Today Facebook presented a 6-month developer roadmap. Finally – it’s been frustrating as hell writing a book about Facebook and not knowing what was coming from them and when, not to mention staying abreast of all the changes for our clients. In their presentation Facebook said that there were not many or big changes being announced, but I beg to differ. Some of them are quite significant. I’ll be covering those changes over the coming weeks and how they will affect your business, personal, and application presences on Facebook. What’s great is that Facebook is actually giving developers a heads-up for the next six months, and making that information public to all. That’s fantastic. If only I had this before I started writing the book.

Let’s get to the meat of it.

What’s chopped? What’s not? The first  big change, for both developers and users, center around the Facebook Stream and communication channels. Facebook is offering a new one, which is big news, and taking away some old ones, which is, perhaps, bigger news…

The Stream

Notifications are dead. Both application-to-user and user-to-user. At least the way they work today. Ouch.

For those applications or companies that depend on these for growth this is a blow. What are notifications? They are the little lightweight messages that pop up in the Facebook user interface to let you know of some event happening in an application. They can be sent currently by applications on behalf of their users to their friends or other application users (in the case of user-to-user notifications) or from an application to its users directly (for application-to-user ones.) Facebook collects the recent ones in the bottom right of the Facebook window, as shown in the image on the left (usually filled with messages from Facebook, Living Social, or Mafia Wars.) All user-to-user notifications will be routed to the Inbox; however, there will be no way for applications to send anything on behalf of their users anymore without their consent.  Invitations/requests will also be routed ’somewhere’ into the Inbox. Which is fine since I cannot remember the last time time I have even looked at my requests. When they hit the 300-or-so mark I simply delete them all.  Those are all being routed to the Inbox in the near future.

Why kill notifications, one of the only ways left for apps to communicate with users without their consent? Simply put, they don’t work, except in very specific circumstances. Most of the time they are noise. A LOT of noise. Additionally, most people have no clue they even exist or where they live. Currently users have to keep track of five different communication channels in Facebook: invites/requests, messages (Facebook Inbox today), notifications, Feed stories (the stuff on your Wall and News Feed), and IM/Chat. They say it’s too much and no one is clear where to look for them. They’re right.

So basically one-to-one communications of all types Facebook wants to route to the Inbox: one spot for users to check messages targeted directly at them. Makes sense. Unclear how/if Chat will be affected if at all.

One-to-many communications will be handled solely by the Stream in the form of Feed stories published via the Open Stream API. And the automatically-published one-line stores that applications can publish to your Recent Activity section on your Wall? Also gone.

Honestly I think this is a great thing for users and for applications. Why? Because now more than ever developers and content providers are going to have to think about engagement first, before features, before copying the other guy, before writing a line of code. The only way for apps to really spread through the Stream is for users to interact with the stories that applications post there – meaning stories that application users *allow* them to post to begin with – either via the Like or Comment features.

The other big news on the communcation front is that Facebook will provide a means for developers to prompt their users for, and grant the right to store users’ real e-mail addresses. Also the right to store their first and last names most likely, though at the time of this post the details have not been hashed out. You heard that right. Facebook will allow applications to contact users directly without having to use Facebook as the intermediary. This is HUGE. And a huge boon for Facebook Connect developers for sure.

What do you think?

UI Changes : Dashboards, Counters, and the Death of the Profile Box

Facebook is changing the look and feel of the Home Page, at least. A long, narrow bar will contain entries very similar to the way the Facebook Application menu looks today. The screen shot to the right, though blurry, gives you the idea. It will contain the friend lists like it  does today but will also incorporate Bookmarks. And they’re finally giving developers an FBML <fb:bookmark/> tag so they don’t have to jump through hoops to get users to do so. Finally. They are also introducing UI menus they call ‘Dashboards’ that originally will be of two types: Applications and Games. Recommendations might make the cut as well. These are all in early mock-up stages but will potentially be easier ways for users to find new apps and games. There are no distinctions at this time between them.

