’t jive well with startup budget and goals.

Develop a fantastic product, retain a great lawyer, and be patient. You’ll be able to get content deals across the finish line.

Common Mistake – You want exclusive rights to stream HBO’s Game of Thrones past seasons worldwide. Tomorrow. For free.

Not saying that you shouldn’t shoot for the moon. Anything’s possible. But do your homework. Understand your ask and the risks/rewards that come with it. The wrong ask and approach (read: entitled brat) can sink your entire deal. There aren’t that many entertainment companies that hold premium content, so don’t burn bridges.

THE BASIC CONSTRUCTION OF CONTENT DEALS

After passing the sniff test above, you’ll progress to the agreement stage, where you need a great lawyer helping you negotiate these deals. Without over-generalizing too much, here are the basic terms you need to consider going into a content agreement conversation:

  • Content – Are there specific titles that you’re looking to secure? Or are you looking for blanket license agreements from a content owner for their entire catalog? Exclusivity?
  • Minimum Guarantee – How much revenue are you willing to guarantee to the content owner upfront? Typically, your company will have to promise minimum guarantees to content owners. Meaning, you negotiate a baseline annual revenue figure that the content owner will receive from your service. MG’s are paid upfront (annually or for the entire term), and are recoupable against your actualualized revenue.
  • Term – How long are you looking to secure the content for? Too short, and you’re going to be renegotiating agreements before you know it. Too long, and you lock yourself into unfavorable deal terms beyond inflection points. Tough to know upfront, but as a baseline, content agreements generally run from 2-4 years.
  • Territory – Where are you planning on using the content? Worldwide? Asia only? North America? Content licenses, pricing, opportunities, and restrictions vary territory by territory. Very regularly content owners only have rights to license for particular territories. Be thoughtful about this, as it will materially impact every other dealpoint in your agreement.

As a former boss used to say, be warned – “The good news is that you got your deals done. The bad news is that you got your deals done.”

Once you execute content deals with entertainment companies, there’s substantial overhead. You’ll need to start producing — revenue, user numbers, etc — to support your deals. Expectations stack up quickly, and you want to make the most of your opportunity.

IS IT WORTH IT?

Take the advice above with a grain of salt. It’s coming from a guy who once thought he’d be the next Macaulay Culkin.

But really, every startup venturing to working with entertainment will have its own unique challenges. We at Chromatik have seen tremendous benefits from working with the Hollywood and are thankful to our content, musician, and entertainment partners. But there are plenty of startups with different sentiments.

At the end of the day, the choice is yours.

You’re now equipped with a few resources to help you along the way. But if you have any questions, happy to talk anything through via Twitter (@mattdsandler) or email (matt at chromatik dot com).

Thanks to Emily Sandler, Andrew Skotzko, Sam Teller, Patrick Vlaskovits, Joey Flores, Casey Armstrong, Steve Manuel, Rob Ellis, Susan Su, Keyvan Peymani, Matthew Joseph, Kelley McKinney, Nate Redmond, Adam Lilling, and Eric Galen for reading drafts of this piece. Very much appreciated!

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Startup PR: Your 4-Part Guide for Interview Preparation in a Pinch

The following post was contributed by Leta Soza, PR Engineer at AirPR. Follow her @LetaSoza.

Leta Souza

You’ve reviewed the 7 Signs You’re Ready for PR and you’ve landed an interview with star business reporter after chatting them up at a networking event. Giggles dispersed, you now come to terms with the part that makes you panic: They want to interview you tomorrow!

You choose to:

A) Feign illness (complete with faux coughing) while making the call to cancel.

B) Politely ask if the reporter would mind rescheduling (Until you’ve had enough time to build key messaging, prepare talking points, and buy the perfect interview outfit)

C) Accept with enthusiasm, kick it into overdrive, and nail down some strategic talking points stat. You’ll dedicate some extra time to building messaging after the interview so you’re more prepared the next time you hook one.

If you chose A or B, shame on you! When opportunity knocks, it’s in your best interest to answer the door. It’s fine to agree upon a different date and time than the one a reporter first proposes, but this should be due to scheduling conflicts, not your want for a generous amount of prep time.

If you chose C, great job! You have enough time to pull together talking points, and transform into the star spokesperson we know you can be.

The following 4-part guide is packed with idea accelerators and tips for interview preparation when your time is limited. You’ll just need a trusted colleague who understands your messaging objectives and business goals and a few free hours to hash out a plan. Reserve a conference room and have at it!

Part 1: Key Messaging

Goal: Develop 3 talking points that support your core business objectives.

