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daily articles for founders

Here are 10 quality posts from the Founder's Library:

SaaS Economics  

Excellent two-part article, by David Skok of Matrix Partners, about the economics of using salespeople in a SaaS startup. Part 1 and part 2 are both extremely interesting, and although they're long, they're essential reading for any B2B SaaS startup that is nearing the critical stage of having found product-market fit.

It also makes a good case (if such a case was needed) for why VC funding can be essential to winning a market, once you've found a repeatable, scalable sales model.

How realistic should your icons/symbols be?  

When designing your product's interface, arguments about which icons to use for what are inevitable. Having some kind of principles or guidelines can help lessen the amount of time wasted on "but I think this icon is better" types of discussion.

Here, then, is an excellent article from 2010, by Lukas Mathis that gives numerous examples about how to use detail in designing navigational icons for your applications.

People are confused by symbols if they have too many or too few details. They will recognize UI elements which are somewhere in the middle.

The trick is to figure out which details help users identify the UI element, and which details distract from its intended meaning. Some details help users figure out what they're looking at and how they can interact with it; other details distract from the idea you're trying to convey. They turn your interface element from a concept into a specific thing. Thus, if an interface element is too distinct from its real-life counterpart, it becomes too hard to recognize. On the other hand, if it is too realistic, people are unable to figure out that you're trying to communicate an idea, and what idea that might be.

One important exception when it comes to logos:

There is at least one specific area where more details are good: application icons. You want your icon to depict one specific idea: your application.

Coda's leaf isn't a representation of the idea of a leaf; it's a very specific leaf, the Coda leaf. Acorn's acorn isn't just any acorn, it's the Acorn. Adding details moves these images from a generic concept towards a specific entity, and in the case of an application icon, this is exactly what you want.

Three kinds of games

This is just an arbitrary categorisation, but I find it useful. Obviously there are other ways to categorise games, and startups.

I love games. I have played games since I was a child. Computer games, board games, team sports (a bit less than the others), card games, dice games - any kind of game I could get my hands on. I am not Iain M Banks' mythical Player of Games, by far, but I do love the challenge that games pose.

And life itself is a game, as is business. These days I play less of the overly complex strategy game type (such as Civilization, of which I played every version except V), because I have come to the conclusion that those games feel too much like work, and I already have a game that feels like work, with the difference that when I earn gold coins in this game (my business) I actually get to trade them for Macs and summer hats in the appropriate shops.

Different games stretch you in different ways. With some thinking back over the long list of games I have played, these are the three ways they stretch you, and how they map to the entrepreneur's journey.

1. Games of mechanics

The first and most popular kind of game is the game of mechanics. This is a game where you win by application of your intelligence and insight. Most single-player computer games fall solely in this category, because that's all a computer can offer.

Games like the early, single-player Civilization games, or Dune 2, the original C&C, The Loom, Pinball, King's Quest, Trine or Super Mario, Donkey Kong and Battle Isle, most of the Black Isle Studios RPGs, Solitaire (physical or on the computer) or Backgammon are solely in this corner of the ring. Due to their very nature, they can only offer mechanics and so that's all they offer.

This is not to put their offering down. Games of mechanics are great fun. I still play them, though I tend to limit myself to the easy-to-pick-up-and-put-down iPad offerings, these days, due to lack of time.

What defines a game of mechanics is that it is won by analysing the situation "on the battlefield" and playing the right moves. Arguably, that's true of every game, but in a pure mechanical game, the battlefield is limited to the game.

Most startups start off as mechanical games. First, before anything else comes into it, you have to crack the mechanics of building something that makes money. This is a game where the battlefield is the product and the market, and I'm willing to go on a thick limb and say that if you're good at mechanical games, you will eventually figure out this game too. It might be the hardest mechanical game you've ever played, but it is just step 1 on the business journey.

2. Games of people

The second category of games, which some will argue is more interesting, but which is really just a matter of preference on the moment, is the game of people. In this game, the battlefield shifts from the board to the people around it.

To me, these have always been fascinating, because I used to be really bad at them, and therefore they were a constant challenge, something to learn and get better at. I don't like losing, but luckily for me that is coupled with a habit of, when I lose, trying again, and again, and again, until I win.

Most multiplayer games and board games touch on this dimension. Games like Warcraft 2-3, Settlers of Catan, Dominion or Dominant Species, look like they're people game (because, well, they involve people) but the game is not won by playing the people, so they're still fairly mechanical in the end.

