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daily articles for founders

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

The (un)importance of design  

Is design an important part of a startup's offering? If it is, how can we explain the fairly large numbers of companies who are making a killing while harbouring less-than-stellar, or even frankly horrible looking websites?

Jason Cohen nails it, as usual:

I think you can go either way, but you must decide whether or not you're going to value design as core to your startup's identity, and then act consistently.

(...)

...it is useful to decide where you come down on the question of design in your startup, because if it's important you'd better work on that right now and develop a consistent culture of valuing design through-and-through, and if it's not important you'd better decide what is important and nail those things all the harder, because you'll be competing with people who are using superior design to cover up their lack of competency in those same areas.

In other words, "it depends". In some businesses, design is crucial. In others, it doesn't matter. Make sure you figure out which business you're in and then act accordingly.

Dangers of data visualisation  

Des Traynor, whose articles have been featured on swombat.com before several times already, posts yet another article worthy of your time. This one outlines the dangers of bad data visualisation, which is just as pernicious as bad data analysis.

Your goal when designing with data is to make large volumes of information easy to digest. That doesn't mean you hide details, it means you make it easy to find the important ones. If you don't know which ones are important, then you need to find out before you tackle the design.

(...)

The real genius in data analysis is knowing what questions to ask. Everyone wants sexy charts showing sales, or revenue. High and to the right, right? There are so many useful questions that go unanswered, and that's where data visualisation can help.

Paths to $5m  

Here's an article from 2010, by Gabriel Weinberg, doing some maths to calculate how to achieve a $5m exit depending on what sort of funding and cofounders you take. The conclusion:

At no investment and two co-founders, you'd need a $10M sale to get your $5M. At 80/20 that becomes $6.25M. And of course as a sole founder it's just $5M.

Those differences are pretty vast. $5M exit as a sole founder with no investment to $100M exit with several rounds of financing and two co-founders.

And yet the financial outcome is the same. But the probabilities are not. It's much easier to sell a small company for $15M than it is to IPO.

Of course, as Tim Ferriss puts it, why do you want $5m? If it's in order to sustain a certain lifestyle, then perhaps a muse or other lifestyle business may be even easier to achieve.

A good friend of mine has a talent for building these businesses - he can fairly reliably build a business that will make between £5k and £20k a month for a few hours a week of required effort. These are not always inspiring businesses, but in terms of allowing him to have the lifestyle he wants, and enabling him to do what he wants with his time, they are clearly successes.

If you just want a free lifestyle that enables you to spend your time on what you want, and if "what you want" isn't startups, you don't even need to build an exit-worthy startup to get your desired lifestyle.

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.

Don't seek product feedback from friends  

Blake Williams on where to look for product feedback:

While you should listen closely to criticism from friends, you should take most compliments with a grain, nay, large shaker of salt. Take them for what they are: support and validation that you are a friend. The same goes for more conventional, standardized user testing, too. The average person often just doesn't want to hurt your feelings, even when they're repeatedly told they're anonymous and getting paid to do so.

In fact, most people, even if they're not friends, will give you positive feedback when asked face-to-face. "Your product is good" is not a reliable metric. Measure usage and conversion goals instead. Some inspiration here. Alternatively, ask a community of opinionated jerks for their opinions here.

At the same time, don't take this as an excuse to not seek feedback from your friends. Seek feedback from every source you can get your grubby paws on, especially if this is your first startup. Lack of feedback kills.

Finally, the best source of advice on how to get feedback may well be Rob Fitzpatrick's Mom Test, an excellent, easy to read book which I highly recommend to startup founders.

The obvious, the easy and the possible  

Jason Fried proposes a method of categorising product features, in order to better prioritise them: obvious (stuff that needs to dominate), easy (stuff that people will do a lot) and possible (things that need to be possible, but that people don't do often). Key quote:

Making something obvious is expensive because it often means you have to a whole bunch of other things less obvious. Obvious dominates and only one thing can truly dominate at a time. It may be worth it to make that one thing completely obvious, but it's still expensive.

Obvious is all about always. The thing(s) people do all the time, the always stuff, should be obvious. The core, the epicenter, the essence of the product should be obvious.

The value of time, or not  

Here's an interesting article by Jack Groetzinger, making a relatively elaborate argument for how to value one's time.

Every person at every company has an implicit hourly rate of value they create for the business. Perhaps Bob, our traveling salesman, provides $150 of value for every hour that he's working [1]. If Bob catches the flu and is forced to spend a day hunched over a toilet rather on the road selling, then the DCF of future SeatGeek earnings decreases by $1,500 [2].

