Here are 10 quality posts from the Founder's Library:
Thursday, 09 January 2014
Pick a goal ✶
Deciding what the goal should be is hard. Startups are flooded with numbers: web traffic analytics, product event data, site speed & perf metrics, app store metrics, cohort data, and on and on. People see dashboards full of dozens of numbers, with additional complexity because you never just care about a number but also how it changes too.
One wise saying is that you get what you measure. Another wise saying is that you really do get what you measure, and nothing else, so be careful what you measure.
For any company, however, picking the most important metric and focusing on that is fundamentally important. For many profitable companies, the key metric will be, quite simply, profit. But that's at the company level. When you're driving a specific change, focusing on what impact you want to see out of that change is important.
However, don't let yourself be caught into mistaking the measure for the real thing. Measures can be misleading and can even distort things in such a way that a previous good measure becomes dissociated from real positive change. Whenever you measure things and aim for goals, keep an eye out for these distortions.
Still. As Eric Ries put it, if you cannot fail, you cannot learn. Goals are things you can fail at (or even succeed!). Read more here.
If you read this far, you should follow me on twitter here.
Wednesday, 04 May 2011
How to stop startups from failing in 4 common ways ✶
Most articles listing ways startups fail are not very interesting. There are millions of ways startups can fail.
This article by Elad Gil is different, because it offers some concrete advice about what to do to prevent each of those issues: running out of money, team implosion, a living dead company, or a bad board/investors. Have a read.
Tuesday, 29 July 2014
How to ask for introductions ✶
Elad Gil on how to ask for intros:
One of the key things you learn when building a consumer product is to make things as easy, streamlined, and friction free as possible for your users. When asking an angel, advisor, or other person to make an introduction for you, the same rule applies. The structure below saves a lot of pain & back and forth for you, as well as for the person being asked to make an introduction on your behalf.
By spending a little bit of time up front you can make life dramatically easier for the person doing you a favor / offering an introduction. It also increases the likelihood dramatically that an introduction will actually occur and yield a follow-on conversation.
Elad rips into a couple of templates (good and bad intros) to show how it should be done. As someone who has frequently both been asked to make intros, and asked others for intros, I can only agree with his approach.
Make it easy for people to help you, and they're much more likely to do so! Worth also consulting this article, this presentation from Founder-Centric, and the "Reaching Out" section of this article for additional perspective (thanks Sal for the suggestions!).
If you read this far, you should follow me on twitter here.
Wednesday, 15 December 2010
Ask for forgiveness, not permission ✶
When it comes to startups, if you feel the urge to ask for permission for everything you do, you'll never get anywhere. This is true in many other environments, but whereas asking for permission will merely make you ineffective in the typical corporate environment, in a startup it will kill your startup dead.
In fact, to steal a trademark'd phrase : Just Do It.
Tuesday, 13 December 2011
In the previous article, we explored the pros and cons of product companies. In this one, before looking at productised services themselves, let's see what services companies have to offer.
Services companies are much better and much worse than product companies, depending on how you look at them.
The classic example of a service company is a consulting, web development or design agency (like, oh, 37signals - but before they built Basecamp). Essentially, a services company trades skilled time for money in a mostly linear way.
There are great benefits to services. First, you can often ask for a significant chunk of the money upfront. That's great for cash flow, and not to be underestimated. It means that services companies very rarely require investment to take off.
Secondly, you know pretty much right away whether anyone wants to buy your time, so you're not sitting for years waiting to find out if you have a business. It can take a few months, or even years for sales to ramp up to a level where the business can be called "alive", but sometime in the first few months you should start to see significant amounts of cash coming in. If you don't, you're probably selling the wrong service, or selling it very, very badly.
Another good thing about services is that people instinctively understand that skilled time is worth money, so whereas convincing even a 10-people company to spend $200/m on a web product might be a tough sell, they will not hesitate to spend a few thousand dollars on the right service. And before you say "but the $200/m comes in every month forever", first of all, that's ignoring inevitable churn, and secondly, most businesses would (and should) rather have $3000 upfront than $200/m for 18 months, even if the latter is slightly more.
Finally, one last benefit of services is that services markets are often very fragmented, so it's much easier to build a moderately successful company in that kind of market. There are very few winner-takes-all services markets. Most of them look a lot like accountancy and consulting: a handful of huge mega-firms, a bunch of very large firms, quite a few large firms, and lots and lots of small firms. It's much easier to get a foot in the door and build a sustainable business in this type of market.
