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daily articles for founders

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

The SaaS market in Japan  

Jason Winder:

Japan is a notoriously difficult market to crack. Successful, established businesses entering Japan from overseas that do not bother to tailor their marketing and product for Japan regularly fail here.

Notably however, Japan’s SaaS market is bigger than every other SaaS market in Asia combined. If you put in the time and effort to battle through the adversity, there is a wide range of fantastic opportunities here generated by criminally under-served market segments.

Whether you're looking to expand your existing product to this large potential market, or simply looking to target it directly (hopefully after moving there and spending a few years absorbing the culture), this article will come in handy.

The article covers things like how to get feedback, how Japanese consumers make decisions, how to deal with Japanese people's sensitivity to "Japanese-ness", and how to provide the levels of customer service that Japanese consumers expect.

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.

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.

Why blog?  

Gabriel Weinberg on why and whether he should blogs:

It's not an easy decision, and one that is constantly in your face, simply because blogging takes a lot of time. A good post may take 3-5 hours when all is said and done. That time (for me) is often directly taken away from other professional activity, so the opportunity cost is quite high. In other words, I must have a good reason for doing so or else I really shouldn't be doing it.

Gabriel lists 4 key reasons:

  • Writing leads to understanding: writing things down forces you to think through them more logically.
  • Writing blogs helps you get over your fears of putting your opinion out there: in this, it's very much like public speaking.
  • You can reach the right people: building a following will help you reach an audience with other things you have to say.
  • You can stand out: having a popular blog is a great way to stand out in your field.

I agree with all these reasons and they are great reasons to blog. Personally, I have a few other reasons:

  • I just enjoy it. I love writing, expressing thoughts in the written medium. Throughout my life, I've always spent a good amount of time each day writing things. Whether it has been fiction writing, posting on message boards, commenting on HN, chatting on IRC or even blogging, writing my thoughts out is something that I can't help doing each and every day.
  • Blogging is an opportunity generator. A lot of really excellent opportunities have come my way because of blog posts I'd written. This ranges from coverage from sites like LifeHacker, Slashdot or TechCrunch, to essential business deals that made a big difference to one of my business ventures.
  • It serves a purpose. I like to share useful lessons with others. I'm a big believer that when good ideas spread, we (humans) all benefit. It makes sense to take part in the spreading of good ideas.
  • It's as essential as having business cards: although this is changing these days, with Twitter taking the place of a blog, I still feel like an entrepreneur without any kind of personal or startup blog is a bit strange and incomplete.

I'm sure there are many other reasons to blog. Fundamentally, I think the best reason is because it's just fun.

What could go wrong?  

Leo Widrich:

“What could go wrong?”, is the one line that brought us to where we are today. It is the one sentence that helped us to outsmart any enemy, as we could pre-empt their attacks, built caves with better protection and make sure our children and theirs will make it through many summers.

(...)

On behalf of “Yes!” and on behalf of daring, it is my sincere belief that thinking “What could go wrong?” can’t bring us any good (anymore).

Instead, I think it is of the highest importance to learn (and learning this I think we must, as none of us are born with it) to start asking ourselves and everyone else “What could go right today?”. And then, go do that right thing.

While the sentiment of this article is right, I have to pick a nit about this "discarding 'what could go wrong?'" business.

"What could go wrong?" is still incredibly useful, because it is a risk exploration question. Successful entrepreneurs don't ignore risk, they minimise and embrace it. To do that, they need to be very aware of the risks - i.e. of what could go wrong.

We can never be aware of all the risks (and that is a risk, or meta-risk, in itself). However, we can make a decent effort to think about the risks and come up with ways to mitigate or minimise them so that "what could go wrong?" is no longer unknown and unlimited.

Smart entrepreneurs knowingly take risks with small potential downsides and large potential upsides. For example, in starting Buffer, Leo took the risk that it might not work and waste some of his time (unlimited downside), minimised that into "it might not work but we'll focus on proving that it works as quickly as possible" (small downside), and therefore reaped the large upside of a successful, rapidly growing startup.

Ignoring risks would have meant building Buffer with no validation to a full-featured version 1 before launching it, and then perhaps finding out that nobody wants it.

Solving the chicken and egg problem  

Another good article by Vinicius Vacanti, this one focusing on how to keep the first 1,000 users, particularly when your service suffers from a chicken-and-egg problem of needing users to attract users.

