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What You Need to Read This Week

Andrew Warner is one of the best interviewers I have ever watched. This is a long video (1 hr) with Naval, the co-founder of VentureHacks and AngelList, but totally worth it.

The title might make it sound like a lame MBA post, but it’s far from it. Chris Dixon explains how some startups who start with small features (Foursquare, Instagram, etc.) can become big businesses.

Startups like Groupon, Gilt Groupe, and even big tech companies like Amazon are tiptoeing between the digital and physical worlds now. Even though they are unsexy, hybrid startups were some of the biggest wins of 2010.

Jason is a badass and shares 14 practical tips on being a great CEO. To give you fair warning, it’s not a glamorous job.

Today Brad Hargreaves wrote a blog post “The Scene will Kill You”.

Read the post (it’s very good), but the premise is getting caught up in the “startup scene” will kill your company. You will get too focused on building shiny things and pleasing the socialites as opposed to building something useful.

This happens too often here in Silicon Valley. Everyone wants to build another me-too Groupon, Foursquare, Facebook, Yelp + Twitter company.

But at the same time, events are incredibly important to your startup and the startup ecosystem at large (Chris Dixon agrees). Even Mark Zuckerberg goes to events to represent his company. These physical events are where you can find employees, advisors, investors, and important feedback.

What StartupDigest does is we cut through the noise and help entrepreneurs find the events that are best at delivering these things to their attendees.

In this post I want to highlight 3 “high value” types of events. My definition (borrowed from Brad Feld) of a high value event would be one in which entrepreneurs can work together on a regular basis.

Hackathons
Startup Weekend takes place in 100+ cities around the world and is spreading like wildfire. In these events entrepreneurs get together on Friday, brainstorm ideas, and actually build a startup in a weekend. These events are perfect for getting anyone to experience what starting a startup is like, all compresed into a 54 hour period.

Meetups
Lean Startup Meetups take place in 70+ cities around the world. These are regular meetups around the “lean startup” methodology and invite engineers/founders to come share how they are incorporating these methods in their startup.

User Groups
Twilio a popular telephony API company hosts regular user groups in 20 cities around the world. At these events developers who are using the Twilio API meetup to discuss best practices and ways they can leverage the platform better.

There are many other high value events to feature, but above were 3 common examples. The easiest way to stay up to date with these events is to sign up for StartupDigest and pick the city you live in. Make sure to keep a balance with your time and only attend the events that will be highest value to you and your startup.

We’ve noticed that there have been a ton of job postings lately in the Startup Jobs section of the StartupDigest Classifieds. This is a great sign of growth for lots of startups all over the world, which is both righteous and awesome.

As all of you continue the hiring process, we want to share an idea that will speed up the process of finding the best person for any job opening you have at your startup.

The key to startup hiring is realizing that the people you really want to hire aren’t looking for jobs.

The people you really want to hire are:

1) Working on their own startup, someone else’s startup, or for a large company (and kicking ass) but aren’t very happy there. This means that they would be open to a change if they got really excited about another company, but aren’t actively looking for it.

2) Active participants of the startup community. This means that they frequently communicate with the leaders of the startup community (e.g. Dave McClure, Eric Ries, Fred Wilson, Chris Dixon, etc.), they consume the latest technology and entrepreneurship news, and (ideally) they produce their own thoughts about emerging trends.

(In a fantasy world, they would also be close followers of your startup and frequent consumers of your product/blog, but the vast majority of the people you really want to hire might have heard of you, but don’t really know who you are yet.)

If all of this is true, it’s great that you’ve posted your job to the Classifieds because there is a lot there (co-founder opportunities, feedback requests, startup education content, global and local startup resources, etc.) that might attract someone who isn’t actively looking for a job. Of course, posting on the Classifieds is free anyway, so you really have nothing to lose.