To allow users to see when applications have notified them of something they need to act on – the way notifications do today – Facebook is introducing Counters to the right of bookmarked (only?) applications in this new UI bar. You can see them in the image to the right. Counters show the number of things ‘you need to deal with’ in the item their associated with. Presumably this would be user-to-user or application-to-user messages in the Inbox, for example.

The Facebook chrome is going to change (again) as well – new top nav, cleaner layout.

And oh the poor Boxes tab is finally meeting its maker. As developers we called it ‘Siberia’. If an app had a presence there its engagement was dismal, so this should be of no big surprise to anyone. One other interesting change is the change to profile or application tabs – they are going to be given much less real estate width-wise. I assume this is to compensate for the new left nav idiom? Anwyay they are going from 760->560 pixels in width.

Ethan hinted at some other (seemingly very significant) changes to the Profile page as well. They want to allow more sharing of content that makes your Profile more unique. That’s great – right now everyone’s looks identical except for the profile pic and potentially the one application profile box below the friends widget. They could not elaborate on these changes but suggested that they would involve some work for developers.

Platform Policies and Programs

Highlights here included an entirely new Facebook Developer site with completely rewritten Platform documentation, more social features focused on community. That’s great: the existing wiki is weak at best, pathetic at worst. Many of the most important pages became woefully outdated yet were locked from public editing (<cough>FBJS</cough>). They will be providing comprehensive how-to guides and walkthroughs and will also provide all the content they covered in the demo today. One other interesting thing is that they will be providing a ‘Health of the Platform’ section that will show how all (?!) the APIs are currently working in the wild and the current top bugs they are working on fixing, and those they expect you to work around. This will undoubtedly lessen the massive forum threads that alternate between ‘it works’ and ‘it doesn’t’ posts.

The gargantuan 14-page opus that comprises the Facebook Platform policies have been shrunk to 3. With screenshots showing best practices and examples of flagrant violations of policy. Fantastic!

Application and Page Insights will be updated and accessible through APIs. Darn, just about finished the app to scrape them dynamically.

Open Graph API

This is the next evolution of Facebook Connect it sounds like. Basically it was pitched as a way for ‘any web page’ to become a Facebook Fan Page/Public Profile through the use of what I assume are custom widgets or code in the Facebook Connect or Facebook JavaScript Client Libraries.

For example, let’s say as a brand I don’t want a Facebook Page. I’ve spent a lot of time cultivating an audience on an external site that I control and don’t want to fragment them by investing in a Facebook presence as well. The Open Graph API will allow me to add Facebook widgets and access their entire API allowing my users to become Fans of my EXTERNAL page – and have that show up on their Profiles WITHIN Facebook. These external pages will also show up in Facebook Search from within Facebook, just like they were Pages within the site. Developers will be able to publish Streams targeted directly at these Fans on the external site(s) that use the API. This will undoubtedly be an interesting area of development in the coming months. Along with direct email communication this will probably jolt Facebook Connect implementations into the stratosphere.

Questions Asked By the Audience

Some of these were very good so I’ve included them to the best of my knowledge:

Q: As part of it’s new interactive developer site is Facebook going to give developers a ‘vote’ on features for Facebook to add?

A: Um, no.

Q: What’s up with Facebook’s currency system? Any news?

A: Facebook credits (used in past to purchase Facebook Gifts) are still in use, but they have no ‘real’ announcements. They are testing whether or not to allow developers to use or accept them as currency in their apps but that’s about it for now.

Q: How are apps going to prompt for user email addresses? Extended permissions are painful today.

A: They know, they are going to collapse them into a fewer number of them that allow users and developers a more clear view of how they work and what they grant.

Q: Will counters only show up for bookmarked applications?

A: Yes

Q: Will ‘Publish to a Friend’s Wall’ still work?

