daily articles for founders

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

Test your startup ideas for $20  

In the theme of validating and invalidating your business ideas, here's another approach.

Explain that your brother has a crazy business/product idea, and that he’s about to get a 2nd mortgage on his house, raid his 401k and quit his job. His wife is a nervous wreck, afraid that they’ll lose their house and retirement fund, and he’s hit your parents up for seed money that they really can’t afford to lose. Your parents and your sister-in-law have come to you for help to try to talk him out of his hair brained scheme.

Suggesting that it's your brother's idea is a good move, because people will often avoid giving negative feedback in person. With this approach, however, you'll really elicit all the negative feedback they can come up with.

Look for opportunities rather than ideas

Yesterday, someone emailed me, asking about how to find good ideas to start a startup.

Every founder who's been in the game a few years has clouds of potential ideas floating around that they can't find the time to work on. They might not all be good, but there are always too many of them. At the same time, though some people have this cloud of ideas following them even before they run their first business, many start off with few ideas. Before I started my first business (and for a year or two afterwards), I was one of those people... I didn't have that many ideas. But now? I spot (and ignore) new business opportunities on a weekly basis.

Why is that? I think it's because of a shift in perspective. Few businesses are actually started based on an "idea". Instead, entrepreneurs start businesses because they spot opportunities. That is the shift in perspective that occurs after a few years running your own business: because your job is, basically, to identify and pursue opportunities, you become very good at noticing and evaluating opportunities for business.

Can this shift in perspective happen before running a business? Perhaps, but I don't know of any tried-and-tested methods to induce it. Perspective shifts don't usually happen merely by reading an article or hearing a good story. Articles and stories are just one part of a long series of experiences that lead to someone to change their view of the world.

That said, I think there are a number of things you can do to drive towards that shift in perspective. It might still take years, but getting there in years is still better than not getting there at all. Here are some suggested activities:

  • Go out of your way to meet entrepreneurs and talk about opportunities (rather than ideas) with them. You can meet them for lunch, at startup meetups, etc.
  • Realise that almost everything you can lay your eyes on was built and delivered by a business - even the trees in your local park are probably being tended by a business. Most of these businesses make money. Some make a ton of money. Make it a constant habit to pick out some of those things and figure out how they make money. In the same way that a programmer will try to figure out "how they did it" when exposed to a cool new piece of software, an entrepreneur will have a habit of trying to figure out the business model, constraints, effort and so on, whenever exposed to a cool new business. Keep asking yourself "how would I build this business from scratch?"
  • Learn to sell. Once you know how to sell, the space of opportunities that you can spot grows tremendously.
  • In fact, learn as much as you can from the startup skill set. Each of those skills grows your reach in the opportunity-space.
  • Finally, read the right kinds of blogs/sites. Swombat.com is a good example, but there are many others that provide insight from the point of view of experienced entrepreneurs. Many of those are found in the Founder's Library. With the right kind of daily reading, you can probably brainwash yourself into a different state of mind (whether that's a good thing or not is up for debate).

Ultimately, if you want to achieve this more quickly, jumping in at the deep end and starting a business will always be the quickest way to achieve this perspective shift. Running (and failing at) a business shakes you to your roots, and this kind of painful experience is the stuff perspective shifts are made of. As they say, it "builds character"...

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.

Standing out as a marketing strategy  

Under the guise of providing some practical examples of how they got the attention of big brands like Pepsi or AT&T while running a 3-person startup, Alex Debelov of Virool presents a great philosophy for getting early attention:

When I got there, I wanted to look professional, so I put on a suit and went to the panels. As it turned out, pretty much everyone in the room was dressed in suits. Since I was in my early 20′s most CMO’s/agency reps that I met assumed that I was looking for a job. When I would tell them about my company, they would just follow up with dazed, “cool, here’s my business card” and leave. I realized that I needed to do something different.

Good strategy is about pitting your strengths against their weaknesses. As a new startup, you are definitely not stronger at the traditional networking/marketing game than established players with a lot of resources. You don't even have time as an advantage.

Alex went on to trade his suit for a t-shirt asking "Need 1,000,000 views?" He boldly approached the CMO of PepsiCo on LinkedIn before meeting him in person. He irreverently placed letter flyers advertising his tiny company on every seat at a panel organised by one of his competitors.

What is Virool's relative strength? Nothing to lose. Some of Virool's approaches may infuriate competitors, but there's no chance they'll copy them any time soon. If Virool had done this at a startup event, they would have gone unnoticed, because everyone is in that position. But at a big industry event, it stood out.

The take away here is not to do things that will potentially piss off people in your industry, but to figure out what it is that you're willing to do to grab attention that will be effective and that no one else at the event you're going to is going to do.

That said, the techniques outlined in the article are all pretty cool and worth noting for future use...

Transparency in startups  

Cristina Cordova:

In startups, employees expect a level of transparency that doesn’t exist at large companies.


Transparency should exist to protect from fear, unite everyone toward a common goal and keep each piece of the puzzle operating efficiently together.

There's another very important reason for transparency in a startup: culture.

Your internal culture also ends up impacting how you treat customers. If you're secretive and distrustful, or, god forbid, you lie to your employees, you can bet your bottom dollar that that's exactly how your employees end up treating your customers.

