Well, let’s come back to Earth and realize that we’re building online software and not the future of transportation. Most of us have a practical problem we are trying to solve, full of just enough innovation to potentially be a success (a lucky few are creating something truly amazing). Innovation does come from individual thinking (the “aha” moment), but listening to customers is the only way you can understand what they need in the first place. We’ll never know, but perhaps if Ford never heard someone complain about the inefficiency of buying horses, watching them get old and slow, and then dying, we’d be trotting to the grocery store today.

While I’ve written about this subject in the past, the focus of that article was more on prioritizing features, and not how to use customer feedback to drive early product development. This article focuses on uncovering essential product features by leveraging the intelligence of your customers. So, when you have no product, and just a dream of the solution, how do you pull back from that dream and leverage your early users to help you identify what’s essential?

My answer is you treat early feature requests as if you’re furnishing an empty apartment.

Step 1: Cover the Essentials

Let’s say I just got the keys to my first apartment—ever.  I have $3,000 to furnish the living room—no more—and I have no idea what I should buy first. So I invite you to my brand new apartment and take you into the living room, which is just four bare walls. (So far this sounds like a trashy romance novel.)

Help me out. I have $3k and I need to prioritize what to buy with the cash to furnish the room. Again, assume I have no clue what to buy—absolutely no clue. In your head, name 2 things I should buy first. Got them? Now I bet two of these match what you were thinking:

• couches
• TV
• TV stand
• end tables
• lamps
• coffee table
• DVD
• stereo
• plants

If I was completely off, you do not need to read the rest of this article and my metaphor sucks (and tell me what you were thinking in the comments!). But if I nailed one or both of your items, that’s because you drew upon your experience and needs to help “ignorant me” understand what is essential to furnishing a living room in order for it to be useful. And you’re no genius because you could do this.

This is exactly what your early users will do for you. In a featureless application, the first things people will notice are often the “duh” features that are missing. Without them your product is useless. Why think about a ceiling fan if you have no couch? Why think about “video conferencing for interviews” when The Resumator doesn’t handle “manual resume uploads”? People need to be able to get their existing resumes into The Resumator before it’s the slightest bit useful! Video conferencing is not just icing on the cake—it’s an extra layer of icing!

While all feature requests should be considered carefully, those requests from early adopters should be seriously considered for implementation, especially when they seem obvious and are easy to implement. You need somewhere to sit—get a couch! No one is going to come to your apartment one year from now and say, “Why the hell is there a couch in the living room?” Early feature requests can of course dip into the user-specific, but often they are just obvious—just not to you. You’re not winning any medals for innovation here—implement early requests that are simple and visible to the end user with confidence they will not bite you later on.

Step 2: Add Character and Uniqueness

Once you nail the essentials in your Web app (or apartment), it’s time to try and take what is a functional skeleton and turn it into something that is engaging and noteworthy. This is not easy, but luckily I think there are few strategies for adding unique character to your Web app:

Strategy 1: Paint, Pillows, Plants and Potpourri

So now my living room has all the essentials and is functional, but things still look a little bare. I don‘t have a lot of money, but I want to decorate so that when people come by, they have a pleasant experience. With just a can of paint, a few pillows, some plants and (for the ladies) some sweet smells, I can create a well-designed living space that masks my room’s shortcomings. Heck, painting one wall in a dingy apartment makes any space look better.

I believe in something I call “the façade of great design”. Great design can get you very far. In its early days, I heard many stories about people being drawn in to Mint.com by its beautiful interface design and ease of use, and then panic a week later when they realized they were sharing their bank account information with a brand new company (even though Mint uses the same security as your bank). Mint has many more features today than it did when it launched, but I believe great design was key to early adopters sticking with the product even though it was asking for some serious personal information.

If you work hard on creating a wonderful user experience through great interface and interaction design, you can get by with less features for a longer period of time. If your application feels cutting edge and progressive, users will want to stick around and see what’s next. Their experience using your app is pleasant, so they will come back again. There are many web apps that are successful because of good design and usability, not features. 37signals thrives on this concept. Web 2.0 was all about decentralizing the Web into a series of interconnected and easy-to-use online experiences. If you focus on usability with the few features you have, and create a fantastic brand, you’ll get an early start on creating a loyal customer base. (BTW – this was my strategy with The Resumator.)

Strategy 2: The Tricked-out Entertainment Center

Now let’s suppose I don’t have a sense of good design (or at least I don’t want to tap into it) to add paint, pillows and potpourri. Instead, I want to be the guy on the block with the wall-mounted, 55-inch Samsung TV connected to an Xbox, Blue Ray disc player, digital media center and Dobly surround system. I want people to say,  “Did you see Don’s setup?!!!” and ignore the fact that I have no kitchen table and I reuse disposable plastic cups. I feel as if I can have one incredible area in my apartment, I can be the talk of the town.

What if you focused on one part of your web app, and blew it out into infinity awesomeness? What if you chose one mission-critical feature that, when fully functional, would blow a VC away? This is a strategy for building an app. Focus on one important feature and make it as incredibly useful (or awesome) as possible. I would argue the online document viewing company Scribd did this. By focusing on developing a very attractive and user-friendly document viewer, along with an incredibly reliable document processing queue, Scribd proved to many that despite our pains with reading documents in Acrobat Reader, there was something awesome about instantly embedding any document into any Web page with its exact original formatting—reliably. A few years and nearly $13 million VC dollars later, Scribd is expanding into mobile document viewing, securing key partnerships and publishing deals primarily (in my opinion) because that tricked-out Scribd Reader just seems to be so easy to use. And by focusing on it early, they are simply tweaking it to make it even more awesome. (Note: I have no clue how I ended up with awesome and infinity in this paragraph. I never use those words in real life!)