These should convey your business’s value proposition and share the current news you’re looking to publicize. For each question below, jot down a few answers, pull out the most important 3 ideas. You will turn to these time and time again when talking with the media or even reiterating company goals to your team.

When it comes to the media, you get 27 words, nine seconds and three key points. It’s the 27-9-3 rule. This is a concept that originated with the legal profession, but it holds true for PR. If you can’t get out the most important aspects of your product or business using this rule, then you’ve got work to do. Particularly in today’s fast-paced, attention deficit-driven environment, keep it short, informative and sweet!

What does your company do? 

This should be to the point and speak to the problem your business is solving.

What’s your mission?

Aspiration here is key. How does the world look different once you’ve solved the problem?

What are you doing that’s cutting edge? 

Think about where you’re innovating and how it is relevant to current or emerging business trends. Contrive a clear statement of your relevancy and how you fit into the big picture.

Why is what you do special? 

You can also answer the question, “How are you different from your competitors?” but steer clear of downtalking others and stay focused on your business as a whole. 

What news do you have to share today?

Whether it’s an upcoming product launch, sale, or rebranding, share your most special news (as long as it’s interesting and relevant to the reporter’s audience). 

Part 2: Flavorful Anecdotes aka Tasty Tidbits

Goal: Identify anecdotes that will help ‘show’ instead ‘tell’ your brand’s story.

Sharing actual examples of your company’s day-to-day interactions will illustrate how you’re special. Tangible proof that you’re innovative is much more credible than your statements about it.

Checking out some examples of actions speaking louder than words:

In this company culture piece published by American Express OPEN Forum, online retailer ModCloth employee Martha S. shares an interesting tidbit about how the company shows appreciate to its employees. Once you hit your 2-year “Modiversary,” the company names a dress after you.

Quirky business card printer MOO created a “Startup Toolkit” series on its blog that provides newly launched business with valuable advice on how to get started. How you provide additional value outside of your primary business model is always worth highlighting.

Now, ask yourself:

What unique customer interactions have changed the way we do business?

In what ways, specifically, have we bridged the gap between our customers and the people behind the scenes at our company?

If you have video links, images, or other media that support one of the anecdotes you share, let the reporter know you’ll send them over after the interview.

Part 3: A Mock Interview 

Goal: Hold a faux interview in order to get yourself comfortable with responding under pressure.

Chances are you won’t be asked these exact questions. It’s really just about practice. Think about how to drive the conversation back to your key messages from Part 1.

Have your colleague take notes while conducting the interview so the two of you can discuss areas that need some improvement afterwards. Regardless of how you do, you’ll be so glad you did a dry run before show time.

Mock Interview Questions

Tell me about your business.

Rehearse your 27-9-3 talking points about your business, being sure to deliver in a colorful and authentic way. 

So, what are we here to talk about today?

Often times, reporters have dozens of interviews lined up at any given time. Give a refresher on where your company is right now, and what exciting things you have in the pipeline. 

How are you different than competitor X?

Whether you’re asked this question directly or not, what the reporter really wants to know is why they should be interested in your restaurant-finder app when there are so many others out there like it.

What’s your revenue?

Unless you’re making an announcement sharing company metrics (always have a PR professional help you with something like this!), this question is best answered with a polite, “I’m not at liberty to share that today, but what I can tell you is that our user base has grown significantly this past year. We’re so excited to bring x, y, and z to the marketplace/customer.” Then you lead the conversation elsewhere. This is called bridging. 

Part 4: Delivery & Timing 

Goal: Promote an air of ease during your interview.

Now that you have the right idea about what to share, polish off your preparation with these helpful tips:

Dress for the occasion. Wear something comfortable that speaks to who you are as a brand. If you own a clothing company, wear merchandise from your site. Tech companies (and some tech publications) tend to be fairly casual. Just use your common sense, taking the publication’s audience into account.

Strike a power pose 10-15 minutes before the interview. ‘Superwoman stance’ is said to lower cortisol (the stress hormone) and raise testosterone (which will get you excited to engage).

It’s okay to pause. Not sure how to answer something? Giving yourself a moment to think is perfectly acceptable. If you’re still unsure of how to answer after a moment’s time, it’s more than fine to say you’ll get back to the reporter with an answer later that day.

Now, do you feel more prepared? There are tons of media training videos on YouTubeto browse if you have a little extra time. Good luck!

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Activate or Die: 10+ Ways You Can Improve Your User Activation for SaaS – Part 2

Today’s post comes from Justin Mares, 500 Distribution Hacker-in-Residence, co-author of Traction Book and formerly the Director of Revenue at SaaS developer tools company Airbrake (acq’d by Rackspace in 2013). 

