Goal Setting Cheryl Yeoh

Identify your stage

There are 3 stages in a startup:

1. Product/Solution Fit - Is this the right problem and solution?

2. Product/Market Fit - Does the product make enough money?

3. Scale - Growth stage

Decide what needs to be done to get to the next stage.

Do your unit economics work?

Customer Acquisition Costs (CAC) = the cost to acquire your customers, including salary

Customer Lifetime Value (CLTV) = Purchase Frequency x Average Order x Tenure

Ideally, CLTV > 3 x CAC

If your CLTV < CAC, you risk losing money on acquiring more users.

If it’s higher than 3x, you’re underinvesting and not growing aggressively enough.

Find a one line description

One liners make it easy for you to decide what to focus on. Examples of one liners:

https://medium.com/@levandreessen/elevator-pitches-for-all-the-billion-dollar-startups-58c4b33eb393

Star Metrics

Track a single star metric. The best is revenue, but it can also be active users.

There can be other metrics, like hotel rooms booked or contractors on a platform, but

these usually correlate with your star metric.

It’s very important to focus on growing this. Ideal rate is 5%-10% growth every week.

AARRR

● Acquisition - How many people notice your site?

● Activation - How many sign up and complete a full usage cycle?

● Retention - How many come back to your service?

● Revenue - How do you make money or convert users into customers?

● Referral - How do they bring more users?

Before Product Market Fit, focus on activation and retention.

After PMF, optimize referrals and acquisition.

Optimize revenue any time.

Viral Coefficient = Invitation Rate x Acceptance rate

One Pager

Once you have this done, prepare a one pager to send to potential investors. Don’t make

it too long. It’s just supposed to tease them and get a meeting.

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Pivoting Pivots and E-commerce, by Christy Ng

Definition: A pivot is a change in strategy with no change to vision.

How Christy Ng Shoes pivoted

The first generation of shoes were targeted to the young girls, who would go clubbing

and look for guys. Bad market because they had no money, no credit card, and could

only COD.

Second generation targeted classy older women. Working professionals. Some women

had trouble looking for wedding shoes. Affluent people would pay a premium for a

unique product. Sales tripled after adding this product line.

They then let people design for themselves. Lower inventory risk - didn't need to hold

stock. Allowed them to crowdsource the designs. And people would play with the design,

then just buy a ready made shoe.

Keep it simple

Avoid leceh things. A lot of things will need too much effort for little return. Go for the low

hanging fruit.

Cut out bad customers, bad sales channels. They will kill your motivation and your staff's.

For ecommerce, it's important to go B2 Cluster instead of direct B2C. Volume gives you a

lot of opportunity and makes things easier.

It’s best to expand to Western countries. High internet penetration. They are used to

shopping online (e.g. Amazon and Zappos). Less cross border trading restrictions and

issues with customs. Philippines and Indonesia will detain your items and charge storage

fee.

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Customer Acquisition

Startups should aim to acquire customers without paying anything. The most powerful

type of advertising is organic.

Identify the channels that give recurring referrals. Don't just rely on tech and analytics.

Ask your customers in person.

Influencers are very effective. The ones with 20k-30k followers who are easiest to

manage. They can post about you 10 times and are very sincere.

Differentiation is important, but not everything. Branding is really important. Use better

pictures. Get better designers. People should just be convinced your product is better.

Online direct conversion is not high. People usually need to try shoes. Some people print

the thing from the online store and go offline.

Offline is important. Don't just rely on tech.

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LEGAL Understanding Cap Tables, Jeffrey Char (J-Seed Ventures)

VC money is not for most people

VC is the most expensive kind of money, even more so than loan sharks. You lose a lot of

flexibility. You are stuck with the VC for most of your company's lifespan. And if you do

things wrong, you may end up with nothing. Accept VC money only to scale. It's not for

building prototypes.

Raising a lot of money early is expensive and damages your company. Being poor is an

advantage. Poorness forces you to be creative, gives you more options, and lowers your

burn rate.