Strategy 3: The Bull Riding Machine

If you’re the type of person that really wants to make a splash when you lease an apartment, you know you need to have some off-the-wall “thing” in there. Something that people come over just to see. Something that everyone in the building talks about (good and bad). You risk being branded a weirdo or crazy, but you also have the chance to be known as the only person or business within 500 square miles that actually has a bull riding machine. That’s something the neighborhood will talk about, and the fact that it’s the only thing you have in your apartment makes in even more intriguing.

Perhaps the most risky (and rewarding) strategy for early product development is to try and do something that sounds so ridiculous that if it works, you’ll look like a genius. Try to build something completely off the wall into your application and learn from the reaction. LOL Cats is exactly this. Putting text on pictures of cats makes no sense as a business, but that business is doing pretty well. They learned that ordinary people can be extremely creative, and that creativity is viral and can be monetized. Foursquare is simply mobile-based check-ins at locations, but the odd popularity of “checking in” is giving everyone a glimpse of the future of hyper-local marketing. Remember FuckedCompany? That guy is now a EIR at a prestigious VC firm. The guy who from I Wear Your Shirt sells virtually every day to a sponsor. He just wears shirts.

If you’re going to go for innovative, there just simply can’t be any clear rationale for why you’re building what you’re building. Your idea needs the strong smell of innovation with an odor blast of failure. No one is going to tell you to buy a bull-riding machine for your apartment. You need to develop something that exists no where else.

Conclusion

Don’t waste time learning what users need. Build something minimal and get it out there. This is just my two cents for how to plan your first apartment, or Web app. You can always return the mechanical bull if you have the receipt.

First let me tell you I furnished my entire office for about $4,500 complete with four workspaces, including chairs, desk lamps, wastebins and office supplies. A lounge area complete with futon couch, area rug and end table. Lamps, rugs and some strategically placed whiteboards. Throw in a microwave, printer, a wireless router, TV stand, 32 inch HD television and Xbox 360 entertainment system. Finally, I almost forgot a refrigerator, storage ottomans, extra chairs, three bookcases and some very nice standing lamps. All for $4,500—purchased and set up in 7 days.

This cost does not include computers and monitors, and you should invest in great hardware. The costs listed in here are also based on a bootstrapping budget—if you can spend more, by all means do so within reason. Focus on great chairs before anything else.

$4,500 sounds like a lot, but consider that I do not need to spend any more money on this space until my company outgrows four full-time people. If you’re thinking you could have put together a space for less, I agree. But I bet I wouldn’t want to really work there everyday. This space is hopefully full of energy.

Furthermore, I saved this $4,500 before I even set foot in the office. Not because I had the money in the bank —but because I luckily chose the right building for my office. This leads me to my first of ten tips for you when building up your startup office.

Tip #1: Find office space that comes with tax benefits.

Through a few new friends, I learned about a program in Pittsburgh called Keystone Innovation Zones. These are zones that provide tax credits for businesses that choose to operate in certain locations. Don’t let your suburban upbringing blind you—these are not buildings in blighted communities, as some narrow-minded folk would immediately assume. They’re just available space, all over the city, where economic development is encouraged. Your startup could qualify for tax credits simply by moving into the zone. That means if I have a tax bill of $4,500 by the end of 2010, that amount—and probably more—will be credited. If you work with your local government to find out if there are tax benefits for your business to locate in certain buildings or areas, you can offset the costs of moving into that space, and then some.

Below are some pics of my raw space. Three large windows and two rooms. It’s an old factory building, but it’s secure and not drafty. Plus the price was oh-so-right. And we’re not talking about a rented area with other startups (though I would have loved the cross pollination). This is my office—with a key, and a door.

Tip #2: Measure your space, and then hack off 18 inches per measurement.

A tight fit is the worst thing you could have in a small office. If your stuff is barely fitting in the room, then more than likely people are going to feel on top of each other. Some places can be a little tight, but each person’s workspace has to provide adequate room to work. So when you measure your space, write down the resulting measurements with 18 inches subtracted.

You’re not going to forget about these 18 inches per measurement, but rather plan your space without them, and only use them when you really need them to make something fit. This simple concept will change your whole perspective when it comes to deciding what fits where, and what to purchase. Had it not been for this, I would have purchased four employee work spaces for my office instead of three. And when I was upset something might not fit, I was relieved that I could steal some inches from the 18 that I was saving for this exact reason.

Tip #3: Plan out your space as if you had to live there for 6 months.

We spend one third of our day in the office. The last thing I wanted was to sit in a fluorescent-filled room all day, just waiting for the end of the day so I could go home and relax. My office needed to feel like a place that I could tolerate for 6 months if I had to live there. Note the word, “tolerate.” I don’t feel you can make an office that people would want to live in forever (on a startup budget, that is), but your office should feel like a place you wouldn’t mind being in even if you had no work to do. That’s really the best way to simplify this thought. And I knew a small lounge area for relaxing and gaming would be an attractive perk for recruiting.

I decided to make one room for the employees and lounge, and the smaller room a private office so I could be a chatterbox without driving anyone insane. It would also allow employees to not feel like their boss is hovering over them as they may want to check Facebook occasionally without worry of reprimand. Employees could sit and watch TV during lunch or when they felt drained, and a friendly game of Madden or Rock Band might break up a hard day’s work.

Tip #4: Plan a color palette.

To have a cohesive space that is not just wood and dull drab office colors, you need to plan for a color palette. This is not hard, and I am going to make this as easy as I can for those of you who think you don’t know anything about color. Remember the color wheel? If not, google it. Colors opposite from each other on the color wheel work well together, as do colors right next to each other. You can create great 2-color themes with colors opposite each other on the wheel, and great three color palettes with one color, its opposite and an adjacent color.