We’re betting, however, that the Classifieds section isn’t the only place you’ve posted a job listing. Like many of us, you’ve probably paid money to post your job listing to a popular job board or hired a recruiter to post your job listings in even more expensive places.

Why would you pay money to post job listings in places the people you really want to hire never visit?

If the people you really want to hire aren’t looking for jobs, they will never see your listing on craigslist, Monster, HotJobs, theLadders, or even a place like StartUpers (which, admittedly, is at least the most fun one) because job listings are all that they offer.

Those places are great for stacking resumes of people who can fill limited holes with set tasks in your company, but the people who will actually make a lasting positive impact on the future of your startup visit those sites only when they’re looking for a cheap wetsuit or a two-bedroom in SOMA.

Since popular job boards won’t help you find the people you really want to hire, stop wasting your money on them and try these 3 things:

1) Pay for distribution, not for posting.

Or, to quote what many (like, say, Gary Vaynerchuk) have said before us — if content is king, marketing is queen and *she* runs the household.

If you have money to spend on hiring, spend it on marketing your company and your open position to people who definitely are not looking for jobs. Bake your job opening into content you produce on your blog or into a post/comment you add to the content you read.

To give you a real example, here at StartupDigest we help you distribute your Classifieds listings into the events content that is consumed every week by thousands of active members of local startup communities around the world.

Spreading good news about your startup to the people who care about the startup ecosystem most is the best way to find and hire the people you really want to hire.

2) Seek one great person, not “a response.”

What’s the key metric of success in startup hiring? Many founders or recruiters will tell you that they spend money posting on popular job boards because they know that they will get a response. From that response, they will know that a certain percentage will be acceptable resumes, and they know that they can find at least one acceptable person out of the set number of people they interview.

But if resumes reveal only a fraction of a person and hiring should be treated like getting married, how could you possibly settle for what’s acceptable from a numbers game when it comes to startup hiring?

If you go into the hiring process seeking one great person instead of “a response” then you will spend your time and money where the people you really want to hire are instead of where the most resumes will come from. This is a hard approach to take because hiring is an awkward process and if you don’t get 20 resumes in your inbox after day one, it’s easy to feel like you aren’t making progress.

Then again, if you change your definition of progress to locating one person you would really want to hire each day, that feeling also changes. We suggest sending simple notes to each of those people on a regular basis to keep him or her up to date on all of the cool things you’re doing at your startup. You can then track each person’s response as it shifts from “that’s cool” to “what’s coming next?” and “what if?” with a simple spreadsheet. Sounds like Salesforce for marriage, doesn’t it?

3) To speed up the entire hiring process, make it fun by hosting a startup party at your place. Or at least go to someone else’s.

Let’s face it, all of us just want to spend time building products, making customers happy, putting money in the bank, and changing the world for the better. We end up paying money to post a job somewhere, sifting through what we get, and taking what we’re given because we want our needs filled now so we can get back to the fun stuff.

So, to save time and our sanity, we need to make hiring part of the fun stuff. One fun and efficient way to find the people you really want to hire faster is to host a startup party.

It’s cheap (unless you’re too cool for pizza and beer) and brings a large group of startup people around you, giving you the opportunity to show all of them who you really are and how much fun they all could be having if they were working with you instead of their current startup or big company.

Also, many entrepreneurs like to try before they buy when it comes to hiring as much as they like to save time, and hosting a party is the easiest way to get a first honest look at all of your potential candidates at once.

If you’re desperate for talent, especially on the technical side, and you don’t think that your party will attract them, at least don’t waste money on recruiters or expect technical talent to immediately respond to your job postings. Go chill out where the people you want to hire already are, as long as you’re willing to bring your brain and not spam every engineer you meet.

To give you one awesome place to go, the Hackers and Founders Meetup is the best place to grab a beer with smart, passionate startup people and talk about what you’re working on. On top of that, every week there are cool speakers and hackathons and iPhone, Android, WordPress, Drupal, Ruby, you-name-it meetups happening all over the world that are full of the people you really want to hire. You can find all of these events going on in your city here.

