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daily articles for founders

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

A/B testing product price  

Some excellent advice from Paras Chopra about how to go about testing price, starting with a point that will come as a surprise to many:

... you should NEVER show different prices to the visitors for exactly the same product or service.

It’s illegal and can lead to huge potential lawsuits.

Instead, he recommends varying and splitting your price plans (e.g. turning a $20/5GB offer into two plans, at $8/2GB and $40/10GB, then, if the $40 sells, offering $40/5GB later) to determine the price sensitivity of your users and find a sweet spot.

Another point worth making on this topic is that, when doing price testing in person or via an online survey, you should never offer people several prices and ask them to choose the right one - they'll always pick a lower one, because you've just put them into negotiation mode. Instead, offer a single price and measure the purchasing rate.

Update: Reader Chris Schneider did a bit of research and found some links about whether price testing is really illegal:

From the first link, the following extract is relevant:

First, the Robinson-Patman Act covers commodities, in other words tangible items. Value transactions that substantially involve services or licenses to intellectual property such as software are not subject to the terms of the Robinson-Patman Act. As the US economy increasingly becomes a service economy rather than a manufacturing economy, the jurisdiction of the Robinson-Patman Act over transactions decreases.

So, it appears that SaaS startups are covered.

The born-again entrepreneur

When I finally left Accenture and started running my own business, I felt great. In fact, I started feeling great even earlier, despite (or perhaps because of) the lack of sleep of working two jobs. I felt part of a special, privileged few, who had seen the light of entrepreneurship and got the fact that it was so much better to be an entrepreneur than to slave away at a job.

In the few months leading up to and after leaving the corporate world, I was absolutely convinced that what I was doing was much better than a job. I would constantly talk about how great I felt about starting my own business. I'd talk about it with everyone, really. It was my favourite topic. And no doubt, in every one of those interactions, I would come across as fanatical, blunt and borderline unpleasant, because I Believed.

Even the demise of my first business only slightly dampened my enthusiasm. It took at least a year or two before I started to understand that although running my own business is clearly the absolute best option for me, that's not true of everyone.

There are many smart, competent people out there who are happier in other fields. Some prefer the academic life. Others enjoy the corporate environment and its specific sets of challenges. Others are happy as programmers and have absolutely no interest in learning how to run a business (which is a completely different skill set than writing code). Some want to become highly specialised experts in a narrow field, rather than gallivanting generalists.

Even security and stability, long decried by entrepreneurs as being a corporate illusion (when you run your own business, only one person can fire you), is in fact an advantage of the corporate world.

I want to fly away

The best analogy I've come up with so far is that working in a corporate job is like flying in a large passenger airplane. Working in a large company, you surrender your fate to the pilot, you agree to follow the rules set by the hosts and hostesses, you agree to do so with a lot of other people and to respect their rights too. You also accept that your flight might be cancelled or delayed, that you may be forcefully expelled from the plane before take-off if you don't behave yourself, that you may be arrested at your destination if you misbehave during the flight, and so on.

In exchange for this, what you gain is a vanishingly small likelihood of anything going really badly wrong (yes, large passenger planes do crash, and when they do, there's a lot of media talk about it, but statistically, it's incredibly rare). You also gain the ability to fly far and fast no matter your own personal ability to fly a plane.

Working on your own business, on the other hand, is like building your own plane and using it to fly to wherever you want to. If your plane is large enough to have hostesses, they'll do whatever you tell them to, and you can fly the plane wherever you think makes sense. If the plane is going to crash, you're probably going to know about it long before anyone else does, and you can grab your parachute and leap out long before hitting the ground (and then start building a new plane from scratch to continue your journey).

Having your own business is like having your own plane or boat - it provides you with incredible levels of freedom and autonomy. But, like having your own boat or plane, it's not for everyone, and not everyone wants to do it. It may be the absolute best choice for you, but that says nothing about what the best choice is for other people.

An admonition

So, this article is an admonition to all those who have recently joined the world of startups. Whether you took the leap a few months ago or a few years ago - don't be fooled into thinking that your way is the only way. There are many other ways to live one's life. This way is definitely not the universal "best" way. It's just one way among many.

Respect those who choose a different path.


