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daily articles for founders

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

Toxic investment  

Kicking off the series of Founder Stories via Stef, here's a tale of the failed startup Tab by Shawn Zvinis.

It's always good to reflect back at the end of a project especially if it failed. Shawn highlights a number of reasons why his startup failed, none of which are particularly original (unfortunately), but which must have been painful to learn. I'm linking to this one because it seems like yet another startup that was hobbled by raising investment:

Key learning: try to avoid raising a single penny until you have built a working prototype and have some (any) early revenue — and in a best case, revenue that can at least pay your overheads, so you can have the upper hand when negotiating with early investors.

And:

Our biggest mistake was listening to these investors too much, and we started focusing our efforts on how we could make Tab more investable rather than talking to customers and iterating the product. If we spent more time working on the product, the product itself would have made the company investible, rather than us jumping the gun.

My takeaway is that out of 10 key lessons learned, eight are related, directly or indirectly, to the funding, and may have been avoided if no funding had been raised:

2 . Raising too little too early: That's obviously related to funding.

3 . Building a not-so-minimum viable product: would have been avoidable if there was no funding to insulate the team from the realities of having to make money.

4 . Focusing on accelerator too early: accelerators are another step in the funding game that should be avoided in most cases. I chalk that one up as funding-related too.

5 . Going to the USA at the wrong time: would not have been possible to even consider without the cushion of funding.

6 . Starting scaling too early: according to Shawn this was kicked off by investors.

7 . Overvaluing qualitative vs quantitative: when you need to sell right away and start making money yesterday, it's impossible not to learn that adding some quantitative benefit to your customers is essential.

8 . Not generating any revenue: when you need money today, you don't talk to people who don't want to pay.

9 . Not building a financial model early enough: while "building a financial model" might be something you omit without funding, we're only talking about the theoretical financial model here. The practical one is being built every day, through actual selling and delivering.

Starting a business is hard and risky.

Starting a business with funding is harder and riskier.

What's the use of stories that aren't even true?

In Salman Rushdie's excellent book Haroun and the Sea of Stories, there's a striking scene near the beginning where Haroun, the child of a famous storyteller, confronts his father by repeating a line that was previously parroted by a narrow-minded neighbour:

What's the use of stories that aren't even true?

Oh boy. What a scene. The question is a slap in the face of his father, of course, and Haroun spends much of the story (which I gather might be imagined rather than true) making up for this mistake, through fantastic adventures in a universe where two factions are at war: those who tell stories, and those who want all stories to end and silence to reign.

So, what's the use?

When it comes to the great written works of humanity, almost all of them are fictional. Whether you look deep into the past, to Gilgamesh, the Mahabharata or the Romance of the Three Kingdoms, or in the less distant past, to authors such as Herman Hesse, Gabriel Garcia Marques, Tolstoi, Dickens, Victor Hugo, and so on (the list is not endless, but is long), fiction dominates any sensible list of the Greatest Written Works of Humanity. Here or there, a work of non-fiction might peep in and even claim a rightful place, but few seem capable of comparison with the "stories that aren't even true" when it comes to telling eternal Truths.

For this is where fiction is so much better: at the telling not of factual truths that anyone can observe, but of greater Truths about life, about what it means, what it's about, how to live it, how to enjoy it and be happy and find a purpose. To observe these Truths, one needs very good eyes indeed, and telling them directly is almost impossible. Instead, a great author must tell a story that illustrates the Truth that they experienced and observed. If they do it extremely well, it becomes a kind of distilled life experience that the reader assimilates and which changes their understanding of life in subtle and important ways.

If you're looking for truth, then non-fiction is great. If you're looking for Truth, however, you have to look into stories that may not be true but are True.

Startup stories

Which brings me nicely to the subject of startup stories. In my writings on swombat.com, I've endeavoured to always be factually true when telling a story. I don't make things up. However, I am also a lover of fiction and, as argued above, I feel there can be more Truth worth telling in fiction than in fact.

So, this is a thought that I'm struggling with, as far as writing for swombat.com goes. Does fiction have a place in business writing?

Experience is very valuable in business, where many crucial decisions are made on hunches, based on incomplete data, and good fiction is very good at distilling experience that normally might take a lifetime to accumulate, and transmitting it in a few hours.