Investors look to make money if you sell the company or go public. They don't want

dividends. IPOs are the exceptions. M&A are the norm.

Do not set your valuation too high

If you value yourself too high, you have to sell your company at a very high price later.

Being acquired for too little may mean that the VC takes most of your equity later (see

participating preferred stock).

Being valued at too high early on makes it very painful to raise at a lower valuation later

(down rounds). Anti-dilution protection terms means that an investor who buys shares at

a high price earlier will get a large amount of your equity later on.

Only raise as much money as you need to get to your 'profitable' point. Dilute yourself

roughly 20%-30% per round.

Get it right the first time

You cannot fix your cap table later. Do not go 'lean startup' on your cap table. Do it slowly

and carefully. Get a good lawyer, and make sure you understand every term.

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Do not simply divide your share equally

Some people are founders. Some are early employees. Give everyone co-founder titles,

but don't give them a co-founder share.

Be careful of giving more than 10% equity to the people who don't work weekends, go

home early, will quit their job after the company raises funding, and so on. These are

early employees. They should be given less equity and more salary.

Vesting

(Reverse) vesting is very, very important. Many companies have people who leave the

company later, or when things get tough. It is a difficult conversation to have early on,

but impossible to have once people leave.

A lot of companies are killed by freeloaders.

How Liquidation Preference works

This decides who gets the money first in a M&A.

If an investor invests $1M, they want to make sure that you don't shut down the company

tomorrow and pocket the money, or sell the company for less than $1M. An investor with

1x liquidation preference who invests $1M will get all the money if you sell the company

at $1M and the founders get nothing.

An investor with 3x liquidation preference who invests $1M will get $3M guaranteed

back. Be careful of this.

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Participating preferred stock

After liquidation preference, this term means that they still get an extra share. Let's say

an investor invests $1M at 1x and takes 25% of your company. The company is acquired

for $4M. The investor takes their $1M back first, and then their share of 25% ($750k) of

the remaining $3M. So despite them holding only 25% shares, they get $1.75M (43%) of

the acquisition.

Anti-dilution protection

This means that if the next round has a lower valuation, the initial investors get a larger

share of your company, based on the new valuation. For example, a VC invests $1M at a

valuation of $4M (25% of the company). On your next round, you are valued at $2M. With

anti-dilution protection, the earlier investor gets to have 50% of your company based on

the new valuation ($1M out of $2M). So be careful not to be too greedy with valuation.

Other potential dangers

Money at the VC level is an arms race. We are not in Silicon Valley, which is a good thing,

because it means your competitors have less money to fight with.

In case of conflict with the VC, make sure your arguments are settled at a home court. It

can use foreign laws. But if you are a startup forced to fight in court in Singapore or Hong

Kong over several weeks or months, you will lose because you can't afford a long battle.

VCs can afford to fight.

Convertible notes are dangerous, because they are essentially debt. Because most

startups essentially have negative profit, convertible notes means that you can be

bankrupt even with money in the bank. Being bankrupt is very bad. Use convertible

equity instead and don't simply follow whatever Silicon Valley startups do.

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Startup Law, by Marcus van Geyzel

Have your own lawyer

The VC's lawyer is there to protect the interests of the VC. It hurts your negotiation ability

and you may sign off more rights than you need to.

“Lawyer up” as early as possible, before signing anything. Once you get into shareholder

or joint venture agreements, you really need a lawyer. Prevention is cheaper than cure.

Don't worry so much about lawyer costs. Ask for a quotation before deciding it's too

expensive. Normal range might be around RM3k to RM10k, but varies a lot based on

what you're trying to do and how much time the work takes.

Don’t use template contracts

Especially avoid the templates from other countries. A lot of them are 'donated' to the

public by VCs, meaning that they're very investor friendly. A lot of these templates are

there to 'set industry standards'.

Be careful with giving equity

Be very careful when giving any equity away, even 1%. Things like anti-dilution clauses

will multiply the equity you lose.

