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

All startup advice is wrong?  

Evan Williams says startup advice is wrong because it's often not proven properly since it's impossible to A/B test startup advice, and all advice depends on context.

He's right. And wrong. I guess that's ironic? Hah. Anyway.

As I covered in my article on how to write good startup advice articles, when giving startup advice, the two most important points are:

  1. Avoid over-generalisation
  2. Provide context to personal experience

If you avoid over-generalisation and provide context, then people can work out if, and how, your advice applies to their situation.

Obviously, if I dish out advice like "only hire A players", then my advice is wrong. But that's just because it's crappy advice. If, instead, I say: "in a company like the one that I'm running (include description), in this context, I found that hiring in this way worked better for me than hiring in this other way", that's advice that is valuable because it includes the context needed to figure out how and when to use it.

The best advice is disastrous in the wrong context. Startup advice is never universally right, but that doesn't mean it's universally wrong.

How to deal with massive technological disruption  

I went to a couple of events, recently. Each had a a very different feel.

Journalism

The first was an even for journalists and hackers. There, the main concern echoed by the journalists in the room was of how they could continue to do what they feel is a valuable thing, despite the major changes that technology has wrought on their industry.

Journalists feel (quite rightly) that they perform a public service. In the words of the respectable speaker at this event, their job, among other things, is to give people the information they need (but don't necessarily want) alongside with the information they want (but which isn't really useful to them). In other words, give people something that will help them vote in the next election alongside their daily dose of football trivia.

This all felt very noble, if a little paternalistic, but my feeling was that they were living in a dream. Let me explain what I mean by mentioning the second event.

Health

Healthcare, particularly in the UK, is hardly a progressive field full of consumer technology innovations. And yet, the event that I went to (MC ThinkCamp mHealth) was surprisingly progressive. The people presenting were, most of them, doctors. And yet they fully, clearly understood that technology is changing the reality of healthcare.

For example, one presenter had built an application that allowed patients to handle their own records. He didn't wait for approval from the NHS, he didn't even seek the approval of other doctors. What this entrepreneur realised was, to put it in his own words, that "history is moving this way", and that people who argue that patients shouldn't control their own records will, in 30 or 40 years, be regarded as incomprehensibly wrong, much as we now regard those who argued, up until the 1970s in Switzerland, that women shouldn't vote. Those people were, and are, on the wrong side of history.

My feeling was that these people "got it". They understood that technology moves inexorably forward and does not care much for the established order. They understood that it will turn the world of healthcare upside down over the next few decades - wether healthcare professionals like it or not - and that if they don't want to be left behind, they'd better join in the change.

They understood that if technology makes possible something clearly desired by many, this thing will happen, and will keep happening, and will be unstoppable - whether that is free movie downloads, patients controlling their records, or, as the linked article discusses, news personalisation.

Journalism, redux

Jeremy Mims, echoing the feelings expressed by journalists at the first event, proposes that:

Part of the purpose of news is to create an educated and engaged citizenry, not merely provide a funnel for our natural predilection for the stuff we like (which the Internet is already stunningly good at).

He continues:

What I’d prefer to see is a service that tracks what everyone reads and shows me results not from people like me, but people who aren’t. I’m already great at finding information that confirms my outlook and disposition (on the Internet, it’s a Google search away). I need to be reminded that the world is big, opinions are diverse, there are subjects that I’m woefully uneducated about, and that not everyone thinks the way I do.

That's all very nice, but that's not how disruption work. What people want, they will get, and the way forward is not to pine for something that might work as it did in the past (or, even worse, provides something that most people don't want, such as news that they disagree with).

I actually agree with journalism's goals, however paternalistic. People need to get more than a daily dose of X Factor and Football to be functioning citizens - and many people don't get that info-nutrition. But the way to achieve this is to look forward, at things as they will be 10, 20, 30 years from now, and build from there, not from a past that is quickly fading.

This means, for example, accepting that news personalisation is on the way, and that people will read only the news they want to read. This doesn't mean they won't be exposed to different viewpoints, but it means that in order to reach people, you'll have to build something that they actively want to follow - not just piggyback on the local sports news and hope they read the headline printed on the front of the paper before they vote.

It's change, real change, and it requires a different mindset, one that's willing to start from where things are going, rather than whence they came.