And speaking of technical talent, did you really think that great engineers would just read your job posting and email you in the first place? Honestly, put yourself in their shoes. Every brilliant programmer is what LeBron James was two weeks ago, a prized free agent (though programmers tend to be a lot less narcissistic).

Brilliant programmers are prized free agents. If you want to land them, hang out with them at their place!

Did Miami land LeBron by posting a listing somewhere, offering the best terms and hoping for the best?

No, Pat Riley & Co. hung out with LeBron where he spent his time, told him how sweet it would be to play with Dwyane Wade and Chris Bosh, and got him so excited about the opportunity that LeBron left his home and $30+ million to join them. You can land the next LeBron for your startup by taking the same approach.

In the end, if you remember that the people you really want to hire aren’t looking for jobs, the best way to find those people is to organize or attend fun startup events.

Take every chance you can to show active members of the startup community who you are and what your startup is all about, and talent will leave their current jobs and money on the table just to join you.

Last week Usher’s “Oh My Gosh” was bumpin’ from the radio of a grey rental minivan heading to San Francisco for Dorsey & Whitney‘s “Are we all blowing another bubble?” event at Pier 38. Well, it was bumpin’ only until the phone belonging to the minivan’s driver made a sound. Every time it buzzed or rang, he and his two programmers shrieked “Holy shit!” and immediately turned off Usher.

They were obsessed with the phone because they had interviewed with Y-Combinator earlier in the day. It was only a matter of minutes before they would find out if they had been accepted into the June 2010 program. A phone call would mean they were accepted; an email would mean rejection.

To save you the suspense, they ended up getting the email later that night. But there’s a story to this minivan ride that’s much bigger than them. (Trust me, they’ll be fine.)

Between the reckless driving, hot radio beats and girly shrieks, I wondered:

When’s the last time a big early-stage VC firm got entrepreneurs excited like this?

Seriously. Take a look at these firms:

Not to pick on these 7 firms (we just randomly selected them) but all of them claim to be “Early-Stage” VC firms.

Can you name more than a couple of their portfolio companies?
Can you give me specific examples of what they’ve done to help early-stage entrepreneurs and strengthen the startup ecosystem?
Can you tell me why one of these firms is better than any of the others?

Neither can we.

Why can’t we answer those simple questions? All of these firms have hundreds of millions under management. All of them are involved with cool companies we care about like Pandora, Posterous, UStream, YouSendIt, and oDesk. I’m sure that all of them have great people doing excellent work for those companies too, but we haven’t heard any of their stories. In fact, very few (if any) of us early-stage entrepreneurs have any idea who the people at those firms are and what they care about most.

In contrast, look at the look at the logos from these venture capital firms:

What are the first things that come to your mind now?

All of these firms have less than $50m under management and are taking large chunks (6-12%) of great early-stage companies for less than $50k of investment with few strings attached. Nevertheless, many great young technology teams are literally weaving through traffic, killing hot radio beats, and shrieking in anticipation of giving chunks of our companies to them.

Why?

The answer is branding. We wrote a post recently on startup leadership and how people don’t buy what you do; they buy why you do it. This idea is important for every entrepreneur to understand as they seek out new customers and talent. It is also important for every VC to understand when they ask themselves why early-stage entrepreneurs don’t care about them and they are getting beat by the VC’s who do understand marketing like Fred Wilson, Chris Dixon, Brad Feld, Charlie O’Donnell, and Dave McClure.

The VC firms that are struggling right now will tell you that their funds are too big. They’ll tell you that there aren’t enough good companies out there to put their LP’s money to work.

