100 questions investors WILL ask

During a whirlwind trip to Hong Kong, I was asked to talk on raising a seed round, something we recently .

*Groan worthy event title, I know :)

During it I mentioned prepping likely investor questions.  Here is my list of 100 in no particular order:

1. Who else has committed?
2. How much is the customer acquisition cost?
3. What is the LTV and LT?
4. How does this change with volume?
5. When would you get to market saturation?
6. How much runway do you have?
7. What about you makes you suited to start this company?
8. Who is your target user?
9. How did you customers find you?
10. What is your go to market strategy?
11. Have you tested your go to market strategy?
12. What do you want out of your startup?
13. What is the return multiple you expect for investment?
14. What are the possible exits for your startup and when?
15. Have you invested personally in the company?
16. If so, how much?
17. What is your runway?
18. What is your burn rate?
19. What is your cash flow situation?
20. What is the team now?
21. What will be the use of proceeds?
22. Why are you raising the money you are?
23. Why are you planning to spend like that?
24. What’s the cap table now?
25. What’s the cap table post close?
26. What’s your ownership percentage?
27. What’s the valuation, pre and post?
28. How much have they committed?
29. How are the unit economics?
30. What is unique about your team?
31. What are the team backgrounds?
32. What is unique about your technology?
33. Can you describe your technology in more basis?
34. Who are your closest competitors?
35. How are you different from them?
36. What is the competitive barrier?
37. Are you competing on price, product, UX  etc etc?
38. Has this business model been proven elsewhere?
39. What is your target market?
40. What is your addressable market?
41. What is your branding strategy?
42. Will you partner up with other companies?
43. Why are you based in USA / Hong Kong?
44. What is your expansion plan beyond…?
45. What platforms are critical to your success and why?
46. How have you constructed your business projections?
47. When is expected breakeven timeframe?
48. If you had half/double/triple the funds how would that change your plan?
49. Why are you using a convertible note / equity vehicle?
50. How do you justify the valuation / cap?
51. What are the comparables for your valuation?
52. What are the comparables for exit?
53. What is the projected revenue and profit over the next 3 years
54. Do you have any debts or liabilities
55. Do you have any licensing requirements?
56. What is the IP ownership and exclusivity on your technology usage?
57. Are your original seed investors following on?
58. How will you get to 100k / 1M / 1M customers?
59. What is the conversion rate to register/download?
60. What is the conversion rate to pay?
61. What is the ARPPU first day, week, month, 3 months, 6 months, 1 year
62. What is the retention rate first day etc
63. What has been the user feedback so far?
64. Can I talk to some users?
65. Would you consider a tranche investment?
66. What type of investor are you looking for?
67. Will you increase the round size?
68. When are you closing the round?
69. Do you have a prototype of the next project?
70. What’s to stop Tencent/Zynga/Google etc entering the market?
71. How far will this round last you?
72. When will you start to raise the next round?
73. Who are you going to raise the next round with?
74. How do you monetize?
75. Are there any other alternative monetization techniques?
76. What are your biggest challenges at the moment?
77. What are the terms of the deal?
78. What is the downside protection of the deal?
79. What is the upside opportunity for the deal in the next round?
80. What is there is an acquisition before the end of the next round?
81. How much have employees got in your company and on what terms?
82. Why are you personally the right CEO for the company?
83. What are the unknowns in your business model?
84. What is your directly addressable market?
85. What is the likely revenue share/terms of go to market partnerships?
86. Do you have experience growing businesses?
87. Can I invest later on?
88. When do you need the funds by?
89. What will the board and management structure look like post closing?
90. What is your China entry strategy?
91. Is your localization strategy?
92. What is the company structure?
93. Who has authority/veto for this funding round?
94. What is your co-founder’s share situation?
95. Can I get access to your metrics dashboard?
96. Who are your existing investors?
97. What is your ideal investor?
98. How much do you want me to invest?
99. Do you have any contractual commitments we should know about?
100. What is the minimum/maximum investment block?

*I was the vast majority of these at one point or another during the round…

Full slides:

Any feedback?  Email

Really THQ?

Was up in LA last week for my very first E3.   

Glad I came.  Bunch of awesome meetings mostly at JW Marriott, Millenium Biltmore and other hotels dotted around the convention center.  

The time I spent actually at E3 itself, walking the show floor didn’t leave me with as positive an impression.

Take this “promotion” for THQ’s upcoming Darksiders 2*

Really THQ?  

In this day and age must we objectify women to promote an apocalyptic action game?

Yes I get it, you’re targeting a male audience.  And guys just like looking at sexy girls, no matter the product right?