How to invalidate your startup idea  

Some good methods for invalidating ideas. Method 2, which is morally grey, got ripped into on HN. To that I'd reply that lying is a part of life, and I challenge anyone to go a single day without telling even a single white lie. Not all lies are equal.

Here are the methods proposed to identify a "hair on fire" problem, as opposed to a nice to have:

  1. Get a focus group, talk to them about the problem you're solving, and then provide them with a URL where they can go later to sign up for the product.
  2. Cold-email 20 potential customers and offer to pay them money to use the product. When they do sign up, tell them the offer was oversubscribed and is not longer available.
  3. Create a landing page with a 10-step registration process. Drive traffic to it. See how far into the process people are willing to go (the further, the more desperate they are for the product).

The article also points out this doesn't apply to all product types.

Don't choose freemium by default  

When releasing a product for free, just about every developer simply assumes that consumers will be willing to pay for it in some way, they assume that there will be a reliable revenue stream in the next year, or two years. Conversely, quite often there isn’t, and startups go bust. If a product is released on a pay-only basis, you know in the first month if the product will succeed, rather than two years and thousands of dollars down the road.

It's not quite so clear-cut, but this article makes a good point that you should think carefully about whether to have a freemium model, or a pay-only model. In the past few years, many startups fell into the freemium model by default. Some have, in time, realised that this was not right for their products. Others have sunk.

Some products (for example, many enterprise products) are ill-suited to freemium. Think (and test) carefully before choosing freemium for your business. Above all, avoid choosing freemium implicitly, without even making a conscious choice.

Cheap startup advertising  

Rob Walling, following on an earlier article about the half-life of traffic sources (go read it if you haven't yet), describes some concrete ways to use paid advertising to get some bursts of usage that (if your site is sticky enough) will then hopefully result in some customers or at least some validated learning. He covers:

  • Niche Advertising
  • Google AdWords
  • Facebook
  • StumbleUpon
  • Reddit

Each is broken down and detailed. Definitely worth a read if you're considering using paid advertising to drive some initial traffic to your site. As Rob points out:

To conclude, I want to reiterate what I said early in this article: unless you have deep pockets think of advertising not as a long-term traffic strategy, but as a testing tool to improve your website and find out more about your ideal visitor. Few bootstrapped startups can withstand the cash outlay required to turn advertising into a marketing activity with a positive ROI, but that shouldn't keep you from testing the waters to find out for yourself.

Don't dwell on startup mistakes  

That was the point when the failure really hit me for the first time. I'm a very optimistic person, but for a few weeks there I was very unhappy. The company didn't end though. I let it linger via my nights and weekends for another year and half or so, while I essentially dwelled on the past.

Continuing to think about it and tinker with it was certainly preventing me from moving forward onto bigger and better things. It was essentially a complete waste of time.

I had trouble letting go. And then one day everything changed. It wasn't an explicit decision I can remember, but more of a shift in state of mind. If anything, the trigger may have been moving my server and losing some of the files such that I couldn't easily get the learnection code running again.

Knowing when you've failed is a lot harder than knowing when you've succeeded, but you need the former to get to the latter.

As I argued before, impatience may kill startups, but it also frees up the founders of those startups to move onto better opportunities.

Phantom user profiles for non-registered users  

Fred Wilson:

I think that social services that are public by default and have huge logged out user bases, should "phantom register" their logged out users by storing activity against their cookies and building user profiles on their logged out users. This does two things. First, if those logged out users eventually register and become logged in users, this "phantom profile" can help the user get a lot of value from the service right away. And second, this "phantom registration" might allow the service to permit lightweight engagement without logging in. Lightweight engagement might be favoriting an item on Etsy, hearting something on Tumblr, or starring something on Twitter.

Great point. Of course, this may well be technically illegal in the EU.

Customer churn and engagement  

Yet another excellent article by Des Traynor, this one about how to think of "churn" and how to reduce it by engaging with customers at the right point.

Activity churn is where the rubber hits the road. Typical Churn stats use account cancellations as a measurement but cancellation is only ever a trailing indicator. It’s the last thing that happens.

