U Grok It Blog

U Grok It is executing what some call a pivot, others a strategy shift.  We are changing from the consumer focused “Find Your Stuff” to the business focused “Smartphone RFID.”  So here is a peek inside our startup to show what drove this change.

We started with a problem –  This is a great place to start.  Find a problem that needs a solution and validate it.  Our problem: misplacing all the myriad of everyday stuff that you need, especially families with younger kids.  And we validated that there are a lot of families who misplace stuff and are looking for a solution.

Then we outlined a solution – use UHF Gen 2 RFID tags on your everyday stuff.  They are cheap, lightweight and battery-less and then attach a reader to your smartphone to find all the stuff.

People were intrigued.  They understood the problem and the solution and wanted to know more.  So we went looking for the smartphone device that we could resell along with the app we would write.

That’s when we hit our big issue…no device existed for UHF Gen 2 RFID that was lightweight, small, attractive and affordable for consumers.  OK, then we will create what we need.

With a series of ever smaller prototypes, we got to our current ‘grokker,’ a unique UHF Gen 2 RFID device in that supports iOS and Android, is sleek and attractive, is economical and has an open development platform.

What happened next is that the RFID industry came knocking, ready to buy U Grok It.  Businesses need our system to expand their RFID implementations.  The pain is high and the need is immediate.

The lingo for this is Product/Market fit.  Solving the problem of “Find your Stuff” led us to create the product, but having the product (even in its prototype form) led us to a better market (better = one that has a higher pain, is ready to purchase and is easy to reach).

We appreciate all the attention and support we got for the “Find Your Stuff” product and we hope you  will continue to cheer us on in our pursuit of “Smartphone RFID.”

As an entrepreneur, you need to embrace that you will be making many choices based on limited information and your best guess and what is the right thing to do. Should you hire someone or use a contractor? Which contractor should you use? What is the priority of this feature vs. that feature? Who is your target market? How do you talk about your product? The aggregate of all these detailed choices are what make or break your product and your company.

At U Grok It, we made a choice about a month ago to accept a slot to present/compete at Jason Calacanis’ LAUNCH Conference http://conference.launch.co Being selected as one of the 40 new companies to present onstage is great validation for U Grok It, but the decision to accept was complicated by the LAUNCH rules that you must be completely stealth prior to your time on stage. This means that for the last month, we have not been able to talk publically about U Grok It, which meant turning down three great opportunities: The Women 2.0 Pitch Conference, Boulder Beta and even a spot in Tech Cocktail’s SXSW competition that happens three days after LAUNCH (but which required that they can publicize our participation starting last week). This requirement also meant taking down our website and our YouTube channel as well as stopping our tweets and facebook posts. We even had to ask others to take down old content about us (and everyone was kind enough to do so).

Deciding to go silent just as we were building buzz and momentum towards fundraising was not an easy thing to do. And the LAUNCH rules restricted us from even saying that we were part of LAUNCH until the morning of the event, so we had to go silent without giving people an explanation.

What our experience has taught us about these choices is that once you make the choice, you need to go all in to make that choice as successful as possible.

Our LAUNCH experience so far has been (to steal one of Jason’s favorite words) Awesome. We had a month to focus on our product and make it better. We got great guidance on how to present and we have had incredible opportunities to network with angels investors, VCs, mentors, press and fellow startups.

This blog post coincides with the end of our presentation at LAUNCH and our ability to break the silence. We won’t know until the end of the conference (evening of Mar 8th) if we won any prizes (almost $1mil in various investments).

There is a lot of conventional wisdom (and blog posts) that say that being fearless is a major component to running a successful startup – burn the fear and all that – and certainly the stereotype of the startup entrepreneur is the young daredevil with the f-you, I can do anything attitude.

But, I’ll let you in a secret…not only am I not a daredevil, but I was an especially fearful child.

My entrepreneurial superpower comes from having overcome some of these fears and learning how to deal with the rest, not from not having the fears in the first place.

To give you an idea of my fearful childhood, I begged my mom to take me to see the movie Earthquake when I was 9 years old.  The hook for this movies was “Sensaround” sound where the bass made the seats actually shake so you could feel the earthquake.  You guessed it, I ran out of the theater at the first tremor during the opening credits.

And while I now live in a ski area and enjoy skiing powder and trees, skiing used to be almost terrifying, causing that paralyzing fear that is the complete opposite of what you need to get down a tricky slope.