Seriously, this is so freakin easy. Think about it—you see the color wheel in action every day:

• Christmas (red and green)
• Minnesota Vikings (purple and yellow)
• Denver Broncos (blue and orange)
• McDonald’s (red and yellow)
• Burger King (blue, orange and red)

When you get into shades and tints, you have a lot more options. Just choose the colors you want and get a sample of each as torn paper, marker, whatever—just have a sample because in the store not every blue is your blue.

I chose a specific orange, green and blue as my color palette. If we were standing in my empty office and I told you that was my palette, many might say it sounds ugly. But I am a designer, and you probably aren’t. Trust me—those are awesome colors together.

Tip #5: Shop like a college student.

With your space measurements in hand, you can now see what’s out there for purchase. If you approach this as if you were a broke ass college student, you will recall that you typically looked for cheap stuff that was durable, and used stuff you could buy from others on campus. Remember the great deals you found? You can find these same deals for your startup.

I say first start your search for office furniture and equipment with other startup founders. Be sure to bring along a camera and take pictures so you can capture the things you may purchase and imagine them in your space. Other founders may be moving, shutting down, or downsizing and have available stuff at discount prices. If you can get a Aeron chair from them for $150, I suggest you go for it. An Aeron chair with two years of farting into it is still worth more than any brand new chair, IMHO.

Next, do some browsing in stores and online using Bing or Google Products. Try and find office chairs, futons, and lamps that are one of your colors. DO NOT plan on buying anything—you are browsing and trying to see what is out there. If you can’t find your colors, either change your colors or keep looking. DO NOT give up on having a color palette. Furthermore, don’t plan on buying something expensive simple because it is your color. Follow these guidelines for acceptable prices. I assure you that you can find products in this range, as I did.

• Employee office chairs – $60 to $200 (buy what you can afford–but it must have ergonomic features!)
• Employee workstations – $20 to $150 (Wooden table to decent frosted glass desks)
• Desk lamps – $5 to $10
• Standing lamps – $19 to $30
• Futon/couch – $99 to $199
• TV – Under $400
• TV stand – $50 to $99
• Office supplies – Dollar store (expect Uni ball pens—a must have!)
• Ottomans and end tables – $10 to $20
• Bookcases – $29 to $79 (depending on size)
• Xbox – $199
• Microwave – $29 to $39
• Refrigerator – $100 to $170
• Stereo – Bring in the one you have stored from college
• Rugs – $10 to $40
• Whiteboard space – $12 to $99
• Waste bins – $2 to $7

I was able to find all these things on the lower end of the price ranges above, and in my color palette (except for the white boards—I didn’t know Home Depot had material perfect for this at $12!). Look online for things that are geared towards college students and you can usually find great deals. And yes—it’s quality stuff. Not garbage. Oh—and be sure to get dimensions on EVERYTHING!

Tip #6: Bring along a consultant.

Having someone around who can give you some ideas on what to do in your space is wonderful. Try and bring along someone who has a good aesthetic taste. Ask them to find interesting things for you within your budget. Push them to just look if they keep wondering why you need this kind of stuff for an office. People with an outside eye to your vision might be able to shape that vision in a way that makes the space work better.

My wife played a huge role in finding a cheap couch and lamps, as well as helping me determine how to best orient things in the office. She charges $100 per hour if you need a consult. I’m joking—unless you live in Pittsburgh and are actually going to pay that rate.

Tip #7: Clip coupons, and take advantage of sales.

Did you know Bed Bath and Beyond has some awesome dorm lamps perfect for a trendy office? And did you know you can get 20% off your purchase with some silly coupons they mail every week? And Office Depot sends out 10% off cards if you ever purchased office supplies through their store? Target gave me $10 back because I purchased $100 in stuff. If you take the time to find discount cards and coupons, you can afford that Xbox 360 with just your savings!

During the holidays you find great discounts in stores and online. I found and purchased three L-shaped workstations for $89 each. I slapped a 10% discount on the whole order and took $9 off each one at that. The best deal I found otherwise was $330 per workstation! Screw that! And if shipping online isn’t free, say bye-bye. Try and make purchases when stores are desperate for sales. Take stuff back if it goes on sale the next week.

Tip #8: Put it together fast.

Try and order everything so it comes in the same week. This way you can assemble everything and have a functioning office fast, instead of trickling in boxes over the course of a month. The sooner you get settled in to your office, the sooner you can get back to business.

Tip #9: Leave the fluorescent lights off.

Fluorescent lighting is the ugliest lighting you could have in an office. Imagine if your favorite restaurant or lounge used fluorescent lighting—it’d be a bright, oh-so-not intimate experience that the last thing you could do is relax. We barely have any fluorescent lights in our homes, so when we are under them we can only think of work (or cooking, or….#2).

Light your space with traditional bulbs and lamps. You may need an overhead light as well, but make sure it’s not fluorescent bulbs—hang an IKEA ball lamp or something. Employees new to this type of environment might say it feels dark at first, but I have never met someone who didn’t feel more at home with lamp lighting after a few weeks. You can always turn on the overheads if you really need a lot of light for some special task.

Tip #10: If employees abuse your perks, it’s YOUR fault.

There are so many people who think having a TV or a game center in the office is a recipe for inefficiency. They’re dinosaurs. Showing employees that you trust them to balance work and play during business hours is a great selling point when recruiting. I dare say if you provide these perks, and they’re being abused, it’s your fault. Perhaps you did not set and enforce clear guidelines around usage. Perhaps you hired the wrong people. Most likely, you simply aren’t providing them with challenges in their work that they want to focus on.

The Result

I’m very happy with the result. My wife deserves a LOT of the credit. The space is warm, colorful and inviting. The people who have been to the space for interviews have loved it and seem excited to potentially come aboard. I am thinking about flipping around the workstations to add more privacy for each employee. One week of effort and I was able to not only make my business real, but perhaps make it real to others as well. Better yet, the tax incentives I will receive will more than make this investment affordable. It feels great to just need to worry about putting things on the walls. Please—tell me what you think!