Clearly fiction is not the appropriate mode of writing for all startup advice. A "how to use LinkedIn" written as a suspense novel would most likely be a terrible idea (though rather original), but it seems to me there are many other valuable lessons of business that could be better illustrated by fictional stories than by factual articles. Those are the ones that you might capitalise as Lessons as opposed to lowercase lessons (I do like to play with capitalisation).

I'm very keen to hear what other people have to say about this. Please do let me know your thoughts - by replying to this if you've received this article by email, by emailing me directly, or by posting comments on Hacker News if this does get on HN (Update: here it is).

Some obvious disclaimers:

  • Fictional stories should be clearly advertised as such. Making up stories and presenting them as factual anecdotes is obviously misleading and wrong. Writing short fictional stories to explain business wisdoms, though, seems ethical.
  • Clearly verifiable theories should not be told as fictional stories - they should be verified and told as fact.
  • However, "profound truths" as Niels Bohr called them, which have the characteristic that their opposites are also true, are well suited to fictional story-telling.
  • "What's the point?" To partially transmit experience normally available only to those who have been running businesses for years, to those who haven't.

People, processes and tools

Some years ago, one of my managers used to repeat this "Accenture truism" (or so he designated it): to fix or improve something, first you need the right people, then you need the right processes to help those people work together, then finally you need the right tools to support those processes. People, processes, and tools - in that order.

This is even more true for tech startups than for corporations. As geeks, whenever we face a problem, we often start by looking for a tool to fix it. "Our team isn't communicating properly - let's set up Campfire." "But I don't like Campfire, why don't we use Yammer?" "Yammer and Campfire are so lame, let's just use good old IRC."

This is the wrong approach. Tools by themselves rarely resolve problems in your business. If your team isn't communicating, you need to solve that problem step by step.

First you need to figure out if that's because of a "people" problem. Maybe one member of your team just doesn't want to talk to the others. If that's the case, no tools or processes are going to fix that. For example, many sales organisations try to get their salespeople to communicate everything they know about every client - but salespeople don't want to do that, because it makes them more easily replaceable. Setting up a CRM tool doesn't solve that problem, until you fix the people, by giving them the right incentives to do what you want (or, if that's impossible, either changing what you want or changing the people).

Then, you need to look at the "processes" part of the problem. For example, assuming your team wants to communicate with each other, maybe they can't because they tend to sleep at random schedules in different parts of the world. That's a process problem that can be fixed by, for example, declaring a certain time each day "team time". For example, you can anoint the period between 2pm and 4pm in some timezone as "team time", and require everyone to be available to chat at that time every weekday.

Finally, once you've got the right people and they have the right processes in place to support them, then you can start looking for tools to support those processes. Depending on what you actually want "team time" to look like, you might choose campfire, GTalk, IRC, or any number of other tools. But by now, you can select the tool based on whether or not it supports your processes, rather than whether or not it's the sexy SaaS app of the month.


Should you really be a startup entrepreneur?  

Great read, by Mark Suster, about the difference between being an entrepreneur and being a VC. The description of being an entrepreneur is pretty spot on, and if you cannot read that story and think, "wow, ok, I'm alright with that", you probably shouldn't start your own business... yet... maybe...

The one thing that those "Entrepreneurship is scary" posts always miss is the progression in one's character. I am a very different person than who I was when I quit my safe Accenture job to jump into my first flaming disaster of a startup. Most entrepreneurs I've talked to agree that you learn a whole lot about both how to run a business, and about yourself, when you spend a few years running a startup.

I'd argue that most people who start startups aren't ready for them, at the beginning. They progress towards this Zen-like resistance to risk, stress, and rejection, but it takes a couple of years of constant terror to get there. So, even if you don't see yourself in that list of characteristics yet, it's probably enough if you think you might be able to see yourself there sometime in the next few years.

Focus on one thing  

Jason Cohen and Noah Kagan arrive at the insight:

[Noah] said: “A startup can focus on only one metric. So you have to decide what that is and ignore everything else.”

Jason proceeds to apply this idea to WP Engine, his current startup, via an insightful socratic discussion between himself and Noah.

It's a very worthwhile article, worth your time. One of the conclusions:

Little incremental things can come later, when you have the extra time. Today, it’s just big needle-moving things.