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Be careful what you sign

Register your company when things get serious.

Don't leave in a clause you don't understand. If it can be explained more easily, it should

probably be easier to understand in writing.

Do your due diligence on investors. Some are conservative businessmen and may not

deal with startups as they should. Some deals are more like acquisitions, not

investments. They often don't have bad intentions, but are just conservative.

Be sure who calls the shots. Especially with passive investors. Small things like requiring

certain cheques be signed by the investor may severely hurt you in the future.

Sometimes they just want to see how you spend the money - you can negotiate smarter

ways to do things like that.

Major issues to look at is entry of new shareholders, deadlock & dispute resolution, exit

provisions, conciliation procedure. These are hard to discuss now, but near impossible

when they're necessary.

Sometimes there are terms that force two arguing people to sit down together and have

X hours of discussion before it is escalated to court. It may sound silly to force people to

talk, but it has worked before and saved people a lot of time and money.

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A Glossary of VC terms

VC = Venture Capital, someone who invests other people's money into a fast growing

company, for the purpose of reselling the stock back

M&A = Mergers and Acquisitions

Stock options (normal vesting) = Person is given the right to buy shares for cheap.

Usually vested for 4 years. If they leave 2 years, they can only buy half the shares.

Reverse vesting = Put the shares in their hands from day one. If you leave before 4 years

we have the right to buy the shares back at the original price.

Common stock = normal stock, legally defined and can't be negotiated

Preferred stock = special kind of stock, based on a made up number. This is negotiated

between founders and investors. Right before an IPO, all preferred stock converts into

common stock. In a M&A deal, the buyers usually buy all the preferred stock.

Convertible note = a loan that converts into equity after the company has a bit more

operating history under its belt and there is more information available to establish a fair

price

Liquidation preference = Who gets paid off first when a company is acquired. If a

company has 2x liquidation preference, that means that if they invest $2M, they are

guaranteed to get back $4M if the company is acquired. Which means that if the

company is acquired for $4M or less, the investor keeps everything.

Participating preferred stock = The investor puts in 1M. The company is bought for 4M.

If the investor gets 3x liquidation preference, they can get 3M first. Participating

preferred stock means that they can also get a portion of the remaining 1M after their

share.

Anti-dilution protection = If the next person buys stock for cheaper, the earlier investor

gets that lower price and their equity is adjusted for the earlier

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Culture How to Develop the Culture You Want, by Malek Ali (BFM)

Why culture matters

As a company grows, culture conflicts play in. Some will be aggressive. They start bitching

and arguing. Good people leave, bad people stay. This can be very expensive to fix - BFM

took over a year to fix this.

What kind culture of does BFM do?

Malaysia has a very hierarchical system. This tends to disengage people from their jobs.

In many corporations, people often work for their own personal goals over the

company's goals.

BFM has an entrepreneurial culture. This gives employees more of a sense of ownership.

It empowers them. It gives people a sense of purpose and aligns it with the company.

Allow people to take risk and make mistakes. Try not to intervene if people are trying

something risky, as long as it doesn't kill the company. This allows them to grow.

However, have some checks and get riskier things approved by someone senior.

Everyone makes really big mistakes every now and then.

Break people into Cells

Teams are run as Cells of 5-7 people. Cells are very effective units of organization. They

fix themselves. They own things. They decide fast. Strong communication lines. Each cell

has a team leader. Communists came to power using Cells. Terrorists use Cells to

optimize both communication and impact.

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Incentives

Give salary, profits, and dividends to employees. This aligns them to the company

interests. 15%-20% of the company allocated to employees is good.

Stock options don't always go so well. Sometimes people who have lost interest just stick

around for the stock options. So they may also incentivize bad people to stay.

Mix the silos - marketing, sales, finance, ops, inv. Design working spaces to get them to

mix. Force communication. Align rewards. Have some rituals, like celebrating sales.

SAYS Culture: Building a Winning Workplace, by Sam Wee

At 20+ people, the SAYS team took the staff down to a retreat. They told people that they

would build a company together. They discussed what the culture should be, listed down

some things. And they drilled down to what exactly they wanted to build.

The SAYS culture code:

1. Achieve the impossible - Keep pushing for what you think is impossible.

2. Go for growth

3. Speed

4. Care - Love what you do, and care for others

5. Keep it real - Be ambitious but realistic

When hiring a new team member, they checked against these key values when deciding

to hire the person.

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How to poach top talent when you're a startup?

The office needs to be a fun place to work. This is one of their key elements in poaching

top talent.

Hire superstars only. Don't hire average people.

Rate everyone based on motivation and competence. If their motivation or competence

is low, don't hire.

Even more menial jobs like admin should have highly motivated or enjoyable people, but

is less critical.

Salary doesn't need to be high to attract talent. Offer shares. Offer EPF, SOCSO, basic

medical.

The founder filters out the first batch of CVs, before handing them over to HR to process.

Only let a HR do this when they can do it as accurately as the founder.

If there's nothing exciting about the CV, it gets archived. Bad CVs look like they come from

a template.

Fresh graduates are the best type of people. They are smart and hungry. They come in

without baggage, without expectations, without bitterness, and can be scaled further

than the experienced people.

Companies are used as vehicles for the staff to achieve their dreams. Not the other way

around. If someone feels that the company is using/manipulating them, the performance

drops drastically.

Finally, make sure that you as the individual are attractive enough to pull in everyone.

There's always a cap on every company. This cap is based on the founders. If you don't

grow, the company would not grow.

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Rituals at SAYS:

Smoke Signals: The boss shouldn’t be the ones telling people when outings should

happen. Otherwise people will just come because the boss told them to. Completely

decentralize all company outings. People just say that they want to do something, which

they can ask company to sponsor. This builds sincere friendships.

In Your Face: Get people out of the office environment, sit at a round table, eat together.

It becomes a safe spaces for them to say whatever. Here, everyone is encouraged to say

whatever they feel about each other. Mainly what they should keep doing, stop doing,

and start doing. Some of the best things come from this.

Gratitude: At the end of the day, a random person shares one thing that you're grateful

for in the week.

24 Hour Rule: If something/someone pisses you off, solve it within 24 hours. It really

helps in a fast-moving startup because there's a lot of friction. Usually the company

makes a mistake, and some guy later says "I told you so". They should be voicing their

opinions when it could make a difference!

Level Up: In startups, a lot of people usually start doing everything. Eventually they need

a job description. Instead of giving a job description to people, let them pick it for

themselves.

Free breakfast: SAYS have flexible hours but want people to be in the office on time, for

communication purposes. So they gave limited amount of free breakfast, as an incentive

for people to come early.

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TECHNICAL Understanding Analytics, by James McErlain (Humin)

What is data science?

A lot of data is dirty and never perfect. Data science means capturing data properly,

processing it, storing it, and deciding what is useful. It allows you to forecast the future

more accurately based on what you have. You need to pick the right tool for the right job.

Define what data to collect

1. Pick your metrics and KPI - it can be revenue, active user count, retention, conversion

rate.

2. Can you act on the metric? If not, it's worthless. For example, real time data collection

for user count is often not actionable, because you can't simply call the user and tell

them to not leave.

3. Track where your users are coming from. So you can scale and repeat that.

4. For Average Order Value (AOV), the data is usually a non-normal distribution. Most

purchases are low, with a long tail for the people who are buying $3000 of clothes and so

on. Normalize it into a bell curve by applying a logarithm.

5. Do a segmentation analysis on AOV. This means looking at area between the first

quartile and Q3. This is where most of your users are and where you should optimize.

Also look at the area above Q3 - these are your premium customers.

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How should I capture data?

1. Data capture is dirty. Data capture is not perfect.

2. Have more than one method for capturing data. Preferably at least 3. If one data is wrong, figure out why it's not matching.