Please note I made a mistake and saturated the photos – it is not this vivid!

I thought I’d share a few things that I learned during my time at AlphaLab to hopefully encourage you to apply to participate in one these programs. The experience is incredible, and the knowledge you gain will be invaluable.

Lesson 1: Even a small amount of operating capital from an investment can be extremely useful.

Outsiders often look at the $15-$25,000 provided by startup programs as being no where near enough money to get a business off the ground. They’re wrong. You sure can’t live off $15,000, but if startup capital was purely for living, it would be called “welfare”. While you may use some of the investment to live a “Ramen noodle” lifestyle, its primary purpose is to support the development of your business. You have no idea how many things creep up that need to be paid for when starting a company. You’ll need to lease a server. You’ll need to buy computers or software manuals. You’ll need to pay contractors to do some dirty work. You’ll even need to pay an attorney to look at the document that GETS you the investment. If I had to pay $2,000 out of my pocket simply to incorporate, and get legal documents produced, I probably would have never started my business anytime soon. Or at least it would have stalled so I could first convince my wife I had a good idea, and then allow me to spend our money on that idea. Being able to chip away at a small five figure bank account to support the business operations is extremely helpful.

Lesson 2: Startup programs accelerate your understanding of the investment world.

Who the hell wouldn’t want to get a $1 million investment from Sequoia Capital for fair terms? But since you have no concept of what investment terms even are, a startup program really helps you understand how investments are arranged. Sure, the small investment you get from the incubator is not going to require 3,000 pages to read through, but even this simple transaction will show you that with a great team, and a great idea, you can get a check. Yeah. A check. You do some meetings. You forward emails to an attorney. You make calls. You sit in a room and they hand you probably the biggest single check you’ve ever received. Throughout that GLORIOUS process, you learn about important issues like dilution, option pools, pre and post money, convertible note, blah blah blah. You need to be able to speak this language else you won’t emit the confidence worthy of an investment. The experience of convincing the program to invest in your startup at least lays the foundation for when you may be negotiating for that $1 million round. But trust me – I hear that’s a lot of paperwork, and strings. But at least you know the game.

Lesson 3:  Developers succeed in startup programs. Business people fail.

You need to be able to build what you’re proposing. If you’re the MBA, and you have a developer cofounder, understand this now and never forget it—you are no where near as valuable to an early stage startup as the developer next to you with just 10% equity in the company. To succeed in a startup program, you need to be able to build a product rapidly and with as few people as possible. Teams with two members who cannot do development have a much higher risk of not being successful because there’s too much time spent writing business plans, and less time writing code. Ev Williams flat out said he did nothing related to business planning when they decided to do Twitter. And do you think Steve Jobs would be holding up an iPhone today if the Woz wasn’t there building the future of home computers many years ago? So if you’re a startup founder and are known as the “business” person, recognize that hoarding 90% of your equity is just pathetic. You do not have the skills to get it done. Developers, developers, developers.

Lesson 4: Demo Day is not necessarily magical.

Most startup programs have what is known commonly as Demo Day. This day is where the media, investors and other influentials gather to see demos of the newly-formed startup businesses. You will almost always have some HEAVY players in the room. I’m talking some of the most successful venture capital firms in the world. It will be investment analysts mostly. These people do the vetting of startups and only bring the most interesting to the venture partners. In your head, you’re thinking this is your chance to land an investment—and it is. But the odds are ridiculously against you. You have no momentum. You have barely launched. Your story is just not interesting, yet. Only a small number of startups can attract VC interest simply from Demo Day. Still, many entrepreneurs look at Demo Day as do or die when they should be looking at it as the official coming out party and expect nothing more. Get up there and exude the attitude that you are moving forward with your idea with or without anyone in the room. Most likely after all the presentations have ended, and you’ve mingled with VCs, you will end the day with nothing but business cards. Luckily, my company was generating some revenues and my customers loved the product. So for me Demo Day was about telling everyone my plans for going forward. But you best believe I, like you will, was hoping I’d be one of those special companies. I wasn’t.

Lesson 5: Financial projections are both utterly ridiculous and insanely useful.

No one wants to openly  admit that financial projections are just guesses when they talk with investors. I struggled with inventing a growth curve for The Resumator based on new customers per month because I had no data to justify, “150 new customers in January 2011″. But investors need to see projections, and the startup program wants you to make some guesses. They will not use that word unless under pressure, but that’s basically what you’re doing. Just plug in some numbers and see how ridiculous they “feel”. In other words, The Resumator is not a $100 billion company, so if my projections show that, I can feel safe knocking back a lot of numbers. All you need to do is get projections to a point where you and others can agree that the business could theoretically achieve that size. That’s what projections are for—putting a ceiling on the potential of your company that everyone agrees to.

But while projections are not based on any real facts, they are insanely useful when you apply the math with real data, and then compare that to your projections. In other words, it was so revealing for me to to see how much money my company would earn in a year if I did not get another customer. And if I wanted my company to be worth $10 million, I could see how many new customers I would need to get to that number. Suddenly I could say things like, “I need to quadruple my customers per month to hit $2 million”—which then put $10 million in perspective—not at all worth thinking about until I quadrupled new customers. Even more, I could just focus on doubling sign ups to even get to a $1 million business, and then even be more granular. If I can get 5 more customers per month, that’s a $130,000 revenue stream. Startup programs encourage you to plug in some numbers to get you thinking about these things so you can learn how to manage the initial growth of your business.

Lesson 6: Everyone roots for startups.

I cannot tell you how amazing it is that some very important people will do almost anything for a startup in these programs. VCs and other influentials will contact prospective customers, make introductions, share tips, and do so many other things with no expectation of anything in return—expect for you to succeed. The startup program organizers will work hard to get you press, help you find employees and advisers, and even raise more capital. You never feel alone or abandoned unless you’re not asking for help. This is perhaps one of the biggest reasons to get into an incubator. You’re going to have one hell of a stable of talent to help you get off the ground.