Customers don’t make a snap decision to quit an app and delete all their data on the spot unless the app has really screwed up for them. Typically customers gradually stop using it, it goes from every morning to every week to once a month. Eventually their data in the app grows out of date and soon they realise they’re paying $29 per month for something they don’t need and don’t use. At this point you can’t recover them easily, but this is the first time a churn metric will recognise them.

Des offers some practical advice for how to address the churn. Read the whole article here.

More on splitting equity 50/50 or not  

Several articles came out since Joel Spolsky's OnStartups answer about splitting shares, some very cogently arguing against a 50/50 split, and proposing alternative methods. I've waited until a few accumulated before posting a summary.

The first, by Dan Shapiro, argues:

50/50 isn’t a business decision, it’s a compromise

It goes on to propose a relatively complex system to get this hard decision done up-front and avoid later arguments.

Mark Suster agrees (in fact, Dan's article quotes the talk that Mark's article is based on):

50/50 partnerships can be hugely unstable – even if you’ve been friends since high school.

(...)

Most senior employees who join are given 2% if they join early. Maybe they get up to 10% if they joined REALLY early and were senior. Who gets 30%? Nobody. That’s who. So trust me when I tell you that you can hire incredibly talented people for 30% of your company. Or 20%. Let’s be honest – even 10%.

It's worth noting that both Mark and Dan had a 50/50 split in their first startup (they both say so in their articles). This means they know first-hand the problems it can cause.

On the other side of the debate we have both Joel Spolsky and Fred Wilson. Fred argues:

And I second with emphasis the focus on fairness. Founding teams that allocate the founders equity fairly stay together a lot more than founding teams where one founder has a much better deal than the others. The same is true of venture capital firms. The most stable venture partnerships are those where the partners share in the carry equally or near equally. At the end of the day, this is as much about respect as it is about money. And when people feel disrespected, they are going to leave at some point.

So, what to make of these two apparent contradictions, both of them argued very convincingly, by people with vast amounts of experience in the domain?

Well, usually when you get this kind of situation, where both sides are convincing, both sides are credible, both sides make sense, that points to a very interesting "hidden variable", a disagreement that's not obvious, and usually hidden in the meaning of commonly accepted words.

In this case, I believe the hidden variable is inside the meaning of the word "friend".

Fairness and self-interest

There are many different types of possible relationships between people. To take just two, some people form relationships around fairness, and others form them around self-interest (and most use both with different people).

There's nothing wrong with either of those. Both occur frequently. Typically, older relationships tend to be based around fairness, but not always. And it's not that rare for one person to think that the relationship is based around fairness, while the other person is focused on self-interest. This is not a bad reflection on either friend, just a reality.

If you structure a company's shares based on fairness, but your relationship is based on self-interest, you're headed for the trouble Mark and Dan mention, as soon as you hit a hard decision. If you structure a company's shares based on self-interest, when your relationship with your cofounder is based around fairness, then the minute you use the power which you gave yourself to overrule the other person's decision, you've probably lost a cofounder and gained a competent but demotivated employee. And you'll have to deal with the demotivational aspects of the lack of fairness of the split forever.

My view, then, is that you should base your equity split on the type of relationship you have with your cofounder. There is no "one size fits all" solution. Make sure you fully understand what the dynamics of the relationship are before you decide on a split, that you know where each party is coming from, what they want, what they look for in this friendship. Then make sure that split extends and strengthens your relationship rather than undermine it.

And don't forget to read this, especially the comments, for a view of what happens when it all goes wrong.

Core peer groups  

This post by Brian Balfour appeared on Hacker News under the title "How I found a cofounder, built a prototype and raised $5M in less than 4 weeks", a title which sounds like it came straight out of Daniel B Markham's linkbait headline generator, but, surprisingly:

  1. it's got very little to do with raising money or building prototypes, and
  2. it's an excellent article about a general strategy for improving your odds of startup success.

The key point of the article is that a great way to boost your success is to surround yourself with a "close peer group" of people who are more or less at the same stage in life, with whom you can develop deep relationships, who will be brutally honest with each other, and who have reasonably complementary skill sets. The effect of that:

They help raise funding faster, find co-founders and early employees, and acquire your early customers. These are often considered the toughest items in starting a company.

The unanswered question is, how do you find such core peer groups to join? Is the answer something like TechHub (in London)?

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