A: Not been addressed; only changes they’ve made to the Stream have been the Open Stream API and that’s just been a week ago – no changes planned.

Q: Is Facebook killing the verified applications program altogether?

A: Yes! They are going to spend a lot of time and expense making sure ALL applications are up to the same level of quality as verified ones were.

Q: Any idea in the new Stream of which messages will get more visibility or prioritization (popularity?)

A: Likes and Comments are key – make sure that people want to Comment and Like them. This will ensure their spread. He was unsure of how this affects search rankings within Facebook search.

That’s about it, in a nutshell.

Thoughts? Questions?

Cappy Popp will be speaking at a MITX event Wednesday, June 24, 2009 on a panel titled,  ’Web Marketing on a Shoestring – Being Scrappy in a Down Economy‘.

The second installment of the MITX Marketing Technology Series, an educational series designed to explore the platforms, systems and infrastructures that allow marketers to execute efficiently, will be held  at K&L Gates at the State Street Financial Center in Boston from 8-10AM.

The following industry experts will be joining Cappy:

• Jeff Cram, CSO / Co-Founder,  ISITE Design
• Mike Volpe, VP Marketing, HubSpot
• Greg Slama, Manager of Contextual Marketing, One to One Interactive

Click here for detailed information about the event, or here to register.

Click here for directions. (or via Google)

MITX – the Massachusetts Innovation & Technology Exchange – today is the leading industry association in the country, bringing together digital technology, marketing and media professionals, to engage in what is next for the web and how it impacts the marketing and business worlds. With 250 plus member companies representing over 7,000 digital professionals, it is a dynamic and growing community of thought leaders, collaborators, and individuals in search of insight, education and opportunity. Check them out – or even better - join!

Our publisher,  Addison-Wesley Professional, has graciously published ‘Rough Cuts’ -  that means they still need final edits – of the first five chapters of our upcoming book, Facebook Development: A Complete Guide to Smart Application Development for the Facebook Platform, on InformIT’s Safari Books Online. Rough Cuts allow readers to get access to the book before it’s published or purchase advance copies.

Here’s an excerpt:

Currently Facebook has over  250 million active users and offers well beyond 52,000 applications — and the rate at which new applications are launching is staggering. But there is a lack of up-to-date information about developing those applications effectively — particularly in the light of platform  modifications that have rendered many applications obsolete. This book provides instruction on using the latest Facebook platform features and  helps developers create and deploy successful Facebook apps, revealing what makes them successful, how to measure progress, and how to deploy changes that will maximize the application’s value…

Please give it a read and let us know if you have any thoughts, questions, or ideas about the book or the chapters.

Mike Langford, fellow panelist and CEO of Tweetworks, has posted video of the panel discussion from the Girls in Tech Boston event held on May 6th, 2009 at Microsoft’s Cambridge Research Center.

You can view the video here.

Along with Mike, Cappy was joined by the following panelists:

• Rachel Happe, Co-Founder, Community Roundtable
• Karen Rubin, Product Owner, HubSpot and co-host of HubSpot TV

The event, Using Social Media in your Organization , covered many aspects of using and improving social media for business. Case studies from several companies were presented which the panelists reviewed and applied their knowledge to help them improve their reach and results.

Thought Labs’s Cappy Popp will be speaking on a panel titled, “Linked in – How to Increase Sales“ on Thursday, June 18, 2009 from 11:45A – 1:30P at the Clark University Graduate Management Center in Framingham, MA. This should be an interesting event; it will undoubtedly be covering a much broader range of topics related to developing a brand and increasing your presence using all forms of social media. Please attend and bring some of your most pressing questions.

The following industry experts will be joining him:

• Mike Langford, CEO of Tweetworks
• Jeff Cutler, writer, JeffCutler.com
• Eric Guerin, founder SmartMarket media

The panel is sponsored by the MetroWest Chamber of Commerce. Many thanks to Ed Nunes, Business Banker with TD Banknorth for organizing it.

