daily articles for founders

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

Dropping out for a startup  

Joel Gascoigne's cofounder, Leo Widrich, dropped out of university to start successful startup Buffer. Here are Joel's insights (some gleaned from Leo) about the interaction between university and startups.

My belief and experience with going through Leo dropping out is that when it is good to drop out for your startup, you will know it. That said, I think one of the biggest misconceptions is that you have to abruptly cut everything off and burn all your bridges with university.

How I’ve seen it play out more often than not, is that someone does many different side-projects during college and then when something begins to work, they go through a massive amount of learning and progress in an incredibly short space of time. This is very much related to Paul Graham’s notion of compressing your life:

But don't be too keen to do it:

[M]y advice to anyone thinking of dropping out is to keep studying, and use every opportunity to build projects and startups on the side. When something starts to work, you’ll have that same feeling that many others have, and you’ll know that it’s your duty to keep building it and bring it to the world. Until that happens, keep studying and keep building. When it happens, drop out slowly.

Play/life balance  

Greg Bayer:

Working for a startup usually means putting in more hours than others.  Recently, I spent two days on less than 3 hours of sleep in order to push out our new Pulse.me release.  This doesn’t seem strange to me and didn’t make me unhappy.  In fact, it was one of the most exciting and fun things I’ve done in a while.

Chasing after dreams is an essential part of my life.  The feeling of fulfillment I get from doing so makes me a much happier / more content person, and this in turn positively affects my relationships.

I've argued before that hours are not a measure of productivity, but that's not Greg's claim in this post. He's saying, quite rightly, that working on your startup is not work, it's play - and so, unlike working stupid hours on a job, working stupid hours on a startup is a blessing, not a curse.

I'm reminded of an old saying:

Why work for someone else from nine to five for a daily wage, when you can work twenty-four hours a day for yourself for free?

So which view is right? Neither, really. If you feel like working, work. If you feel like resting, rest. If you feel like playing, play. Working for yourself, chasing your own dreams, is worth pursuing with far more energy than the typical job - but life is what happens while you're busy working on your startup.

I'll finish with an observation: I feel most happy, most rested, and most productive when I have had a solid 8 hours of sleep, starting and ending at the same time each day. This plus a good task list has more effect on my productivity than anything else - other than, perhaps, the pressure of an immediate deadline. But that type of intense work under pressure usually has a cost the following days.

Paid iPhone apps vs in-app purchases  

Tony Wright investigates the economics of paid apps vs in-app purchases, and finds that IAPs are where the money is.

So why are free apps outperforming paid apps? That deserves its own post. In brief, it comes down to ARPU (average revenue per user). Farmville-style games can pull in an ARPU $5 or more per month. In fact, there are reports of $13 ARPUs. Per month! Per user! Average!

How is this possible? Virtual goods elegantly fill up the demand curve for an offering. In other words, they accommodate customers who can happily spend hundreds or thousands of dollars (“Whales”, in Vegas parlance) without having to give up mainstream users (who can still be valuable as evangelists beyond the fact that they give the whales someone to play with).

This shouldn't be a huge surprise. After all, there's a good reason why SaaS is such a popular business model: a low monthly price tends to generate more revenue than a higher up-front price (for most types of products). IAP's throw in the advantages of an app-store like model where people can keep buying more without entering their credit card details.

In conclusion: if you can make your app charge via IAPs (but that's not always possible or advisable), do so, because it will make a significant difference to your revenues. In particular, as Tony suggests, try to ensure that if a customer turns up who, for whatever reason, feels like blowing $500 on your app, give them a way to do so.

User activity streams and cohort metrics  

Great article by Dan Martell about how to use user activity streams and cohort metrics to learn from your app usage and build a tighter feedback loop. The article is full of concrete examples.

The main context within which very personal metrics (the user activity stream, principally) is useful is when you don't have enough data to conduct high-level tests or analysis of traffic, for example, at the very beginning of a startup. But even later on, it can be useful to drill into a few random users and figure out what they did and whether it uncovers an issue in your product.

Of course, this type of spying on users should only be used where there are no confidentiality issues, and with appropriate anonymisation where relevant. For a twitter helper application, though, it's very reasonable.

Finally, don't forget that metrics are only valuable if they are actionable and interpreted correctly.

Bootstrapping on the side  

Joel Gascoigne proposes a method for working on a startup while busy doing something else (a full-time job to pay the bills, for example). He doesn't mention too many details of actual method, but one of his methods seems to be to do something every day to push the startup forward, no matter how small.

This is definitely a good method to build your startup if you have no other choices (which is the case for most), and I agree with Joel that it is better than his previously described "working in waves" method.

However, he is too quick to discard the potential for losing to faster competition:

On top of that, let yourself succumb to the myth that you can be killed by your competition and you’re in for a tough ride.

This really depends on what kind of product you're building. It's sound advice only in the sense that if you're building a winner-takes-all, high profile product, you shouldn't be bootstrapping anyway.

VC funding approach breakdown  

Roger Ehrenberg proposes this clear breakdown of VC funds into two components: stage entry (broken down into seed funds, classic VCs and growth/alernative investors), and persistence (broken down by follow-on likelihood and emphasis).

The article seems targeted at VCs more than founders, but it's useful for both. For example, if trying to raise money from a VC, you'd be wise to understand their strategy in this context, so you know both what to expect in the current round, and what to expect in the future.

Gamification Wiki  

Despite the funny name, excellent collection of ideas for adding game mechanics to a web application. A friend of mine succeeded in doing just that after reading this cracked.com article, but this website is far more complete. Particularly the Game Mechanics section, which lists no less than 33 mechanisms by which to make an application more game-like.

My favourite:

Loss Aversion

The act of inducing player behavior not by giving a reward, but by not instituting a punishment. Produces consistent level of activity, timed around the schedule.

Almost all startup products can benefit from these. This site is a gold mine.

Four pricing principles  

Excellent points by Des Traynor:

  1. Charge earlier than you're comfortable
  2. Charge more than you're comfortable
  3. Justify (or kill) your lowest plan
  4. Plan on changing prices

Each of those deserves highlighting, but Des already does a good job of discussing them in the article, so I'll just comment on the last one.

Pricing is a very tricky thing to get right the first time. Yet, in a world where we are willing to A/B test so many things, we are strangely reticent towards changing our pricing around dramatically. Yet the stories of startups that changed their pricing schemes (not just their prices, but also the structure of the way they charge) and multiplied their earnings abound.

Learning how much your product should cost to maximise profits should be very high on your list of hypotheses. Therefore, start testing prices early, rather than late. This will also help ensure that you fit your product to the right market.

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.

Seeing opportunities, and missing them  

This engaging story of the early days of a startup team (which is now working on their next startup) who went to Silicon Valley with a dream and not much idea of what they were going to do, but made it work through spotting an opportunity and going with it:

In a day of work, we wrote the software in 300 lines of code and tested it. We ordered a label printer from Dymo and hooked them up to a Dell Mini 10v netbook. After that was done, we contacted an event organizer, convinced him that our system wasn’t going to fail, and asked if we could print name badges for him.

The event organizer let us try out our system, and that night turned out to be amazing. People thought it was the coolest thing ever to type their name in a laptop and instantly have a name badge print out. At the end of the night, we handed out lots of cards and got lots of people to try our mobile app. It was the first time in my life that there was “buzz” around something I created.

But then, they sold the company and went back to their previous idea, which HN user SwellJoe takes issue to:

You made a product no one wanted, and in order to market it, you stumbled onto a product that lots of people wanted in a market where billions of dollars are spent each year (we spend about 10 grand a year on conferences, and we're a tiny company with a tiny marketing budget). You've now ditched the product people wanted, presumably selling it for a pittance, and went right back to a similar mobile app to the one you couldn't convince anyone to use, despite excellent marketing savvy.

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