3. Tag data you don't understand. Figure out what's going on with these tags.

4. You just need at least Google Analytics for most things. You usually don't need a data scientist. But be careful that when your data is big enough, Google Analytics samples it. This means they will throw away some data and only take a few samples from these.

5. Good data analysis needs a good data engineer. Do it early so you have data to capture. Hire someone who has done it before. Tell them what the KPIs are (they can't read your mind).

6. Decide how to store the data. Data is $$$ so you don't want to lose it.

Some data tools

1. MySQL is great. Old technologies are really good because they work. Don't jump into

something just because it's a buzzword.

2. Hadoop is one of the first for big data.

3. S3 is where you dump all backups. Backup all the time. Take S3 and push it to Glacier.

Every now and then someone screws up and destroys years of data.

4. Spark - great for a lot of things.

5. R is great. It can tell you statistics in two lines of code.

6. Python is a great language for data engineers.

7. Things like Localytics are great if you don't have data scientists. But do you really want

to give your personal data to a third party?

8. NoSQL is good for unstructured data, like flat text, NLP. You can process anything. But

don't use it just because it's cool. Make sure it's solving a problem.

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A typical situation of data processing

1. GPB file is sent from client's phone to S3.

2. Spark Streaming process pick up all these GPBs.

3. The processor will break it out into metrics and other info.

4. The metric writes it to S3 as flattened CSV.

5. CSV is picked up by Hadoop and is aggregated.

6. The aggregated data is pushed back to S3 and piped out to MySQL.

7. Analytics queries this data and presents it as a dashboard.

8. Take this data, compare it to Google Analytics to see if it matches.

This is really complex. Your guys need to be smart.

Write code so you don’t have to ask again

Ideally the data scientist doesn't need to talk to people. If the CEO wants to know

something, the data scientist should just pop out that information on a dashboard

somewhere and let the CEO play with it, tweak things themselves.

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Best Practices for Engineering Management,

by Florian (Box) Management is not about managing projects

Startup guys are smart.

Managers remove roadblocks. Tweak the organization. Let it move on its own like a

machine, but optimize.

Happy engineers are productive. Productive engineers are happy. The key to making

them happy is to keep them productive.

Attack problems as a group

The importance is finishing projects, especially hard things. When multiple people work

on a project, they motivate each other. Prioritize the most important things. Use agile to

keep people from colliding. Have code reviews.

Write tech design docs

Write down the architecture, systemize design, write requirements. Make sure the

engineers understand everything to be done. The right tools will be chosen only when

they know the requirements.

Build a good pipeline from dev to production

Code review. Continuous integration pipeline.

If an engineer makes 1 dumb mistake a year, and you have 100 engineers, you have 2

mistakes a week.

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Do one on one meetings

This is very important. Don't talk about progress. Progress should all be online (e.g.

Trello, Asana). Ask whether the team is doing well. Ask if they need help. What would

make you happier?

Prevent people from being scared to meet manager, make sure nobody is hiding

problems, show roadblocks. Teach people to solve their problems themselves.

[Bonus: Ben Horowitz (Horowitz-Andreesen) also writes in detail on how to run a 1 on 1 meeting in his

book The Hard Things About Hard Things]

Show and Tell at the end of a sprint

Talk about the bad, talk about the good.

Do it in written form. Let people +1 it. If it has a lot of +1's, it's most likely important. If

there's a bug, find out why the bug is there.

Hiring technical guys

Hiring is the hardest thing in any startup.

Hire smart people (who are not assholes). Box does five interviews of 1 hour, often

clustered together to respect time. Every interview focuses on one side. Give a grade:

Hire/No Hire, Strongly Hire/Strongly Not Hire.

Train engineers to set questions for hiring. Incentivize people to recommend.

Cultural values of Box: Once people are hired, trust them immediately and completely.

Get shit done. Move fast. Bring your wacky self to work every day, accept everyone, let

them be themselves. Make mom proud. Think 10x (within a year); don't have small

bottlenecks.

You need titles. At different level, expect different level of impact, and salary.

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