Click here to register for the event.

Click here for directions.

Quick Transitions

Today Facebook launched a beta feature it calls ‘Quick Transitions.’ This feature supposedly results in faster load times for Facebook Platform Application canvas pages. It somehow uses Ajax to load them which keeps the browser from having to do a full page refresh to render the Facebook UI elements that surround every canvas page (like the Chat and Application menu, navigation bar, and ads, etc.)

I wanted to see what effect, if any, enabling this feature had on one of our popular Facebook applications, Doorbell. Since this application has over 300k active users a free speed boost sounded just fine with me!

First, to enable the feature go to the Application Settings for your app and click on the Canvas tab. You’ll see a set of two radio buttons at the bottom of the page labeled ‘Quick Transitions.’ Click the ‘On’ button. That’s it. If your application is iframe-based you have to also edit the URLs that govern page transitions. Here’s a shot showing where to turn it on:

Enabling Quick Transitions for a Facebook Application

Yes, But Does it Work?

In a word, no, at least not for me. Could it be the code? Perhaps. We use Facebook’s tab control to navigate between the canvas pages in our application currently. This could be the issue.

Server access logs show that the correct pages are being loaded;  however, the tab for the page never changes nor does its content load. The browser (Firefox, latest) simply sits there with an hourglass. It’s still responsive, but the canvas page content never shows. Noticed that Facebook passed along a few new GET variables as well, but they also appear to be modifying the URL for each tab’s link.

For example, here’s the link to our rankings page:

http://apps.facebook.com/myapp/?page=rankings&_fb_fromhash=xxxxx

The link changes after quick transitions are enabled. Here’s what my server’s access log shows (and it’s serving the content up perfectly: I get a 200/OK status code for it):

myapp/#/myapp/?page=rankings&_fb_fromhash=xxxxx&quickling[version]=xxxxx%3B0&nectar_impid=xxxxxx&nctrct=xxxxx

…and here’s the link that shows up in the browser’s address bar:

http://apps.facebook.com/myapp/#/myapp?page=rankings&_fb_fromhash=xxxxx&_fb_q=1&_fb_qsub=apps.facebook.com

I’d like to get this working to test how big a speed improvement you can expect to see on your canvas page loads. I know the feature is in beta so I’ll keep this post updated with my findings as I get them…

One of the biggest fears in dealing with social media (especially on a service as public as Twitter) is how to deal with inevitable negative comments about you or your brand. There’s a right and wrong way to deal with it. Replying immediately to your detractor may not always be the best solution – in fact it rarely is. You must maintain a position of strength and honor whenever dealing with criticism. This may not always be possible, but it is always possible to make the problem worse by handling it incorrectly. The Air Force Web Posting Response Assessment is a great reference.
When a negative tweet (or blog comment, etc.) is posted there are several steps to follow and questions to ask yourself:

How Bad is it, Really?

This is a subjective measure of how important the message is in context. Are they joking? Being amusing? Using satire? If so, is it worth responding? Or are they angry or raging? Has a product failed in the field? Have they lost money (and time is money) because of it? Have they had a terrible support experience with your brand? Do they simply dislike you? With popularity and readership come trolls – you may just want to let them pass.

Identify the user

If the message is deemed important enough to respond, then go to their blog/Facebook/Twitter profile and review their latest content manually or by using some of the countless free tools provided on the Web. Tweetstats and Twitalyzer are great for Twitter. Use Google or LinkedIn to get a quick feel for their background. If they have a blog, glance through the topics of their posts. This should not take long – 10 minutes is plenty. You just want to get a sense of who they are to give you an idea of what type of person you are dealing with. Are they a decision maker? An influencer? Or just trying to stir up trouble to get noticed?

If the comment came from Twitter, follow them on Twitter

If you are not already following them, do so. This allows you to open the possibility of private direct-message (DM) communication with them. The idea is to get them off the public time line (the public stream everyone sees in Twitter) and into a one-on-one conversation to mitigate the damage they could cause.

