swombat.com

daily articles for founders

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

Venture capital basics  

This is a good, relatively brief overview of the basics of looking for money from VCs.

If you're not familiar with any of the concepts in it, it's worth a read. Covered:

  • What VCs are looking for
  • The difference between VCs and angels
  • Asking for the right amount
  • Planning on future rounds of investment
  • Understanding pre-money, post-money and % ownership
  • Negotiating
  • Comps
  • % ownership
  • Exit strategy (with example)
  • Understanding how a VC fund works
  • VC maths
  • The fallacy of taking other people's money
Getting into a startup right after university  

Some great tips by Jean Hsu. Startups won't hire fresh graduates on the basis that "they can do the job already". They will hire on the basis of potential. It is understood that it will take time and training to grow a new graduate into a fully productive hire (and that, largely, is why graduates make less money than experienced hires).

Here are Jean's tips:

  1. Try to get personal recommendations, by letting your friends know you're looking for a startup job, and going to relevant meetups and events.
  2. Tailor your resumé to the job you're applying for.
  3. List extra-curricular projects. In my opinion, those are often much more interesting and convincing than anything you may have done in class.
  4. Have an online presence so you stand out.
  5. Prepare for the interview by reading up on the startup and familiarising yourself with the product.
  6. Be relaxed, friendly, comfortable (be yourself!) during the interview - they're not just testing you on your technical ability, they also want to check they can work with you day in day out.

Don't forget to evaluate whether you want to work at that startup. For a new graduate, the calculation is slightly different, in that almost any job will teach you a lot, but don't let yourself stagnate during your first few years out of university - they are possibly the most important of your career, in terms of their potential to set your direction for the next 10, 20 years.

The main advantage of a startup job for a college graduate is that you will be able to grow into a position of responsibility much, much faster than at a larger company - but you do need to go about it deliberately to make the most of it.

Another piece of advice: if the "startup" turns out to be nothing like what it advertised itself as (some people are unscrupulous about calling their small businesses startups), leave quickly! The personal growth opportunities in a small business which isn't growing are usually extremely limited.

Show it doesn't work  

Boris Veldhuijzen van Zanten, founder of Twitter Counter, Spread.us and The Next Web

The product was a failure.

We found out pretty quickly after we launched and soon had a meeting with the group of informal investors who funded us. We explained to them what happened and offered two options. 1: we could keep on developing, try to find a solution and work on it for another year or two. Or, the second option, we could kill the product and return most of the money ( a bit more than 50%) back to the investors.

We are very proud that we had the chance to successfully show that this particular solution didn’t work. Of course we would have preferred it if the solution would have been perfect, but at least we had the chance to give it a try.

Great approach, and only possible when you see the business as the secondary item, and you (the entrepreneur) as the primary driver. Those who advocate that your startup should take over your life would probably not be able to take this step.

You should probably send more email than you do  

Here's a very lengthy, opinionated and, I believe, absolutely correct piece by Patrick McKenzie admonishing startup-starting geeks to send more emails to their customers:

A long time ago, I used to be an anti-spam researcher. I was very, passionately committed to getting 95% less email in people’s inboxes. This lead me to have an enormous psychological block against collecting and sending emails for my businesses. My perceptions were that:

  • users bucket email into “tolerably annoying” and “hated with passion unmatched by a thousand burning suns”
  • email marketing is universally kind of seedy
  • asking for email addresses would damage customer confidence
  • other methods of communication made email obsolete
  • ethical use of email is economically marginal for the business

These perceptions were catastrophically wrong. If you are currently where I was six years ago, let’s have an intervention. You should start collecting emails from people interested in your topic of expertise and periodically dusting off their inboxes, too.

My quick calculations about engagement yielded a typical engagement rate of about 0.5% on Twitter, 5% on RSS, and close to 50% on email. One way to look at it is that each email subscriber is worth 100 Twitter followers in terms of engagement. So really, going by the subscriber count for swombat.com, I have the engagement equivalent of 63,000 Twitter followers right now... and it was a lot easier to achieve than getting 63,000 followers.

My not-so-carefully-controlled-tests showed that whether I display "You should follow me on twitter here" or "You should follow my RSS feed here" or "You should subscribe to my email list here" at the bottom of posts, I get the same action rate, give or take. This is why I took off the low-engagement Twitter follow message and replaced it with email.