In reality, demand for venture capital is not lacking. If anything it’s growing and we’re actually getting better at building more companies in which more VC’s (like, say, Redpoint’s Satish Dharmaraj) want to invest:

If there are so many fundable companies out there, every early-stage VC firm has a tremendous opportunity in front of them to make a killing right now. They shouldn’t have a problem putting all of their capital to work, albeit in smaller chunks because it costs less today (especially for consumer internet companies) for us to get started than ever before. Though the size of each individual investment and payday is shrinking, the total amount of  money to be made is getting bigger, and it’s out there for the taking.

But the firms that are not actively pushing their brand through the startup ecosystem are missing out on all of this. They will never show up on the radars of the next generation of disruptive companies as interesting funding options.

Their cash might as well be on the sidelines. No one will want it unless they know who they are and why they want to use it.

YC is the golden example here. We’ve all read Paul Graham’s essays, applied to Startup School, and submitted content to Hacker News. Their community has become our community, and it’s paying off. Other firms are sorting through their rejects, fighting over their alumni, and claiming that there aren’t enough deals out there to put all of their LP’s money to work.

The size of your fund isn’t your problem; it’s your branding.

Unfortunately, this branding problem hurts everyone in the startup ecosystem, not just early-stage VC firms. For every VC that chooses to shed capital instead of addressing their branding problem, some fundable companies won’t get funded. At the same time, other fundable companies will keep giving away big chunks of equity for a bridge-round ($10-$20K) before spending more time raising another round (instead of working on their product) to give away another big chunk. That’s a big drag on efficiency, incentives, and quality-control for an ecosystem that’s crucial to the health of the recovering American economy.

So, instead of downsizing your fund, laying-off employees, or going into stealth-mode, here are some tips for finding all of the lucrative early-stage opportunities waiting for you:

1. Going only to TechCrunch’s events does not mean that you have your ear on the ground of the startup ecosystem. Get involved with Startup Weekend, Startup2Startup, Founder Dating, Hackers and Founders, and SF New Tech (and their national counterparts like NY Tech Meetup) to meet the people who are actually creating the next round of profitable companies.
2. Being a “Stealth VC” is just as stupid as being a “Stealth Startup.” Through your website and the people you send to community events, tell us what you are doing for your current portfolio companies right now and how much they are kicking ass. And if you are internally discussing doing more early-stage deals in the near future, you need to tell us NOW so you actually cross our minds later. This means that you need to be both creating (e.g. blogging, tweeting) and commenting on the content early-stage entrepreneurs consume (like the guys we mentioned earlier).
3. Reconsider the makeup of your team. Is your current employee structure optimized for making smaller deals more often all over the world? Finding great deals early requires you to have strong, physical presences in more places. This means that it might be time to replace your two MBA Analysts making $60K/year with four entrepreneurial activists who know your firm and will attend grassroots events and engage early-stage entrepreneurs by both creating and sharing relevant content.
4. Center your startup community around you. Currently, a law firm (Dorsey & Whitney) is dominating most VC firms at this. That’s embarrassing. The best way to find what you’re missing is to bring together the members of the startup ecosystem around you with a personalized event. It doesn’t have to be a big conference, just a simple dinner or drinks. Or do Taco Tuesdays, Happy Hours, or Pancake Breakfasts. We are throwing Startup Waffles and founders love it! If you don’t want to get creative, at least run an invite-only event so you can put your portfolio companies and one other company they think is cool in the same room together and see what happens. Finally, do any of you throw celebrations when something really cool happens to one of your portfolio companies? If you do, we need to know about it.
5. Hold open office hours for free advice. Let us come talk to you about our ideas once a month. You’ll be surprised by the quality of the ideas and the connections we have. We need more mentor/advisor resources that aren’t asking for cash or equity as soon as we talk in the door. The VC firm that gets out in front of this big need first will win big. (Currently, law firms are dominating VC firms at this too.)

If you fix your branding problem, it will pay off. Not only will you have more fun doing your job, but also every new deal, including the next big thing, will weave through traffic and blow off Usher just to give a chunk of their company to you just because of who you are and why you’re in this business.

What do you think are the top 5 VC brands right now?