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What's the best piece of advice you have for someone just getting started with their idea?
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1) Solve a real problem. You shouldn’t be starting a company just to start a company, or because you like the idea of being your own boss. You should solve a problem that will still exist in 5 years or 10 years. Do not start a company that’s based around creating better Twitter groups – that’s a feature, it’s not a business.
2) Address a big market.
3) Have a sustainable competitive advantage. That means you have technology / patents, or you are an expert here, or a proven executive.
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Hi Aaron - your pitch deck has become *the* deck for startups to emulate - I was wondering if you could go back and change anything on the deck or add anything, would you? What advice do you have for someone currently trying to raise?
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If you’re looking to raise money, you need to show three things: 1. You solve a real problem, and therefore have a real business. Creating a company that say, helps manage Twitter lists better, is a feature, not a business. You’d be surprised how many people have features, and not real businesses. Think long and hard about your own business here. 2. Prove you have a big market. I’ve been pitched many, many times on businesses where if you do back of the envelope math there are only say 100,000 potential customers worth maybe $100 / year = $10m / year = too small. It might be a good lifestyle business, but will not attract investors. 3. Have a sustainable advantage. That’s either tech that’s hard to replicate, or patents, or an experienced leadership team. If you have none of the above, you’re hosed.
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What were the key metrics you monitored in the early days trying to grow the business?
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Registered Users = front end demand, active users = product quality, and revenue. Those are still our three key metrics.
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Hi Aaron. I have a question for me and a question for you. My company is your typical lean startup, with a tiny budget, and a small team of highly motivated team members. We are launching our product in about a week, and must face the challenge of marketing with a small budget & not enough $ to hire someone. Advice? My question for you is - Are you investing in other companies since the acquisition of Mint? If so, how does one go about pitching to you?
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If you want to pitch me, you have to meet me in person somewhere. I get too many unsolicited pitches from all over the world from people who think their idea is the best thing ever. Or, join the Founder Institute (http://www.founderinstitute.com) where I teach.
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How long were you in beta for?
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2 months. It’s important while in beta to bring actual people into your actual office and watch them use your software. You will learn more from watching 5-10 people then you could ever think up on your own. Only about 1/3 of software companies do this real user testing…which is why most software is terrible and hard to use for anyone other than the developer.
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Other than your blog, how did you attract so many users so quickly at Mint?
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We gave our initial beta sign ups red-carpet treatment. By the time we were ready to launch, our blog had generated about 20k email addresses of people who said they were interested. Taking them all would have overloaded the system, so we told people that if they wanted “Alpha” access before everyone else, they could put up an “I Want Mint.com” badge on their website or blog.
We had about 600 people do this. That meant 600 free advertisements, plus and increase in Google PageRank, plus those 600 people got special treatment and became our biggest advocates.
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Would you say design of your site had anything to do with your success?
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Yes. Design = trust, and trust is key when working with financial information.
Design matters far more than most people thing. So does brand name. Mint.com is easy to spell, and spelled correctly, and pronounced unambiguously. That gives you word-of-mouth.
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I have bootstrapped my product to market and now I am evaluating when we should scale up and take financing. What sort of benchmarks should I be looking for before seeking investment and what questions should I be asking myself?
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Q: How much to raise? Garage stage: $50 – $150k from family, friends, savings, or mortgaging your house. Make it last 6 months. Seed stage: $500k – $1.0m from angel investors. This will last 9-12 months if you’re good. Funded: $1.0m+
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Love your advice on key metrics for web based businesses - I'm having a hard time finding monitoring tools outside of Google Analytics that are affordable for a bootstrapped startup - do you have any suggestions?
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Google analytics is a fine tool for your metrics. We used it for our first 2.5 years quite well.
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During the early stages of Mint when you were only paying your employees $30,000/yr when the going rate was approximately $100,000/yr - how did you determine the percentage of equity you offered to your employees and how many employees received this compensation?
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Seed / Angel stage: Early employees = 1-2%, VPs = 2-4%. After you take funding, it drops to 0.5 – 1.0% for engineers / employees.
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Would you encourage other startups to try to launch at TechCrunch like you did for Mint.com? How did it help you (if it did)?
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TechCrunch 40 was the most important 7 minutes of my professional career. It launched Mint into the world, attracted tons of press and bloggers, and winning meant that I could go to traditional media and say “don’t you want to talk with the winner of TechCrunch?” Highly recommended.
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Hi Aaron. Did you have any co-Founders when you started mint.com? When did they come on board and how did you find then? How do you determine the right fit?
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I had no co-founders.
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What companies are catching your eye right now?
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I’m invested in: Milo.com, HealthTap.com, BizeeBee.com, and Net Payments Corp; and an advisor to NextJump.com and Levanto.com formally, and more informally.
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How did you forecast your future revenue/growth when you were just getting started?
