No one embodies the classic, sniff-it-out serial entrepreneur more than Mike Cassidy, who has now built and sold four companies (Stylus Innovation, Direct Hit, Xfire and Ruba), some of them with very impressive exits.
Last week, Cassidy traveled to Turkey for a start-up event, and he talked about how he does it. Below right is one of the slides he showed to the audience of about 200 entrepreneurs and investors. It documents the milestones he hit while building DirectHit, which he sold 500 days after he started it, for $532 million to AskJeeves.
I’ve been soaking up the lore of Silicon Valley for the past ten years, but something about Cassidy’s talk still grabbed me: With infectious energy, Cassidy takes the classic tenets of entrepreneurship and douses steroids on them. For the uninitiated, Cassidy’s recommendations look a tad perverse, but the results, like former SF Giants’ Barry Bonds’ home-runs, are effective. To be sure, Cassidy’s is not the recipe used by folks like Mark Zuckerberg, Jeff Bezos, Larry Ellison and Bill Gates, who think especially long-term while building their companies. It’s the recipe for the extremely quick exit. It’s the second of two dominant strands in company-building.
So let’s turn to Cassidy’s philosophies, which he encouraged the Turkish audience — largely a group of early entrepreneurs — to try to emulate if they want to succeed.
- Raise funds in a single day: Most outrageously, for the inexperienced Turkish audience, Cassidy said it is important to try to raise funds in a single day. He wasn’t joking. To create a sense of urgency, you should ask the investors you’re talking with to make sure they have all the decision-makers in their fund present during your pitch. You round up all meetings with investors in a single day (Cassidy calls this “sychronized timing”) and give them a deadline by 5pm to give you a termsheet. He backed up his point, and he does with his other points, with examples from the companies he’s launched. He’s gotten a termsheet on the same day he presented to VCs in seven of the eight times he’s raised a round.
- Idea in two weeks: Entrepreneurs should limit themselves to two weeks to formulate their business idea, he said. Anything longer, and the entrepreneurs risk talking themsleves out of it. Better to launch quick, and to iterate, than take too long perfecting something that will bomb later because it hasn’t been tested.
- Team in two weeks: Entrepreneurs should take only two weeks to put their core team together, another provocative prescription, considering it can take some entrepreneurs months to make core hires. Cassidy wasn’t apologetic. The excitement and urgency you create by offering someone a job on the same day that you meet them, and forcing them to give you an answer by 9am the following day, leads to significant momentum for the company, he said. And if they don’t work out? Well, you can fire them just as quickly. Cassidy talked about some of his tricks: He invites candidates over to dinner at his home — the same night as the interview — with himself and his wife. And once the candidate has accepted, Cassidy makes sure they get all the HR paperwork and agreed-to task-list signed before they even start. That way, they hit the ground running. This contributes to warp speed.
- 3.5 months to launch: Once you’ve settled on your idea, it shouldn’t take any longer than 3.5 months to launch your product. By launching your product, and iterating on a quick schedule of every couple weeks, you’re more likely to surge ahead of slower competitors and bigger companies.
- Deal with hard deadlines. On deal-making, Cassidy’s recipe for success is to drive partners to decisions by pointing a virtual gun at their head. Either they sign a deal by a hard deadline, or he walks. This also helps drive things quickly. A deal’s chances of closing declines by 10 percent every day it doesn’t close, according to Cassidy’s rule of thumb. So he may be bluffing a partner when he provides a deadline, but it’s worth the risk, he says. If a partner is unwilling to sign a deal by an appointed deadline, the chances of it closing are declining anyway. And it’s good if you can use these deals to drive funding decisions too. Cassidy’s second company, Direct Hit, once found a way to accelerate a search results by rendering a URL 50 milliseconds faster than competing search enginse. By convincing a major search engine to sign an binding agreement to use the technology — before the deal was full approved by lawyers — Cassidy was able to present the agreement to investors. This convinced the investors that Direct Hit was worth investing in, and at a higher valuation.
- Raise smaller rounds. Cassidy recommends raising smaller amounts of VC funding, because they can propel you quickly to the next step in your business, with minimal dilution. You can raise money later at higher multiples. The results speak for themselves: He sold Stylus Innovation for $13 million after he and his founders put a total of $1,500 into the company to start with — a near 10,000 times return, he notes. With Direct Hit, he took about $1.3M in funding in his first round, and produced $532M the eventual exit in a year and a half to AskJeeves. With Xfire, he raised $1M, and sold it to MTV/Viacom for $110 within two years. With Ruba, he raised a first round, and Google bought the company within two years after he launched it, but he isn’t saying for how much.
To be sure, his Turkish audience was left scratching their heads.
Cassidy’s slide presentation below.