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daily articles for founders

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

Recall vs recognition for search  

Another great post fron Des Traynor. This one about where specifically you should use recall (e.g. a blank interface where the user needs to know what they're looking for) versus recognition (e.g. a list of categories to entice the user to click in).

Some key points:

Recall needs an exhaustive data set before it works well.

(...)

After a couple of zero result searches you’ll inevitably lose your customer, when they would have been happy to browse and purchase from your kitchen category.

(...)

Your search results page is a marketing page. You should spend time ensuring that it presents products well, and provides key information to inform a customers (e.g. price, delivery date, availability etc). Displaying results in the well known Google style works, but is missing a good opportunity to present your products as well as possible.

Acquiring startups for a living  

Excellent story by Rob Walling about acquiring a product called HitTail from a larger company who neglected it, and starting the process of turning it into a bigger success.

So I tend to focus on ideas that have a 1000x higher chance of success than the next un-monetizable social website you have in mind, but the success I strive for is a bit more modest. Probably close to 1/1000th of the payout of a big exit.

But I believe this approach is far more likely to make you happy, and far more likely to actually make a difference in the lives of more than the handful of people who hit the startup lottery each year.

That can't make his investors happy. Oh wait, he doesn't have any.

Traffic sources have a half-life  

Many startups measure at least some of their success in eyeballs (mistakenly or not). A media event (like a successful post on Reddit or Hacker News) can be an exciting moment in a startup's life. This article by Rob Walling suggests that different forms of marketing have different half-lives. His conclusions:

  • Zero Half-life - Any kind of advertising
  • Short Half-life - StumbleUpon, Twitter, Hacker News, Digg, a direct mailing, most referral links
  • Long Half-life – SEO, email subscribers, RSS subscribers, Facebook fans (in some instances)

This is an excellent point, as well as:

... some companies appear to build their business around viral traffic sources (which have a short half-life), but they are, almost without us noticing, converting them into long half-life sources.

(...)

What you’ll notice is these companies are using short half-life sources to drive traffic, but converting it into a source with a long half-life (an email list). This allows them to build a sustainable business over the long-term.

And therein lies the key: once you have tuned your ability to convert non-sticky traffic into something that will last, all traffic sources are good, no matter what their half-life.

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.

Cold calling versus AdWords  

Here's a great article by Robert Graham, where he explains how he developed a cold-calling approach to generate early leads and enable himself to figure out what his intended customers wanted.

Robert takes us through the evolution of his cold call pitch, culminating with a win-win approach that worked out for him:

Sure enough, each and every prospect, skeptical or not, I used this pitch on agreed to have me out. I booked a week of appointments in a handful of calls. I was so successful, I was forced to start telling people I would contact them the following month to set a date. I had too many appointments and too many blog posts to write. Making the pitch a true win for both of us was the magic that generated the 100% conversion to the next step, but each small piece of experience and learning contributed to that success. I learned a lot about my business from each visit. I didn’t close 100% to sales, but those relationships have yielded a lot more than a simple close. Many people have contacted me weeks or months after our first conversation and ask if I’m still solving the problems we talked about.

It's worth noting that this specific approach won't necessarily work for all industries. For example, it would be disingenuous for GrantTree to start posting reviews of tech companies and use that as a bait to get companies talking to us. That being said, looking for a genuine win-win is a great idea.

Read the whole article here.

How to become an online influencer  

Being an online influencer is not usually the goal of startup founders, but it is something that can help. Influence is a distribution model, and if you have a working distribution model you can often build some kind of business or startup around this means of delivering value.

Here are some thoughts about becoming an online influencer, courtesy of David Spark:

  1. You must create content
  2. Go after a niche
  3. Create a regular series
  4. Request to interview other influencers
  5. Offer yourself up for interviews too
  6. Contribute, for free, to well-trafficked media outlets
  7. Go after your industry's "whale" publications (i.e. the biggest publishers in your niche)
  8. Connect your story with a current trend
  9. Connect your brand with a much bigger brand
  10. Engage with your audience

There's no reason you can't become an influencer as well as starting a startup. The two definitely play on each other. But you'll have to remember that consistency is key to being a successful content producer (whether a performing artist, a writer, a singer, etc), and that is often difficult to achieve with the hectic schedule of a startup.

Another interesting link around this topic, if you're inclined to read more, is Merlin Mann and John Gruber's panel on obsession + topic + voice (transcribed here).

The one-minute entrepreneur

"So figure it out," Harry said. "I have confidence in you. Not total confidence, but if you can't do it, tell me that, and I'll try someone else, or do it myself. If you have a really good idea - for both the ridiculous story, and how to convince Rita Skeeter and her editors to print it - then you can go ahead and do it. But don't go with something mediocre. If you can't come up with something awesome, just say so."

Fred and George exchanged worried glances.

"I can't think of anything," said George.

