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

Hardware startups and quality  

Marc Barros offers some solid tips for starting a hardware startup, which show that although there are similarities between the approaches for hardware and software:

Shipping a quality device is by far the hardest part of building a hardware company. I'm not even talking about the extra work it takes to deliver an amazing customer experience. I'm just referring to a product that doesn't break, feels great when you use it, and delivers on the promise. Not just once either, but multiple times over, across thousands of units.

... the punishment for screwing it up in hardware is much more brutal:

Assuming you retail your product at $100 and it costs you $50 to deliver the finished product to your customer, you have $50 in profit.

Each time you deal with a defective unit it costs about $15 in shipping (to and from the customer), requires you to replace the defective product with a new unit from your warehouse that you can no longer sell, and spend about $5 to ship it back to the factory in buik. Even though your factory says they will reimburse the costs, it will take 60-90 days from the time you send the product back to agreeing on the root cause and in turn the financial reimbursement. In the meantime you are wasting your limited inventory and cash reserves replacing defective units.

Marc offers some solid tips for hardware startups, to avoid shipping a crappy product that gets returned a lot. Read more.

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.

How VC firms are managed  

Here's a great article by Jo Tango, that starts off as a description of the way in which VCs are paid (which is relatively common knowledge), and proceeds to explain some interesting facts about the way VC firms are managed (which is not so common knowledge):

The existence of the management company has a few implications. First, the Chief Partner cannot be fired without his/her consent. Every other partner at a VC firm can be, including the ones who have worked hard to earn pieces of the management company. So, a partner at a venture firm is usually an employee-at-will. They can be fired at any time.

(...)

Now, a VC firm's culture varies from one to another. The Chief Partner may delegate authority so that all partners have a voice in an investment decision-or, he may allow input from others, but in reality, is the one making the decisions. Entrepreneurs need to know that when they pitch a firm. Who is the Chief Partner and do the other partners have power?

Read more here.

What does the business guy do pre-launch?  

I don't quite understand why this idea keeps cropping up lately, even from reputable sources. For example, this one is from Seth Sternberg, the CEO and cofounder of Meebo - so he's hardly a nobody or a slouch. And yet, what to make of this:

For most consumer internet products, there's not a whole lot the business person can really do pre-launch. All of the company's value will come when the team builds and launches a product, so that should be the primary focus. There aren't any partnerships to be struck yet, as the product has yet to build any credibility in the market. There aren't any folks to interview, as you can't afford to hire a full team, and you're wasting your time looking for pre-launch financing—a controversial statement these days, I know, but that's a topic for another post.

The funny thing is, he answers that in the same article, as things to do "2-3 weeks before launch" - all those things can be done long before launch:

  • Get incorporated (how does that need to wait until launch?).
  • Figure out the launch strategy (I sure hope that's being done earlier than a month before launch!).
  • Find good mentors.

Here are a few other things to do if you're the business guy on a pre-launch startup:

And that's just looking through the articles in the Founder's Library.

The truth is, if you followed some kind of discipline like Hypothesis Driven Development to map out the unknowns ahead of you, you should have plenty to do before even starting to code, let alone while the coding is going on.

How to deal with massive technological disruption  

I went to a couple of events, recently. Each had a a very different feel.

Journalism

The first was an even for journalists and hackers. There, the main concern echoed by the journalists in the room was of how they could continue to do what they feel is a valuable thing, despite the major changes that technology has wrought on their industry.

Journalists feel (quite rightly) that they perform a public service. In the words of the respectable speaker at this event, their job, among other things, is to give people the information they need (but don't necessarily want) alongside with the information they want (but which isn't really useful to them). In other words, give people something that will help them vote in the next election alongside their daily dose of football trivia.

This all felt very noble, if a little paternalistic, but my feeling was that they were living in a dream. Let me explain what I mean by mentioning the second event.

Health

Healthcare, particularly in the UK, is hardly a progressive field full of consumer technology innovations. And yet, the event that I went to (MC ThinkCamp mHealth) was surprisingly progressive. The people presenting were, most of them, doctors. And yet they fully, clearly understood that technology is changing the reality of healthcare.

For example, one presenter had built an application that allowed patients to handle their own records. He didn't wait for approval from the NHS, he didn't even seek the approval of other doctors. What this entrepreneur realised was, to put it in his own words, that "history is moving this way", and that people who argue that patients shouldn't control their own records will, in 30 or 40 years, be regarded as incomprehensibly wrong, much as we now regard those who argued, up until the 1970s in Switzerland, that women shouldn't vote. Those people were, and are, on the wrong side of history.

My feeling was that these people "got it". They understood that technology moves inexorably forward and does not care much for the established order. They understood that it will turn the world of healthcare upside down over the next few decades - wether healthcare professionals like it or not - and that if they don't want to be left behind, they'd better join in the change.