Lesson 7: You’ll know when to start your startup when not starting it is no longer an option.

This one sounds cryptic, but it was one of the best pieces of advice I have ever been given. While this revelation must occur prior to starting a company, it is so important to have it. You need to feel like you have no choice but to do your startup. Not because you’re desperate, but for other wonderful reasons. Perhaps you just can’t sit on the idea any longer. Or maybe you need to feed that desire to be your own boss. Or in my case—I got my first customers and felt an absolute obligation to be there for them 24/7. I learned this lesson from someone at Innovation Works, and I must have told about 80 other people it in the past 8 months.

There you go—seven lessons—now get out of here.

I decided to create this list because there are so many great videos, podcasts and articles on operating a startup, I figured I needed a place to keep them organized. Hopefully, you will benefit as well. Feel free to suggest other resources in the comments. Of course, if you sound like a marketing person promoting a product I will have no choice but to delete the comment.

Curriculum

Lesson 1: Starting Up

• What You Need to Know Before Starting a Company – Alex Isklod
  ARTICLE – Alex takes a high level view of taking a startup from idea to formation of a company, and then financing.
• Bootstrapping: The Secret to Entrepreneurial Success – Greg Gianforte
  ARTICLE – Greg presents his reasons for why you should consider avoiding venture capital and try to build your business with other resources.

Lesson 2: Building Your Team

• How To Assemble a Board of Advisers – Inc Magazine
  ARTICLE – This in-depth article will help you navigate the murky waters of advisers, who’s motives can be great or one-sided depending on who you end up bringing on board. Learn how to find, engage and compensate great advisers.
• Scaling Your Tech Team – Joe Stump
  VIDEO – In this FOWA video, Joe explains how to organize and instill some good habits for a team of developers. If you are planning on growing a tech team soon, this video should be very interesting.

Lesson 3: Deciding on a Business Model

• The Secret to Making Money Online - David Heinemeier Hansson
  VIDEO - Using his unique blend of cynicism and insight, David presents a compelling case to develop a successful, profitable business by doing something radical—charging a price.
• Understanding and Calculating Cost Per Acquisition - Andrew Chen
  VIDEO – Numbers guru Andrew Chen demystifies the world of Cost Per Acquisition — an important number to understand when marketing your startup.
• Web App Autopsy – Ryan Campbell
  ARTICLE – Using real data from a few popular online businesses (including his own), Ryan exposes some of the surprising conversion metrics for free and subscription-based web applications businesses at scale. (Download slides here)
• Converting Free Users to Paid Users – Kevin Hale
  SLIDESHOW – Wufoo founder Kevin Hale walks through the process of converting free users to paid users, with strategies and benchmarks for you to use in your own business.

Lesson 4: Pitching to Investors

• The Art of the Start – Guy Kawasaki
  VIDEO – Guy teaches you how to successfully launch the early stages of your startup, and how those lessons will help you successfully pitch investors.
• Want My Money? Here’s My Criteria – Roger Ehrennberg
  ARTICLE – Roger’s to-the-point article on what he looks for in a startup team (and their idea) is an interesting view into the mind of an angel investor in today’s
• TechCrunch 50 – TechCrunch
  VIDEO – Watch nearly 100 videos (between two years) of video from entrepreneurs presenting demos of their software, and VCs commenting on their product. Good for seeing how to handle a five minute product demo and pitch.
• TechCrunch Pitch – FOWA
  VIDEO – This FOWA event was five companies pitching their company in one minute (basically an elevator speech). Presenters were critiqued based on their ability to pitch their company in 60 seconds. This sounds ridiculous, but this video is as close to simulating a stand up conversation with potential investors as you may find on the Web. You should take Jason Calacanis’ blunt criticism of the presentations very seriously. Despite what you think of him, he does a fantastic job of saying what everyone in the room is already thinking. The other panelists also do a great job of simulating the “peppering” you get from investors. Use this video to improve your elevator pitch.

Lesson 5: Building Your Web Application

• How to Build your App Quickly and Cheaply using the Cloud – Mark Masterson
  SLIDESHOW – Mark’s thorough presentation outlines how anyone can use the low-cost infrastructure of cloud computing for building a web application on the cheap.
• Getting Real – 37 Signals
  ARTICLE – Before you go off and build a bloated, unusable web application, read this book. Getting Real helps you learn how to focus on building the features most needed, and avoiding fringe features that make things too complex.
• Scaling Scribd - Scribd
  SLIDESHOW – Not that I want you to do premature optimization, but let’s say you get lucky and have a successful web app. This slideshow tells the story of how popular document sharing site Scribd reached millions of users a month.
• 14 Tips for Building Your Web App – Ryan Carson
  AUDIO – Ryan uses his real world experience of launching DropSend and Amigo to help you get a jump start on thinking about the easily-forgotten challenges and to-dos in building a web application. (Note: If someone has a link to this on the FOWA site, I will gladly change)
• Managing Software Releases - Cal Henderson
  AUDIO – Always entertaining, Cal shares some of the tools and processes he used at Flickr to make testing and releasing less painful. May be a little dated, but the information is useful.
  