Better examples of people games are No Limit Texas Hold'em Poker, some types of tabletop Role Playing Games (at least for the DM) and Diplomacy. In both cases, the game on the table in front of you is just an excuse for the game going on between your head and your opponents' heads. As the saying goes in Poker, don't play the cards, play the people.

Skill at the mechanics of the game is obviously necessary to play this. If you can't move your troops correctly (in Diplomacy), you will probably get eliminated no matter how well you play the people, simply because being weak paints a target on you that's hard to ignore. Same for Poker if you don't know the ranking and probabilities of various card combinations. But it is perfectly possible to get the mechanics of Diplomacy or Poker right and still lose over, and over, and over again, because they're people games.

In startups, people games become essential once you shift from building a product to building a company. Once you've got the basic machine that turns $1 of effort into $2 of revenues pinned down, the next step becomes to scale that up. No matter how technological your product might be, in the end, that will always end up involving other people. Maybe not hundreds of people, but at least dozens. And once you have people around, you have to play people games (avoiding office politics is a very tricky people game).

Much like playing mechanical games can teach you to play this second game, taking the time to play people games will improve your ability to play this part of the game, yet those games are much more rare than the mechanical type, so you have (in my experience, at least) to actively seek them out.

3. Games of self

The third type of game is the rarest and the commonest at the same time. This time, the battlefield is not on the board in front of you. It's not in the people around you. These are games where the battlefield is inside of you. It's you and your personal limitations. Arguably, all games have some element of this in them, at least at the very beginning, but I have yet to encounter an artificial game that is all or even mostly about the self. Perhaps the only such game we have at the moment is life itself.

What I mean by the battlefield being the self is that these games are about finding the limits inside of you and pushing against them. Games of the self open up new perspectives and unlock new skills that make you a better person.

I don't know of any artificial games that are purely of this kind, though many of the aforementioned games have some element of this, for at least a little while, but they abound in real life. I've argued before that successful people are successful, but the better way to phrase it might be that successful people make themselves successful, by winning at this game of self. They constantly find limitations within themselves and push against those.

The game of self becomes more visible as my business succeeds. Sure, success at the mechanics and the people aspects of the game of business is essential to even get there, and credit needs to be given to those games, but as the system that is GrantTree comes together, I find that many of the limitations of GrantTree's growth are not with either the people or the product, but with my own ability to observe and remove barriers.

The game of self is the meta-game. No one ever wins it fully, but every bit of progress you make on it increases your chance of success in all the other games. As such, it is always worth playing.

The only way I can think of to deliberately play this game is to play all games. Try many games, and pay attention to games that frustrate you, games which make you feel like a loser, games which force you to face uncomfortable truths. If you consistently lose at a game, it's a good sign that focusing on this game will make you progress in the game of self. If you're consistently winning, you're probably not learning as much.

Chess is perhaps the ultimate example of a game that rates highly on all three scales. No matter how much you play it and how good you are, you can always find someone who will beat you in novel and interesting ways and force you to think, and learn, and grow.

Life is a game of mechanics, people and self, and the multitude of artificial games humanity has concocted over the centuries can help teach you how to be better at all three dimensions.


Starting up in a recession

With double-dip recession looming in the UK (and downright depression or even complete financial implosion hovering about the rest of Europe), it's worth reviewing that old chestnut of "starting up in a recession", particularly when focusing on B2B startups.

Wisdom passed down from our Wise Elders suggests that:

So maybe a recession is a good time to start a startup. It's hard to say whether advantages like lack of competition outweigh disadvantages like reluctant investors. But it doesn't matter much either way. It's the people that matter. And for a given set of people working on a given technology, the time to act is always now.

Ah, lack of competition. What a boon. With no competition, or even shrinking competition, surely this pulls the bar for success lower, and means that you're more likely to make money, achieve success, reach the sky and pull the moon down to earth! Another idea that I often repeated to myself, as Woobius struggled through its first couple of years, was that the construction industry's implosion meant they would be more willing to consider innovative, different solutions, like ours. They were under pressure, so surely they'd be more willing to try new things.

Wishful thinking? You bet.

I'm on my third business now. The first one was definitely not recession-proof, though it never got a chance to prove it. The second one was not recession-proof either, or at least, its first two products weren't. Woobius is still alive (and in fact doing great), having pivoted to a recession-proof product, but more on that later. My third business is definitely recession-proof, thriving in an environment where not a day goes by without talk of recessions and financial cataclisms.

