Here are 10 quality posts from the Founder's Library:
Tuesday, 17 January 2012
What's the best strategy to get from having no startup to having one that provides you with income?
Is it to find the best idea you have, focus all your energy on it, and make it work at all costs? This seems to be the standard mode of operation for most new entrepreneurs. They'll wait until they have an idea that they can pursue and that seems worth pursuing, and then pour all their energies into that idea. If it works, great. If the idea happens to be a stinker, they'll probably fail. Some might be lucky enough to know that they should validate the idea before pouring a year of development effort into it, and so find out the idea is not so good before all the money is gone.
Once upon a time, it used to be that starting a company and building a new product was a big and all-consuming affair (notice I'm not even talking about cost). If you were Henry Ford and you wanted to try out your new idea about car manufacturing, there was no way to do that without pouring most of your time into that one idea. Steve Jobs and Steve Wozniak had to put their heart and soul into building Apple for it to stand a chance. Granted, Woz also worked at HP at the same time, but it took more than 1 full-time person's attention to get Apple to the point where its potential for success was validated. Even today, many such businesses are still started. Dropbox, AirBNB or Spotify are not the kind of business that you can start with only part of one person's attention. You need several people to dedicate all their time to proving the idea, if you want it to stand a chance.
But is that true of all startup ideas? Clearly not. There are many ideas which you can validate very cheaply and without pouring all your time into them over a long period of time. They may not all be great, world-changing, visionary ideas, but they are still ideas that serve a purpose, fulfill a need, and have the potential to create value for both the founders and the customers.
Is that even true of most startup ideas? Do most startup ideas require a large up-front investment in time to validate that they could be good, worthwhile ideas?
The ever-shrinking minimum viable niche market
As I've argued before, the cost of starting a startup is always decreasing, or rather, the amount of stuff you can do for a given amount of money is always increasing. Let's consider a random niche "X", and let's assume it's a niche that is real (i.e. there is actually a need that could be served and that people would pay money for). 10 years ago, the process of validating the market for X and building a product to serve it would cost a large chunk of money and take all your time for a year.
Today, addressing the same niche would take considerably less money, because of all the tools and methods available to make software development more productive. Even validating the need would take less in both cost and effort, because of all the communication tools at our disposal. Moreover, that niche is probably somewhat bigger today than it was 10 years ago, because there are simply more people on the internet.
Ten years ago, the correct choice might have been to avoid niche X and find something bigger. Today, niche X could be served with a positive return on investment relatively quickly (if you can execute).
I propose that there are countless such micro-niches becoming viable every week, niches that were previously unviable but which are now worth having a shot at if you're looking to make a regular income by building software. These ideas will not make anyone a millionaire, but they are viable to build a sustainable small business that will free the founder(s) from the shackles of corporate work, and perhaps enable them to take a more risky moon-shot on their next venture.
A better time investment model
Some time ago, Chris Yeh wrote that impatience kills startups, and I replied that patience kills human beings. From an investor's point of view, it makes perfect sense that you should dedicate yourself body and soul to a single idea. And in fact, I would argue that you should not raise investment unless you are ready to dedicate yourself to that idea for the next 3-5 years.
However, when it comes to finding an idea to work on, there is no reason to work on a single idea at a time. And, if the ideas are small enough to be implementable by very small teams in a handful of months, there's also no reason why you can't build several of those ideas at the same time (or in quick alternation throughout the year).
If you want to maximise your chances of running a successful startup, where success is defined as achieving at least the "survival" level outlined in this article, and ideally the "comfort" level, it makes a lot more sense to invest your time in many ideas at the same time, test all of them (in parallel or one after the other) and then pursue the one or ones that are most promising.
Some people may accuse you of not committing to your ideas, and that's exactly what you're doing and what you should be doing. Given that ideas can be tested, explored, and sometimes built out into profitable businesses without committing to them to the exclusion of other ideas, committing to a single idea is irrational unless it's the kind of idea that simply requires full-time commitment. And if it is that kind of idea, it's inherently more risky - perhaps you should cut your teeth on a less risky idea.
If you are multi-skilled enough to be able to implement all startup aspects by yourself, you can then become an "army of one" entrepreneur, building multiple profitable products in parallel, turning the "several people work full time on a startup" equation on its head - and getting wealthy in the process.
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Friday, 09 March 2012
What being on the front page of HN will do for you ✶
Noah Lorang reporting on 37signals' stockpile of data:
During that period, there were 24,826 first time visitors to any of our sites who we could identify as having first gotten to us via Hacker News (in all, we received more like 105,000 unique visitors from Hacker News, but many of those were repeat visitors). 97 of those visitors signed up, with more than 85% of them electing the free plan. This conversion rate pales compared to our average conversion rate, particularly for non-search-engine traffic.