On the downside, services are very hard to scale. Since you're selling skilled time, and you only have so much of that yourself, you need to hire other skilled people in order to scale. The maths for that just doesn't work in your favour until you get really big (see this article by Jason Cohen for details), and getting really big is really hard, because you need a lot of smart people, and smart people are rare and expensive and hard to recruit.
Another problem is that services have much lower gross margins, because part of your variable cost (i.e. the cost that is attached to delivering the service) is skilled people's salaries. As long as you're the only person working in your company, the margins look great because it's all profit for you, but as soon as you have to pay someone else, suddenly you find those margins dwindling rapidly. By comparison, with a product, your gross margin can and should be extremely high - 80, 90, or even 95% in some cases.
Finally, services kind of suck because they take constant effort. Most services are not recurring, so you have to keep selling. People leave your company, so you have to keep recruiting. New people don't know what they're doing, so you have to keep teaching and training. If you stop doing any of those things, your company can develop deadly problems very quickly, like a diminishing sales pipeline, running out of people at a given skill level, or even running out of cash. Those things are hard to delegate until you get bigger. And getting bigger is really hard.
Tomorrow, at last, the third alternative: productised services.
If you read this far, you should follow me on twitter here.
Wednesday, 22 May 2013
More about pricing books ✶
Sacha Greif comments on a series of guest posts, starting with his own earlier effort:
All three are great reads and well recommended for thoughts and experiments about pricing. Different books, different desired outcomes, different approaches, all analysed in some level of detail. Worth poking through over a break for ideas about how to test and refine pricing.
The articles focus on pricing ebooks (and additional materials), but the ideas and methods apply to other products too.
Tuesday, 25 October 2011
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.
Monday, 20 December 2010
How to validate a startup idea ✶
Earlier we had an article about how to invalidate a startup idea. On the other side of the coin, here's a method, with examples (both a failure and a success), of how to validate a startup idea.
Of course your idea is pretty good, and of course you can convince people your features are pretty interesting. But without getting down to brass tacks of pricing and business model, you haven't proven anything about your business.
In other words, once you've figured out that there is some interest in the idea, so that it shouldn't be discarded outright, it is often worth doing a more thorough vetting process to make sure that the product is not only filling a need, but can also fill that need productively.
Jason Cohen tells a detailed story of how, using his vetting process, he rejected one idea and followed up on another. Must-read.
Friday, 15 March 2013
I'm a pretty stern opponent of the idea that entrepreneurship is like jumping out of a plane. As an image, it has all sorts of incorrect implications (you only have one shot, you'll die if you fail, it's really scary, it can end in something horrible and violent, it's for thrill-seekers, etc) which mislead new entrepreneurs badly. For example, many will stake everything on that one startup and not realise that entrepreneurship is a career, and that it will probably take them years to get the hang of it.
That said, when you're sitting in your comfortable office chair in the office of a large corporation, earning a comfortable salary, working with comfortable, if slightly boring, colleagues, doing a job that comfortably stretches you a tiny little bit at a time, "taking the leap" does seem absolutely terrifying. It does feel like you're about to throw away your parachute and jump out of a plane.
I know, because I was there - six years ago, in 2007, and it was incredibly scary - though also very exciting, to be fair. I managed to concoct a deal that made it financially less daunting to me, although that deal was certainly a factor in the rapid death of my first startup, and a strain on my second, but psychologically it was still terrifying.
There's no way around it, I think. Either you take that jump before you even know what job security is (i.e. the "straight out of uni" approach, which has its own downsides), or you face this gaping, bottomless chasm and... jump.
You might get lucky. Your first startup might take off like a rocket, or at least like the Wright brothers' flying contraptions, and so you might come to the conclusion that it wasn't really worth being scared of in the first place. But that's pretty unlikely. Much more likely, you will face several years of failing, of barely keeping your head above the water financially, of every once in a while being sat down by your friends and family who will look at you with kindness and concern and ask in a reassuring but worried voice, "so, when are you getting a real job again?"
That being said, I believe there are several important things you can do to make those few years easier, and shorter. So, here's my advice to people who are about to leap into the chasm, or have just done so.
1. Cut (personal) costs to the minimum
Ultimately, your survival as an entrepreneur (not as a "startup" - you're a person, not a corporate entity) will depend on your personal runway. One day, you might find yourself facing rent and food costs with absolutely no money in the bank. You want to push back that day as far as possible, or even avoid it happening at all. The way to do that is to cut your costs.
