For months we’ve heard that startups should prepare for a recession that is looming in the future.  But it always appeared to be around some distant corner.  Well, it seems we’ve arrived.  Giga Om is reporting that Sequoia (considered by many to be the top VC) held an emergency meeting yesterday warning their portfolio companies to buckle down.    B rounds are already a wasteland – at least that’s the sentiment of the VC with whom I had coffee yesterday.  He claimed that money is still rolling into A round startups and that companies needing a C round often have solid financial metrics.  It’s the companies that are approaching a B round that are suffering.

So how can early stage startups weather the storm?

1. Raise as much money as possible on the A round.
2. Measure everything from day one.  Last week’s Startonomics conference has sessions on using a metrics driven approach to execute all the key parts of a startups.  Watch these videos .  Resources should only be invested into development and marketing initiatives that deliver measurable results.
3. As soon as you have raised your series A, figure out the financial performance you’ll need to be considered “a safe bet”.  The best time to raise money is when you are near cash flow positive and have identified several scalable positive ROI marketing programs.  If you need the money to fund these programs and reach your full growth potential – you’ll raise the money.  During frothy times you can raise money on hype; don’t count on hype valuations during a recession.

A recession is when the real entrepreneurs emerge.  Those who think it would be “neat to start a company” generally prefer the safety of a stable job during a recession.  LogMeIn was born in the last recession.  While we had a really hard time raising our $10m A round, twelve months later our $10m B round was much easier based on our proven metrics.   We then went on to build a company that now has its software on 50 million devices and is still on deck for an IPO.  Google also emerged during the last recession.  While the stock has suffered recently, it remains one of the most successful tech companies ever.

Each new startup I help take to market offers many potential rewards but there are risks too. 

The most obvious reward is the financial upside of equity in a successful company.  But there are less tangible benefits like the thrill of being part of a team realizing the potential of their vision.   Probably the most important long-term reward is that each startup success enhances my reputation and opens doors to additional startups with strong potential – while improving the skills I need to maximize these opportunities.  This allows me to continue doing the most enjoyable “job” of my life.

But the risks are very real.  A startup in a bad space with a bad product won’t be much fun to market – and I’ll probably fail.  And when the company flops, it will damage my reputation.  Enough damage to my reputation and I’ll have to figure out a new pursuit.  Of course most people recognize that it’s impossible to have a perfect startup record, but the opportunity cost of committing to the wrong startup means I won’t have the bandwidth to take on a potentially hot company.

Given these rewards and risks, I increasingly find myself evaluating opportunities with a VC-like diligence.  I’ve created an opportunity assessment worksheet that identifies key risks in the business. The standard format makes it easier to compare opportunities.  One of the biggest risks of any business is the inability to raise capital, so early on I set the requirement that I’ll only work with companies that have recently raised a series A or large seed round.  A very good VC can also help improve the odds, as they’ve achieved a better track record with their historical picks (and many would argue their “added value”).

Beyond general business risks, I obviously need to be confident that it is a marketable business and one on which I can make a meaningful impact.  The ideal category is what I refer to as a “disruptor” startup.  These are businesses that enter an existing category with a breakthrough feature or very disruptive pricing model.  My iterative, metrics driven marketing approach is perfect for helping these types of businesses discover their ideal market, differentiate appropriately and identify viable customer acquisition drivers.  Generally these businesses can get substantial traction just by harvesting the existing demand for the category.

Another startup category I often consider is what I call “innovator” startups.  These are much more challenging to take to market, but under certain conditions they are very marketable.  If they solve a specific important problem for a large addressable market and the potential customer lifetime value is high enough, it is generally possible to fund the full demand generation process.   Still, it takes a lot of time to discover the right target users.  Not only do they need to suffer from the problem, your product needs to effectively solve the problem.   Your next big problem is finding a profitable way to reach these target users and messaging they’ll respond to.  These are difficult go to market assignments, but they definitely improve my skills. 

For now I find myself alternating between these types of startups and avoiding those that don’t fall into these categories.

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I’ve been toying with names for my advising services that would capture the value I’m offering to startups…  In a nutshell this value is “helping startups more quickly achieve traction and efficient growth momentum.”  Startup-Marketing.com clearly positions me as a startup marketer, but it’s very generic and says little about what I’m trying to do for startups.

On my drive from Palo Alto to San Francisco today I was pondering how I discovered the need to help startups gain traction/momentum – and the name 12in6 struck me.   Before I explain what the name means, I’ll describe how I came up with it.  My “self – how did I get here?” reflection began by remembering the period when I was planning my next move following LogMeIn.  I was reflecting on 10+ years of startup life and wondering “what was the most important marketing activity we did that led to these two NASDAQ IPO filings?”  I realized that the first 6-12 months were the most critical marketing contributions to the long-term success of each company.  I also realized that what took 12 or more months at Uproar.com took only about six months at LogMeIn.  A solid go to market process was the primary difference.  And finally I realized that this go to market process had a ton of room for improvement.