Same with travel.  I grew up in a family that didn’t travel and had a lot of anxiety about packing, flying, an being in an unfamiliar place.

I would not have been a good entrepreneur in my 20s primarily becuase of my fear reaction.

With time, maturity and a serious amount of work on this, I have gotten over most of the paralyzing fear reactions.  Now when the slope is steep and slippery or the plane suddenly drops, my adrenaline still kicks in but my rational brain continues to function.

So, I am taking the lessons I have learned from skiing, traveling and the other fear triggers I have had in my life and applying these to my startup.  My belief is that you don’t need to be fearless, you need to have skills to manage the fears.

And just a quick Blog note, becuase of overwhleming amounts of blog spam, we have been forced to make a few changes.  You can not longer comment on blog posts over 2 weeks old and if you are new to posting a comment, you will need to enter a captcha.  I personally hate captchas and they often take me 2-3 times to get them right, so I hate having to add this, but the spam traffic has been overwhelming.

“The definition of insanity is doing the same thing over and over and expecting different results.” – unknown author

As we go full strength into raising funding for U Grok It, we are realizing just what an insane process this is.

Every funding opportunity is an extreme long shot.  VCs fund 1% of the opportunities they see in a year; pitch contests take 8 finalists from nearly 100 applicants; incubator programs accept 15 companies from over 600 who apply; angel groups screen 30 companies to pick 1 to investigate further each month.

With these odds, many rejections are coming our way.

Nobody likes rejection.  Being able to take rejection positively and use it to propel instead of defeat is a reason why I didn’t become an entrepreneur until my 40s.  In my 20s, this level of rejection would have devastated me.  Now, while I still feel the punch in my gut, my life and business experiences help me not to take it as personally and not to believe that it means our idea or our team are fundamentally flawed – entrepreneur optimism is strongly required right now.

These high odds of repeated rejection is another reason to have a co-founder.  I can’t imagine trying to ride this roller coaster by myself.  Usually one of us takes the setback harder than the other and this balances us.

This week, we were turned down for a pitch contest and politely told by one VC that they are “not interested in this round.” On the other hand, we made the quarterfinals of another pitch contest (made the top 20 out of 70 entries) and have some great VC and journalist meetings set up for CES next week – the lows and the highs, all at the same time.

We will continue the insanity of trying long shot after long shot, expecting that most will end in rejection but that eventually we will get the result that we need to fund U Grok It to the next phase and bring this idea another step closer to reality.

For this month’s state of U Grok It, since we are getting focused on raising a seed round of funding, we thought it be more interesting to write down our approach to seed funding.  This has come together from lots of reading blog posts and books and talking to people in the startup community.  It is our synthesis of what we feel is right for us, but maybe it will be helpful to others…

Don’t go for funding until you need it for the next step
Getting funding takes time and effort that is somewhat separate from your core goal of building your product (see Prioritizing below for why we say “somewhat separate”).  Self fund for as long as you can make forward progress.  Jason Cohen (@asmartbear) gave us great advice early on when Carrie was on his “loveline for startups” show.  Since we are creating hardware, we are going to need investment.  We knew this, but the reality that we would need to go for funding early was good to keep in mind, still we have focused on getting as much done as we can on our own nickel.  Not only have we made a lot of forward progress, but it also means we have more to show potential investors (prototype, user testing, etc.).  The more you can show, the more data you have, the less risk there is to invest in you. Brad Feld (@bfeld) and Jason Mendelson (@jasonmendelson) discuss this in their book, Venture Deals, read it before you look for funding.

Three Types of Risk
Another friend of ours, Rob Seigel of X/Seed Capital, broke down risk for us in a way that is really easy to grasp.  There are three types of risk – Technology, Execution and Market.  Understand where your highest risks are and do what you can to address those.  If you have execution risk because you don’t have a key member of your team, how are you going to hire that person? All startups have risks; you want investors to feel confident that you can handle them.

What are you going to prove (with their money) and how are you going to know that you have proven it?
This amazing question, courtesy of our friend, Rob Hays of First Round Capital (@robhayes) is a great touchstone not only for your investor pitch, but also for planning what you do while self funded and what you are going to do with your seed funding.  It is not just about having a timeline or even about executing to that timeline, it is about the hypotheses that you are testing about your product/technology/company.  Continue to ask yourself this question (and there is no reason to stop even after funding – seems like any company can ask this for any project).