Vinicius proposes a few approaches:

  • Focus on a niche (it's easier to saturate a smaller niche and then expand to more niches)
  • Become a super user (in other works, fake it)
  • Wow users (provide a level of service that won't scale past thousands of users, but will wow your initial users)
  • Get them to invite their friends (a variation on the niche idea)
  • Create the other side of a two-sided marketplace business to attract one side.

The key is to be willing to offer the kind of extraordinary service that won't scale up (though in some cases, it can), and to be willing to do things, like emailing every new user personally, that would not be practical at scale, because you really need those first users to stick.

On your way to millions of users, don’t forget you have to get 1,000 happy users first.

How to explore and develop a business idea  

Here's a great article by Noah Kagan, outlining the steps from defining a business idea, to evaluating its market potential and finally testing its viability.

This should be a must-read for new entrepreneurs, as a step-by-step template for getting started without risking everything into a moon-shot startup. This approach may not make you the next Steve Jobs, but knowing how to do it will require you to learn many skills which are useful in any business.

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.

Productised services: #3: The best of both worlds

So, finally we come to this third option which, I believe, presents features of both. Product companies were covered here and services companies were covered here.

The third alternative: productised services

First of all, what is a productised service? It's a service which you've systematised and supported by tools, automation, processes, etc, so that you've decoupled the benefit given to the client from the amount of time spent on your side. In other words, whereas in a services company the ratio of X units of time for Y units of income is relatively fixed, in a productised service, X/Y can be all over the place. Some clients will be extremely profitable, and others less so (but still worth serving - otherwise, turn them away, of course).

Accounting services are a great example of productised services. Though many accountants will charge for time above and beyond their "standard service", most of them have packaged things like "yearly accounts" or "VAT returns" into a fixed price deal. This leaves them free to optimise the delivery of those services so that they take a minimum amount of time, while still charging the client the same amount.

Even large consulting companies, like Accenture, try to productise their services. Back when I was there, Accenture was very keen to sell what they called "Managed services", where they would take over an entire function of the business and deliver it for a fixed price, enabling them to manage the costs internally and deliver the service in an efficient way without undercutting their own revenues.

Productised services don't have to, and in many cases, shouldn't, be marketed as such, or else clients may try and push down your prices if they think it doesn't take you that long to deliver (conveniently forgetting the time it's taken you to systematise the service so it can be delivered more efficiently). "But you're getting a lot of value out of our service" doesn't always work, especially not with smaller companies, so think carefully before marketing your productised service as such.

Productised services have a number of advantages. Similarly to products, they can scale much more easily than services. Once a service is properly systematised, it is easier to actually carry out, which makes recruitment much easier, since you don't need your people to be as highly skilled. You won't be able to deal with a sudden million orders, but you can ramp up capacity pretty damn quickly if you need to.

Like products, the margins can also be quite high, because most of the time-consuming parts of the service have been automated or simplified so that the human time spent is small compared to the return. Unlike products, however, the process doesn't move along without human involvement, which means you have to keep working on it - but you can structure productised services so that there is a recurring component, which provides similar benefits.

Since this is a service (and perceived as such), people naturally understand the value of it and are willing to pay real amounts of money (in the thousands or tens of thousands) which they would not be likely to throw into a product by a small company.

Because it is a service, unfortunately, you must do the sales directly - it is difficult to sell services without any salespeople. However, the advantage is that you can tailor your pricing to the type of client, and how much value your productised service brings them. If your service will provide £100k of value to one client and £1m of value to another, it stands to reason that your proposal for the second client will have a markedly higher price tag than the first (which might be based on a percentage, or some other calculation method). This is difficult to achieve with most typical startup products, since you often don't know who you're selling to until too late.

Finally, another advantage of productised services over both products and services is that they can be taken in either direction if needed. If customers start to require a lot of bespoke work, you can evolve towards a normal service model. If, on the contrary, the customer base just keeps growing, you can automate more and more of the service until it becomes self-service. This makes productised services a great way to kick off a product business, by generating these product-related revenues early on and using them to continue building out the self-service aspects of the product (in effect cannibalising your own service with your product).

Productised services are not good at all stages of a company. Google could not and should not run AdWords as a productised service, for example. At that scale, you need maximum automation. But they could have done so in the early days of AdWords. Nor are they always possible in the very early stages, before you have any idea what your market wants (but then, why are you starting a business in that industry?).

I'll address the paths to a productised service, from either a product or a service, in later articles, but hopefully in this article I've made the case for why there is a third model, which sits in between products and services, and which should be worthy of your consideration when trying to figure out how the hell you'll get your company off the ground, particularly if you're a new entrepreneur and are taking my advice to stay away from investment until you have your basic business skills figured out.


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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