In short, use email. It works, bitches.

Product/market fit vs profitability  

Matt Wensing makes a great point that product/market fit is only part of the objective. If the product/market fit is not profitable, it can be a very misleading objective.

If you summarize ‘achieving product/market fit’ as the goal, you may end up achieving a state wherein you have lots of customers but very little profit. As a result, you have lots of demand, and even lots of potential, linear growth, but you’ve settled for linear and you’ve settled for thin margins and you are stuck.

The whole article is excellent and very much worth your time, though the Hacker News thread about it is curiously devoid of comments - perhaps because Matt has said everything already.

Lean Startup Machine learnings  

Eric Ries, already mentioned earlier today, also posted this retrospective on Lean Startup Machine, a Boston-based "build an MVP in 48 hours" event.

He makes a few really important points:

For example, one team managed to put together a very decent looking minimum viable product, in the form of a landing page with a “click to signup button” that basically did nothing but collect data about who was clicking. And their MVP even had a reasonably high click rate. But is a 25% click rate validation of the idea? That depends on who’s clicking and why. Do they understand the product? Are they eager to try it, or were they just enticed by the shiny button? Unfortunately, the team had no way of answering these questions. They weren’t even collecting contact information from these first customers. They were just counting clicks.

(...)

This is a classic startup fallacy: “ship it and see what happens.” Whenever you use this plan, you are guaranteed to succeed – at seeing what happens. Unfortunately, if you cannot fail, you cannot learn.

One way to organise the MVP-building process to ensure it does answer real questions is, of course, Hypothesis-Driven Development, covered here before.

3 Lessons from launching a product  

No completely new advice in this article, but a very good point about design/usability of your first version:

However, your first design shouldn’t matter. You should be solving such a huge need that users and customers will do anything to use your product to solve their needs. When your hair is on fire, the look of the firehose doesn’t really matter.

If poor usability or bland visual effects push away early adopters, then you haven’t actually solved an important problem (at which time you pivot).

As Sean mentions earlier, though:

Not all advice is created equal (...) If the advice doesn't sit well with you, don't blindly follow it

Not all startups are created equal. Not all startups are solving a hair-on-fire problem. Twitter, which he uses as an example later in the article, certainly did not solve any critical problem initially.

Side projects  

Andrew Dumont makes an interesting point:

Know that when you start just a side project, you’re starting so much more. It’ll completely consume you. The worst failure in any side project is to devote time, energy and sanity for any sustained period only to close the doors.

Side projects are a means to an end.

They need to start with an end-state in mind – create a passive income stream, validate my idea. They need to have deadlines and key metrics – six months to profitability, 10 paying users to validate my idea. But most importantly, they need to be a sprint. The longer a project lingers, the harder it becomes to keep morale high and pull the plug if it’s not working out.

There is, of course, a valid point there. Then again, I am reminded of those people who assault young musicians with questions like "But why do you want to play the violin? What are you trying to achieve?"

Isn't playing violin and starting side-projects just for the fun of it enough for a start?

I am pretty sure that most people who eventually started side projects with clear end-states in mind first started side-projects just for the heck of it. They probably did that for years before the thought that a side-project could have an end-state right from the beginning entered their mind. That certainly was the case for me: most of my early programming, writing or web activities were done purely for the heck of it.

So, perhaps better advice is to be aware that some day you will want to graduate to definite goals.

But if you want to start a side-project today for the heck of it? Go for it.

More about finding cofounders  

Some great ideas in this Quora thread, as a follow up to earlier today. Hat tip to Salim Virani of LeanCamp.

Startups can't afford a cover-up culture  

Following on last week's point about not drinking your own kool-aid, here's an article by Steve Blank about the dangers of a cover-up culture in startups:

[My investors] reminded me that failures in startups tell the founders which direction not to pursue – while teaching you how to succeed. This means covering up failure in a startup [is] like tossing their money in the street. So instead of a cover-up culture they encouraged a “Lessons Learned culture.”

A key element of a “Lessons Learned” culture is rapid dissemination of information. All information, whether good or bad, must be shared rapidly. We taught our company that understanding sales losses were more important than understanding sales wins; understanding why a competitor’s products were better was more important than rationalizing ways in which ours were superior.

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