In some industries, having a great, positive, transparent, trustful culture is a competitive advantage. For example, GrantTree competes with a lot of accountants and other R&D Tax Credits practitioners who are typically very accountant-like, closed up, secretive. In this industry, having GrantTree's culture is a great competitive advantage, because it comes through on our site, in our communications, in our attitudes, in the way we talk to clients and in the way clients talk about us.

In others, e.g. most startups, such a culture is not simply an advantage: it's a cost of entry, both in terms of attracting good people and in terms of your reputation with customers. If you're a closed up, secretive, boring company competing with startups, that will be a competitive disadvantage, and may be a killer depending on your customer base.

Finally, culture is also what makes your startup a nice place to work - both for you and for your employees. If your culture is closed and secretive, it may not be good enough to retain even you!

Engagement: Getting your users on-board  

Here's a great article, with examples from Foursquare, Instagram, Quora and Path, about how to hook your users into engaging with your app. In short, figure out which user actions drive engagement (e.g., for FriendFeed, it was "connect to 5 or more people"), and focus your design on encouraging this in new users.

The article also covers how this "design for engagement" needs to change depending on the kind of application you're building. For example, Instagram encourages you to follow more people so you see more cool photos in your stream, whereas Foursquare encourages you to follow people you know, because check-ins by strangers are boring.

Ideas and equity split  

Manu Kumar, serial entrepreneur and VC, makes the case that ideas do matter:

Ideas and Execution are Yin and Yang of the startup world. You need both in order to make magic happen. You need the right idea and the right team that is capable of executing on that right idea. One without the other will fall flat on its face eventually. You may have a brilliant idea, but if you can’t execute it, it’s not going to happen. On the contrary, and this is what people forget, that you might have an absolutely stellar team, but if the idea isn’t right, even a stellar team isn’t going to be able to pull it off.

He makes very good points (it's worth reading the full article), but I can't help the feeling he's arguing against a straw man. I don't believe anyone has ever claimed that having the right idea doesn't matter at all. Of course it does. We finally get to the point of the argument near the end of the article:

And it is because ideas matter that founders’ equity splits should also reflect that. If one person has an idea and brings in one or two more co-founders to join in, even if nothing is built yet, it shouldn’t be an even equity split. In fact, it should almost never be an even equity split:

The reason why people will say that ideas don't matter at that very early stage is because:

  1. You don't know if your idea is any good at that point. You may have to iterate several times and transform the idea through and through before it is any good. Why, then, should the person with the initial seed idea be rewarded more for just contributing what is most likely a bad initial idea?
  2. Even if the idea is brilliant, it's the team's execution that will make it come alive. The idea by itself is worthless. If you claim you can recruit another equally brilliant team, that is an argument for giving your current partner less equity (maybe). But recruiting an awesome team is execution, not ideation.
  3. On the other hand, a team that can execute successfully will squeeze at least moderate success even out of a mediocre idea, or will iterate over to a better idea together.

Ideas matter, but they don't matter enough to be worth having these arguments over. The real reason why it might make sense to split the equity unevenly, if you even want to, is that people will join with different levels of skill and experience, and at different stages of progress.

I really do think that this debate of ideas over execution is completely outweighed by the consideration of what sort of relationship you have with your cofounder(s). Arguing over percentages is only worth doing in the context of an interest-based relationship, as I've argued here.

Don't build a product without validation  

Trevor Owens:

There’s a pervasive, logical fallacy out there in startup land. Propagated by a Steve Jobs quote and entrepreneurs in denial, it is the fallacy that customers don’t know what they want until you show it to them. Of course, the mass market doesn’t know what it wants until you show them, but early adopters do. Logically, they must know.

A good point worth making more than once: if you are convinced that your idea is evidently brilliant, but you can't get any customer validation for it, you are wrong.

Going into denial, failing to accept that you're wrong, won't make you right: it'll just make you poorer. Having a vision is essential. Having tunnel vision is deadly.

It is important to get some market validation for your ideas, especially if you think they don't need validation, because they're obviously valid: that's the time when you're most in danger of getting it all wrong and flattening yourself on the ground like an egg fallen off a high shelf.

Myths of building a great mobile team  

Great article busting some preconceptions about mobile development. In short:

  • Don't hire mobile experts; your own team will be experts within 6 months;
  • don't treat your mobile codebase differently from your normal codebase; follow the same engineering practices;
  • don't worry about carrier and handset deals; focus on standard consumer distribution first;
  • don't build multi-platform right away; start with iPhone or Android; and
  • don't sit on your laurels after launching; the mobile landscape is constantly changing.

The full article has more details.

Why your startup shouldn't hire a Marketer from Microsoft  

Most startups already understand this instinctively, and it has been drummed in by a fair few horror stories from the dot-com-boom era, but it bears repeating.

Large corporation skills often don't translate well to a startup situation, which requires more of an enterprising "let's try this and see if it works" approach and an ability to work decisively with very few resources.

The key points from the article:

  1. Large company executives are often over-specialised.
  2. They struggle with small/inexistant budgets.
  3. They don't know much about how to create early traction and develop a market from zero.
  4. They need other people to delegate to.
  5. They can be very good at selling ideas, internally, that are very bad for a startup.

Conversely, the author points out that he'd consider a big company hire if:

  1. They are active in social media outside their job function.
  2. They are active in their local startup community.
  3. They can clearly and thoughtfully articulate why they want to work for your company.
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