Resist the hasty reply – seriously, just calm down

The gut feeling is to defend immediately and publicly. Perhaps via a public @reply on Twitter if that’s where the comment originated (which would be your only option if there is not a mutual follower relationship which allows DMs.) On Twitter especially, quick reactions can be seen as defensive actions, especially for brands. Competitors will be watching. Usually what the person wants is an audience or a soapbox. Do NOT reply defensively. If they already have a bad impression of your brand or are angry, replying immediately and defensively will just amplify their feelings. Remember they don’t know you, and you don’t know them. Rapid replies may literally make them feel like you are stalking them (especially in cases where they’ve already dealt with your support organization and are venting frustration!) They’ve spent hours on the phone with your company with no result and suddenly with one message they have the brand at their feet? Take time to come up with an appropriate response. Remember that all public responses will be seen by all of your followers as well! Don’t get caught with your foot in your mouth or pie on your face. The same logic applies to other venues: blog comments, Facebook status comments, etc.

Play nice and come up with a ‘remarkable’ response

Even if you are completely convinced the person hasn’t a clue what they are talking about make sure you treat them with dignity, respect, and courtesy. Treat it as a golden opportunity to reinforce the dominance of your customer satisfaction (or your genuine humanity if it’s You.) On Twitter, apologize publicly then ask them to DM you to explain the problem. Once you are in DM contact, listen to their problem and make sure their issues are addressed, if possible. DO NOT send them through the same channels your Web site would. Get them to someone that can make decisions and help them. Work with whatever resources at your disposal to come up with an appropriate response if time allows. But you should not wait longer than a few hours to reply. Make sure that response is not only good, it’s remarkable. You want them to not only be happy: you want them to relay the experience to others if possible.

If others are involved, find, follow, and research them as well

Sometimes a problem grows quickly or many are involved to begin with. Make sure you follow and research all the friends of the original sender if they are part of the conversation. Many times these people will become brand advocates if they feel you have handled a situation well and help to alleviate the problem for you.

No matter the outcome, be gracious

Thank them for contacting you. Be sincere. Give them something free if you can (or are in a business that has product at all) for their trouble. Make sure they realize and come away with the feeling that you gave it your all to make them happy, even if the outcome does not make them so. Sometimes, you cannot. Products have bugs, hardware has failures, calls get dropped, stuff happens. But most of the time people just want to know you care enough to help them or listen. If the problem the person refers to is a known issue, ensure that you will personally follow up with them when a fix or solution is available – and do so.

The new (as of March 2009 – who knows what next week holds) Facebook Pages have become more like regular Facebook profiles. The important thing to note for the purpose of this post is that they now have a Publisher that allows Page admins to set status messages for the page. And make no mistake  – these are status updates just like you would set on your own personal profiles. Why is this important? First, it allows you to handle Pages as just another source for status messages, secondly, it integrates Pages more fully into the Facebook Feed model, and finally it’s important to realize that it has created problems for some (see this for example.) Now that Pages are part of News Feed any status updates or posts made by a Page or will show up in your personal Feed. Obviously it makes sense to syndicate these status messages in as many ways as possible. But, the question is, how?

This post, first of a series on Facebook Pages, will begin the discussion by first talking about how you can get a Page’s status from the API.

How do you get the status for a Page via the API?

You can get the Page’s status by using one of the same API methods you do to get a normal user’s status – you just use the PageID as the UserID parameter in the call. You will need a valid Facebook Session key to do this, however! I’ll discuss what that means in my next post. Just remember that a Page cannot login to Facebook to get its own session key. To get that PageID you either snag it from Facebook’s POST variables (’fb_sig_page_id‘) that are sent to a Page app’s canvas page or copy it from the Page’s URL (if you are going to be using it in places that may not have access to the POST variable or need to store it.)