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In short, you can’t accurate project. Everyone’s projections look like a hockey stick up and to the right any way.
What’s more important is to show how much money you can make per user or per transaction. Some businesses (like Social networks) only make a couple of dollars per user per year, and therefore need 10m+ users before they will make any real money. And getting to that level is rare. Mint is at 4.0m users have 3 hard years.
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How big was your team when you started Mint?
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I started Mint alone. I worked in my apartment 14 hours a day, 7 days a week for 6-7 months before bringing on two other engineers.
We were about 8 people when we launched a year later.
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What do you think of current market appetite for apps like Square? Too early?
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The market for Square is not too early.
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What should I look out for when evaluating potential investors?
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Money is money, so look for someone with good connections and reputation who can help you raise your next round of funding (this is the single best function of a VC, regardless of what expertise they think they bring to the strategy of your business). And look for a good personal fit. I go out to a 3 hour dinner before I take on any new major investor to make sure I can stand to be around them and that they are actually good people.
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Was there ever a point where you wondered if you weren't going to succeed? Have you ever had self-doubt?
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Our doubts are traitors, and make us lose the good we might oft win, by fearing to attempt. ~Shakespeare
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Why could not Banks do exactly what Mint did? They had access to everything Mint needed to be successful?
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Did they have everything Mint.com did? I personally don’t know any awesome programmers from top 10 schools (Duke, Princeton, MIT, Stanford, Harvard, etc.) or the best product managers or best designers go to work for banks. It’s the people. Startups move and innovate faster.
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What objections did you face when you were turned down the first 50 times when raising?
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Just what you would expect: No one will ever trust a startup with their financial information; You don’t have a background in personal finance. All over-comeable.
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If you had no co-founders, how did you build your initial team? Were they paid equity or salary?
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I paid by first engineers 1.5-2% equity, and a salary of $3000 / mo from my own savings.
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After the inception of an idea, what is the first step I should take in regards to getting funding? Pre-launch funding, that is. I have presentations and executive summaries ready for anyone to see. How do I get these in front of the right people. Seems as if the most desirable entrepreneurs are so hard to reach (THANK GOD FOR SPROUTER, SERIOUSLY)
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Of course the most desirable investors are hard to reach, and you won’t get them with an executive summary. I’m a minor angel investor and I see 3+ pitches every single day. They come in via email, via LinkedIn, via Facebook, from friends of friends, from people I went to college with. It’s overwhelming, and no, I’m not going to take my valuable time to evaluate your shitty business. You need to find me at a conference, and entice me within the first 30 seconds with what you’re doing.
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Sometimes I feel as if I have to sit on some ideas because I am not a coder or developer. I have started the process of teaching myself though. Aside from services such as elance.com, what would be the best way to reach out to developers and coders to get them onboard for my project with the opportunity of being in-house?
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If you’re not a coder, find a technical co-founder. You’re not going to be able to start a successful “tech” company without technical help. Elance and outsourcing don’t count – anyone could do that, and while you might get some good programmers, only a good technical person can tell them what to code and how it’s elegantly solving a business problem.
In short, without a technical co-founder, you’re screwed.
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You're a tech star! How often do you get contacted from someone asking to 'meet up and pick your brain''? How do you vet these people? How do you balance 'giving back to a community of rising stars' vs. ‘spending too much of your time doing this sort of stuff’? Any good tips/tools you use or can suggest?
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I try to do events like this to satisfy several hundred people at once, and teach regularly at the Founder Institute. If you want regular access to me, people like Phil Libin of EverNote, Phil Kaplan of Blippy, Elon Musk, etc. join Founder Institute (SiValley, San Diego, Brussels, Berlin, Paris, Houston, New York, or Singapore).
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When you won the Techcrunch40 Top Company award in 2007 - what do you think were the key factors that set you apart from the other 700 companies that pitched?
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All my investors and VCs told TechCrunch we were hot shit, and our pitch was solid. We did one interview, and earned a slot on stage. Other companies had to go through multiple rounds, loads of pitch coaching, etc. In a word, we were prepared, and had built up a solid reputation through the grapevine before the TechCrunch decisions were made.
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What are your thoughts on people verification online? How do I know that I'm talking to Aaron Patzer?
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You don’t. I could be faking it. But why would I spend an hour impersonating Aaron Patzer?
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How did you create your first key connection (angel/vc), as that's the problem I'm getting it done right now because without it, how can a first time entrepreneur get funded without any track record and credibility?
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It’s tough. Mint had 50 “Nos” before it’s first “yes” from Josh Kopelman of First Round Capital: http://www.firstround.com I got that connect at a networking dinner, and when Josh didn’t balk at my 30 second elevator pitch, I ran out to my car where I had a laptop running a database and web server with the Mint.com prototype app. That’s being prepared.
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