Does that mean no A/B testing, no tweaking of AdWords copy, no landing page optimization? For Noah, yes that’s exactly what that means. I’m not as disciplined, so for me it’s not so spartan. We’ve all heard stories about little tweaks resulting in 15% lift in revenue. Fine.

But remember you’re deciding between spending hours iterating to a 15% lift, versus spending all your energy, time, emails, social media, creativity, new features, marketing efforts, ads, measurement, trying to get a 2x or 3x change in the Most Important Number, that’s an order of magnitude better. And you can still do the 15% thing!

Is that always true in all contexts? Well, I don't think it necessarily is. For those things which aren't going to move the needle, there's always consultants and other subcontractors. If the ROI is there and it can happen with minimal input, it might make sense to do it nevertheless, so long as it doesn't cost you attention.

As the amount of cash in the company increases (through sales), it makes sense to start looking at those peripheral items and seeing if you can get someone else to do them for a price that works.

How to choose a domain name  

A company or domain name seems so inconsequential in the greater scheme of things. After all, what will sell is the product, right? Google would still have stormed the world even if it was launched as searchforstuff.com, right?

Whenever starting a new business, venture, site, or other thing that needs a name, it always feels like finding the name takes a disproportionate amount of time compared to its impact. But from experience, I find that actually, the right name can be very important depending on the context.

Really, the importance of a name depends on your business. For something like GrantTree, having a clear, memorable and trustworthy business name is essential, since we often introduce ourselves over the phone, and our customers want to feel reassured that we are not some rip-off outfit. Would you get your tax credits handled by "Rapid Lobster Inc" (one of our quickly-discarded brainstorming options)? However cool that name may be in the right context, it would be disastrous in ours.

For something like Bushido, having a cool-sounding name is probably more important, and the clash with the existing concept of Bushido is not too much of a problem, given how Rails-related stuff has tended to dominate whatever word it's adopted.

On this topic, here's an excellent article by The Name Inspector about some common, older myths of selecting domain names, and how they have evolved over the last 10 years.

Some of the key points:

  • Short is good, but memorable and clear longer names are better than opaque shorter names.
  • Ideally the name should have some meaning associated with it that helps bolster your brand (I certainly agree).
  • You should be able to dominate the search engine results page for your name (i.e. avoid names with a very popular existing use).
  • Alphabetical order is not very relevant today.
  • There are no magic letters that make a domain name better.
  • All types and patterns of names can be good.

Chris Dixon also pipes in with some advice, focused more on naming startups rather than domains:

  • Your name should be easy to spell once heard in conversation.
  • Different products require different naming strategies.
  • Related Words on RhymeZone can be a great way to come up with a good domain.

All good stuff, to keep in mind when you're next looking for a domain.

I'll conclude with this quote from Umberto Eco's excellent book, "The Name of the Rose":

Stat rosa pristina nomine, nomina nuda tenemus.

Or, for those who don't speak Latin:

The name of the rose of yesteryear is but a name, but only names remain among us.

An easy way to increase startup success rates  

Mike Thomsen writing for Forbes, about the culture of working ridiculous hours:

The irony of this increase in working hours is that it usually comes in service of extraordinarily bad ideas, the majority of which end in failure.

Yep. This is not a new point, unsurprisingly for such an endemic problem.

A study in Sleep, the journal of the American Sleep Disorders Association, found significant declines on “divergent” thinking, a category of mostly creative brain functions.

Sounds a bit like Modafinil's effect on me then.

Here's a constructive and effortless suggestion if you want to easily boost your startup's success chances by what, in my opinion and experience, will be a significant margin (more than double I reckon):

Sleep 8 hours a night minimum, and enforce a half-hour walk through a park every day. And a two-hour walk on Sunday.

Your best ideas will come during that walk, and they will make a very tangible difference to your business's likelihood of success.

The CEO should personally email the first 1000 signups  

Here's another good article by Rob Fitzpatrick. This one suggests a practical approach to getting priceless feedback and connecting to your early users: email them personally.

First, it ferrets out earlyvangelists. They’ll respond to your one line email with a book of suggestions and use cases. Treasure them.