Here’s an overview of three ways of getting a Page’s status:

So which way is ‘best’?

It depends on what you need out of the status itself. For example, the first method above, using users_getInfo, only allows you to get the LAST status message for a given Page (or user.) For example it returns the following (PHP):

Array
(
    [0] => Array
        (
            [uid] => 714497440
            [status] => Array
                (
                    [message] => is writing a blog post about Facebook Fan Pages
                    [time] => 1237687152
                    [status_id] => 7066343802
                )
        )
)

The second method, status_get, returns more information about each status message. Additionally, it lets you return more than one.
For example, either of these would return the last 2 status messages for user 714497440

$facebook->api_client->status_get('714497440','2');
$facebook->api_client->call_method("facebook.status.get",
                                                   array(  'uid'=>'714497440',
                                                             'limit'=>'2')
);

The results are shown below in JSON format since the PHP client return value does not offer associative names for the data:

[
   {
      "uid":714497440,
      "status_id":70669311802,
      "time":1237687152,
      "source":6628568379,
      "message":"status message 0"
   },

   {
      "uid":714497440,
      "status_id":70669311802,
      "time":1237687152,
      "source":0,
      "message":"status message 1"
   }
]

Finally, using FQL allows you to filter down to only the relevant bit of information you need. For example, if you just want the ids of the last 5 statuses messages for a Page you can simply use this FQL query:

SELECT status_id FROM status WHERE uid = $pageID LIMIT 5

The beauty of the final approach is that it not only allows you to minimize the size of the return data from Facebook but it also can be used as part of the FQL preloading process that performs FQL queries before calling your canvas page. You still take the hit for the FQL call, but it save a round trip, and additionally removes the automatic sending of the currently-logged in user’s entire friend list as part of the Facebook POST variables sent to your page! This can cut down on traffic if your app users have large numbers of friends. Since the average friend count on Facebook now stands at 120 this could be significant for long-term bandwidth costs. NOTE: the status_get API call basically returns the same result as this FQL query:

SELECT * FROM status where uid = $pageID ...

Hopefully this gives you some insight into the basic involved with getting a Facebook Page’s status. In the next post I’ll talk about how you handle this because Facebook requires a valid session key from a logged-in user to call any of these APIs. This can cause problems, for example, when you have code that runs without user interaction (via a cron job to update a Page profile tab for example.)

Stay tuned…

Facebook says they will soon be updating the developer application that allows you to manage your applications. It’s about time. It’s a mess at the moment. As long as they don’t break the application setup APIs this will be great.

Check it out for yourself here.

This week I attended the excellent MassTLC unConference. Among excellent sessions on effective use of Twitter, how to generate free PR, common startup mistakes, and others the unConference was a stellar event. One of the sessions I attended was about the process and best practices on raising the first round of funding for a startup. It was run by Steve O’Leary (of General Catalyst Venture Partners) and James Gershwiler (of Common Angels: “Boston’s Largest Network of Technology Investors” .) The session was incredibly informative for someone who’s new to the process of getting their startup funded via VC or Angel money. This is going to be a long post, but the information I found to be invaluable and interesting since it came directly from active investors and VCs.

The first thing to understand is what the differences are between ‘VCs’ and ‘Angels.’

VCs are companies that raise money from 3rd parties (individuals, institutional investors), manage this money in a fund, and deploy this money in hopes of a return on the investment. These funds have a term like any loan (usually < 10 years.) VCs expect returns on their investment relative to the pool of money the manage in the fund, usually in the range of 10-20% of the pool. A ’small’ VC fund is about $200 million: a VC of this size would expect a return of $10-$20 million on their investment. So it’s critical that you choose a fund that matches your company’s mission: if your vision is to grow to be a $2 million company don’t shop for VCs that have multi-billion-dollar funds under management.