My conclusions, based on my experience, is as follows:

  1. A rising tide floats all boats. Given the choice of starting a business in a booming market or in a shrinking market, always pick the former.
  2. Some products are more recession-proof than others. If you're starting up in a recession, be sure to sell something utterly tangible. Like money. Or sales. If your customers can't directly see how it impacts the bottom line, they won't buy.
  3. There are booming markets even in a recession. For example, the "mobile / tablet" space has been booming throughout this last recession. If you can deliver tangible value in a booming market, great.
  4. There are small and/or shrinking markets even in a boom (for example, audio publishing in 2006, when I started my first startup around audio publishing). Pick one of these, and you'll get to feel as if you were in a recession, even while the rest of the world is bubbling away. If you're targeting one of these, well, why? Life's too short.

So, before you start your B2B business in a recession, ask yourself if that business model is suited for a recession. Can you directly measure the value it provides, in pounds, dollars, or euros (until they split that up into 20 currencies again, at least)? If not, maybe it's worth finding another business idea.


Startup sales: #7: Lead generation depends on people

First, second, third, fourth, fifth, sixth parts. Now seventh part:

#7: Lead generation depends on people

The ideal (or rather, idealised) lead generation approach is one where you just have a process that magically produces a list of leads that you then approach, pitch, and close (or not). It's nice, impersonal and predictable, and is the given model for many mass-market B2B and B2C tools that are entirely web-based. Unfortunately, it largely doesn't match the reality of higher-price (product, service, or combination of both) B2B sales, at least not when it comes to small companies.

Instead, what I've observed actually happening is that different people have different preferred ways to generate leads. They have some ways they hate and some ways they love. As a new company, you need to make the most of the resources you have, and that means leveraging your people's abilities to generate leads, to the max.

Here are some examples of different people having vastly different ways to generate leads:

One person I know is extremely good at cold calling - insanely so. It might sound like an exaggeration, but I've observed him calling a company he's never dealt with before, and figuring out how to engage and build rapport simply from the way the other person said "Hello" when they picked up the phone. If you have someone like that on your team, obviously cold calling lists of companies becomes a viable lead generation approach (though it's still best to pre-qualify and triage those early leads).

Another is what I call a super-networker. She is simply able to work a room and meet almost everyone worth meeting. She then relentlessly follows up, builds relationships, and gets to know basically everybody. Her favourite and most effective lead generation method is obviously turning up at interesting events.

Myself, I find that my best leads have also come up in networking events, but much more indirectly. For me, it's best to be involved in an event in some capacity, which gets other people to come to me. Some of those then turn into very strong leads.

Every person has one more more lead generation approaches that work best for them. When you track statistics of "how many leads we got from X", bear in mind that when you're small, your salespeople's favourite lead generation techniques will vastly distort the numbers. Accept that and embrace it, because it gives you an edge over more systematised companies that try to shoehorn their sales force into standardised processes.


The law of averages  

Joel Gascoigne:

As soon as I accepted that the whole world works in ratios, that's when it became easier. Knowing that success happens in ratios allowed me to go ahead and send that email, without worrying about not getting a response, about ‘failing'.

In sales, this is usually phrased "every no gets you closer to a yes". Joel gives some examples of this fundamentally important rule, but the key is, simply, that everything you do will have a certain success rate, and part of your job as a founder is to figure out that success rate, and then figure out if it's high enough to enable you to run the business successfully.

That you will encounter failures is a certainty. In some parts of the business, the failure rate will hopefully be very low (e.g. keeping existing clients happy). In other parts, it will probably be very high (e.g. sales). That's part of the job.

How to email busy people  

As a founder, you will find yourself emailing busy people on a regular basis - investors, potential clients, actual clients, actual clients who haven't paid their invoices... and so on. Hopefully not too many of the latter.

Here are some good advice from Jason Freedman of FlightCaster on the etiquette of emailing the kind of ultra-busy person who literally gets a thousand personal, non-spam emails a day. In short:

  • Keep the subject line concrete and very descriptive.
  • Use your company email address.
  • Remind the receiver of the context.
  • Limit your mail to five sentences - or, ideally, three.
  • Make it clear and explicit what you're asking for.
  • Respond immediately if he answers.
  • Include a short, professional signature with the relevant details.

Random acts of violence

Point (tru.che / imakeshinythings):

I'm very disappointed in Urban Outfitters. I know they have stolen designs from plenty of other artists. I understand that they are a business, but it's not cool to completely rip off an independent designer's work.

Double-point (consumerist.com):

Something is rotten in Denmark, or rather, in the I Heart Destination jewelry line of baubles offered by Urban Outfitters. Turns out those $19 danglers in the shape of the various United States of America with a heart cut-out are exactly like necklaces crafted by an independent jewelry designer named Stevie.

