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daily articles for founders

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

How to start a startup  

As I mentioned earlier, I will be posting older articles for the Founder's Library.

This classic from Paul Graham is a must-read for startup founders, and very much deserves to be the first to receive the "Library treatment".

You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.

Bearing in mind that Paul wrote this around the time when he started YCombinator, and so didn't have the vast amounts of experience watching over 200 startups grow, this is nevertheless an excellent pattern.

Starting with good people means to start with the right kind of obsessive, determined, smart people:

It means someone who takes their work a little too seriously; someone who does what they do so well that they pass right through professional and cross over into obsessive.

Building what customers want means getting something out and quickly iterating it based on customer feedback:

In a startup, your initial plans are almost certain to be wrong in some way, and your first priority should be to figure out where. The only way to do that is to try implementing them.

This, however, should come with the caveat that not all product problems are revealed by coding - nor is the quickest way to check off hypotheses always to build something. See this article, or most of the Lean Startup methodology.

Paul's final point is about spending as little as possible - both in terms of hiring, and in terms of other miscellaneous expenses like Aeron chairs. This fits in with the Lean Startup methodology which is popular today, although one update from Lean is that, once you reach profitable product/market fit, i.e. once you have built a process that takes in $1 at one end and turns it into $2 at the other end, then you should invest money into scaling that process to saturation.

Dangerous data for startups  

An interview with Patrick Vlaskovits, posted on the chart.io blog, outlining some good points about dangerous data:

Many people, especially those handicapped with a graduate level education, like myself, think that data is only interesting and can only be acted upon if it is "statistically significant". In the context of early stage Customer Development, I believe this is well-intentioned, but ultimately, misguided.

and

Evidence comes in a diversity of forms. It can be anecdotal, it can be in aggregate or it can be a trend line. If you take an open-minded approach to the types of evidence you'll accept, and adjust for their biases/problems/problems accordingly, you'll likely fare better in the chaos of startup-land than just simply jettisoning what you feel is low-quality data.

and

In my opinion, trying to make CustDev formulaic, well-that's a road to perdition. Some of the techniques that may work now, might not work as well in two, five, ten years, so there is no point writing a hyper-specific rule book because no book can know exactly the context you are operating in and when you are operating there.

There are a lot of other good points made, generally pointing to the fact that not all business decisions can be reduced to a statistical A/B test, and how techniques and methods for customer development need to remain contextually sensitive to be useful. It's worth reading the full article.

How to evaluate a non-technical cofounder  

Nathan Hurst on how to evaluate a non-technical cofounder:

If you're joining someone else's company, the team has to be good enough for you to give up [100 - (your equity share)]% of the company. Let's consider the situation where there is a sole non-technical founder approaching you to be the other member of the founding team. How should you evaluate that person/startup?

The key points to look out for, according to Nathan, are:

  • Traction (measured differently for different kinds of startups);
  • Domain expertise;
  • Marketing ability;
  • Fundraising ability;
  • Product skill;
  • Respect for development;
  • Startup experience;
  • Relevant connections/following.

Really, joining a startup as a cofounder is like being a major investor in that startup. You should use many of the same metrics as any investor (as a bonus, this will teach you how to pitch your startup).

One meta-metric that comes to mind, in addition to this list, is whether or not the startup/founder really needs you to succeed. If the startup needs you specifically in order to have a ghost of a chance, then you're not joining it - it's joining you. And so the negotiations about share percentages should reflect that.

Advice for a young entrepreneur  

Tony Stubblebine starts with the following (well presented) advice:

  1. Surround yourself with interesting people;
  2. Focus on the right things (which means, ironically, figuring out what the right things are);
  3. Be useful.

He ends on a little zinger:

There's basically two ways to be financially successful as a company. One, you could rely on time-tested business fundamentals. I call this the Warren Buffet model.

Two, you could rely on the greater fool theory, which is that with enough hype, smoke, and mirrors you can find a buyer who is an even greater fool than your investors.

(...)

So much of the startup world is arrayed around the greater fool theory that I felt like my best chance was to build a company that was independent of that system. I think of bootstrapping as a very slow form of raising money. But now that we've done it, I have a reliable stream of income and never have to raise money again. It's really just at this moment in time that we can switch from doing whatever it takes to survive to actually testing our ability to make a major impact.