Lesson 6: Operating Your Business

• Street Smarts: Secrets of a $110 Million Man – Norm Brodsky
  ARTICLE – Norm works through the 10 most important lessons he has learned (after 30 years as an entrepreneur) for running a business that he believes every successful entrepreneur should live by.
• How to Save Money Operating a Startup – Jason Calacanis
  ARTICLE – In addition to great advice like, “Buy cheap desks and expensive chairs”, Jason provides a great list of tips on how to spend less money on the things that don’t really help your business succeed.
• Employer Costs for Employee Compensation – Bureau of Labor Statistics
  ARTICLE – Learn how to calculate the real cost of having an employee.
• Work/Life Balance – Jason Calacanis and Tom Nixon
  VIDEO – Tom and Jason debate approaches to balancing your work and life when you’re an entrepreneur.
• What Do You Do After Selling a Business for One Billion Dollars? – Kevin Ryan
  AUDIO – This Venture Voice podcast is with former DoubleClick CEO Kevin Ryan about what it takes to manage a rapidly growing business, and survive the hurdles. This podcast is a great example of the energy, passion and vision you need to be a successful entrepreneur.
• Creating an International Business – Fabrice Grinda
  AUDIO – This Venture Voice podcast is with OLX CEO Fabrice Grinda. Fabrice reveals many of the challenges and opportunities in building a business that targets a worldwide audience.
• Growing Your Team and Business – Aaron Patzer
  VIDEO – This incredible video is a very transparent story about the creation and exit of Mint.com. Aaron’s presentation is excellent in that he is not a “hot shot” entrepreneur who is just exiting another company, but rather a classic example of an ambitious hacker who methodically grew his business until it sold to Intuit for $170 million.

Lesson 7: Marketing Your Business

• Marketing on a Startup Budget – InsideCRM
  ARTICLE – Don’t let the source fool you—this page contains a LOT of links to resources for business cards, online advertising, free PR advice and strategies, promotions and advertising.
• 50 Social Site Your Businees Needs to Be On – InsideCRM
  ARTICLE – I’m telling you—don’t sleep on InsideCRM. This is another great list on the site for you to turn into a checklist of social sites that you should try and establish a presence on.
• Headline Tests – Signal vs. Noise
  ARTICLE – Jason Fried provides an informative look into how testing various headlines can dramatically increase conversions.

Supplemental Tools and Resources

Useful Tools

• Google Analytics – Duh. The definitive free software for tracking and analyzing your website traffic.
• Google Apps – Google Apps is a free alternative to Microsoft Office. Manage your business email, spreadsheets, documents and more all from a centralized console. One thing—be a hawk on password security to prevent breaches.
• WordPress – You need to be blogging. This is great, open source software to do just that. You can also remove the tech stuff and just use their hosted system at WordPress.com.
• Highrise – As an entrepreneur, you will be doing a lot of networking. The worst thing you can do is stuff all those business cards in a drawer. Highrise makes each contact a living record, capturing your actions and conversations associated with each person in real time.
• Website Grader – This useful resource instantly provides you with VALUABLE data on the optimization of your website, including your Google PageRank. This is a must use website if you plan on doing online advertising.
• Are My Sites Up? -Great tool that provides you with real-time monitoring of your site status. Useful when you can’t afford 24-hour tech support.
• Userfly -If you have users, this tool is fantastic. Userfly enables you to record and playback site usage from real users. It installs on your website with one line of code. Use this tool to see how features are being used—and more importantly—how to increase conversion on landing pages.
• Campaign Monitor -An email list management system that I use and love. It has a robust API so you can integrate with your web application to do real-time list management easily.
• MailChimp – An email management system that is popular and much like Campaign Monitor. One unique feature is their patent-pending use of A/B testing on email campaigns.
• Web Development Project Estimator - Great tool for doing granular estimation of the cost of hiring freelance developers to build your web application.
• UserVoice -Provide your customers with the ability to offer real-time feedback on your web application. Users can vote on features, allowing the most popular suggestions to float to the top.
• Get Satisfaction – Much like UserVoice but more mature, GS is a hosted support community for your application. You can choose to actively participate in the conversation or not (i.e. officially support the community, or not).
• Balsamiq – Generate wireframes of web applications using this fantastic tool. I use Balsamiq and continue to be amazed at how well it works for generating sketches of how a screen might look and function—without worrying about design.
• Jing – Jing makes it easy to produce video demonstrations of your product. Most importantly, it’s free.
• OpenX – If your business model is advertising, why not try and use this popular open source ad platform technology to keep all the revenue from ads in house?

Useful Resources

• Future of Web Apps – A great collection of archived conference videos, slideshows and podcasts from leading Web hackers and entrepreneurs.
• This Week In Startups – This podcast, hosted by Jason Calacanis, is all about exploring different issues related to creating and growing startup companies. Often there are great founders and VCs as insightful guests.
• Venture Voice – In this podcast series, Gregory Galant interviews some of the most respected Web entrepreneurs and venture capitalists.
• WorkHappy.net – A “killer resource for entrepreneurs”, Carson McComas provides entrepreneurs with great links and tips. Too bad they come bi-monthly at the most.
• Web Design Resources – Elementiks maintains a great list of design and development resources.
• Test Credit Card Account Numbers – You will need them. PayPal provides a good list.
• Ad Unit Guidelines – Make sure your designers know the standard sizes for website ads.