This type of mindset is holding the industry back.

*I use Darksiders 2 as an example, plenty more on the show floor..

Life in a startup mansion

Love being surrounded by intense folks…

Took this pic today, all crunching late into the night despite the public holiday.

Factory 0 is a startup house I’m staying at in San Francisco. Startup mansion would be another way to describe it (this place is huge!) but would give it the wrong connotation: the work:party ratio is disturbingly high.

There are hackers, creatives and product guys. Companies with tons of users through to nascent ideas bubbling into life right next to my desk.

Yes it’s noisy, gets untidy and feels like a dorm.  But the energy is inspiring.  

Couldn’t imagine staying in a boring hotel any more…

Choosing iOS game categories… just roll the dice?

So you’ve made a great iOS game, prepared your launch and are ready to submit.

Now how to pick your App store sub/categories?  

Ranking within these subcategories after all is a critical part of picking up organic users, which is important for a successful game launch.

“Easy!”  you say… “Just pick what your gut tells you perfectly fits your game, you dummy!" 

Fair enough, but what if your game fits into multiple subcategories, then how to decide?

Like in our case with our first .

Hmm let’s see…

• We’re a 3d fashion game that young girls would like, so put it in Kids
• But then moms and entire families can enjoy it, so maybe put it in Family?
• But it’s a role playing game (you’re an aspiring stylist) so put it in RPG! 
• But it’s mechanic is a fashion puzzler, so really it belongs in Puzzles 
• Or maybe Strategy?  Coz there is planning to what to buy and wear…
• Hang on, it’s really a Simulation of a fashion career come to think of it…
• But then again it has a mini game which is definitely very Arcade.. 
• …
  

Ugh….where the heck should it go?!

Having found no obvious choice, my inner engineer was itching for a number based approach to decide.  

Searching around uncovered some great sources including  by Casey Fleser, which I then stripped down to the possible categories and honing in on iPhone.

So let’s look at the % of top free iPhone games in the target subcategories:

Arcade 26.75%
Simulation 18.50%
Family 14.25%
Kids 13.50%
Puzzle 13.00%
Strategy 11.00%
Role Playing 8.50%

According to this the clear loser is RPG and clear winner is Arcade - that must be the one with the most demand and therefore the biggest demand, so just choose that one right?

But hang on, whilst there are a lot of players in that category, competition must be strong right, even for a unique game?

And does biggest demand mean biggest profits?

So let’s look at another way to slice it, by % breakdown of top grossing games:

Simulation 24.25%
Role Playing 20.75%
Arcade 20.00%
Strategy 17.25%
Family 10.50%
Puzzle 9.75%
Kids 5.00%

Hmm, the picture changes significantly. Arcade isn’t on top now.  It isn’t even #2nd…

So let’s take another way to slice it, this time by ratio of top grossing to top free ranking. ie- which subcategories were over or underperforming relative to their competition / volume.

Role Playing 244.12%
Strategy 156.82%
Simulation 131.08%
Puzzle 75.00%
Arcade 74.77%
Family 73.68%
Kids 37.04%

That seemed better.

Now we had the top subcategories that had the best "bang for buck”… and what we ended up running with:

Results?  

The game ended up hitting the Top 10 free RPG game in over 15 countries.  We also hit Top #10 in our secondary subcategory, Strategy, in a bunch of countries. Given it was a first launch and we had and still have a lot to learn, we were happy at how it turned out.

Lessons learned

• In the absence of an “only sensible choice” a methodical approach to choosing your app categories is a good idea
• Consider market demand, monetization and competition when deciding
• A racing game won’t find all the racing fans who are searching in that part of the app store.  At the end of the day, the choice should “make sense” *  
• Secondary subcategory also plays (a surprisingly) important part, don’t just focus on the primary subcategory

Caveats and notes

• This is just one approach, there are plenty of others to go about deciding. Would love to hear any other others people are using out there..
• In the absence of a proper A/B test there is no way to isolate how much impact the subcategory choice.  Certainly there were other factors for the launch that played their part too (more in a future post).
• Apart from pure numbers, there are plenty of other marketing considerations.  For example for us we didn’t want to get labelled as just a “kids” game, given half our audience is adult
• Although I haven’t done it myself, I’m assuming this type of approach would work to other app categories apart from games

* Although it would be interesting to explore the impact of a “novelty” choice that sticks out of a “wrong” category. Perhaps an interesting future blog topic…

Defusing a bomb (in mid air)

 famously said that doing a startup was akin to jumping off a cliff and building a plane on the way down.