However, Jack then rightly undermines this point later (though doesn't go far enough in getting rid of it):

The rate at which you value your time value your time is not static; it's constantly changing. If I'm stuck on a plane with no internet, the rate at which I'm creating value for SeatGeek is low. On the other hand, suppose it's 3am in the morning and I'm feverishly working on a presentation for a massive client. The presentation will take place in five hours. Here, the rate at which I'm creating value quite high. If two hours magically disappeared from the clock, it could destroy a meaningful amount of SeatGeek's enterprise value. So I feel justified in, say, asking my girlfriend to get me a Diet Coke so that I don't have to break my concentration (thankfully she's an economics student, so she understands).

Jack then continues with a comparison of the value of someone's time to the company and their wage, but I'll stop here for an important tangent to a point which I think is crucial to the discussion.

Time is worthless

Time is the most valuable thing in the world, and yet by itself it is worthless. Time well used is valuable. As John Gruber said of Jobs in this article:

Late last night, long hours after the news broke that he was gone, my thoughts returned to those grass stains on his shoes back in June. I realize only now why they caught my eye. Those grass stained sneakers were the product of limited time, well spent.

We all have limited time, and we can't buy more of it, so philosophically, we might say it's all priceless. So why do I say it's worthless? Because unless you spend it well, that time does not have any intrinsic value to your business (though it is probably still worth something to you personally).

I believe and have believed for a while that time is not the right thing to measure or preserve. Buying a $700 computer instead of spending an hour searching for an equivalent $640 computer (the example Jack uses) is a valid trade-off, but not because of the time being saved.

What makes the trade-off valid is the energy, the attention that's being saved.

We each have a limited amount of attention and energy (two sides of the same coin) to spend on a vast number of potential attention sinks each day. We can only care about so many different things each day, every day, before our very ability to give a damn gives up and we just don't care anymore and can't bring ourselves to care.

Spending energy caring about saving $60 on the purchase of a new computer is not worth Jack's limited supply of energy.

Whenever you're about to engage in chasing down some rabbit-hole distraction, think of this - if there are only 10 things that you have space to properly care about today, should this be one of them?

Leading indicators of engaged users  

Very interesting. Richard Price reports on the Growth Hackers conference:

(...) it's important for the operational metric to be concrete, and also relatively early in the funnel of the user's experience of the site. As the funnel continues, drop-off becomes high, and you want to find a leading indicator as close as possible to the top of the funnel that you can work on to minimize the drop-off.

Richard also gives some good examples of leading indicators from well-known examples. Figuring out those leading indicators can be very difficult, so this is useful too:

[Facebook] looked at cohorts of users that became engaged, and cohorts of users that did not become engaged, and the pattern that emerged was that the engaged cohorts had hit at least 7 friends within 10 days of signing up.

So even a company the scale of Facebook had to use good old eyeballing to figure out what was going on!

Start with a prototype  

This article is fairly basic, but it does cover the essentials of why and how you should go about putting together a prototype (software or hardware), and also points out that you should test the prototype not only technically, but, even more important, commercially, before raising money.

Validate the customer need and opportunity. I always hate it when I see startups invest millions of dollars in technology before they validate their ideas in the market, only to find that customers seem to be looking for something slightly different. Test your idea early in a form that is easy and inexpensive to modify.

What goes wrong with startups  

Jessica Livingston (Jessica Graham?) at YC startup school this year:

We all know that a lot of smart and talented people start startups. You see huge numbers of startups getting started, and yet there are actually only a handful of startups that are big successes. What happens along the way that causes such failure?

Jessica's excellent article covers a number of typical failure modes. Particularly sad to me:

Not making something people want is the biggest cause of failure we see early on. (The second biggest is founder disputes.)

In the age of the lean startup methodology, spending years of your life making something people don't want seems like a shameful and avoidable waste. And yet it still happens, a lot! The lure of a good idea is such that people often don't realise that there are many ways to implement that idea, and that most of them are wrong. So they settle on the first approach, which is usually wrong.

As for the founder disputes thing, it's even more shameful. I'm right now in touch with a startup whose founders are splitting, hard, despite them having a highly successful product on their hand.

In any case, the article is a great introduction to the typical killers that might kill your startup, which you won't know about unless you're already well immersed in the startup culture and experience. Worth a read as a good overview of "things you don't know you don't know".

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