So you’re now convinced you should improve your activation, and are willing to dedicate some time to it.

Not much time — luckily, improving activation often only takes a few minutes a week to set up and run a new A/B test — but enough time to make it a priority for your company.

What should you focus on?

The first step is to map out the ideal path a customer takes after signing up for your app. To do this, ask yourself:

In an ideal world, what steps would every new user take after signing up?

To figure this out, begin with measurement.

 

How to Map Out Your Ideal Customer Flow

At Airbrake, the first thing we did to improve our lagging activation was measure the key actions our most successful customers took.

Airbrake is an error tracking tool developers use to capture any issues that might occur in their software. So, in order for a customer to get maximum value out of the product, they had to use the product to actually capture and track their errors.

This wasn’t just a hypothesis: after looking at the data, we saw that users who captured an error with Airbrake were 300% more likely to stay a customer than those that didn’t. Capturing an error with Airbrake was our activation threshold. Knowing this, we re-built our activation flow to help get as many people possible to that moment where they captured their first error.

In the Airbrake case, our ideal customer flow looked like this:

  1. User signs up for Airbrake
  2. Indicates which programming language (Ruby, Python, PHP, etc.) they use
  3. Installs and deploys a few lines of code in their app
  4. Captures their first error
  5. Marks their error as resolved

Take a minute and map out the ideal flow in your app — it should be simple, and should only require a few minutes to outline.

Once you have this ideal flow sketched out,  and have started measuring the steps in your funnel at which people are falling out, then you want to start running A/B tests to increase the percentage of users that move from one step to the other. Focus on improving your steps with the greatest drop-off first, especially those that occur earlier in the funnel. Then you’ll see gains all the way down.

Let’s go back to the Bingo Card Creator example from part 1 of this series.

 

Screen Shot 2014-06-11 at 9.02.29 PM.png

 

In Bingo Card Creator’s case, the ideal customer signs up, hits their dashboard, creates a list, customizes their list of bingo cards, schedules a print run and then downloads the cards.

Given these steps, you can see the largest drop-off in the activation funnel is from the “Create List” to the “Customize” step. This is the step you’d want to optimize.

 

How to Optimize Your Activation Threshold

In your early stages of optimization, you’ll want to collect qualitative data around why your users are failing to customize their lists. You can get this data in a few different ways:

  1. calling people who haven’t finished a key step (bribe them with gift cards if you have to, but you’ll be surprised at how far you can go by just being friendly and asking),
  2. setting up a survey tool like Qualaroo
  3. watching users go through your onboarding process, ie at Starbucks.

For example, let’s say you talk to 15 people who have created lists of bingo cards but haven’t customized those lists. And, after talking with them, you found that 9 of them couldn’t think of how to customize a list, and planned to finish it “later.” That’s a huge insight!

You’ve now figured out a major roadblock to activation.

You can now use this information on drop-offs to design an intelligent A/B test and see if it increases the number of people customizing their bingo card lists.

For example, you might try sending a triggered email to users who’ve created lists and haven’t customized that list for 24 hours. This email would then show users how to customize lists, and cover the reasons why someone would want to do this. You could also test making customization easier, suggesting different ways in-app that users could customize, or have a popup or product walkthrough that shows users why they should customize a list, and touches on how to do it.

In short, there are a lot of creative solutions to improve drop-off points.

Some other ideas for ways you can increase activation rate and smooth out those drop-offs:

1. Have amazing support. Support can be critical for users who might be confused after signing up. One useful trick is to tag users who’ve signed up in the last 30 days and make sure they receive priority support. Not only does it lead to a great customer experience, but if you can quickly resolve an issue before your users get frustrated there’s a good chance they stay active in your app and don’t just get frustrated and bounce.

2. Automated welcome email. Colin of Customer.io talks about this tactic of sending a personalized email from the founder within an hour of a user signing up. In this email, just ask how you can help or check and see if they’re confused about anything. This gives new users the ability to ask any questions they may have, and gives your team an understanding of the kinds of problems new signups are facing. Some companies take it a step further and try to call every new user that signs up. Often, these conversations are great times to discuss why a user signed up, what they’re hoping to get out of your product, and get a sense for how likely someone is to upgrade down the road.

3. Onboarding flow. Creating a first-time-user onboarding tutorial or flow can be critical in including your activation rate. Again, Twitter is great here – your experience when signing up for a new account is completely different than the experience you have the rest of your time as an active Twitter user.

4. Lifecycle emails. We touched on this above, but lifecycle emails that expose new features to a user – especially if you can base them on actions a customer has already taken in your app – are huge for improving your activation rates. These are the kinds of emails you’ll get if you sign up for Twitter but don’t follow anyone. Twitter knows the number of people you follow is a key activation metric for them, and will send emails reminding you to follow a few people (and suggest individuals you may want to follow).