Angels are usually individual investors but can also be hybrids (syndicates of individuals.) Some have money under management, some do not; however, the money is usually theirs, not a 3rd party’s. Angels tend to be cashed-out entrepreneurs with expertise in their fields. They usually invest in people they know, businesses they understand expertly, or in referrals from trusted sources. Angel investors generally make much smaller investments (< $10 million in most cases) but may band together to invest larger amounts of money. Certainly there are some Angels with vast resources but most invest much less than $10 million individually. As a rule of thumb individuals have less money than institutions.

The panel discussed ‘qualifying questions’: these are the things that VC and Angel investors need answers to immediately before considering an investment. They are (in no particular order here):

• What’s the size of the company? How big (meaning how big a valuation) can it get?
  • a VC would most likely invest in a company that can meet their requirements for returns (remember: rule of thumb is 10-20% of their fund size and within a timeframe that they receive these returns in time to pay back fund’s investors!)

• At what stage of funding is the company (none, angel, VC round A/B/C)?
  • VCs usually expect to take 20% of profits
  • VCs usually have an expense/load amount – that is, their ‘paycheck’ – of about 2%. This is what you must pay them regularly just like you would pay an employee.
  • Different VCs have different risk profiles – some invest in only early startups which have much higher risk (thus potential for higher reward); some invest only in late-stage startups which are less risky. Generally, a VC’s risk profile is related directly to the size of the fund(s) it manages.
  • Order of liquidation if company fails: debtors, VCs, other investors
• What expertise does the company have?
  • Having advisers – non-paid individuals that are helping you out since they know you and have connections – that are respected as experts in a field is a huge help. They cannot write the check but they can make it much easier to get your foot in the door of those that can.
  • Early-stage VC investors are usually experts themselves in specific fields; they know if an idea is viable. Late-stage investors are usually generalists with access to experts as needed. They are more focused on financial outcomes.
• What’s the company’s overall business strategy?

• Where is the investing firm in the life of its fund?
  • Later investments are ‘harder’ for VCs since they are under more pressure to succeed (they’re closer to having to pay back the money they borrowed to invest.)
  • Example: a VC that’s 6 years into an 8-year fund is less likely to take a risk than one that is just starting a fund.

The panel then discussed how to ‘pitch’ your idea, company, or service to investors. Everyone who reads this has most likely heard stories about this. And what everyone has heard probably involves some drama and horror. So it was very interesting to hear feedback directly from actual investors to cut through the myth and misinformation that surrounds this feared, mystical, and often hallowed process.

So, what do investors look for in a good pitch? First, they are always on the lookout for a ‘Big Idea’ that addresses a big or untapped market opportunity. Less competition == more possibility for success. Also, a successful pitch will show that the company will have more than one revenue stream.  Always be sure that your company shows potential for more than one revenue stream, at least three unless your idea is ‘revolutionary’. And trust me, it most likely is not (sorry!) For example, one investor said he would ‘never’ invest in anything related to the blogosphere – it’s a monolithic revenue stream that does not scale. If a blogger stops blogging, revenue stops too. One can only blog so many hours a week until they drop dead. And they do. Even Arrington is going to have to slow down at some point. Another thing is that investors realize is that the business plan that a company uses when they pitch invariably changes as the company moves through the funding process. Can the company cope? If so, how? Do they have a strong enough vision and understanding of their markets to make relevant changes without blowing the scope of the product or its time to market? Can the company deal with very frank discussions about changes in their product or service without causing collapse or a deleterious change in direction?

The discussion then turned to the ‘Elements of the Pitch.’ It involves five areas of risk and return: people, the problem, market size, competition, and the company’s ‘go to market strategy.’ I will address each of these in turn.

First, and most important by far – all investors present wholeheartedly agreed on this point unanimously – are the people involved in the company. Credibility is king and nothing trumps it. If you’ve never sought funding or had entrepreneurial success before the funding process is most definitely going to be much more difficult for you. Having a set of trusted, successful advisers on board is key. One investor said something along the lines of: “You want to find that one guy that you’d invest in no matter what he did. You just KNOW he’d find a way to make money regardless of what it was. If this guy starts a hot dog cart I’d be the first one to give him money…” If you aren’t that guy (or girl) find someone who is and ask them to be an adviser.