Today it feels more like defusing a bomb that also decided to jump off the same cliff.

This morning after a great first day of  (already in the top 100 iPhone games in USA, OMG!) we were riding high and ready to conquer the world.

Then we noticed ratings much lower than we had previously in our public beta.  There we rated ~4.5 stars, but in this launch version we were at ~3.5 stars.  

Analytics also bore that out, with ~10% of players worldwide having major problems.

And in in around half of Europe the ratings were simply horrible:

Some frantic troubleshooting isolated one problem with number format, with commas used by many Europeans triggering the bug. Damn!

Given the time to get Apple to approve a fix, we had to make a snap call to withdraw from these affected countries.  Then we’d launch again there with the next update.

In the US though, only a minority were having problems so we decided to continue on. However we did make some remote server changes to improve the new user experience for everyone and hopefully counteract some of the negative ratings. Short term crisis averted.

Lesson learned: Test more, but stay nimble to handle anything.

Now on to the rest of the plane :)

Shockingly easy way to get thousands of users to your new app

It’s THE challenge for mobile app developers.  

How to get a new app noticed amongst literally a gazillion others?

I’d been mulling this over leading up to the launch of our first .

We were confident we’d created something unique and fun. But would any even get to see it?

So a plan was put together leading up to a big (for us) marketing campaign:

1. Private alpha on iOS to validate MVP (done)
2. Public beta on Android to tune for monetization & retention (done)
3. Launch on iOS as a paid app for final run with testers and friends (last weekend)
4. Change price from paid to free in preparation for marketing (yesterday)
5. Begin our marketing campaign (starting later today)

Whilst the real judge of the plan will come out of #5, something interesting came out today in this part*

4.  Change price from paid to free…

We found though when we changed from paid to free, within an hour we started appear on several “Sale Alert” sites and apps:

Which then corresponded in our analytics to a big uptick in the new install rate:

Which in turn led to our game starting to appear for the first time on several charts:

We originally went out as paid to discourage people from downloading and give us a chance to iron out kinks before starting marketing.

And by doing that and subsequently dropping to zero, we got thousands of installs in a few hours.

 All before spending a single dollar on marketing.

Caveats:

• I wouldn’t say I recommend it, if you’re large you’ll annoy a lot of users
• if you’re small, you’ll annoy first adopters who commit to you (as we’ve found out)
• you can’t start free, then go paid then go free and have the same impact
• yes, 3000 users is small, but for a small startup it can kick start your growth 
• most important - this all doesn’t matter if your app doesn’t resonate with users (we spent months in beta first)

* ps - I’ll be blogging about the result of the marketing campaign and other parts in coming days, lots of fun things to share

Hostage negotiation (aka Buying a domain)

TL;DR - Domain squatters are smart. Be patient & plan well.

In the movies, hostage negotiation always seems glamorous.

Cool negotiator in shades. Panicky terrorist.  An easy dance into submission.

I thought acquiring a domain name from a squatter would be similar.

I was wrong, totally.

While planning our new 3d mobile games, we had decided we needed a new brandname separate from .  

After naming our first game beta Dress Me Girl (as generic as it gets, I know) we decided we actually quite liked the sound of Me Girl.  Easy to spell, catchy in a “Me Tarzan and You Jane” way and surprisingly warm and personal. Bingo!

Of course, was already taken.

By a pro squatter with over 10k .

Ok, time to roll up the sleeves.

I studiously read Fred Wilson’s “” post, dusted off an old yahoo account and shot off the first mail, copied and pasted from another article I found at the top of Google search:

Hi,
I saw that this .com domain “megirl" is parked. I wondered what are your plans for it. If you don’t have plans are you interested in selling? If yes, what would be your starting price?
Thanks

The reply within two minutes gave me a shock:

Wooah….$75k?  For 6 measly characters?  Let’s try something more reasonable…

A heartening reply…

• Give yourself plenty of time for the negotiation (weeks or preferably months). If your deadline is short, you WILL get fleeced
• Have a few different alternatives so you don’t get emotionally attached to just one 
• Read all the blogs about domain names, then know that domain squatters know that you’re also reading them - adapt appropriately
• Don’t reveal your real identity or use their name for your product before the domain is yours - if they know you have funding, expect the price to go up orders of magnitude
• Don’t disclose your real maximum budget as your budget to them, unless you’re weeks in and it’s not going anywhere (I ended up paying exactly what I stated earlier was my maximum budget - he knew that)
• Don’t be eager and play a little hardball…

Startup founders vs domain terrorists, unite.