How far should you cut down? Well, that will entirely depend on your personal circumstances, but chances are it's lower than you think. When I first left Accenture, I could barely live on Â£2,500 a month, net. By the time my involvement with Woobius ended and I started GrantTree, my personal, monthly costs were below Â£1,200 a month - that's living in central London, aged 29. Half of that was rent and bills, and the rest went on groceries, travel costs, and the odd beer. Mercifully, most startup events have free beer and sometimes pizza. Yay!
What you want to cut, in particular, are big, monthly costs. Have a car? Get rid of it. Big flat/house? Move into a single room in a shared flat or house. Daily Costa Coffee? Out. Anything that's regular and big or adds up should go.
You'll surprise yourself how low these costs can go.
The one thing you shouldn't do is move away from a startup hub (like London) to the middle of nowhere. Personal connections are hugely important in this new world you're entering. You must be at the centre of things.
2. Do not take funding
This is a controversial one, but here's a reality of being an entrepreneur: your job is to make money. As a new entrepreneur, your job is to learn to make money. Anything that delays that learning is really bad.
If you have a year's worth of funding in the bank, you won't feel that much pressure to either cut personal costs or make some money now. If you have just your personal savings and a business bank account that contains a big fat round Â£0, the pressure to make some cash flow is your daily companion, morning, day and night. This pressure is good - it's what makes you learn to spot opportunities for making money.
In addition, it means that any money you make is your money. You will probably choose to reinvest a lot of it in your learning and/or your business, but it's yours. No investors to report to. Did you just make Â£1,000? It's yours to spend. Don't forget about taxes though!
For most new entrepreneurs, investment is a cushion that delays their learning. If you're thinking of raising investment to cover your personal costs, don't - instead, learn to make money. It's really not that hard. Many people far less clever than you have figured it out. You can too.
3. Connect with mentors and peers and listen to them
The mistakes that killed or maimed Vocalix and Woobius, my previous two startups, were not very original. They were awfully predictable. In fact, I recall sitting with my cofounder in a great meeting with William Reeve, cofounder of ScreenSelect (which later acquired Lovefilm and took its name) and angel investor, a super-smart guy who explained to us in detail why Woobius didn't work as a business model.
Did we listen? Sure. Did it worry us? Of course! We felt very deflated when we walked out of that meeting. Did we rebuild our reality distortion field within minutes of walking out and go merrily on our way, ignoring all that good advice, and hitting the wall he described? You betcha!
It's not enough to get good advice, you also have to listen to it.
The problem is, of course, how to tell which piece of advice is good, and which is bad. The solution to that is to know the context of the advice-giver, and consider that along with the advice. If you're building something that involves selling to businesses and someone who's been doing that for years gives you advice, that advice is golden, for example.
Most startups fail for boring and predictable reasons. Very few fail for reasons that were really specific to them. To avoid being one of those generic flops, surround yourself with mentors who have actual startup experience, and with peers who share your issues and concerns. Talk to them, and listen to them. Get rid of your startup gung-ho attitude, and actually share your problems. Their informed advice is worth a lot more than that elusive intro to an investor or potential customer.
4. Don't tie yourself to one idea
In the business model workshops I've given over the last few years, I make one point particularly often: there are many ways to implement your idea, and most of them are wrong. Your job as an entrepreneur is to figure out the right one.
Beyond that, though, you need to pick an idea space where there might be something worth doing. Too many startups declare that they're going to "revolutionise email" or some other random unattainable goal, and then fail hard because they picked a space that is incredibly difficult to crack profitably. Don't force yourself into that corner prematurely. Play with multiple ideas, in multiple markets, until you find a market that seems to stick, that seems to be both interesting and relevant to you, and profitable.
"I quit my day job yesterday. I'm starting a business to solve the problems of email tomorrow." is not something you want to either hear, or be saying.
5. Don't make plans or set deadlines
You may think it's sensible to "give it six months" and then go back to the corporate grind. It's not. If you've given it six months it will probably take you three years.
While I don't recommend taking risks that mean that you won't be able to pick yourself up and try again after your first startup bites the dust (such as mortgaging the house to pay for the startup), there is something to be said for burning the boats.
Don't look back. Your way forward is forward. If you do need to get a day job again, get it in a startup, not in a large company. Make sure enough people on the startup scene know you or know of you so that it won't be a problem. If you do need a job again before you finally make it as an entrepreneur, it should not be a job you have to interview for.
This is a pretty long article - and that's not counting all the articles it links to. If I'd read and applied all this advice back when I took the leap, it would have saved me a lot of pain.