Secondly, the investors want to understand the problem, and be sure that you do, too. “What pain are you trying  to solve, or ‘what’s the pain you fix’?” This is where the company’s product or service enters into the mix. If you are looking for early funding, expect that the investors will be experts in your product’s industry. If they are not, you are doing it wrong. Why? Because someone from the investment firm WILL sit on your company’s board. The relationship must be both beneficial and reciprocal. Expert investors that sit on your board can be HUGE resources that could help your company land critical customers, crush the competition, or avert catastrophe. Or they can be enormous drains that can hamper your ability to execute, or worse, drive the company in the wrong direction. Remember that once you take funding you are ceding some control to the investor and their goals must be the same or at least in line with your company’s. You better be able to work with this person! Also, one big question that comes up frequently is, “does the product work?” If it’s theoretical do you have expert proof of its viability?

Next, what is the market size you are entering? Is it an emerging or mature market? Is it’s growth explosive (social media) or flat (RAM)? Can you prove it? How well do you know the market you are in?

Analysis and understanding of your competition follows as the next important element in your pitch. The worst thing you can do is state, “…the only competition we have is ourselves. Our product is so revolutionary there just are not any other competitors.” All the investors knowingly laughed out loud at this. It supposedly happens all the time. “Trust us,” they basically said, “EVERYONE ALWAYS has competition. And you better know who they are, what they do, how they do it, and where they do it.” You must also prove that you understand your past, present, and future competitors. If you are in a highly-regulated market (like pharmaceuticals or mission-critical systems) then regulatory agencies become your competitors and you must intimately understand them and their requirements.

Finally, the pitch has to address the strategy your company has for getting to market. What’s your company’s sales model and distribution plans? How will you reach your market? The more efficient your sales model is the more likely you are to get funding. A sales model that eats up 40% of your budget or is very labor-intensive will be eyed with extreme suspicion. Efficiency and speed are key here, as is the ability to prove ROI.  Better to have multiple models that drive those three (or more) revenue streams I mentioned above. As part of this strategy, you should at least think of your exit plans if the need arises. Profitability is something you ought to be mindful of but there are reasons to remain unprofitable for as long as possible.

Other things like time lines (different stages of development, deployment, growth, etc. shown over time) and current status reports are also helpful. The worst thing you can do is to shop ‘every investor in town’ with the same pitch. Most likely the first one will have a ton of excellent feedback. Use it. Retool as needed. It’s exponentially more difficult to get funding from an investor or VC once they’ve shown you the door. Some have one-shot-only policies as a rule. Even if they do not the burden of proof weighs very heavily on your shoulders if you approach them again. Best to use your least-likely choice as a sounding board and incorporate their feedback before pitching to the one(s) you really care about.

An insightful listener asked about the effects the current market woes are having on investors and their willingness to take new risks. One investor said the new conditions were “GREAT!” He said almost everything (goods, labor, real estate) is cheaper in a slow market and therefore it’s a great time to grow a business. Another voiced some concern in the three- to five-year window because of longer funding-to-exit times the industry now faces due to the new rules of financial markets. The mean time before first funding to exit in 2001 was 2.1 years. Now, it’s eight. IPOs are more difficult because of consolidation and restructuring of the financial markets. It’s better to have the mindset of “what’s the likely path of being acquired” rather than “how do we go public.” IPOs are much more difficult to pull off these days.

Hopefully this shed some light on the process of getting your company its first round of financing, even if it is just a reinforcement of what you already know. Kudos to MassTLC for getting all of these people in one place at one time – it’s rare that you get access to investors or Angels in a situation where you are able to ask questions without being there for a pitch.