It wasn’t that long ago that the most significant investment you could ask someone to make was a financial one. But something started changing with the advent of the social web a few short years ago. It suddenly became more critical to get people to invest their social capital (their ability to influence those in their social circle) than getting them to invest their financial capital.
The make or break point for facebook wasn’t getting outside investors to put in money, it was convincing users to to risk sharing a new idea with their friends. They could raise all the money in the world, but if they couldn’t get people to refer people they wouldn’t succeed.
Thankfully their timing was perfect. We were all hungry for online connection, so we took the social risk and made the investment. It worked. Really well. And in the process it made a few people insanely rich financially, and the rest of us much richer socially.
Some of you noticed that I all but disappeared from this blog a few months ago. In September, my brother Matt (who’s brilliant) approached me with an idea and asked me to join him in working on a new project with an incredible team. He wanted to create an opportunity for people to invest their social capital and see both social and financial rewards. I think we’ve done exactly that.
We designed Moolala to combine the hottest space on the web (Daily Deals) with the most powerful marketing force ever (word of mouth). Rather than spending millions of dollars on traditional marketing and advertising, we’ve designed a system that rewards our users really well when they do the marketing for us.
We launched on Wednesday and the response has absolutely blown us away.
Let me know what you think of Moolala (and yes, it’s an affiliate link).
Please note: If somebody else has already referred you to Moolala, please use this link instead and put their email address in the referral code box in the final step so they get credit for your invite instead of me.
Lots of people have ideas. Very few people act on them. Between having an idea and shipping it is the real work, the execution.
Without the ability to execute an idea is just that, an idea.
Zuckerberg had something the Winklevi did not, the ability to execute, quickly.
The magic is in the execution.
Surplus is the extra left over from a transaction. Surpluses can be leveraged to make change.
There are two ways to leverage surpluses:
Make surpluses in an unrelated way and route them to where they are needed.
Do what creates the surpluses.
If you want to make change you need to be doing one or the other.
How do you create surplus?
Contrary to popular belief, you don't win by coming up with something better. You win by having a better story.
Here's the rub. You can't just tell the winner's story better than the winner. You have to tell a different story.
What story are you telling?
1. Find people who share a dream
2. Connect them to each other
3. Take them where they want to go
Here's the secret. You don't need everybody.
You need 1000 true fans. People who will cross the street to join you in what you're doing.
A few questions for the journey:
Who are you upsetting?
Who are you connecting?
Who are you leading?
Very few people have a habit of delivering early. Most people wait until the last minute to start on a project and then deliver right before (or more often right after) the deadline. I've found this to be especially true with graphic designers and web developers, but I think most of us are guilty of this at some point.
Here's a really good approach to deadlines I learned from Seth Godin during SAMBA.
Don't use other people's deadlines and never do anything at the last minute.
If someone gives you a deadline, don't use it. Instead set your own deadline ahead of theirs. Get in the habit of shipping early. You'll exceed the other person's expectations.
How do you treat deadlines?
In yesterday’s post I gave 5 reasons to bootstrap your business. Today I wanted to take a look at reasons why you might want to consider taking outside money.
1. The people on the VC team. This is probably the most important thing to consider when contemplating taking outside money…it’s more important than the actual money. What expertise do they bring to the table? Who can they introduce you to? What doors can they help open?
2. You need to expand more quickly than bootstrapping allows. It’s almost impossible to bootstrap your way into a nationwide (or global) product launch. It’s just too expensive.
3. You need to scale quickly. It would have been really difficult (perhaps impossible) to bootstrap facebook. The scale of infrastructure and development that was needed far outstripped facebook’s ability to generate revenue early on.
4. You’re building to be acquired (rather than to get cash flow positive). So you’ve invented an amazing new technology that will change the game for (insert your favorite big dot com here). In order to get enough market share to be noticed you need to offer your service for free and build a user base. That can be really expensive. If you can find VCs who believe in what you’re doing it makes sense to take their money so you can build your user base.
5. Venture capital leads to more venture capital. Once you’ve got outside investors in the game with you, they have every incentive to see you succeed. Don’t underestimate the importance of this. As they introduce you to other VCs you’ll reap the benefits above over and over again (especially number 1).
1. When you take someone else’s money you answer to them. This will force you to make decisions differently and sometimes not in the best interest of the company (your company).
2. Constraints force creativity. It’s really healthy to ask questions like how would we do this with less money? How could we do this with no traditional marketing? How could we do this with less employees?
3. You might love what you’re doing and want to stick with it long term. Which leads us to the next point.
4. If you take in investors they’ll want an exit, that’s why they made the investment in the first place. What happens if they want out and you want to stay in?
5. You don’t have anything to lose. Seriously, this is a big deal. You don’t have a ton of money to build a business, so you don’t have a lot to lose. Big companies have everything to lose. You don’t, you can take risks they can’t, take advantage of it.
Here’s a great free resource from Seth Godin on Bootstrapping.
A freelancer gets paid when he works.
An entrepreneur makes money while he sleeps.
A freelancer says, "It couldn't work without me."
An entrepreneur says, "Only tell me what happened today if it was an exception."
A freelancer takes his time and trades it for money.
An entrepreneur takes other peoples money and takes risks with it. He then (hopefully) sells the company and gives them 10X their money back.
One isn't better than the other. But it is important to understand which one you are.