When all is said and done, what’s our likely financial outcome from Hacker News visitors for those 25 posts? About $300 total per month.
In short, unless your audience is hackers and other assorted startup geeks, if your marketing plan consists of "getting on Hacker News" you're probably screwed.
Some might object that 37signals is a special case, because everyone on HN knows about them already anyway, but this jives with my experience, that HN sends plenty of traffic, and they'll have quite a few insightful comments, and a few of them might even be operating in your industry, but the net benefit of getting on HN is advice, not traffic.
Tuesday, 11 January 2011
How many startup-related articles do you read every day? If you're anything like me (i.e. addicted to Hacker News and other startup news sources), this ranges from 1 or 2 on slow days to more than half a dozen, maybe even a dozen.
How many can you remember reading? If you're like me a few months ago, not so many. There's the odd article that stands out, and, with some effort, sometimes you can recall what the point was. While you're reading it, it feels like you're learning useful stuff, but as soon as you close the article and move on to something else, it fades into the background noise and you forget any actionable information you had encountered.
Reading articles about startup advice should be good and productive for startup founders, but the reality is that most of the time people spend reading startup articles is much like productivity porn - something that you do to procrastinate instead of actually building your startup (or even, instead of even starting it).
There's a better way.
The benefit of taking notes
A couple of months ago, I started this site, swombat.com. Its purpose is to make use of all this time I spend reading startup articles, and turn it into something useful for others. There was a hidden benefit that I haven't realised until recently, though: I remember the good articles and their points much more clearly.
The reason for that is simple, and nothing new. When you quickly read an article (as you must if you're regularly perusing a source of news like HN), it doesn't leave much of an impression. You forget it quickly. On swombat.com, however, I try do several more things with the article:
- I extract the key points;
- I determine whether it's worth sharing with swombat.com readers;
- I summarise the article so that readers will be able to decide whether they want to click through;
- I try to relate it to previous articles that I've posted about;
- I try to relate it to my own experiences and come up with an insightful comment where possible;
- I write this down, make a post, and summarise it even more into a tweet.
Doing all these things forces me to really assimilate the article. Not only that, but I often glance over the articles I've previously posted to judge, a few days or weeks later, whether I posted the right kind of stuff. This reminds me of the key points from these articles and so I forget less of what I assimilated.
Involuntarily, I've created a note-taking system for startup advice articles, and the result is that I'm much better at remembering the points that were made in those articles.
You can do this too
Use whatever note-taking tool you're comfortable with. I prefer a simple notebook for this purpose, because a notebook allows you to look over your previous entries in a way that an electronic notes application does not. But the key point is this:
Whenever you read an article:
- Extract the key points and write them in your notebook
- Look over previous entries and try to relate it to previous articles you wrote about
- Write down your opinion about this article
- Try to summarise the most important point of article in one line
- Do the above as if someone else was going to read your notes later
Doing this will force your brain to really assimilate the points of the article in a much more permanent manner. It should help you make much, much better use of all this startup wisdom out there.
An additional benefit of this is that when you will become much better at recognising empty, time-wasting articles. Those are the ones where you have nothing worth writing down by the time you get to the end. Avoid those, or at least treat them as what they are: pure entertainment.
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Friday, 06 March 2015
Hidden cofounders ✶
Suranga Chandratillake on partners, friends, etc, as hidden cofounders:
I’ve found that “hidden co-founders” – husbands, wives, girlfriends, boyfriends and even parents – are often a crucial factor in the success of a startup. Why? Because being a founder and entrepreneur is not like a regular job. Startups are under-funded, under-connected and under-resourced compared to their competition. The way you beat these odds often requires super-human effort and commitment. This places you under strain, and the primary nature of this strain is physical. You have to travel, with no notice and at inconvenient times, often around the world. You have to focus entirely on the company and its mission, often pulling all-nighters and usually working through weekends.
All of this strain takes its toll. You will extract time and energy from some other part of your life and that probably means your family. Having someone else who can change their schedule at the drop of a hat, keep the trains running at home and go that step further to provide unconditional support, understanding and advice (after all, who better than your life partner or spouse?) is key in allowing you to perform at your best.
To make this relationship work in the long term, however, I believe founders need to be fully aware of the (often quiet) sacrifices these hidden co-founders are making and work to balance the effects of these contributions.
Suranga then proposes five principles to help this type of relationship work, based on respect, openness and balance.
This seems like very good advice, and is to be contrasted with the exceptionally terrible advice coming from a respected figure like Ron Conway, who stated:
Dating someone or married: warn them that they’re not first in line, that you have this vocation, that your duty is to your company. It has to be that fanatical.