 

Conclusion: 6 More Steps to Better Activation in SaaS

We’ve covered why activation is important for SaaS, common problems SaaS companies face in activating their users, gone through how to increase your activation rate, and lastly given some ideas about tests you can run to improve this key metric.

In summary, if you’re interested in improving this critical metric, here are the steps you should take today:

  1. Set up proper analytics. More on that here and here. You can’t measure what you can’t improve!
  2. Track multiple steps in your activation funnel. If you don’t have a clear idea of what actions should constitute an active user, take a look at your best (or most profitable) customers. What actions did they take after signing up? What actions did they take before becoming a valuable customer? Those are the ones you’ll want to encourage other users to take.
  3. Create an activation pipeline like the one for Bingo Card Creator above, and take note of the step with the largest drop-off rate.
  4. Design an A/B test that uses some of the techniques we covered above to improve activation.
  5. See what kind of impact your test has had on the activation numbers. If activation has gone up, roll out the improvements and begin another test!
  6. Rinse and repeat until your activation rate is where you’d like it to be (at least above 60%).

In the next post, I’ll cover another key metric many SaaS companies struggle to improve: retention. Until then, stay tuned.

Justin Mares is a Distribution Hacker-in-Residence at 500 Startups. Justin is co-author of Traction Book and formerly the Director of Revenue at SaaS developer tools company Airbrake (acq’d by Rackspace in 2013).

For more growth goodness from the 500 Distribution team subscribe to Distrosnack, our daily bite-sized email of 1 actionable growth tips + 1 awesome GIF.

And, check out these articles you may have missed:

 

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500 Startups Announces ‘KISS’

We’re thrilled to announce a totally unsexy, yet super useful, set of legal documents for founders and investors affectionately called the KISS (“Keep It Simple Security”). While regular folks can probably ignore this earth-shattering news completely and go back to watching the World Cup, founders and investors should probably pause the game for 5 minutes and keep reading.

The KISS docs are designed to SAVE founders & investors TIME and MONEY. They’re FREE legal docs you can use to RAISE MONEY quickly & easily, hopefully WITHOUT GETTING SCREWED.*

Got that? Good. But wait… why the hell are we doing this?

We’ve seen lots of people get screwed over in the past (both founders and investors, and sometimes people = us), and we’ve also paid a lot of money to lawyers (who are otherwise very nice people) who don’t really need any more money.

Over the past few years, convertible notes have become one of the most popular ways to structure seed stage financings. Although some VCs and investors may not always like using convertible notes, they are nonetheless an extremely common and frequent form of legal structure in the US and particularly in Silicon Valley. Because convertible notes are generally simpler and less expensive than doing a more formal priced round, many founders and investors use them to “bridge” a company until it gets to larger, more traditional financing.

If done right, convertible notes are a simple and efficient means to close a round of financing because they contain limited rights and defer some of the more complicated negotiations until the (larger) priced round. However, convertible note financings have grown increasingly more complicated recently as companies push for complex conversion scenarios and an abundance of features. This complexity increases legal costs (for companies and investors) and extends the time it takes to close a deal.

But it doesn’t have to be that way.

To keep convertible equity financings quick and simple, 500 Startups has created theKISS legal docs. The KISS docs are short and sweet “open source” documents drafted after multiple discussions with a number of Silicon Valley law firms and early-stage investors. They are designed to be flexible without being overly customizable, simplewhile still including all of the necessary features, and balanced from both a company and investor standpoint. We have provided two flavors of KISS to address the most common convertible financing structures we see today, along with a summary of the key terms**:

There an abundance of convertible security forms floating around these days – whether championed by accelerators, investors or law firms. And over the course of the last 4 years, we have seen hundreds (if not thousands) of permutations on the “standard” convertible note.Each has its merits, and the YC SAFE docs in particular were a big step forward in creating a true industry standard (we have used them on several occasions since we are a frequent investor in YC companies). Still, we have yet to see a form that strikes the right balance for us – a balance between the interests of the founders as well as those of the investors. While historically investors have usually had more negotiating leverage than founders, sometimes we feel the pendulum has swung too far, and now smaller angel investors may well be the ones under pressure to accept unbalanced terms. The KISS legal docs were built on the shoulders of our predecessors and were designed with balance and simplicity in mind.

We’ve put in a lot of work to make KISS docs one of the best convertible instruments on the market, and we encourage companies seeking an investment from 500 to use KISS docs (either flavor is fine with us). In fact, we’d love to see KISS docs adopted by other investors, thereby reducing legal costs for everyone and eliminating some of the friction involved in closing a round of financing.