To be fair, there are situations where you do need the extra money to grow extra fast, or else you lose. Groupon is a good example - had they not executed so brilliantly and quickly, they would have been eaten alive by the dozens of clones which emerged everywhere.

I'm a big fan of getting profitable early, but it is neither the only way, nor the universal best way.

Finding a great startup advisor  

When I look back at the kind of naive mistakes I made on previous startup endeavours, it almost physically hurts, particularly when considering how avoidable many of them were. I excuse myself by saying that I didn't know any better, that I've learned a bit now.

What gets really scary is that I haven't stopped making those mistakes. No matter how confident I might be today, in one year I will look back and see many silly mistakes that I made, things that in hindsight will seem obvious but which are entirely opaque to me today.

The right kind of advice, delivered in the right manner at the right time can make or break your startup. This is why building relationships to other people within the startup community is so important. Learning to run businesses well can take quite a few years and involve hundreds of avoidable mistakes. The right advisor can help you avoid those mistakes and save you enormous amounts of unnecessary pain and cost.

Here's some good advice from Jason Freedman on why and how to select people to advise you on your startup journey:

There are many parts of the start-up process that don't need significant innovation. An entrepreneur's education is to learn all these conventions that work well and then innovate on their product.

The conventions can vary greatly depending on the year, industry, country, and so on, which is why personalised advice from someone who cares and has been there recently enough is so essential. Jason outlines a few key attributes of a good advisor for your startup:

  • They're only a few steps further down the path.
  • They're happy to help with the small challenges.
  • They will call you out when you do stupid stuff.
  • They're respected by your cofounders.
  • They care more about you personally than about your startup.

Sound advice.

Motivating your (technical) cofounder  

I asked my technical cofounder to set up a simple email opt-in form for people to sign up as beta users for our startup. Whenever anyone submitted their information, an email would be sent to both my tech cofounder and I to alert us of a new sign-up.

Although all we had was a simple coming soon page and a video, I began spreading the message far and wide. We both received our first "You have a new signup (beta user)!" email that day. Hundreds more piled in the next few days.

Signups were my new form of "motivation" currency. Every user that signed up made developing and launching the project more and more urgent. Whereas before we were the only two people excited to launch our startup, now hundreds of other people were excited and waiting for us to launch.

It's a good start, but...

"Other things" is my way of saying: I felt useless. I could whip up a design and could dabble with simple HTML and CSS, but was too much of a novice to contribute to the back-end code. And unfortunately, at this point, most of the work that needed to be done heavily relied on the back-end.

If you think all the work that needs to be done is coding, you've probably not planned your startup right. Go back and list the hypotheses and order them by uncertainty/risk. Unless you're doing rocket science, "can we build this thing?" should be somewhere near the bottom, and is the only question that may require a long, uninterrupted stretch of coding.

In pretty much every case, there will be more non-coding work to do than coding work. In a tech startup, there will certainly be a number of coding sprints, but those should be interspersed with feedback gathering and other customer development exercises, even in a B2C startup. And you don't need to be technical to do customer development.

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.

Sell the dream, not the job  

Some great advice on startup recruiting from Roger Ehrenberg:

You're not hiring to fill a role; you're selling a dream. This doesn't mean being fluffy (which engineers hate); it means clearly articulating the company's big vision and how the right person will help the company disrupt and transform the market.

The rest of the article is worth your while too. Every founder will find themselves needing to recruit someone some day, and those early hires determine the fate of your company, so you have to hire the best you can.

Every entrepreneur should write  

Jason L Baptiste makes a great case for why every entrepreneur should write. I agree with this - in fact, I believe that writing is one of those essential skills that you should somehow recruit on any early startup team, because of all the opportunities it opens up.