Second, a non-negligible percent of your otherwise silent cancellations will get in touch with dealbreaker feature requests and support crises.

Third, your users with sales-potential will identify themselves by reaching out. If you email all your trial users, the ones who are seriously considering a purchase will jump at the chance to talk directly to the CEO or founder.

We used this approach in the early days of Woobius, and it certainly helped. As discussed previously, early on, metrics (and even A/B testing) don't make sense because you don't have much data. These types of approaches help you get some kind of insight at the point in time where statistical significance is still a long, long way away.

Building a viable business in 4 months  

This anonymous reddit poster built a viable business turning over $150k/year and making $1k/week of profit, in 4 months.

Then he decided to post an AMA (Ask Me Anything) on Reddit.

Worth a good read, and worth noting once again that building a profitable business and building a hot new startup can be completely orthogonal activities. Maids In Black applies a lot of the tools of the startup world (glossy design, cool attitude, differentiated service, etc) to a domain that many hackers would consider beneath them. The result for the entrepreneur is not beneath most hackers, though: he's doubled his salary and is planning to quit his job in 4 months, once he has paid up his debt.

Have a read for yourself.

Entreporn: learning vs doing vs wasting time

One comment thread on my Mixergy Premium article yesterday made a number of interesting (if flawed, in my opinion) points.

One of the key points was an attack on the practice of sitting around watching screencasts, reading articles, and doing basically anything except building a business, and hoping to somehow attain success by that method. The point is interesting enough to deserve a brief article.

Entreporn: mental masturbation

There is a category of advice articles, and a way of consuming those articles (as well as better ones) which is wholly unproductive. We all know it. We've all been there, and we've done it over and over again because, well, it's addictive. It gives you the buzz of learning stuff, absorbing new information, adding to your growing skill set. It's a bit like grinding in MMOs - killing wild boar after wild boar, accumulating XP until you're finally ready to make it to the next level.

Unfortunately, the real world doesn't work like that. There's no speed limit. There's not even a speed meter. There's no destination, there are no road markers, there is just purposeful movement vs going round in circle. There is no levelling system in the real world, and no one in the entire universe is going to give a shit whether you read a million startup advice articles, ever. Probably not even you.

Reading business books and articles, watching screencasts and interviews, is utterly useless beyond the first few weeks where you're actually learning a rough map of what stuff there is available for you to draw from. If you know nothing about startups, spending a week randomly reading all sorts of articles in the Founder's Library makes sense. It's like an accelerated brainwashing programme to fill your mind with the awareness of what's there for you to draw from.

But beyond that initial sip on the firehose, the rest is mental masturbation. Unless you have something practical that you need to do, reading about startups, business, and so on, is a waste of time.

Learning and doing

However, there is a context within which "startup advice" articles and other materials (to categorise them with this giant brush) are priceless and invaluable: that's when you actually have something specific that you want to do.

If you want to figure out how to advertise on Facebook successfully, reading articles about the topic, by people who have done it successfully, is so immensely valuable that anyone who doesn't do it must be an idiot.

If you want to fix your business's broken customer service process, watching an interview of an expert who has seen your issues a hundred times and explains exactly what works to fix them is great use of your time. It has concrete and obvious value to you.

In short, if you have a specific problem to solve or opportunity to address, and you want to acquire a specific skill to address that opportunity or problem, then spending time learning rather than just jumping into doing is a no-brainer.

Another way to look at it: if you would consider paying someone to solve this problem for you, then learning about the problem is valuable. You wouldn't pay someone to talk to you about startups in general, so don't waste your time on it.

Qualifying my advice

Daniel B Markham rightly criticised the world of entreporn. That stuff is a waste of time. And I deserve some criticism for not specifying this in my article. Here, then, is the correction, or addition:

If you don't have specific problems that you're trying to solve, don't sign up to Mixergy Premium - or, in fact, any kind of source of "startup advice".

Instead, stop reading this article (it's a waste of your time too), get out of your chair, and go and find some concrete problems and opportunities to measure yourself against.

Once you've found them, then you can go back and make use of the treasure trove of advice on this site, on Mixergy, on HN, and on many other sites that I've linked to here.

You'll no doubt discover that masturbation simply isn't as good as the real thing. Go forth and do stuff, for real.


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