Entrepreneurial Activism

I found this great video on Vimeo today featuring two prominent entrepreneurs Tim Ferriss  the New York Time Bestselling Author of The Four Hour Work Week and Kevin Rose founder of Digg, co-founder of Revision3, and Pownce. 

There was so much good stuff in this video I decided to write out a transcripted version of what Tim and Kevin said:

Issue #1 – Naming Companies

Tim - How did you name your book, “The Four Hour Work Week”? The first initial title was “Drug Dealing for Fun and Profit”. The Pro’s of that title is it polarizes people quickly, it forces people to love it or hate it, and people would be forced to at least look at it. Tim ended up having to pick a new name because of Wal-Mart and the way he chose a new title was instead of fighting the people with vested interest in the name (distributors, publishers, authors, etc) and rather than turn this into a huge ego battle he created a test.

He took 12 perspective titles and created a google adwords campaign (had title pop us ad sidebar advertisement) and the url of the ad went to a blank page or under construction page, the point of the test was he was just testing the key words. All he cared about was the attention/hits part of the process and ran this test for a week and after he knew by many standard deviations that the “4 Hour Work Week” had the best click through rate compared to the other names. Tim also did testing on the cover by actually printing out variations of the cover and putting them on books in the bookstore. After he sat there and watch which cover got picked up more. This is how he tested his book cover.

Kevin – Kevin has come up with multiple names for multiple companies such as: Digg, Pownce, System, Revision3, and Wefollow. Kevin likes to have memorable, short names. He wanted “Dig.com” but Disney owned it. So Kevin decided to add an extra g because of other successful misspelled companies, like Flickr, Del.ici.ous, and an extra G sounded cool at the time. For Digg he definitely made sure he got the .com. 

On the other hand Pownce was brainstormed by the team, came up with it because Pownce was his cats food, and he got the url for free (which is typically unheard of). The misspelling of Pownce wasn’t to hard for people to comprehend but he never got into the level of sophistication that Tim Ferriss did.

Tim – Side note – How did Linkin Park choose their name?  Mike Shinoda explained that it was easy, they wanted the .com. They could have used the right spelling for the .net, etc but they needed the .com for the longevity of the brand.

What about natural search traffic? Google Keyword tool (gives you all the top search terms) but the mainstream media doesn’t have time to spell out the name (if it is a misspelling) and explain it.

If your thinking about branding don’t forget to think outside of natural search traffic and even paid search traffic. Don’t be afraid of building a brand yourself if the name is slightly off.

Issue #2 – Angel Investing

Kevin – Kevin personally hasn’t done a ton of angel investing but has done a lot more advisory role stuff. The difference between angel and advisor is if company believes you can help them out (in product direction, marketing, etc) they set aside a pool of shares for advisors. If you jump on as an advisor normally the shares the company offers vest over a length of time. The requirements for an advisor are typically a monthly meeting either with a group of advisors or 1 on 1 interaction, to basically be a sounding board for ideas and provide guidance to the company.

Tim – Advisory shares tend to vest over a period of time (you don’t get all your shares at once) so you have prove yourself as an advisor. The common rate of vesting is monthly vesting on an 18-24 vesting period. Range of equity compensation for an advisor is .025%-.05% or even more if the advisors take a more serious role. Check out venture hacks article on advisors.

Kevin – Compensation for advisors depends what stage the company is in, you aren’t going to get a 1% of facebook but if its early stage stage company .025%-.05% is not out of the normal range. Advising startups is good because it allows you to play in other startups and gives you an outlet to keep your creative juices flowing outside of your full time gig. Advisory role is a way to allow you to not invest a significant portion of your time/resources but allows you to take a role in startups. 

Checkpoints/criteria of what you look in before you invest:

• Typically comes from introductions by other angels, people you respect and who have done well in angel investing
• Kevin will go and meet with a ton of companies 3~4 a month and 90% of the time Kevin provides general advice but the companies are too early for real investment. They need to develop a tangible prototype first so he can hold it and touch it and get into the product.

Tim – Some of the companies Tim has invested in are Posterous, Rescue Time and more

Main investment criteria  

• Does it overlap with what I am doing?
• The more you can create a Keiretsu and that help each other the better.
• Given that it is much easier to promote them over the media pick companies that can help each other
• Almost always co-invested with an experienced angel that does the due diligence
• Looking for a team that is younger, smaller, and at a very early stage.
• Like a mix between technical person and a business person
• Tim brings to the table his analytics skill and how to up the conversion rate of the model, and the PR side of things.
• Need to see some traction and the founders put some skin in the game and got something more than just the idea

Traffic doesn’t do any good until it converts visitors to users. Take care of the product first, don’t be in a rush, then get the traffic.

Issue #3 – How be and get in contact with advisors or angels

Kevin – don’t just email angels with “I have this great idea…” Actually take the time to build it and get a working prototype out there. Anyone can be an advisor if they have a valuable skill set (ex. Amazing graphic artist, PR person, etc)

To be an Advisor tell the team here is how I can help you, and give them a taste of how you can help. Show them you can something for the team first. Give them some freebies then after talk about how you can formalize the arrangement and make it work for everyone.

Tim - To get an angels attention take action and do something, don’t just talk about it.