Building international relationships  

Irina Dzhambazova shares how Bulgarian startups deal with obscurity, and succeed building international relationships:

Serendipity and true partnerships

"Investing time in getting to know an organisation or a person, without looking for the immediate quid pro quo is the way to go. Just get to know people, interact with them in the manner you do with friends and leave the rest to chance." - Vesselina Tasheva

Good partners understand each others goals and can act proactively on each other's behalf. This type of relationship is much easier when you can relate this way at a personal level. Vesselina's advice is to start here - the deal's come more easily later.

She's the former partnerships manager for a large, multi-national IT company, and now runs community for the largest accelerator in Southeast Europe, so has seen this work in both contexts.

Getting in the door, with research

Max Gurvits, an internationally-connected investor, emphasises the value of a little research. He encourages startups to invest a few hours in a list of 100 desired connections.

He wants them to do the mental exercise and leap to realize just how many people are hidden in Linkedin, Crunchbase, or alumni groups. All they have to do is look rather than rely on the obvious choices. Probabilistically, this larger amount of people also increases the chances of a connection actually happening and being helpful.

A list of 100 might seem daunting at first, but it's easier if you break it down into categories:

  • ideal customers
  • distribution partners
  • investors
  • analogs (companies who've done something similiar and can share benchmarks and advice)
  • compeititors
  • antilogs (comppanies who've tried something similar and failed)
  • domain experts, including press

Aim for a minimum of 10 per category, and you'll probably start finding a lot more low-hanging fruit.

Being equal

Boyan Benev, learned the importance of equal terms early on in his real estate career. He now has a few startups behind him and is a national TV personality. "If you put yourself as an inferior, you effectively are saying ‘Hey I am different from you.’ People are very good at sensing that and, with the neediness that you exude, they would subconsciously judge you more harshly. We are in fact all the same, entrepreneurs, investors and venture capitalists and we should feel equal with each other all the time.”

Lino Velev, director of Obecto, a software development company, starts on the outskirts of a certain social groups. For him, getting to the core through the weaker connections is more practical than going straight for the big fish.

Lino relies on story-telling to be memorable. I also happen to know he parties a lot too!

All of these are viable, authentic, and easy approaches to building your international network. Sofia, Bulgaria now has a growing startup scene, but it happened because of founders like these, hustling their way up from the remote, Southeast corner of Europe.

You have to be prepared; it takes a while for your network to build. But it usually pays off faster than you expected. No reason to let your current obscurity stop you.

Start something small  

Joel Gascoigne:

What I’m starting to notice more and more, is that great things almost always start small. Most of us know that Branson started the Virgin brand with a student magazine, but Virgin is just one of many examples which shows that the reality is counterintuitive: actually, the best things we know and love started as tiny things.

I’ve found that if I look into my own life, I find similarly that some of the most important achievements I’ve made started as little projects. My startup Buffer itself is a great example: it started as a two page website and in addition the short blog post describing this process has now turned into a talk I’ve given more than 30 times.

This applies in other areas of life - programming, for example, has Gall's Law:

A complex system that works is invariably found to have evolved from a simple system that worked. The inverse proposition also appears to be true: A complex system designed from scratch never works and cannot be made to work. You have to start over, beginning with a working simple system.

The copywriting difference  

A simple tip from Alex Pankratov that applies to almost every aspect of designing a product:

Simply changing the email subject from "Email Confirmation" to "Please confirm your email address" increased the number of completed subscriptions from 51% to 82%.

37Signals have harped on about it before too. Copywriting is design.

And then, there's also the fact that new users will fall back on text before other visual cues, as pointed out by Jennifer Boriss. Text matters.

Anatomy of the long sales letter  

"Long sales letter" landing pages, such as this one, are often used in the Direct Marketing/MLM industry, because, well, they work rather well. In this article, Paras Chopra interviews copywriter Jeremy Reeves about how to put together a long form salesletter, why it works, and so on.

Question: Do you think “sophisticated” web designers lose a lot because they are not ready to embrace techniques employed by long sales letter pages?

Absolutely. In fact, I’d be willing to bet that if they started testing long-form salesletters… they’d very soon be able to buy themselves a new house.

While the long-form salesletter format has certainly proven its worth in some industries, one would do well to apply a thick layer of context to this advice. In some cases (for example, a site targeted at geeks, a long salesletter would be simply disastrous, because it conveys a certain product image that Github's market has a strong dislike for.

So, it really depends who you're selling to, and, as Paras himself would probably advise (update: he has just done so here), the solution to this is not to decide in theory which one works, but to do some testing and figure out which one converts best for your product and your market.

