On October 29, our friends at VentureBeat will be hosting a 2-part round table discussion with some of the Silicon Valley’s most successful and influential founders and investors to talk about how the economic downturn will inevitably affect startups, and how founders and execs can manage through what looks to be a recession that’ll last a few years…

They have a great list of participants, including Ron Conway, Max Levchin, John Doerr, Jason Calacanis and… you?

According to Matt Marshall at VentureBeat, the round tables will “explore what these investors and entrepreneurs did to survive and thrive through the last downturn, how this recession is different, and what that means for decision-making over the next six months.”

Want a seat at the table? They have limited space available, so you have to apply to participate. If you’re a startup founder or CEO, here’s your chance. Tickets for the event will be $189 and will include breakfast. Apply here to be considered for a spot (and mention “Startonomics” in your company discription for a 40% discount).

Good luck!

Here’s a great post from Brad Feld on how to digest all the recent economic buzz, scares, advice, etc.
You’re a startup. It’s Monday. It’s a new week. Let’s start the week right

Read his original post here.

Ok, by now you’ve read 3,127 blog posts either talking about the coming current downturn credit crisis recession coming reconfiguration of all things as we’ve known them. You’ve studied Sequoia’s Get Real or Go Home presentation. You’ve read Alan Patricof’s Chill Out memo, Ron Conway’s Get Ready For It To Suck email, Benchmark’s Adapt and Live Lean memo and John Borthwick’s Don’t Panic - Profit memo. For some balance, you’ve read Dave McClure’s brilliant rant Fear is the Mind Killer of the Silicon Valley Entrepreneur (we must be Muad’Dib, not Clark Kent) and Ted Rheingold’s VC Gloom Means Entrepreneur and Angel Boon. And you are carefully monitoring Fred Wilson’s blog to get a good synthesis of what he and others are thinking.

It’s Monday morning of another week. Central banks all over the world are coordinating their activities to try to make things “get better.” Morgan Stanley got their deal done with Mitsubishi so it doesn’t look like they are going to go bankrupt, at least not this month. The Dow is up almost 500 points so far today. Paul Krugman won the Nobel Prize for Economics. And you realized that slide 53 is by far the most valuable one in the Sequoia deck.

But what the fuck should you do now?

Having lived through an aggressive downturn when the Internet bubble burst, I’m going to spend the next “chunk of blog posts” trying to give you - the entrepreneur, CEO, or executive of a startup - some practical suggestions about how to implement some of the advice (much of it conflicting) that you are getting from all of the experts out there.

If you’ve been a long time reader of this blog, you know that I don’t care much about the macro stuff, nor do I believe anyone can accurately predict anything. All I think you can do is (a) deal with your current reality while (b) envisioning what you think you want your future reality to be while (c) recognizing that your view of future reality will change on a regular basis.

Hopefully I’ll be able to give you some useful tools and suggestions that have worked for me in the past that you can actually implement. My first suggestion - take a deep breath and don’t panic. More later.

Whew! This is the last session for the day and then we’re off to the MySpace after party. This entry is going to be short and sweet, folks! Be sure to check out the slides and the video.

The big takeaways were:

Saar Gur asks: When is the right time to talk to angel investors?

Peter Pham answers: Talk to VCs all the time and keep your relationship with them warm. Refer them to deal flow. Help them do due diligence on business plans. When the time comes and you are ready to raise money, it will be an easy phone call because they already know you. The people who you are taking money from are going to be your board members. If you didn’t get to know them before, you won’t know what kind of board member they will be.

Saar Gur adds: It is not the idea that VCs get excited about, but the idea AND the team. Establish early that you are not just an idea person but a person that can assemble a team and get things done.

Saar Gur asks: This conference spent a lot of time talking about metrics. What metrics are angels, investors, VCs looking for?

Peter Pham answers: The metrics are around how you make money. How need to tell the story and extrapolate it into something that is very interesting. In this current climate, it is very important to show how you will make money

Manish Chandra: In the early stages. you have to measure hundreds of little points since you don’t what is going to drive your growth. If you don’t measure, how will you improve your business?

Saar Gur adds: Investors are not interested in websites, but a great business. Young entrepreneurs don’t show how to connect a great product to a great business.