If you've just quit your job, or are about to - do yourself a favour and save yourself all that pain.
You'll still be terrified of the leap. Nothing will change that except the feeling that actually, things aren't as bad as you had expected. But believe me - if you apply the advice in this article, your real chance of success will be vastly improved.
If you read this far, you should follow me on twitter here.
Thursday, 24 February 2011
Paulina Sygulska is a founder of GrantTree, a business (which I cofounded with her) that helps UK-based tech companies get tax credits from the government. She's a member of BNI and an extremely active networker.
In this article, Paulina shares some advice on how to go about generating business out of networking events.
For a great many types of businesses, networking is a crucial way of acquiring leads, particularly at the early stages of growing a business. And yet many people either get it wrong or ignore it completely. This is particularly the case in tech circles, where many people shy away from small talk and so end up deciding that networking is not for them, a waste of time. In some cases, they might even be right! Networking is not for everyone.
In this article, I'll try to provide some fundamental principles for how to go about networking so that it's not boring, and it's lucrative.
The first thing to say about networking for leads is... don't. If you go to events and just focus on what you can get out of it, you'll get very little, if anything.
Instead, try to figure out how to make useful connections for those you meet, and how to help them. The most successful networking salesmen that I met where those who built strong relationships by, first and foremost, giving a lot of referrals.
Be seen as a generous business person, who is focused on the bigger picture, not just the bottom line of their own company. When you give people good leads, you achieve 3 things:
- they will feel inclined (or, in some cases, obliged) to help you in return;
- they will spread a good word about you;
- they will trust you more.
It may sound clichÃ©'ed to say that givers get, but when it comes to business networking, it's a fundamental principle. The more you are able to help other people, even (or particularly) those who are not potential leads for your business, the more leads you will get in return. So the first question you should ask yourself whenever meeting someone is: what lead can I pass to help them?
Once you get in the habit of asking this question, and once you've built up a decent rolodex of useful contacts, the awkward "small talk" stage tends to disappear. There's a purpose to the conversation right from the start: you're trying to help someone, the person in front of you.
Although you should not directly focus on getting leads from networking, there are some general principles you can apply to increase the chances that you will in fact get leads, direct or indirect.
1. Don't spam
The most common mistake is spamming fellow networkers with business cards and information about you.
Any information about you is almost useless before you establish credibility. The founder of the most successful business referrals organisation globally, Ivan Misner, talks about the CVP process: Credibility, Visibility and Profitability. Those are key stages in networking for leads and if you try to omit one of them, you minimise your chances to succeed as a networker.
2. Allocate the time
Be prepared to invest a lot of time.
Studies have shown that successful networkers invest six hours or more in networking and follow-ups every week, whereas those that claim networking doesn't work for them are prepared to dedicate on average two hours a week to it.
When you are new to a particular networking scene, expect to have to invest a few weeks to a few months (depending on the industry you are in) before results start to show.
3. If you don't ask, you don't get
Don't just assume that because people know what you do, they will give you business or make connections.
Be humble enough to simply ask for things you need, in such a way that the recipient of your request doesn't feel pushed against the wall. Most people will rebel when feeling forced to do something so when you ask for a favour, give the fellow networker the freedom (and a way) of saying no without appearing mean.
Educate fellow networkers about ways to help you, and ask for things other than access to customers. Think about ways in which people could do your business a favour without risking their credibility. Once you have gotten someone to help you with one, easy thing, they're more likely to help you again in the future. It's often good to ask for help for a contact of yours rather than for yourself, to appear more generous.
Of course, only do this after you've done your best to help the other person.
4. Fish across ponds
Most people tend to network only with their peers, or with the personality types they're most comfortable with. As Iqbal pointed out earlier this week, that's not where your customers (or leads to your customers) are.
Don't be afraid to network with people you wouldn't naturally tend to speak with, be it because of the sector they are in or their personality. If you are in financial services or nanotechnology, don't look down on tradespeople. Find ways in which you can relate to the way a person from an entirely different industry does business, and ways in which you can help them. I've heard numerous stories of IT system integrators getting their biggest leads from beauticians or other completely unrelated sources.
Show interest and respect for what the person you've met does, find out about what, in all the things they do, really rocks their boat. Most people have some things they're really passionate about. One of the easiest ways of opening people up is getting them excited.
According to William Moulton Marston, who developed a popular personality profiling system in the 1920s, there are four basic types of personality, with two of them being people-focused (Influential, Steady), and two being task-focused (Dominant, Conscientious). If you are one of the former, then, when networking, you will feel there is more potential in conversations with people focused folks, and tend to steer clear of more withdrawn people. This is natural. The problem, however, is that you will miss out on 50% (or more) of possible opportunities.