"Neither can I," said Fred. "Sorry."

Harry stared at them.

And then Harry began to explain how you went about thinking of things.

It had been known to take longer than two seconds, said Harry.

(awesome source)

The book "The One Minute Manager", despite its facetious title, had a positive impact. This is not because one minute is enough to spend with the people you're managing (I'm sure not even the author believed that), but because a great many managers don't even spend one minute doing it. Explicitly spending just one minute telling someone they did a good job is a hell of a lot better than just making a mental note and saying nothing.

Most entrepreneurs that I know are can-do, action-driven types. They need to be like that in order to overcome the humongous inertial barriers that get in the way of getting anything done. If you're the kind of person who prefers to sit back and think about stuff, entrepreneurship will be quite a challenge. The default in the world of... humans... is that nothing happens. It takes hard work, energy, focus, determination, impatience, in short, an urge to make things happen right now, to make anything at all happen.

There's a reverse side to this, though: it causes problems; two in particular.

The first is a tendency to make decisions that are half-baked. Now, I'm not an advocate of spending too long making decisions. Entrepreneurs succeed by getting things right 70% of the time, while making all those decisions quickly, when other people might spend days, weeks, or even longer searching for the perfect answer. But that's not to say that every decision needs to be instantaneous and gut-driven, or that every decision should be made hastily.

First, some decisions are actually worth getting right. Knowing which ones those are is half the battle of becoming an experienced entrepreneur, but a good general guidance is how easily reversible the decision is, how long you'll have to live with it, how much work is attached to it, and how much it influences the shape of your business. Generally, if you're going to be stuck with your decision for the next 6 months at least, and it will swallow up two months of coding time, it's worth spending a few hours gathering data and thinking to raise that 70% a bit higher.

Even if the decision is nowhere near that important, if there's any work at all attached to it, try to spend at least a minute thinking about it, rather than deciding instantly, with no thought whatsoever. One minute is not that much. Don' be a zero-minute entrepreneur.

The second problem caused by making decisions very quickly is that when we need to make a quick choice, we tend to only consider solutions that we know already. A programmer will fix every problem with more code. A manager will create more processes. A designer will fix the design to eliminate the problem.

However, the best solution is not always the one you know. Every problem may look like a nail at first, but if you spend a minute thinking about it, and consider other possible types of solutions, you may realise that a screwdriver may be better suited.

A good set of questions to ask yourself during that one minute is:

  • Do I actually know what the problem is?
  • Do I know the extent and impact of the problem?
  • Who is the best person to fix this problem?
  • Does this problem actually need to be fixed?

Most of the time, you'll know the answers to these questions, and they'll help you to make the right decision. If you simply can't answer one of those basic questions, however, maybe you need to spend one more minute (or even a little longer) figuring it out before making the decision.


Venture capital basics  

This is a good, relatively brief overview of the basics of looking for money from VCs.

If you're not familiar with any of the concepts in it, it's worth a read. Covered:

  • What VCs are looking for
  • The difference between VCs and angels
  • Asking for the right amount
  • Planning on future rounds of investment
  • Understanding pre-money, post-money and % ownership
  • Negotiating
  • Comps
  • % ownership
  • Exit strategy (with example)
  • Understanding how a VC fund works
  • VC maths
  • The fallacy of taking other people's money
So you want to join a startup  

Working for an existing startup is a good way to learn the ropes. Dana Levine makes a valid point that working for a very early stage startup will give you founder-level risk (and lack of pay) without the matching equity, and that therefore:

If you're primarily looking to learn a lot and to prepare for your own startup, I would target a startup with 15-30 employees who has taken a decent-sized round. They will pay you a salary that is close to what you could have gotten elsewhere, and you will still have the opportunity to feel like you are part of a small team that can have a big impact. Plus, money won't be super-tight, so they won't need a quick exit, and will be likely to be around for a while.

That said, as he points out:

With few exceptions, the most successful startup founders are the ones who ate Ramen and packed three people into a one-bedroom apartment.

You aren't going to learn how to do that in a 15-people post-funding startup. Then again, maybe that's really the sort of thing you can learn on the job.

This HN comment also points out that culture fit is very, very important when joining a startup.

How to generate startup ideas  

Wesley Tansey proposes a number of techniques for generating startup ideas. The techniques are useful tools to expand your repertoire of techniques, but the key point, in my opinion, is after the list:

One important thing to remember is that these are not meant to be options that you choose at the start. Rather, consider each of these strategies to be a background process that runs continuously in your mind. Every time you encounter a problem, if it may be solvable by one of these strategies, that’s a potential startup idea!

This echoes what I've pointed out before: the way to generate ideas for businesses begins with a continuous process of evaluating business opportunities, rather than business ideas, around you.

That said, once an opportunity has been flagged, Wesley's techniques can help to define what sort of opportunity it is.

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