They understood that if technology makes possible something clearly desired by many, this thing will happen, and will keep happening, and will be unstoppable - whether that is free movie downloads, patients controlling their records, or, as the linked article discusses, news personalisation.

Journalism, redux

Jeremy Mims, echoing the feelings expressed by journalists at the first event, proposes that:

Part of the purpose of news is to create an educated and engaged citizenry, not merely provide a funnel for our natural predilection for the stuff we like (which the Internet is already stunningly good at).

He continues:

What I'd prefer to see is a service that tracks what everyone reads and shows me results not from people like me, but people who aren't. I'm already great at finding information that confirms my outlook and disposition (on the Internet, it's a Google search away). I need to be reminded that the world is big, opinions are diverse, there are subjects that I'm woefully uneducated about, and that not everyone thinks the way I do.

That's all very nice, but that's not how disruption work. What people want, they will get, and the way forward is not to pine for something that might work as it did in the past (or, even worse, provides something that most people don't want, such as news that they disagree with).

I actually agree with journalism's goals, however paternalistic. People need to get more than a daily dose of X Factor and Football to be functioning citizens - and many people don't get that info-nutrition. But the way to achieve this is to look forward, at things as they will be 10, 20, 30 years from now, and build from there, not from a past that is quickly fading.

This means, for example, accepting that news personalisation is on the way, and that people will read only the news they want to read. This doesn't mean they won't be exposed to different viewpoints, but it means that in order to reach people, you'll have to build something that they actively want to follow - not just piggyback on the local sports news and hope they read the headline printed on the front of the paper before they vote.

It's change, real change, and it requires a different mindset, one that's willing to start from where things are going, rather than whence they came.

Customer churn and engagement  

Yet another excellent article by Des Traynor, this one about how to think of "churn" and how to reduce it by engaging with customers at the right point.

Activity churn is where the rubber hits the road. Typical Churn stats use account cancellations as a measurement but cancellation is only ever a trailing indicator. It's the last thing that happens.

Customers don't make a snap decision to quit an app and delete all their data on the spot unless the app has really screwed up for them. Typically customers gradually stop using it, it goes from every morning to every week to once a month. Eventually their data in the app grows out of date and soon they realise they're paying $29 per month for something they don't need and don't use. At this point you can't recover them easily, but this is the first time a churn metric will recognise them.

Des offers some practical advice for how to address the churn. Read the whole article here.

Recruiting in the Valley: the recruiter honeypot  

Elaine Wherry has written a detailed analysis of recruiting in the Valley. If you're based anywhere else, it may be of mostly intellectual interest, but if you're competing for developers there, it seems like a must-read - and highly entertaining, too.

The honeypot idea emerged slowly, "If only I weren't a founder! Which recruiters would have contacted me as an engineer?" I stewed on the idea of posting my resume online with a fictitious name for days and then one sleepless night, without telling anyone, I woke up and posted a small three-page website with an about page, resume, and blog for a supposed Pete London whose interests and engineering persona mirrored my own except he wasn't a founder. I swapped out my post-graduate experience with my husband so it wouldn't be too easy to trace back to me. I returned to bed with a small glimmer of hope - I had been hunting for recruiters for months but now the recruiters would come to me!

Elaine goes on to break down and analyse the data she has gathered, and derive some solid actionable tips for startups who need to hire. Read it here.

Side projects  

Andrew Dumont makes an interesting point:

Know that when you start just a side project, you're starting so much more. It'll completely consume you. The worst failure in any side project is to devote time, energy and sanity for any sustained period only to close the doors.

Side projects are a means to an end.

They need to start with an end-state in mind - create a passive income stream, validate my idea. They need to have deadlines and key metrics - six months to profitability, 10 paying users to validate my idea. But most importantly, they need to be a sprint. The longer a project lingers, the harder it becomes to keep morale high and pull the plug if it's not working out.

There is, of course, a valid point there. Then again, I am reminded of those people who assault young musicians with questions like "But why do you want to play the violin? What are you trying to achieve?"

Isn't playing violin and starting side-projects just for the fun of it enough for a start?

I am pretty sure that most people who eventually started side projects with clear end-states in mind first started side-projects just for the heck of it. They probably did that for years before the thought that a side-project could have an end-state right from the beginning entered their mind. That certainly was the case for me: most of my early programming, writing or web activities were done purely for the heck of it.

So, perhaps better advice is to be aware that some day you will want to graduate to definite goals.

But if you want to start a side-project today for the heck of it? Go for it.

Formula for elevator pitches  

A simple formula for an effective elevator pitch, via Elliot Loh:

We solve [problem] by providing [advantage], to help [target] accomplish [target's goal].

And, once it makes sense, bolt on:

We make money by charging [customers] to get [benefit].

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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