Reading Assignments

• Purple Cow – by Seth Godin
  You’re either a Purple Cow or you’re not. You’re either remarkable or invisible. Make your choice. Face it, the checklist of tired ‘P’s marketers have used for decades to get their product noticed–Pricing, Promotion, Publicity, to name a few–aren’t working anymore. There’s an exceptionally important ‘P’ that has to be added to the list. It’s Purple Cow. Seth Godin urges you to put a Purple Cow into everything you build, and everything you do, to create something truly noticeable.
• Founders at Work: Stories of Startups’ Early Days – by Jessica Livingston
  This is a collection of interviews with founders of famous technology companies about what happened in the very earliest days. These people are celebrities now. What was it like when they were just a couple friends with an idea? Founders like Steve Wozniak (Apple), Caterina Fake (Flickr), Mitch Kapor (Lotus), Max Levchin (PayPal), and Sabeer Bhatia (Hotmail) tell you in their own words about their surprising and often very funny discoveries as they learned how to build a company.
• Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers- by Geoffrey A, Moore
  Author Geoffrey Moore makes the case that high-tech products require marketing strategies that differ from those in other industries. His chasm theory describes how high-tech products initially sell well, mainly to a technically literate customer base, but then hit a lull as marketing professionals try to cross the chasm to mainstream buyers. This pattern, says Moore, is unique to the high-tech industry.
• Buzzmarketing: Get People to Talk About Your Stuff - by Mark Hughes
  Remember Half.com? Back in the days of the dotcom boom, the discount retail Web site drew headlines when it persuaded the town of Halfway, Ore., to change its name to Half.com for a year. The stunt helped the company gain millions of customers and position itself to be bought out by eBay for a handsome premium. Hughes, the brain behind Half.com’s marketing ploy, extols the virtues of “buzz marketing,” his name for the idea that companies can dramatically boost sales by attracting publicity and fueling widespread word-of-mouth.
• Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Growing Firm - by Verne Harnish
  Business guru Verne Harnish’s firm Gazelles has brought hundreds of businesses to fast-growth profitability. Now he shares entrepreneurial secrets in this must-read business primer. Harnish has discovered John D. Rockefeller’s underlying strategy. Further study uncovered three winning habits: Priorities, data and rhythm.
• The 22 Immutable Laws of Marketing – by Alie Ries and Jack Trout
  (Old but worth the read) The premise behind this book is that in order for marketing strategies to work, they must be in tune with some quintessential force in the marketplace. Just as the laws of physics define the workings of the universe, so do successful marketing programs conform to the “22 Laws.” Each law is presented with illustrations of how it works based on actual companies and their marketing strategies.
• AdWords For Dummies – by Howie Jacobson
  What’s the good word? It’s AdWords, the marketing solution that helps turn clicks into cash by attracting the right visitors to your Web site. This book shows how to find the best search terms to help build your business, as well as how to research your market, build a direct marketing strategy, analyze ad success, and turn a tidy profit.

When prioritizing the features that you want to dedicate time to, you should focus on features that are deal makers and deal breakers. If you get caught up implementing features that are no big deal, you’re just wasting precious time and precious early-stage resources. It’s sort of like an airplane pilot checking that the window shades are all up while taking off from a short runway.

When you’re an early stage startup, and you don’t have the luxury of war chest of cash from a recent VC round, you should generally have these financial goals at the top of your operational plan:

• Getting the first revenues
• Getting to break even revenues

Notice I did not even mention making a profit. You can’t be concerned with profit until you can cover the bills, so don’t even put it in your early stage operational plan. Now, this means that your team should focus on features that get customers to sign up and pay. If your driving well-qualified traffic to your website, and your web app does not have the features that these ready buyers need, that will be seen in a cringe-worthy “Bounce Rate” or “Avg. Time on Site”.

In general, you can think of features as falling into one of these categories:

• Deal breaker – This is a must-have feature that will close the sale because it is essential to the customer, and quite possible required in order for them to operate. Most features will fall in this category. They’re not innovative. They’re table stakes.
• Deal maker – This is your secret sauce, or at least your creative take on a problem. It separates you from your competitors. It’s a feature that is unexpected and exciting at the same time. It gets people excited and ready to sign up. These features get you press, interviews and buzz. They’re very, very rare.
• No big deal – This feature is a nice-to-have or maybe just something you’d like to get off your task list. It will not be a factor in a customer deciding to buy your product. Often these features are the fun or easy stuff (customized colors!), which is why we get caught up on developing them.

Let’s focus on deal breaker features, because I have no way of helping you identify deal maker features. Here’s some examples of popular web apps, and what I think would have been deal breaker features, and features that are no big deal—at the time the product launched. That’s not to say the features are not valuable—remember we are talking about early-stage companies and prioritizing features:

All of these companies did a good job prioritizing at least the features mentioned above. They’ve probably done a good job prioritizing other features as well, as their traffic is good. I have made some good decisions for my product, but here’s the examples where I failed to prioritize with The Resumator:

• I implemented custom CSS for job boards when I should have implemented automated resume parsing for manual resume uploads. Businesses and recruiters hate to type in all the contact information just to upload a resume.
• I implemented resume flow charting when I should have expanded the resume search form to allow more granular searches. Both are valuable but the resume search still has not been expanded and people are asking for it.
• I updated my marketing website many times before implementing reporting tools. This is the deal maker that has been lagging behind for months. I could kick myself!

Once I implement the deal breaker reporting feature, I’m going to hit non-profits real hard. If my hunch is correct, with my pricing and features, I can snag a decent number of customers in this category. Hopefully, the fact that I waited five months to implement the deal breaker reporting feature will actually become no big deal in the long run.

My company had early investment inquiries, great buzz (see here and here), so I just figured I just had to keep generating some buzz, blow out the product, and slowly grow the company. I also had a small amount of seed stage investment through the Pittsburgh-based AlphaLab program, which I was sipping, and I was buoyed by the complete arrogance that The Resumator was too good for an investor to pass up on once I left AlphaLab. Yes, I was that idiotic young entrepreneur who, despite reading everything out there from seasoned colleagues, was intoxicated by that first paying customer.

Your first customer is like the first person who ever liked you. They provide you with a rush of exaggerated confidence. A belief that you are are indeed a hottie, despite your insecurities. Sure it was just a, “I think you’re cute” compliment in the hallway at school, but you’re projecting that moment way out into the future, using it to predict your potential. You’re imagining your “cuteness” trend is hockey sticking so far up and to the right that some woman, or some man out there, will have no choice but to acquire you. In essence they are taking you off the market, freezing out competitors as you walk down the aisle. And you assume you’ll have many choices too, as I assumed I would have many investment offers.