So, each time you network, set yourself a task of approaching at least a few people who clearly aren't those you would get on with perfectly from the first minute. Feel out their energy and mood, and try to adjust to it, so that you don't appear threatening, frustrating or bored.
5. Present yourself
Before you've approached anyone, or said anything, your image has already spoken tons about you.
Look professional and neat but not boring. Generally it is better to be over- than underdressed, even in the age when tech tycoons wear blue jeans and black turtlenecks. People do subconsciously associate what you look like with how well you are doing.
This works in reverse too. Upon entering a room full of people, I quickly identify those I want to speak with, based just on their image (dress sense, posture, energy). In most cases, I find that my intuition suggesting I should approach someone was correct. Make sure you are one of those people others decide to approach when scanning the room.
6. Be sociable, energetic and clear-minded
Don't go networking unless you are willing to make the effort to be sociable and proactive.
If you are worn out, tired, or down, it's best to give it a miss. You will need energy to gracefully break into conversations, approach people in a friendly way, and be an interesting, intelligent partner in conversation.
And, it may sound obvious, but don't get drunk at networking events. It makes a terrible impression when the first words out of your mouth are a slurred out "Heeey, haaao's it goin...!" Have a couple of drinks if it relaxes you, but stay sharp.
7. Entering and exiting conversations
To enter a conversation, three approaches generally work in most cases. First, if you scan the room and see anyone standing by themselves and looking available, just walk right up to them and introduce yourself. If no one is free, approach an existing group, and listen in on their conversation, and wait for an appropriate time to make an intelligent comment. Alternatively, if you're feeling brave, just walk up to a group and introduce yourself! This takes a little courage, but once the conversation gets going, people rarely remember how it was started anyway.
Almost all networkers find that it's easier to enter a conversation than to exit it. To deal with the latter, typically, saying "it was nice to talk to you" with confidence and shaking someone's hand works much better than trying to come up with an excuse, or, even worse, running away to the loo. If you are talking with just one person, suggest that both of you should join another group and meet new people.
About when to exit: a common mistake that even good networkers make, usually out of politeness, is taking part in irrelevant, time-filling conversation with a person they are not going to be able to help or want to stay in touch with.
Exercise mental discipline. When the conversation looks like it's going to drag on, ask yourself: "Would I want to continue this conversation for months after the end of the event?"
If the answer is no, move on! If the answer is yes, and you can see an immediate opportunity of some sort, why not suggest to your new acquaintance to join you for a meal or drink right after the event (or during a break)?
8. Follow up
Lastly, networking only begins with face to face conversations. When and how you follow up is crucial to how the relationship develops.
The key principles with follow-ups are that you should always get in touch, rather than waiting for the other person to do so, that you should do what you said you would (whether that's testing out their product, writing a testimonial, making a connection, etc), and that you should present some "next steps" for the relationship to develop. Make it easy for people to trust you and for the relationships to grow.
Once you understand these basic principles, there are a lot of different follow-up systems that can be applied.
I know a successful networker who would write a follow-up email the next day, but, instead of sending it, save it in "Drafts" and connect to the person on LinkedIn instead. It's enough to remind someone about you and draw their attention to your profile. Two or three days later he would send the saved email which then had a much better chances of being recognised and opened.
Personally, I usually follow up almost immediately and, after a few days, call potential strategic partners/clients/introducers or the most impressive networkers I met and suggest a coffee.
The key to successful networking is to focus on helping the other person. Give what you want to get. If you want to get leads from networking, you should be a source of leads yourself. In addition to this fundamental principle:
- Don't spam. Before you tell others about your business, establish your credibility.
- Set aside enough time, for both events and follow-ups. This can add up to over six hours a week.
- Tell people what you're looking for, after you've done your best to help them.
- Don't network only with the people you're comfortable with. Many leads will come from people in unrelated industries, or people with different personality styles.
- Present yourself well. Be one of those people who everyone wants to talk to.
- Be sociable, energetic and clear-minded. If you're worn out, go home and sleep.
- Don't get caught in never-ending, unproductive discussions. Learn to enter and leave the conversation smoothly.
- Follow-up consistently. Be the one to follow up, come through on your promises, and provide some "next steps".
I hope you find this advice useful, and I look forward to bumping into you at networking events!
This article is part of a series.
If you read this far, you should follow me on twitter here.