Regardless, here's one of several gems in the article:

Question: What are your favorite copywriting tips and techniques?

The best technique you can ever use in copy is simply understanding the dominant emotions going on inside your prospects mind at the exact moment he/she is reading your copy. If you can understand that… it paves the way for every single word on the page and the copy flows like water.

Idea stagnation  

Noah Smith points out that the startup bubble can lead to stagnation of ideas:

I wonder if the Entrepreneurship Subculture isn't creating some unwarranted adverse effects. By putting entrepreneurs in such close and constant contact with each other, does the Subculture ferment creativity and cross-collaboration? Probably. But it also may inadvertently stifle creativity, by exactly the process that Steven Smith's research describes.

Noah suggests a solution: go on breaks, to the countryside or wherever is different from where you are. In his words, engineer a "change of context".

I can't disagree with that. Some of my best business ideas have occurred to me while floating about in the ocean or lying on a sunny beach. I wonder if that means I can claim my holidays as business expenses...

If you're stuck on a problem, going on a break is generally a good idea, but it's also a good idea if you're trying to generate ideas.

Use the tools you're displacing  

This is a variant of "eat your own dog food", but with a bit more nuance to it. Rob Fitz points out:

I've made this mistake a lot. I have an idea. I ask customers if it's a problem. It is. I ask how they currently solve it. Excel? That's barbaric. A better, more specific tool could exist, so I go to work.

(...)

In every case, the mistake was discovered when I began seriously using the existing tools for that exact use case. And I usually realise: they're not so bad!

One of the questions that smart investors will often ask is: how are power users solving this problem right now? The answer is never "they're not solving it", unless it's just not a real problem. Power users will always figure out ways to contort tools, processes, people - whatever is available to them - to somehow power through the problem and get whatever it is they want done.

Ideally, you should be a power user of your product. If that's not possible, then at least you should have such a user as a close advisor or even part of the founding team. They will be the ones who sit up in the brainstorming session and point out that the entire product is unnecessary because everyone solves it with a simple excel spreadsheet at the moment.

Outbound VC dialing  

By Mark Suster; if you get an email that looks like:

Hi [entrepreneur],

I hope all is well. I’m an investor at [Big Name, Large Fund VC] and recently came across [Your Company].

It looks as though you’ve built a very interesting business, and I’d love to spend some time getting a better understanding of your future plans for the company and if there is an opportunity to partner with [My Firm].

In case you aren’t familiar, I’ve attached a brief overview on our firm. [It's big, well known & we've invested in all of these really cool companies]

Do you have time for a half hour conversation over the next week or so? What fits your schedule?

Looking forward to speaking,

Name

Then:

He’s an analyst, which means he’s very junior – probably 24. He’s on a fishing trip. No reason not to call him but I wouldn’t get too excited about it. Sorry.

We got a few of those calls at Woobius, and yeah, they all amounted to exactly nothing.

Even if you're talking to a partner, funding is nowhere near being in the bag. But if you've been contacted by an Analyst who's just fishing for information, then the right response, as Mark puts it, is a polite no or "yes, if".

Read Mark's full article here.

The MicroPreneur Manifesto  

Rob Walling of SoftwareByRob has just published a "MicroPreneur manifesto". In it, he presents some principles for building microbusinesses online - not the kind of business that will sell to Google for $10m or even $1b, the kind that will make a steady income for its owners, and grow slowly and organically, and enable its owners to eventually have a relaxed, pleasant lifestyle with enough time to focus on other things that they also enjoy.

It's a good overview of an online business philosophy, which is different from the typical Silicon Valley approach, but certainly works for some people (and, possibly, it works for more people than the so-called "startup lottery").

I'll list the headings here, but please do have a read to get the full text.

The headings:

  1. It's much harder than it looks.
  2. There is power in working alone.
  3. Focus on your strengths.
  4. Freelancing is dangerous.
  5. Seek leverage.
  6. Stay away from moonshot ideas.
  7. Product last. Market first.
  8. Charge for your product.
  9. Passion isn't all it's cracked up to be.
  10. The pressure of freedom.
  11. Become a black belt internet marketer.
  12. Think human automation.
  13. The more you do in public, the faster things will move.
  14. Failure is an option.
  15. Live like a pauper, treat your business like a king.
  16. Reject growth.
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