Please don't do that. That is execrable advice, guaranteed to torpedo a relationship that you deeply depend on. On the contrary, respectfully start by making it clear to your significant other that they're always first in line, even though in practice it may not seem so at times.
You don't get extraordinary commitment from people without offering them extraordinary commitment on your side. If you tell someone they're second place, don't be surprised to find yourself also at second place (and therefore not worth all the hassle).
If you read this far, you should follow my RSS feed here.
Wednesday, 24 July 2013
"If you want to make money, go into banking, not into startups."
"Only go into startups if you're really passionate about them, because you probably won't make any more money than from a good job, and probably a lot less."
"Startups are very risky, you'll probably fail to make any money."
"A startup's purpose should be to change the world for the better in a meaningful way."
Raise your hand if you've ever heard this. Raise your other hand if you've ever said this to others.
I have both hands up. If you searched through my voluminous HN posting history, you'd probably find at least the first statement in there word for word. What can I say, youth errs.
An alternative view
Having a good job in a high-wage industry can potentially result in having a relatively high wage. For example, being in finance (or indeed in software engineering in the Valley) can result in pretty high wages.
However, those wages are taxed very heavily. Of what remains, a lot goes into maintaining a certain lifestyle that goes with the job. Whether that's spending half your disposable income on rent in the Valley or having to go out to expensive bars all the time in the City, somehow, many if not most people working in these high-wage jobs don't accumulate all that much money.
Moreover, whilst those kinds of jobs used to be relatively steady, it can hardly be said that they are risk-free, especially in today's world. If you're working in a job, that means you're at the mercy of factors that you cannot see and which may drive you out of that job with little notice. And once the job is over, so's the money.
Finally, the kinds of jobs that pay well also have a tendency to require complete focus. They consume your attention, your life. You can't be an M&A banker earning hundreds of thousands of pounds a year without working incredibly long weeks that sap your life in exchange for all this money. When you work that kind of job, you have to be all-in.
I contend that a job, any job, is a very poor way to "get rich". It can be a good way to learn, but to get rich? Nope.
What about startups?
Startups in the Valley sense are also a pretty poor way to get rich, because they are like jobs with a high potential payoff on exit. If you sell your business for hundreds of millions, you will be rich. If you don't, however, you will just have collected a (probably not so great) salary for a few years, while pouring your entire life into the game. This is not that dissimilar to the banking world.
The quotes I started the article with are actually not so far off the truth, if you limit the word "startup" to the funded kind.
However, if you include all aggressively growing businesses in the word "startup", as per my definition from some time ago, then the picture changes. A rapidly growing business can definitely make you rich. In fact, one might say it's the best and most popular way to build a fortune.
However, no business will make you rich unless you actively want to make money. If you go into business with the mindset that you're in it to change the world and don't want any money, then guess what: you probably won't make much money. You probably won't change the world either, but that's another matter.
There are always exceptions, of course. However, it's never healthy to count on being one of the exceptions. A good plan, after all, doesn't just present one path to success - it sets things up so that all, or at least most, paths lead to success.
I meet far too many entrepreneurs who seem almost embarrassed to admit they want to make money. This is a very nasty side-effect of the Valley mentality of "it's about changing the world", a mentality that's contaminated the rest of the world (with both good and bad side-effects).
Wake up! If you're broke, it's perfectly ok, admirable even, to want to make more money. Society has little respect for the broke idealist waiting for his or her big break. If you're a student living with your parents (or about to once you leave university), or if you're beholden to a soul-sucking job because it pays your rent, or if you find yourself never able to afford the things you want, even though they are reasonable things like an up-to-date computer and a decent house to live in - then you absolutely should want to make money.
Money is not evil. It's a token of success in today's world. Wanting to make some money so you get the good things that go with it (like comfort and security) is a perfectly valid and admirable desire for anyone who's broke.
Of course, if all you ever want in life is money, then that's a different issue, but my guess is if you're still reading this article, that's not your problem.
A successful entrepreneur actively finds and uncovers opportunities for financial gain in the world around them. In order to find those, you need to be in the right mindset, and that mindset includes wanting to find these opportunities. If you've brainwashed yourself, or let others brainwash you, into not wanting money, you will not be a successful entrepreneur.
There will come a point in life where you have enough money, hopefully. At that point, you probably should start ventures that aren't about making money (though money-making businesses are a very robust way to change the world). However, that time is not when you're living off pot noodles and unable to afford a car.
Don't listen to people who tell you you shouldn't want to make money, that you should be "in the game" to change the world instead.
Until you've made enough money to at least be comfortable, you should be in the game to make money, explicitly, without any shame or hesitation about it.
If you read this far, you should follow my RSS feed here.