Double-tweet point (myaimistrue.com):

Today has been a fun ride. Behold the power of social media muscle. (...) What I do have - and the reason that my call for a boycott on Urban Outfitters spread so fast and wide - is a tribe. A tight knit group of independent artists and crafters that follow me. My cause resounded with them. They spread it, and their friends spread it, and a few big influencers on Twitter spread it, and then it was gone.

Counter-point (regretsy.com):

Now, I'm not generally the voice of reason, so this is an uncomfortable position to take. But I'm just not sure I want to start a boycott over an idea that many people have had, some for years before Truche even opened her Etsy store.

I'm not saying that Urban Outfitters doesn't help themselves to the designs of others. They certainly have a record of pilfering designs, and they may very well have stolen this one. The question, for me at least, is who did they steal it from? And if we don't know that much, how do we know it's really been stolen at all?

Double counter-point (consumerist.com's ^H division):

While this particular seller may have thought up the idea all on her own, different versions of the necklace predate her shop, dating back to as early as 2008.

Maybe there really are no new ideas out there.

"OMG WTF is wrong with you" point (Urban Outfitters):

In her recent blog post and on Twitter Koerner claims that Urban Outfitters stole her designs or was inspired in some way by the items in her Etsy shop for our I Heart Destination necklaces. In fact, a quick search on Etsy for ‘state necklace' reveals several other sellers with similar products (as seen here on Regretsy) who offered their wares as much as a year earlier than Ms. Koerner.

We are not implying that Koerner stole her necklace idea from one of these other designers, we are simply stating the obvious—that the idea is not unique to Koerner and she can in no way claim to be its originator.

"Let's learn from this" point (UserVoice):

This week a blogger with a mere 1,000 followers on Twitter discovered (apparently just the latest in many) an Urban Outfitters product that was a rip-off of an independent artist. She blogged and tweeted about it. The result was that thousands of people retweeted it, she & Urban Outfitters became a trending topic, and American Apparel removed the product from their shelves.

(...)

Any customer can deliver a killing blow, and any customer can deliver a fame-creating endorsement. Feel free to focus on courting "big" bloggers and tweeters for press - but don't risk treating any of your customers badly. You never know what might happen.

My conclusion:

The internet is a batshit crazy place. It has brought a scale of millions to the lynch mob mentality every little village has been capable of for millenia. Like in all of history, many (most?) lynch mobs are uninformed, or actively disinformed, or even deliberately manipulated, but if they're hauling you up a lamppost or lighting a fire under your feet, that's of little comfort.

Be aware of that, be ready for random acts of wanton violence from unexpected sources, watch out for the sudden flash lynch mobs appearing out of nowhere and baying for your blood, and when they do happen, be on the ball and active in managing the mob.

Otherwise, expect to get lynched from time to time.


Internalising and externalising success and failure  

This interesting article about how important a culture of failure is to innovation led to a fantastic comment on Hacker News:

One thing I remember reading that really stuck with me - most people externalize failure and internalize success. Meaning, when things go wrong, they point to external factors. When things go right, they credit their own skill and ability.

The opposite way is to externalize success and internalize failure - that means claiming responsibility for it whenever you don't get desired results, but being very skeptical of your successes and looking for where external factors broke your way so you don't get too high on yourself.

Turns out, externalizing failure/internalizing success makes you much happier but much less able to produce results.

Whereas internalizing failure/externalizing success makes you much less happy but much more able to deliver results.

Both are worth reading, and match up with Eric Ries' if you can't fail, you can't learn, a quote which I'm finding more and more insightful every day.

How to get and measure traction  

Here's an excellent guest post on TechCrunch EU by Alan Gleeson, making some useful points both about how to get traction, and how to present it to potential investors. the article is long but full of useful information and worth your time. A choice extract:

The most persuasive evidence you can provide that your business is worth investing in is ‘evidence of demand'. Clearly if this demand is translated into sales you have irrefutable evidence that the start-up has traction. The greater the sales the greater the proof.

In terms of the ‘traction hierarchy', active users and letters of intent probably fall into the next tier below real sales, finally followed by viewer numbers (on your website). While growing visitor numbers to a website was once a good barometer of the potential of a business, it is no longer considered a valuable proxy. These visitors have to convert to sales and hence once again the focus returns to the one piece of evidence that trumps all others - real sales.

It also links to this excellent post by Gabriel Weinberg of Duck Duck Go, which lists a great many ways to acquire initial users.

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