All the initial points really boil down to the last one:

It Is A Rapid Accelerator Of Serendipity

Startups are certainly impacted by luck, but I believe they are impacted just as much by serendipity. You never know who knows who or who you may run into at an event. By putting yourself out there and making yourself open to meeting as many people as possible, serendipity is much more likely to happen. Once you have even a minor audience, you are now likely to experience the effects of serendipity. One article might reach 500 or 50,000 people in a short span of time. Remember that we live in a world where content/information travels faster than ever before. Out of those 50,000 people, you never know who might be reading, who might reach out to you, or who might leave a comment. I can tell you this: The majority of good things that have happened to me in business can be traced back to my writing

Writing is a great way to create opportunities for yourself and your startup.

Jason also provides some tips about how to get started:

  • Keep it simple, worry about the aesthetics later on
  • Define a specific audience to write to
  • Set a regular routine
  • Don't force it
  • Initially share with close entrepreneurial friends
  • Watch your analytics
  • Avoid rambling
  • No linkbait, just thoughtbait
  • Make yourself easy to reach

All great points. If you're an entrepreneur and hesitating to get started, read the article. If you're worried about your writing skills, read this first.

Random acts of violence

Point (tru.che / imakeshinythings):

I'm very disappointed in Urban Outfitters. I know they have stolen designs from plenty of other artists. I understand that they are a business, but it's not cool to completely rip off an independent designer's work.

Double-point (consumerist.com):

Something is rotten in Denmark, or rather, in the I Heart Destination jewelry line of baubles offered by Urban Outfitters. Turns out those $19 danglers in the shape of the various United States of America with a heart cut-out are exactly like necklaces crafted by an independent jewelry designer named Stevie.

Double-tweet point (myaimistrue.com):

Today has been a fun ride. Behold the power of social media muscle. (...) What I do have - and the reason that my call for a boycott on Urban Outfitters spread so fast and wide - is a tribe. A tight knit group of independent artists and crafters that follow me. My cause resounded with them. They spread it, and their friends spread it, and a few big influencers on Twitter spread it, and then it was gone.

Counter-point (regretsy.com):

Now, I'm not generally the voice of reason, so this is an uncomfortable position to take. But I'm just not sure I want to start a boycott over an idea that many people have had, some for years before Truche even opened her Etsy store.

I'm not saying that Urban Outfitters doesn't help themselves to the designs of others. They certainly have a record of pilfering designs, and they may very well have stolen this one. The question, for me at least, is who did they steal it from? And if we don't know that much, how do we know it's really been stolen at all?

Double counter-point (consumerist.com's ^H division):

While this particular seller may have thought up the idea all on her own, different versions of the necklace predate her shop, dating back to as early as 2008.

Maybe there really are no new ideas out there.

"OMG WTF is wrong with you" point (Urban Outfitters):

In her recent blog post and on Twitter Koerner claims that Urban Outfitters stole her designs or was inspired in some way by the items in her Etsy shop for our I Heart Destination necklaces. In fact, a quick search on Etsy for ‘state necklace' reveals several other sellers with similar products (as seen here on Regretsy) who offered their wares as much as a year earlier than Ms. Koerner.

We are not implying that Koerner stole her necklace idea from one of these other designers, we are simply stating the obvious—that the idea is not unique to Koerner and she can in no way claim to be its originator.

"Let's learn from this" point (UserVoice):

This week a blogger with a mere 1,000 followers on Twitter discovered (apparently just the latest in many) an Urban Outfitters product that was a rip-off of an independent artist. She blogged and tweeted about it. The result was that thousands of people retweeted it, she & Urban Outfitters became a trending topic, and American Apparel removed the product from their shelves.

(...)

Any customer can deliver a killing blow, and any customer can deliver a fame-creating endorsement. Feel free to focus on courting "big" bloggers and tweeters for press - but don't risk treating any of your customers badly. You never know what might happen.

My conclusion:

The internet is a batshit crazy place. It has brought a scale of millions to the lynch mob mentality every little village has been capable of for millenia. Like in all of history, many (most?) lynch mobs are uninformed, or actively disinformed, or even deliberately manipulated, but if they're hauling you up a lamppost or lighting a fire under your feet, that's of little comfort.

Be aware of that, be ready for random acts of wanton violence from unexpected sources, watch out for the sudden flash lynch mobs appearing out of nowhere and baying for your blood, and when they do happen, be on the ball and active in managing the mob.

Otherwise, expect to get lynched from time to time.


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