As with other startup products and services, we expect we will iterate further on KISS. If you have comments and/or suggestions as to how we can improve our docs, or if you want to be included on the list of investors who has agreed to accept the forms, let us know by sending us an email at kiss@500startups.com or sending a tweet to me@gregraiten.

Special shoutout to Gunderson Dettmer for collaborating with us on this!

*You are encouraged to review the terms of the KISS documents with your own lawyer before using them. 500 Startups does not assume any responsibility for any consequence of using KISS. 

**Additional platforms that support KISS:

How to Get More Out of A/B Testing When Your ‘Better’ Variant Fails

We’re big advocates of a/b tests on your most important real estate. But what happens when you run an A/B test where your new ‘improved’ version doesn’t win?

Today we look at how Love With Food (a 500 company) extracted an important conversion funnel optimization even when their original version won a major homepage A/B test.

First, an A/B review. It’s all too easy to fall into the shotgun approach to A/B testing. Remember that frequency doesn’t make up for randomness, and simply running more test won’t on its own yield meaningful insights or lift.

Instead, the A/B test itself is just one part of the optimization process:

1. Start with a problem
2. INTERVIEW customers
3. Design a hypothesis
4. Test the hypothesis.

If done properly, steps 1 – 4 require creativity, and a good amount of resource investment. All of which can tend to bias us towards the exciting new variant that we worked hard to design.

However, just because your experiment tells you you were right to begin with doesn’t mean you have to call it a total wash.

Let’s see how Love With Food designed a stronger conversion funnel, even when a homepage A/B test pointed to the original as the winner.

Aihui Ong:

We’re always trying to make sure the messaging is clear on the Love With Food Homepage, so we installed Qualaroo and started asking visitors, “What do you think Love With Food does?”

Some people said, “Ok, you are a snack box subscription.” They understood right away.

Others weren’t so sure. For example, people who don’t understand subscription models had a harder time.

We decided to take the customer insights a step further because it’s important that customers understand what we offer right away.

So we went to Starbucks and approached strangers with our laptops. We ran a little UX test, then quizzed them: do you know what we do, what is the pricing, how do you cancel, etc.

All of the people we interviewed said basically the same things:

‘I need more information, one sentence telling me I can discover healthy snacks is not good enough, I don’t know what I’m getting so can you show me what’s been in past boxes’

and so on.

As a result of these studies, and because it seemed so unanimous, we decided to make a homepage version with a lot of information, answering every question. It was very cluttered (which my team hated).

We tested both versions, the clutter versus streamlined. In the end, our original homepage — with less information — still converted more people.

The moral of this part of the story is you have to test.

We asked detailed questions of a group of people face to face, and all of them said “I need more information in order to be convinced!”

However, testing across thousands of site visitors showed the opposite was true.

So you ended up with the original homepage. What was the benefit of this test then?

The face to face part of it helped us to understand the why, but the end result — does it translate to more customers? — was a totally different thing.

We also learned something very valuable from designing the test. We learned that people do want information, and so they like to go from homepage to the About page. Many of our visitors like to read about us, the company and team behind the boxes.

What did you change / improve then? 

A lot of marketers think, the shorter the funnel, the better your conversion rates.

For us, that turned out not to be entirely true.

Our funnel A/B test didn’t change our homepage design, but it did show us that people want to visit our About page, learn about the company and the team before giving us their credit card.

Having the About page in the middle of the funnel actually helped with conversion. It lets us satisfy people’s need for more information but doesn’t cram it all onto one single homepage.

We did the face to face tests, and then we actually created a version with everything the customer wanted. But it was still the original version — the one based on our gut feeling — that was the winner.

But we still learned something extremely valuable from that test, and the insights work that led up to it.

Just because our gut was right that time doesn’t mean we’re going to stop testing.

We say ok this is what customers SAY they want, but this is what our results show… so how can we incorporate the customer feedback in some other way?

———-

Love With Food is a snack box subscription service and ecommerce store that specializes in natural, organic and gourmet snacks.

The company is part consumer-facing sub-commerce, part market intelligence platform. As the company engages its female “foodie” target demographic, it’s also collecting product intelligence for consumer food brands of all sizes, including General Mills, Nestle, Green and Blacks Organic Chocolate, SoyJoy, and Lindt Chocolates.

Love With Food participated in the 500 Distribution Program last fall, working closely with Hacker-in-Residence Matt Berman on paid acquisition, better analytics, and drip and trigger emails, and now they’re so awesome they’re hiring.

Check out Love With Food’s current openings here.

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