Saar Gur asks: We are facing a big economic downturn. Is it a good time to be an entrepreneur?

Garrett Camp: I founded Stumbleupon in 2001, right at the beginning of the tech meltdown.

Peter Pham: If you believe in the dream, just do it. Your competition won’t be able to make it. Build a company and last a couple of years.
Manish Chandra: It is always a good time to be an entrepreneur. Life doesn’t stop. People are going to be born, marry, and die. Think about revenue very carefully.

Thor Muller, CEO & Co-founder of Get Satisfaction, is dedicated to turning customer service into customer engagement. He highlights three ways companies can increase customer satisfaction and translate this satisfaction into increased engagement: 1) putting conversations at the center of the business, 2) reducing your sphere of control to increase your sphere of influence, and 3) by “smashing the silos” and forgetting customer service strategies that distance and frustrate customers. What is the end result? More loyal customers and reduced customer service costs.

According to Muller, Maslow’s hierarchy of needs can be applied to customer service. A company can create satisfied customers by meeting minimum expectations, but when a company meets a customer’s desires they have a committed customer. However, even more favorable is when a company identifies unrecognized needs of the customer. When a company can identify unrecognized needs, they have an evangelist. Zappos.com is perhaps one of the best examples of a company that has incorporated these principles into their customer service strategy. As a result, Zappos has succeeded in turning customer service into customer engagement and becoming a juggernaut in online sales in the process.

‘Andrew Chen, blogger extraordinaire, remarks ‘Those who can build audiences and monetize them in the current market will survive’. Understanding source of your traffic and the metric that represents your revenue stream has huge implications on your ability to monetize. There are two broad types of monetization:

• Direct, where you engage a website and pull out your credit card at the end, for e.g. Amazon
• Indirect, where you typically go via intermediary, for e.g. Google,

According to Andrew, there are lessons for both players in direct and indirect monetization world.
Direct monetizers, need to think of user experience as a funnel, where in users are flowing in from different sources. He cautions such companies,for e.g Amazon, to customize user context to address the psychological skew that they may have or face a churn rate. “You can’t have too much Funnel“, he muses. Such companies are well advised to create a dashboard of funnel profitability versus traffic source, to identify avenues for improvement.

Companies with indirect monetization, are in business of corralling as much traffic as they can, so Andrew advises creating a inventory dashboard that gives a view into the value of the inventory being generating from your site.

Finally, Andrew advises that in indirect affiliate or partnership model, helping your partner succeed will go a long way in improving your monetization.

Muhammed Saleem, social media consultant at ACS, discussed the effectiveness that a Social Media Optimization strategy can have on growing your company. Social media campaigns such as blogs, microblogs, social news sites, and social networks can be low cost, high impact strategies for startups to drive additional traffic to their site and build a highly targeted audience. In his presentation, Muhummed outlined nine fundamentals of Social Media Optimization:

1. Understand your audience and figure out a strategy to bring them to your site.
2. Attract attention by being original.
3. Be link-worthy—Use interesting content to draw attention, and increase visibility.
4. Make tagging, bookmarking and sharing easy.
5. Help your content travel through RSS, email subscriptions, newsletters, embeds, mash-ups, and e-books.
6. Reward and thank helpful and valuable users, linkers, and traffic sources.
7. Be real & genuine—use “white hat” techniques to encourage positive PR.
8. Participate
9. Develop and stick to a SMO strategy and use tactics wisely.

For more information on SMO fundamentals and techniques, watch the video of Muhammed’s presentation below:

Lance Tokuda from RockYou talks about the essential ingredients for creating a viral application on social platforms. Today six out of ten social media sites permit third-party embeddable applications which translates to almost 300M users. The number of users accessible in this way is expected to triple in the next six months!

The numbers tell the harsh truth. 99% of all applications for social media fail (i.e. they acquire less than 1M users). What should you look to do to reduce the chance of failure?

Viral growth requires referral traffic. Referral traffic comes from two sources:
1. Install flow - Make sure the installation of your application is simple and straight forward. This is the opportunity to get the user to invite his friends. Why do you think Facebook asks you if you would like to automatically invite the contacts from your email inbox?
2. Engagement Flow - This is the way a person uses your application. The primary flow (i.e. writing a review for a movie) should have a mechanism to invite new people (through sharing, for example).

