Book review – How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO

Published on May 13 2013

Just like most young techies, I dream about creating something big that could change the world to better - and why not become famous and gazillionaire too? ;)

Everybody has ideas (some great and some not), but the path to its implementation is complicated - if it ever exists. We need to risk to score high, and Tom Taulli’s book focuses on how to achieve this in a reasonable way, maximizing success chances. The book focuses on the San Francisco tech startup scene, but 90% of the presented concepts and ideas can be applied anywhere and at any fledgling company. Many topics are addressed, which range from the definition of the startup mission, legalese and finances, the transformation of the idea in product, product analysis, market analysis, team building and team management, funding and how an IPO works. Everything is presented in a straightforward manner, so it’s pretty easy to understand.

If you are an aspiring entrepreneur like me, this book is a must read and it will help you a lot.

Book on Amazon: How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO

My personal notes

Mission

  • Have a/know your mission.
  • Have passion for what you do.
  • Know your company vision and strategy.
  • Be commited to what you do.
  • Care more about your mission than anything else.
  • Think on grand scale => market opportunities of less of 1 billion are not worth the risk for VCs.
  • Be prepared to fail.
  • Obtain legal services.
  • Search for a startup attorney.
  • Negotiate attorney fees.
  • Take calculated risks, when proper.
  • Register your brand.

The product

  • You need to get the timing right. Fact.
  • Have simplicity and focus: it’s fairly common for her to flit from one idea to the next, trying to implement not just one but all of the latest, coolest, and most up-to-the-minute technologies.
  • Get in the habit of saying ‘no’ to requests to add a little more of this and a little more of that => FEATURE CREEP!
  • Build a minimum viable product and release it to obtain valuable feedback on it from the users.
  • Have an appropriate and elegant design.
  • Your product needs to be habit forming.
  • Stay away from product categories for which daily user engagement is difficult to achieve.
  • Fun features can lead to added user management.
  • Plataform as a service requires a developers program.
  • Success in product development is solving one or two big problems that your customers have.

Raising capital

  • Great resource: angel.co

The pitch

  • Elevator pitch: a presentation no longer than one minute that describes your venture.
  • Basic structure by Peter Thiel: PROBLEM + SOLUTION = MONEY
  • “Launch costs haven’t come down in decades. We slash them by 90%. The market is worth $10 billion.”
  • The Deck (of slides):
  • Minimal text
  • Don’t assume people know your business (explain specialiazed and complex stuff)
  • Don’t use cliches. They make your idea sound unoriginal
  • Present financials on Excel files
  • On the exit, show them you’re commited to the company
  • No more than 12 slides
  • Focus on proof points: tangible signs of your business potential
  • RetailRoadshow.com: this web site hosts videotaped presentations given by executives of companies that are up for IPOs.

Go-to market

  • To reach breakout velocity, a company must solve the tricky issue of distribution.
  • Nice article: Clayton Christensen’s The Innovator’s Dilemma (Harvard Business Review Press, 1997)
  • Nice article: Blue Ocean Strategy (Harvard Business Review Press, 2005)
  • Customer lifetime value (CLV) involves measuring the average revenue per user, the gross profit, and the average customer churn.
  • Companies need to spend time on programs to improve retention.
  • Cost to acquire a customer (CAC) consists mostly of advertising and marketing costs. For a company to be successful, the CLV must exceed the CAC.
  • For a truly viral product, users need to send out invites within 24 hours of signing up.
  • You need a News section on your web site.
  • A company should also devote some effort to its own blog.

The business model

  • Pincus’ two-step process—to test the business model and find the drivers—is critical for any entrepreneur. Using a random approach is destined for failure, as seen with tribe.net.
  • Finding the Ideal Business Model - look for:
  • Sustainable competitive advantage
  • Predictable revenue
  • Customer retention
  • Gross margin: this needs to be over 70% or so
  • Customer fragmentation: a business model has risk if one or more customers represent over 10% of overall revenues. Have a large customer base.
  • Marketing

Being a great CEO

  • A CEO needs to be constantly aware of their own actions.
  • Ability to say “no”.
  • You need to put a stop to certain projects because they show few signs of success => “FAIL FAST”!
  • Move fast. That’s an advantage of small companies.
  • A company needs to keep moving “fast and break things”.
  • Politics are the enemy of innovation.
  • Question assumptions - a CEO should not accept the conventional wisdom.

The team

  • Many of your hiring decisions will be mistakes. That’s a fact. Get used to it.
  • You want a co-founder you’ve known for several years and with whom you have chemistry.
  • They should also share your values and outlook on life.

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