Prioritizing
Knowing that we need to go for seed funding early has helped us prioritize our activities, which can feel overwhelming where there are just three of you and everything needs to be done from scratch.  ”Is this necessary for funding?”  has become another question that we continually ask ourselves right now.  Networking, check.  Business planning, check.  Working prototype, check.  Better designed website, check. Facebook promotion, No. Messaging, check.  Something to keep in mind here though is that there is really no activity for funding (except maybe setting up the actual pitch meetings) that you should not be able to leverage for product/company development.  What we mean is that getting your pitch right is really just getting your company right.  What a potential investor wants to know is that you have your act together, you understand your business, you have identified your risks and know how you are going to address them.  This is all stuff you need to run your business anyway.  So, prioritizing what you need to raise money is just a way of addressing some business needs that you will ultimately need anyway.

This leads us to Funding is not the end goal
Your successful product and your successful company is the end goal.  Funding is tactical to reach that success.  Look at your product, determine a path to success, break that into steps, look for funding for the next step or so, determine how much that will cost and ask for that amount.  More funding is not necessarily better, it just means giving up more control of your company early on, and limiting your options.  The earlier the money, the more expensive (i.e. the more equity you have to give away) it will be.  You are not trying to win here, you are trying to get the capital you need to move towards success.  And it is not just capital, it is also advice and connections – those that your funders bring.  You need to choose them as carefully as they choose you.  In the Deck heading below we mention product/market fit and founder/market fit, as the founders, you need to look for company/funder fit.  We can learn so much about potential funders before we ever approach them.  Do your homework and look for funders who fund the category your product is in, who fund companies that serve your same target market, who like the same activities you do.  In our case, we need funders who fund consumer electronics devices, not exclusively, but at least have an interest and experience with them since they have their own issues and a knowledgeable funder is a much more helpful funder.

Relationships
As we said in a previous post, it takes a village to raise a startup, and the village is out there, full of extremely helpful, knowledgeable, experienced people who willing to care about your baby.  How awesome is that?  But they don’t beat a path to your door; it is your responsibility to go find them.  Twitter, LinkedIn, Facebook, blogs, Tech Crunch, friends, friends of friends, acquaintances of friends – seek them out, do your homework, ask questions and always think about what you can give (can you test someone else’s product?  can you tweet about it? pass on an article that is appropriate to them?).  If you can’t think of anything you can give back now, don’t worry, you will have your chance to give to others as the village is giving to you.

And now, The Pitch Deck
There are lots of great blog posts and slide shares available to help you create your pitch deck.  Some of the ones that helped us a lot were from Dave McClure, Brendan Baker, Jason Cohen, and the Dress Rush Pitch Deck. All of these are good for form and also for identifying the key questions your pitch needs to address:

• What is the problem and who are we solving it for – no one loves our solution more than we do.  We spend all our time on our solution, but investors need to know what problem our solution solves.  Problems (also called pain) is 100% from the customer’s point of view.  Keep pushing yourself to be able to talk about the problem without discussing your solution – your pitch, your product and your ability to communicate will improve because of it.
• Demo as early as possible and let investors play with stuff.
•  Introduce the team with their relevant background.  Adam D’Augelli (@adaugelli) of True Ventures says they are not just looking for product/market fit, but also for founder/market fit.  You need to show them that your team knows your market.
• Size of the target Market
• How you are going to reach the target market?
• How you are going to make money (what is your business model)?
• Who is the competition and what are your key differentiators against them?
• How can you grow (or where can you pivot)?
• What is your timeline and how well have you executed on it so far.  Jason Cohen gave us another great piece of advice here – if you just show up and pitch, you will be a dot, you want to be a line (trending upwards of course), so do what you can to show progression points.  This blog is one way we are communicating our ‘line-ness.”
• Financial Projections – ones that look plausible and have the backup data and logic available to show.  Look for comparables and how they grew.  Investors don’t expect you to predict the future, but they expect you to be logical about your predictions and to show that you will be able to take new data as it comes and adjust your predictions accordingly.
• And finally, what funding are you seeking?  Again, there should be logic here.  Back to what you are going to prove but now you break it down with what tactics you are going to use to prove it and what resources you need to implement those tactics.  You also want to ask for enough to keep you going if some of your hypothesis prove wrong and you need to pivot.  That’s ok.  Again back to Rob Hayes who says that ultimately funders want to invest in a machine that takes their nickels and turns them into quarters.  What you need seed funding for is to create that machine.  Let the funders know this and make sure to ask for enough to get there.  Then your next round is all about showing how your machine does this and you just need capital to scale it.