Every flow has two variables: x (invited friends) and y (accept rate). The virality of your app can be determined by multiplying these two variables together. If x*y > 1, then your application is viral.

Therefore, if a user invites 20 friends and 6% accept, your application is viral. (20 * 6% = 1.2). Don’ worry if one flow isn’t viral, since the result of each flow can be added. If the sum of the flows is still less than 1, consider using advertising to supplement your growth.

Viral applications are used primarily as a marketing vehicle to reach a broad audience. It won’t work if you are targeting a specific demographic.

Stephen Spencer is an SEO Wizard. He is an encyclopedia of SEO knowledge and I urge you to check out the video of his presentation and his slide set for comprehensive details.

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In an earlier presentation from Dogster, Ted (their CEO) mentioned the difficulty of competing for page rank for the word “dog”, and Stephen spent the last five minutes of his presentation divulging three tactics for competing for page rank for the word “dog”.

1. Leverage some of the great tools that are available. Internet Marketing Ninjas is expensive, but worth it. It can analyze back links and anchor text. Good anchor text links (internal and external) such as “Click Here” or “Check this out” set importance, but not contextual relevance. Contact some of the sites that link to the Dogster site and ask them to change the anchor text to “Dog ster” (two separate words). It is a cool trick that will help Dogster to link for “dog”.

2. Look at the source for the homepage of Dogster and search for the “nofollow” attribute. Use this attribute for places where it doesn’t make sense to chase page rank (i.e. the link to Terms and Conditions). Looking at the Dogster homepage, there is user-generated link for Healthy Autumn Brownie Recipe which is not important compared to links to “Dog Breeds”. Set the “Healthy Autumn Brownie Recipe” to use the “nofollow” attribute.

3. Look to see who ranks in the top 10 already. What are they doing to get there? If they are using a dodgy tactic, report it to Google.

‘Test your marketing channels’ says Sean Ellis, startup marketing expert. A good marketing plan is all about choosing channels and putting in a rigorous plan to test these against metrics that matter for your business. Three step approach to executing on a web 2.0 marketing plan

• Discover your users and gather relevant metrics
• Learn from testing and optimize
• Budget and Hire

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Where do you start? Free marketing channels are the best place to start, for e.g. viral apps. Optimize your business economics, by spending time to identify the channels that matter. Doing so, helps improves customer experience, reduces friction in the acquisition process. Paid channels help in demand harvesting for innovators and demand creation for disrupters. PR, for example, is great for innovators, where as SEO works for disrupters. Budget as much as you have the capacity to test. Then find out which tests worked and fund them. Do not set expectations up front in the early stage, rather rely on test results to ramp up. Finally, hire in to fill gaps that are slowing you down. Do not hire to ‘figure things out’.

On the question of tracking of your channels, Sean suggests, using triangulated approach, for e.g. with tracking urls, surveys, instead of a single source.

As far as Ted Rheingold, “Top Dog” at Dogster.com, is concerned, one of the most important questions startups should be asking themselves is “What are your objectives, and how do you prove them?” Setting your objectives and key results are critical to making your company successful and can lead to transformative growth. However, you can’t just wing it, these objectives need to be defined in advance, must be collectively agreed upon by all stakeholders, and all resources must be allocated to achieve them.
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Rheingold recommends a disciplined approach to defining objectives and key results. For example, maintaining a clear methodology, not diluting responsibility among stakeholders, and focusing on 3 to 4 performance indicators to reduce “info-porn” are critical to testing and measuring user behavior effectively.

For more information, check out Ted’s Dogster Case Study on the Startonomics blog.

Suggested Reading:
Web Analytics by Avinash Kaushik
Advanced Web Metrics by Brian Clifton

Free/Cheap Tools:
Google Analytics, Trends, Adwords Keyword Tool, and Website Optimizer
Awstats (free server-side webstats)
CrazyEgg (click tracking heat map)
Kissmetrics (social space anayltics)
Medialerts (iPhone apps)
Silverback (experience testing)