I now realize how easy it actually is to get a few customers. Take that moment, love it, and then realize it is the easy part. It’s behind me now, and as I look at my non-hockey-stick-looking “soup bowl” trend, I take joy in the simple fact that the trend is not a downhill slalom. Sure, it’s paid traffic, costing good money a month. Many sign up for the Free Plan. I of course am banking that they will outgrow that plan. But with my expenses being ridiculously low—I mean less than a car payment—I can afford a little ad spend to drive traffic, generate usage, and in the process alleviate my anxiety when I have low sign up days. I have a 30-day free trial, which means no sign ups today equals little chance of revenue next month.

How I wish I could travel back in time, bleep slap the living bleep out of myself and focus on traffic growth, traffic growth, and traffic growth. This is a numbers game, people. You can predict your revenue simply based on the amount of traffic that comes to your site. You must scale your traffic to scale your business. This means every month you must know if your traffic grew or fell, and why.

Here’s an important tip—separate usage traffic from sales traffic. If your site involves daily usage by customers, or the driving of non prospects to your website via those customers, your traffic numbers are flooded with visits that were most likely not intended to generate revenue. You must devise ways to get at exactly how many people visit your website as a potential customer. Here’s some tips:

• Use a special character pattern in all your ad links so you can easily search for that traffic in Google Analytics. I use /home/s:source
• If possible, use a subdomain or some other URL than your home page for users to log in. This cuts out some of that loyal traffic from the sales traffic
• Track the average number of log ins per day and then always subtract that number of visits from the tally for the home page

Do these things and it is amazing how you can zero in on exact conversion stats. I have some funky tools for doing the math on this quickly. It’s a little obsessive, but incredibly valuable. When the template is perfected, I will share it with you.

I digress.

Now I have to show investors how I will scale The Resumator, and yesterday’s late night exercise was my attempt to mathematically predict how my company would do that. See, I hate projections that are just numbers thrown out there. I need data to base projections on. So after half a year in business, I had numbers to plug in—and let me tell you—my conversions need to get much better in order for me to make a nice business out of this.

So here’s the plan:

• The introduction of recruiter-focused product plans (more expensive, easier customer to acquire)
• A buzz marketing tactic that provides me with a 350% boost in traffic (gotta make it happen)
• 40,000 visitors to my web site’s sales funnel by October (via the buzz)
• Doubling the conversion percentage of all my plans by optimizing my landing pages (I think the conversion can be that much better from where I am)
• Convince this investor that I can do this

I’ve already convinced myself, but the anxiety of not knowing the future sure makes a gray hair grow.

By the time (and if) my blog gains any traction, this post could be buried deep into the paginations of what I hope is an entertaining, thought-provoking and inspiring blog about me, my startup companies, design, life and business. The news in this first post could be so old that no one cares. It could reveal nothing about my intentions for writing. It may contain misspellings, because who cares about editing when no one is there to point out grammatical errors? It could be an embarrassing piece of work, this first post, unless I try to do something about that.

If I fail, I would not be alone. In fact, I would have some good company. There’s the zero thought-provoking, matter-of-fact overview of Technorati by Michael Arrington. How wrong Seth Godin was to say Apple Stores would soon be boring—they’re no where near as boring as his first post way back in 2002 (on shopping). Maybe I am too out of touch, but I have no idea what WordPress founder Matt Mullenweg is talking about when he mentions, “NextGen notes”. And finally, I was shocked to see that even 37signals inaugurated its blog with a post dedicating 19 words to letting us all know that there indeed is a fridge that keeps food warm.

Looking around the Web at bloggers who I respect for one reason or another (which includes the aforementioned), I see that this moment—the first post—was often a big flop. I mean who cares, right? This post is suppossed to be our sloppy little entry into the world of blogging. We’re learning to write as much as we are learning to use WordPress. Surely no one will blame us for such a huge flameout in our first attempt to publish a permanent archive of our thoughts on the Web, right?

Your first blog post can be a lot like your junior high school yearbook picture, resurrected from the attic by your wife, who wants to show everyone how “handsome” you looked. You hate the picture. It was taken before you learned how to be cool. Before that friend told you that the Jheri curl was played out. It does not represent what you have become—a smart, sharp dressing fellow who gets his hair diced up on a regular basis. You’re not that old square in the second row, third picture, right page.

But for some reason, we keep our old yearbooks, I believe, for the same reasons we keep our oldest blog posts. Good or bad, it’s history. It’s a moment in time that represents us in the world. “This was me in [insert year]”. And because it’s tucked away in the attic, or many clicks from being seen, we’re comfortable keeping it so we can go and look at it once in a while. If you throw these memories away, they’re gone. Nothing is gained by deleting your history, unless we’re talking about a shared computer in the den that you’ve accidentally used with “Private Browsing” disabled in Safari.

But what if we had a chance to know what a great yearbook picture would look like? That’s what I am hoping to do with this first post. It’s too long, but I want to make sure I can learn from what the aforementioned bloggers experienced when they sat down at this very lonely moment in time and made a mark in the blogosphere. So here goes. You’ve read nearly six hundred words for me to get to what I really wanted to say:

Hi. My name is Don Charlton and I am a Web entrepreneur, designer, developer, speaker and now blogger. I started a “kinda” cash-flow positive company in 2009 called The Resumator. I also started and failed to get another company named JoinSources off the ground. In the course of failing at one venture, and now succeeding (so far) at another, I have learned things about startups that I want to share—and I want your opinions on how I should move forward. This blog will be a very candid account of my daily activities and mental state in trying to get a SaaS startup off of a dirty, cracked and sticky floor that is this horrible economy. Everything from meetings (names redacted) to marketing strategies to pricing to design sketches—I want to share it with you and see if we can help each other grow as entrepreneurs.

That’s my first post. Hoepfully it won’t be lonely for too long, because otherwise I would have only written, “I’m tired as hell it’s late. I need to get up and pitch my company to investors at noon sharp tomorrow and I am freakin nervous. Good night.”

You’ll find out about that tomorrow.