Wednesday, 17 July 2013
Sales or die ✶
Echoing Mark's point from earlier, here's Spencer Fry:
Make sales or die. A little background on me for anyone who hasn’t been reading my articles since 2009: I started selling on the Internet when I was eleven years old, in 1995. Since then I’ve co-founded three successful companies: TypeFrag, Carbonmade and Uncover. What do they all have in common and why are they all still around? It’s revenue. Revenue comes from sales. If you don’t have sales, you don’t have revenue, and without revenue, you will die.
Nothing much to add. All the successful serial entrepreneurs I know are extremely focused on the concept of sales-first. This is the model that works outside the Valley.
... which makes learning to sell one of the most important things you can do with your time, if this is not part of your skill set.
Tuesday, 13 December 2011
Should you pay to pitch your startup? ✶
BetaBeat's Adrianne Jeffries:
So how much is too much? “I’ve always been curious as to why people think pitching should be free,” Ultra Light Startups founder Graham Lawlor wrote in an email. “I think each event is unique and startups should evaluate paying to pitch as an investment, alongside their decision of which lawyer or web host to use. I like to believe startups that pitch at Ultra Light get far more than $50 worth of value in exposure and feedback (and sometimes prizes). I suspect the people who think pitching should be $0 are not running many events themselves.”
I have no problem, in theory, with companies paying to present at an event. However, let's call that what it is: it's a promotional presentation. Presenting it as "pitching", i.e. as an activity directed at investors for the purpose of getting funding, is misleading at best, and downright dishonest in some cases.
Promotional presentations shouldn't be free. Pitching should. Patrick McKenzie puts it best on HN:
It's a sign that you're entering hugely, hugely seedy territory if you ever are asked to pay to receive offers of employment, scholarships, or investment. First, many out-and-out scams operate that way. Second, if the opportunity were legitimate, there is an adverse selection risk. Meritorious candidates for employment/scholarships/investment have no interest in paying to get a chance at them, so those candidates would avoid that opportunity like the plague. The decisionmaker, if they have two brain cells to rub together, knows this and charges anyway. Why would you ever take investment from someone who had a declared policy of only entertaining pitches from the bottom of the barrel? (Plus, egads, what does that say about you to follow-on investors or other parties you need to sell?)
If you read this far, you should follow my RSS feed here.
Saturday, 03 December 2011
How to reply to an angel investor intro ✶
Excellent stuff, by Elad Gil:
Unfortunately, a lot of otherwise savvy entrepreneurs don't follow up with investors well. You have to remember that every thing you do can signal to an investor a lack of urgency/interest in your company, the fact that you are taking your startup casually, desperation, or a lack of ability to follow through. Also, if you don't create urgency or a sense that the investor may miss out on something interesting, then the angel may drag their feet in meeting with you, extending the time of your fundraise.
Elad proceeds to give a solid example of a good investor reply. Bookmark and keep in mind for the next time you need it.
Monday, 20 January 2014
Balance in the startup life ✶
Through the example of his excesses during his years at IronPort, Scott Weiss comes to a wise conclusion:
In retrospect, I believe that I could convince the hardest working CEOs that having some real life balance by investing in your important relationships will make you a better CEO. When you are out of balance, it affects your stress, judgment, and ultimately becomes another destabilizer just when you need to be the most put together. I also believe this change is actually a much better example of leadership than the one I was exuding. When a leader shows the way toward getting things done and balancing their life, it sets a much better example for everyone else in the company who struggle with it too.
Reading the whole article is quite harrowing. Scott's wife deserves a medal for putting up with all this.
At the end of the day, my advice is to reject the Aztec Principle of work: that there must be sacrifice and hardship so that the sun may rise tomorrow. Instead, realise that a healthy, balanced life is a much better starting point for success than an excessive, unbalanced, unhealthy life.
Sunday, 19 December 2010
Frog Driven Development ✶
I'm generally skeptical of outsourcing development in technology startups, although I have seen it work in rare occasions. Outsourcing your core competency is risky, and if you're a tech startup, your core competency (and what you will be competing on) is tech. If that's outsourced, you have little or no control over it.
This article presents an outsourcing horror story, but makes a larger point that applies also to projects without any outsourcing. "We're nearly there" is a cruel misconception. Admitting mistakes and fixing them for the long term is almost always better than assuming that the next corner will be the right one and all the problems will be left behind.
Problems only accumulate unless you take the time to actively fix them.
Of all the lessons learned in this process the most important one is never to stop asking yourself if you are being a frog. Keeping going on the false promise of “we’re nearly there” is lethal. It leads to the equivalent of a startup killing death spiral that can suck up all your most valuable resources: morale, money, focus and worst of all, time.