I had my next move figured out.  I would specialize in helping companies plan and execute their go to market strategy.  My process would improve with each startup experience.  I quickly switched my blog from metricsdrivenmarketing.com to startup-marketing.com and continue to evolve/improve the go to market process with each new startup marketing project.

So today (as I was going through this “self – how did I get here?” exercise) I figured out the name.  It’s 12in6 – reflecting that I’m helping startups achieve 12 months of marketing progress in 6 months.  This is a powerful promise since this period generally has a very high capital burn rate – and getting through it more quickly preserves precious capital.  The name is a great conversation starter (based on the WTF factor).  It is also numbers, which highlights my data driven marketing approach.  Even the logo is a no brainer with a 12 inside the 6.

I’ll continue to post to Startup-Marketing.com since it gets a lot of search traffic, but I’ll eventually transition to the new domain 12in6.com.  Fortunately the move will allow me to switch to a better blogging platform too.

In the last couple weeks I’ve met with CEOs at nearly a dozen well-funded startups desperately in need of a marketing leader.  Many of these companies have expressed a strong desire to work with me on their go to market execution, but one of my key requirements is that they have a marketing leader in place.  This ensures strong knowledge transfer and reduces the need for a long-term engagement with me.

The challenge many of these startups have faced with their hiring is that they were seeking a seasoned marketing leader.   Having led marketing in both early stage ventures and in more established companies, I tell most that they don’t need a seasoned marketing vet.   Experienced marketing execs haven’t rolled up their sleeves and executed for a long time.  The majority of their skills are completely irrelevant in the early go to market stage of a truely innovative startup.  So why pay their required high salary and give up multiple points of equity?

The good news is that for about half the salary and a fraction of the equity they can hire a qualified candidate to be trained and mentored to successfully execute this early marketing stage.  In fact it’s probably easier to train someone with no marketing experience than someone with years of the wrong type of marketing experience.

Of course the right candidate must be dynamic and possess the essential soft skills.  They must be analytical enough to execute a data driven marketing approach and have the discipline to follow a proven go to market process.   Most importantly they must be very curious about discovering how your solution maps to the needs and the buying process of prospective customers.

When the role is positioned correctly, the right candidate will leap at the opportunity.  Nothing is more exciting than being on the ground floor of a hot new startup.  For the next several months they will have the critical responsibility for the planning and execution of the company’s go to market strategy. And (by working with a go to market specialist) they will have guidance and training from someone who has taken multiple companies to market.  It’s important to be honest with them that they may not become the long-term marketing leader, but they are in pole position to get the role.  The ideal candidate will understand that they have everything to gain from this opportunity and nothing to lose.

But how do you find these candidates?  While it would be tempting for me to set up a recruiting business to help startups with this crucial hire, my hands are full with startup marketing advising.  So I’m exploring other ways to address this need/opportunity.  These include working with existing recruiters, partnering with someone who could specialize in filling this type of role, setting up a training boot camp for aspiring startup marketers or some combination of each.  Stay tuned.

Update:   The above recommendations are for startups that have an opening in the marketing leader position. I know many marketing vets, particularly those with strong online marketing skills, that have done exceptionally well with startups.

You may have noticed that the go to market process I use is heavy on identifying and using the right metrics to build your startup marketing engine.  So it’s not surprising that a conference called Startonomics caught my attention.  The organizers describe it as the following:

“Startonomics is a one-day workshop designed by entrepreneurs for entrepreneurs on how to create simple, actionable metrics for internet startups, and use them to make better product and marketing decisions for long-term growth and success.”

I was even more excited when I was asked to speak at the conference.  A whole conference of other nerds focused on actionable startup metrics.  How could I miss this one?

The conference is October 2nd in San Francisco and is affordable at $295 for entrepreneurs.  Here’s a link if you are interested in attending or learning more.

“Potential” is the most important concept in startup marketing.  Startups are all about creating and then realizing potential.  It is our “true north.”

So what is “potential?”  One definition is “capable of being but not yet in existence.”  From a startup marketing perspective, I define potential as the combination of the size of the market and the intensity of the need for your product as it exists today.

A startup’s potential begins with the vision of the founders.  Generally there is some tweaking of the vision based on research around the actual needs of potential customers and the competitive landscape of alternative solutions.  The right business model can also extend potential by enabling you to cost effectively expand market need through demand generation marketing activities.  Startups seeking VC funding must make sure that their potential is sufficiently large to be interesting to the VC.

Generally marketing leaders don’t join a VC backed company until the initial potential has been established.  It is our job to fully realize this potential.  An effective startup marketer is sickened by the idea of falling short of their startup’s potential.  The only growth that is good enough is growth that rides the line of what is possible.  Anything short of that creates an opportunity for a competitor.  Each additional competitor reduces your potential.

Too often startup marketers push the rest of the company to extend potential through feature enhancements while they are falling well short of the existing potential on the marketing side.  Avoid this vicious cycle of chasing markets without fully reaching the potential of your existing market.