Category / What’s next?

4333711366_42d7561930_bNir’s Note: This guest post is written by Michael Simpson. Michael is the co-author of The Secret of Raising Money, which he wrote with Seth Goldstein.

Raising money for a startup is like sex. The more unattainable you seem, the better your chances of getting lucky. Also, the more interest you receive from others, the more appealing you will become to everyone else.

This essay discusses two psychological principles at work in an entrepreneur’s fundraising efforts: social proof and scarcity. Nir has discussed both in previous blog posts regarding product design. In this article, I’ll take you through the mechanics of each, and show you how entrepreneurs use these tools to close their rounds.

SOCIAL PROOF

“If you’re walking down the street and everyone is looking up at the sky, you look up at the sky.” -Babak Nivi, AngelList

Devil investor

This article originally appeared in the Harvard Business Review

A friend called me heartbroken, crying. She had spent months looking for investors to fund her fledgling startup and now she had a big problem. Someone was ready to give her the money.

Trouble was, the cash came with a catch. The only investor willing to pony-up the money was someone she didn’t like. She also got the feeling he did not like her much either, and yet, he wanted to invest. “If he was involved, I have the feeling I would quit my company down the road,” she told me over the phone.

Time was running out, she needed the funds and with no other investor ready to commit, she feared she’d have to take the money from someone she couldn’t stand. The very thought made her sick in the stomach.

2692469539_bdcea8c064_bRecently, I was asked by a friend why there have been so many guest posts on the blog lately. “What’s Nir been up to?” he asked. “Why aren’t you writing anymore?” The answer is, I am writing.

I’m working on two books at the moment. The first is a brief overview of my Hook Model, targeted at product managers, designers, and start-up folks. This e-book will be emailed to all blog subscribers by the end of the year.

The second book — still in early stages — is also about habit-forming technology, but is written in a narrative-style and targeted at a broader audience.

So while I’m feverishly plugging away at these two projects, I will publish occasional blog post of my own in addition to featuring select guest posts related to business, behavior and the brain. Feel free to suggest your own ideas for a guest post.

Nir’s Note: In this guest post, user experience designer Aaron Wilson, discusses a deep flaw of our digital devices and makes an audacious prediction about the future of consumer technology. Follow Aaron on Twitter @aarowilso.

No one wants to make a mistake like the one Clifford Stoll made in 1996. In the February issue of Newsweek Magazine, his now infamous article carried the headline, “The Internet? Bah!

An “online database,” Stoll wrote, will never replace your daily newspaper. To futurists like Nicholas Negroponte who predicted that one day we’d buy books and newspapers “straight over the Internet,” Stoll responded flippantly, “Uh, sure.”

Clifford Stoll is not a stupid man. He has a Ph.D. in astronomy, was a system administrator at Berkeley Lab, and is considered by some to be the father of digital forensics.

Nir’s Note: This guest post is by Max Ogles, a writer and entrepreneur based in Utah. Connect with him on Twitter at @maxogles.

Spotlight

In the beginning of 2010, when daily deals site Groupon was really hitting its stride and copycat businesses were popping up left and right, a small startup called Yipit was just getting off the ground. Yipit was involved in daily deals, too, but rather than creating the deals itself, Yipit simply aggregated the deals offered by the other companies to offer a nice tidy list in a daily email.

Like any startup, the Yipit team planned PR and marketing around their launch and hoped that the buzz would yield a nice base of users, who in turn would share with friends and create steady word-of-mouth growth. They managed to secure the spotlight from a major tech publication and then rode the wave. “After months of toiling away in obscurity, you feel like you’ve finally made it,” wrote Vinicius Vacanti, Yipit’s CEO, on his blog. “People know what you’re working on now. People all over the world are now using your product.”

CurseEthan Stock lived the Silicon Valley dream. He had recently sold his company to eBay and emanated the tanned skin and relaxed composure you’d expect of someone who just cashed a big corporate check. But as we sat across from one another in a Palo Alto coffee shop, I was surprised by what he said next. “Mediocrity is worse than failure, you know?” For seven years before the acquisition, Stock served as the founding CEO of Zvents, an online guide for local events. Though he was successful by anyone’s standards, I could tell he was a guy who, like me, had learned some hard lessons.

Nir’s Note: In this guest post, Ryan Hoover takes a look at how new behaviors are shaping tech opportunities. Ryan blogs at ryanhoover.me and you can follow him on Twitter at rrhoover.

Startups that build a product attached to nascent behaviors have an opportunity to form habits before anyone else. First mover advantage matters. Once a habit is formed, it’s difficult to change and often provides a sustained competitive advantage.

In order to mine for yet untapped opportunities, I began to observe my own behaviors and those of people around me:

How is my daily routine different than last year?

What new behaviors have I seen amongst my social circles (online and off)?

How are “normals” engaging with technology in new ways?

Here are some of the nascent behaviors I’ve observed:

Nir’s Note: This guest post comes from my friend Jules Maltz, a General Partner at Institutional Venture Partners (IVP), a late-stage venture capital firm based in Menlo Park. In this article, Jules admits something few people are brave enough to say here in Silicon Valley — that luck plays a huge role in success.

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I now understand why baseball players are superstitious. During a hitting streak, “hot” players rarely shower. They wear the same clothes and eat the same food. They follow the same routine to an exactness that would make someone with obsessive compulsive disorder proud. They’re trying to keep the magic alive.

But why?

If, as Billy Beane knows, baseball is all about numbers and probabilities, why all the nonsense? There are no “baseball gods” to appease.

Nir’s Note: A few weeks ago, I wrote a brief post summarizing some thoughts for a potential book chapter. I asked my readers for help and you delivered! The comments were fantastic and I received several insightful emails. Therefore, I’ve decided to continue with the experiment with the article below. This week’s post is much shorter and less developed than my previous essays and is intended to solicit more of your thoughts and feedback for a potential book chapter. Give it a quick read and tell me what you think. 

kids on techThe world has become harder to resist. Products are getting better at giving people what they want and – for the most part – that has been good thing. Yet, the historical trend-line shows products are also becoming more habit-forming.

All products alleviate customers’ pain. Even products used to gain pleasure must first generate desire, a unique form of discomfort, which the customer will pay to satiate.

Nir’s Note: In this guest post Ryan Hoover takes a look at how interface changes drive innovation. Ryan blogs at ryanhoover.me and you can follow him on Twitter at rrhoover.

imageWhat do motorized vehicles, broadband internet, and smartphones have in common? These technologies all introduced new forms of user interface, transforming its user’s daily lives and behaviors.

I’ve been studying Nir Eyal’s work and recently read his article on the power of interface changes. As stated in his post, interface changes have the potential to radically change user behavior, disrupt incumbents, and enable new opportunities only imagined in film and sci-fi novels.

If you’re building a new startup or operating an existing business, look out for interface changes. Interface changes have the power to catapult your startup to success or kill it on arrival.

So if interface changes are such a big deal, what opportunities or threats can we anticipate? Here are a few examples: