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daily articles for founders

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

5 lessons about building apps  

Anthony Feint, the Australian founder of Task.fm shares five key lessons he's learned from his experience building apps:

  1. Stop adding features: each feature has a cost in complexity and customer support cost.
  2. Don't promise what you can't deliver: your priorities are ever shifting and unpredictable; promising things to customers who ask for them leads to disappointed customers, and even when you do deliver them they're never as important as they seemed while they were "hot".
  3. Communicate: if your app goes down, don't keep quiet about it, it's probably the worst thing you can do; let them know what's happening.
  4. Charge more: if your product is better than the competition, charge for that.
  5. Ignore the critics: don't waste time responding to overly harsh critics; they'll move on to something else.
Tools to find available startup domain names  

Duane Jackson of UK online accounting software KashFlow, lists some useful tools for finding a good domain name:

A useful list to keep bookmarked for next time you need to do this.

Read up on SEO and Link Building  

Kristi Hines has put together this list of (reputable) blogs, articles and tools around the topic of SEO and link building.

For many tech founders, SEO is associated with spammers, direct marketers, and other "social media experts" - i.e. fluff. But that's a one-sided view. People like Patrick McKenzie demonstrate that SEO can be an extremely powerful part of your toolset.

This list of links, along with Patrick's blog is a great starting point if you want to learn more about SEO and link building.

Perspective  

Dustin Curtis:

It used to confuse and fascinate me how so many people with great dreams and great visions of the future can live such ordinary, repetitive lives. But now I know. I’ve experienced it. Doing something remarkable with your life is tough work, and it helps to remember one simple, motivating fact: in a blink, you could be gone. To paraphrase Steve Jobs: remembering that you are going to die is the best way you can avoid the trap of thinking you have something to lose. You really have nothing to lose.

In a conversation with a friend recently, he said he was disappointed that some of his friends had turned out to be not as remarkable as he thought them. He felt this was a flaw in them, something incurable. I disagreed.

For myself, I believe that I am trying to do something remarkable with my life. I also believe that it is in anyone's grasp to do so. Once upon a time, I did believe that being remarkable, unique, different, was something "god-given" (in the philosophical sense), something internal that you could not learn.

Ironically, in hindsight, at that time of my life I was wholly unremarkable. I was one of those people with dreams, living an ordinary, repetitive life.

What changed me was an event and the introspection from that event, both conscious and subconscious. As Jobs put it: remembering that you are going to die is the best way you can avoid the trap. Faced with the prospect of imminent death, I discovered that my life had not been well lived, until then.

It took years for this change to fully make its way through to my actions, but I believe a lot of my best decisions since then trace back to those fateful 45 minutes in a tube carriage.

And so my conclusion: I don't believe that being remarkable has anything to do with intelligence, skill, competence, education, background, etc. It has to do with perspective. Barring terrible luck (if I had not survived that day, I would have no chance of becoming remarkable, obviously), it is within all of us to be remarkable, special, different, unique, to have an impact on the world around us and feel that our life was worth living.

What stops most of us from doing so is not inability. It is comfort and fear, and their brethren, laziness and excuses. But those foes soon fall when faced with a proper perspective of life, and death.

Gabriel Weinberg's startup advice flowchart  

Needs no further description. Check it out.

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.

Friends, Family and Fools: the worst investors

"If you're struggling to raise investment from angel investors, the next fallback is FFF funding - Friends, Family and Fools. You can always raise a few tens of thousands of pounds from this source no matter how early you are."

The above is a fairly standard bit of startup wisdom, dished out to all and sundry. It seems pretty sensible on the surface. If your idea is any good, if you're a smart person who can convince others that you'll do well, it ought to be possible to convince someone, anyone, to invest a few tens of thousands of pounds to help get you started.

And since your idea is really good and you are a brilliant new entrepreneur, this may be the best investment decision that those people make in their life. It could be their chance to become rich, piggy-backing on your hard work - but you don't mind that, after all, they're friends and family. And fools, but we'll leave those to later.

Yonder dark clouds

Unfortunately, it's a huge understatement to say that when it comes to startups, things don't always go as planned. In fact, as a first-time entrepreneur, there's a very high chance that your business will go tits-up. Entrepreneurship is a career, you see, and you're just taking your first steps up that ladder. You have no idea what you're doing, even if you wake up every day filled with the confidence to take on the world.

There are ways to decrease that risk, of course. Seeking revenues right away… Keeping costs low… Getting advice from experienced mentors… All those things will help reduce the risk of your first business, but still, chances are against you.

That's alright, in a way, because as long as you don't do anything really stupid and, for example, triple-mortgage your family house to fund your first business, you'll survive the demise of your first venture, and be in a position to take another, better swing at the magical piñata of startup success.

This is where FFF funding screws you over, though.

When can I have that money back?

You see, if you take investment from professional investors, or even other entrepreneurs, they know that it's risky. They know that there's a fair chance you'll screw up and lose the money. Of course, they want to convince themselves that you're different, but professional investors only invest money they can afford to lose, so if they do lose it, they won't cry a river over it. They'll draw a line and move on to the next thing - perhaps even invest in your next venture, who knows. Investors are, largely, rational beings who understand risk.

Friends and Family? Not so much. Friends and Family will often get very upset when they find out you lost their money. You might find yourself highly embarrassed as the story of how you pissed away £20k of Uncle George's retirement funds makes the rounds over, and over, and over again for the next two decades. Not only that, but since they're your friends and your family, you may well feel somewhat obligated to repay the money somehow, sometime, once you've made some more money. It's like a lifelong debt that you can never truly shrug off, unless you're the sort of ungrateful git who probably wouldn't be invited to family reunions anyway.

Friends and Family investments are like the reverse of a convertible note. If everything goes well, they remain an expensive, low-valuation share investment. If things go badly, they turn into a loan securitised by that most valuable of assets: your personal relationships.

One would do well to stay away from such dangerously sharp-edged financial instruments.

Fools

Who's the greater fool? The fool who invests or the fool who takes the fool's money?

"Fool" investment basically means taking investment from people who are not friends or family, and who are also not professional investors or entrepreneurs of any sort. In short, they know nothing about startups, but they buy your sweet talk and decide to invest their hard-earned cash anyway.

The problem with this sort of investment is similar but different to the Friends and Family sort. Fools will not impose an eternal personal debt on you. However, experience shows that when the business turns south, they too will suddenly consider that the money invested should now be withdrawn from the business as soon as possible, and remain deaf and dumb to your declaration that the money has been spent and cannot be recovered.

Unfortunately, this sort of behaviour seems to be the rule rather than the exception. In the midst of a startup failure, which is a depressing enough event to begin with, Fools will drag you down and drag it all out endlessly, until you finally break all communications with them, under unpleasant circumstances.

Whilst a Friends & Family investment is likely to turn into a lifelong debt, a Fool investment will probably turn into a lifelong enemy, someone who will curse you under their breath every time they think of you and all the money you lost them.

Who should you take investment from, then?

There are only two categories of people that I'd consider taking investment from - and this is true at any stage of any business.

The first is professional investors, in which I include people who make regular angel investments, as well as wealthy people who have invested in things that lost them a big chunk of cash before, and who therefore will be fairly rational about the whole process.

The second category is other entrepreneurs, particularly those who have both failed and succeeded, as they know what it takes, they know it's very hard, and they know that if the business is going down the drain, the best thing to do is to let it.

Another key point about investments is you should only ever take money from someone who can afford to lose it. If my advice above falls on deaf ears, at least never take money from someone who simply can't afford the failure. Be very careful about that: you don't want someone's personal ruin on your conscience.

It's worth noting that with the recent advent of SEIS in the UK, investment by both professional investors and successful entrepreneurs is now much less risky than it used to be.

As I hope I've made the case above, taking investment from other types of investors, in particular FFF investors, will only result in trouble and pain further down the line, if the business doesn't succeed as easily as you might have expected.

If you can't raise the investment you need from proper investors, and you find yourself thinking of resorting to FFFs, I suggest you instead consider the idea to be out of your reach. It's better to work on another idea than to end up with the sort of nightmarish scenario that is all too common near the end of an FFF-funded startup.


VisualMess guide to design  

Being able to design your way out of a wet paper bag is one of those skills that is immensely useful as an entrepreneur. Not everyone has an awesome designer as a cofounder and, let's face it, a great many people who are technology wizards or business experts suck at producing something that looks even half-decent.

And yet, decent design is not magic. Great design might be out of the reach of those who don't have a knack for it (though it's worth mentioning that this knack tends to be acquired through decades of practice, not magic), but decent design is within everyone's reach.

Here, then, is an excellent guide to the basics of design. Enjoy.

Modern mass marketing techniques  

Here's a good article by Howard Kingston, outlining tangible ways to grow a product to millions of users, including viral marketing, facebook marketing, localisation, open graph, cross-promotion, and discovery. A good overview of modern mass marketing techniques, basically.

The techniques are declared to apply to both games and other products, but caveat emptor: many of those won't work unless you are selling something to a mass market - in other words, anyone could be your client. Niche products beware.

Aim for a lifestyle, not a jackpot  

This great Mixergy Interview has sparked an interesting discussion on Hacker News about what startup founders should aim for. Says Patrick McKenzie (aka patio11):

I swing more to lifestyles than jackpots, but a successful (for any definition of "successful") lifestyle business is a great place to try conquering the world from. A recurring theme for folks trying to shoot the moon is how much time fundraising takes up and how conflicts with investors can drive you under. If the rent is covered and salaries are already in the bank, you have a great fallback position. (BATNA is "We go back to where we were before we knew you. Oh, shucks, successful business." versus "We fail to make payroll and the bank repossesses my liver.")

I was having a chat with a serial founder friend this morning, and he made a similar point:

What founders are usually looking to get out of their business, financially, isn't a billion dollars, but simply a significant improvement to their lifestyle.

So, if you're a student fresh out of uni and your online business can allow you to double your yearly budget, that's probably good enough for you (for now). And a business that does that shouldn't be all that hard to build for a student with vast swathes of free time...

If you like this Mixergy talk, see also this classic talk by DHH at Startup School 2008.

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