Friday, 14 June 2013
Friday, 14 June 2013
This is just an arbitrary categorisation, but I find it useful. Obviously there are other ways to categorise games, and startups.
I love games. I have played games since I was a child. Computer games, board games, team sports (a bit less than the others), card games, dice games - any kind of game I could get my hands on. I am not Iain M Banks' mythical Player of Games, by far, but I do love the challenge that games pose.
And life itself is a game, as is business. These days I play less of the overly complex strategy game type (such as Civilization, of which I played every version except V), because I have come to the conclusion that those games feel too much like work, and I already have a game that feels like work, with the difference that when I earn gold coins in this game (my business) I actually get to trade them for Macs and summer hats in the appropriate shops.
Different games stretch you in different ways. With some thinking back over the long list of games I have played, these are the three ways they stretch you, and how they map to the entrepreneur's journey.
1. Games of mechanics
The first and most popular kind of game is the game of mechanics. This is a game where you win by application of your intelligence and insight. Most single-player computer games fall solely in this category, because that's all a computer can offer.
Games like the early, single-player Civilization games, or Dune 2, the original C&C, The Loom, Pinball, King's Quest, Trine or Super Mario, Donkey Kong and Battle Isle, most of the Black Isle Studios RPGs, Solitaire (physical or on the computer) or Backgammon are solely in this corner of the ring. Due to their very nature, they can only offer mechanics and so that's all they offer.
This is not to put their offering down. Games of mechanics are great fun. I still play them, though I tend to limit myself to the easy-to-pick-up-and-put-down iPad offerings, these days, due to lack of time.
What defines a game of mechanics is that it is won by analysing the situation "on the battlefield" and playing the right moves. Arguably, that's true of every game, but in a pure mechanical game, the battlefield is limited to the game.
Most startups start off as mechanical games. First, before anything else comes into it, you have to crack the mechanics of building something that makes money. This is a game where the battlefield is the product and the market, and I'm willing to go on a thick limb and say that if you're good at mechanical games, you will eventually figure out this game too. It might be the hardest mechanical game you've ever played, but it is just step 1 on the business journey.
2. Games of people
The second category of games, which some will argue is more interesting, but which is really just a matter of preference on the moment, is the game of people. In this game, the battlefield shifts from the board to the people around it.
To me, these have always been fascinating, because I used to be really bad at them, and therefore they were a constant challenge, something to learn and get better at. I don't like losing, but luckily for me that is coupled with a habit of, when I lose, trying again, and again, and again, until I win.
Most multiplayer games and board games touch on this dimension. Games like Warcraft 2-3, Settlers of Catan, Dominion or Dominant Species, look like they're people game (because, well, they involve people) but the game is not won by playing the people, so they're still fairly mechanical in the end.
Better examples of people games are No Limit Texas Hold'em Poker, some types of tabletop Role Playing Games (at least for the DM) and Diplomacy. In both cases, the game on the table in front of you is just an excuse for the game going on between your head and your opponents' heads. As the saying goes in Poker, don't play the cards, play the people.
Skill at the mechanics of the game is obviously necessary to play this. If you can't move your troops correctly (in Diplomacy), you will probably get eliminated no matter how well you play the people, simply because being weak paints a target on you that's hard to ignore. Same for Poker if you don't know the ranking and probabilities of various card combinations. But it is perfectly possible to get the mechanics of Diplomacy or Poker right and still lose over, and over, and over again, because they're people games.
In startups, people games become essential once you shift from building a product to building a company. Once you've got the basic machine that turns $1 of effort into $2 of revenues pinned down, the next step becomes to scale that up. No matter how technological your product might be, in the end, that will always end up involving other people. Maybe not hundreds of people, but at least dozens. And once you have people around, you have to play people games (avoiding office politics is a very tricky people game).
Much like playing mechanical games can teach you to play this second game, taking the time to play people games will improve your ability to play this part of the game, yet those games are much more rare than the mechanical type, so you have (in my experience, at least) to actively seek them out.
3. Games of self
The third type of game is the rarest and the commonest at the same time. This time, the battlefield is not on the board in front of you. It's not in the people around you. These are games where the battlefield is inside of you. It's you and your personal limitations. Arguably, all games have some element of this in them, at least at the very beginning, but I have yet to encounter an artificial game that is all or even mostly about the self. Perhaps the only such game we have at the moment is life itself.
What I mean by the battlefield being the self is that these games are about finding the limits inside of you and pushing against them. Games of the self open up new perspectives and unlock new skills that make you a better person.
I don't know of any artificial games that are purely of this kind, though many of the aforementioned games have some element of this, for at least a little while, but they abound in real life. I've argued before that successful people are successful, but the better way to phrase it might be that successful people make themselves successful, by winning at this game of self. They constantly find limitations within themselves and push against those.
The game of self becomes more visible as my business succeeds. Sure, success at the mechanics and the people aspects of the game of business is essential to even get there, and credit needs to be given to those games, but as the system that is GrantTree comes together, I find that many of the limitations of GrantTree's growth are not with either the people or the product, but with my own ability to observe and remove barriers.
The game of self is the meta-game. No one ever wins it fully, but every bit of progress you make on it increases your chance of success in all the other games. As such, it is always worth playing.
The only way I can think of to deliberately play this game is to play all games. Try many games, and pay attention to games that frustrate you, games which make you feel like a loser, games which force you to face uncomfortable truths. If you consistently lose at a game, it's a good sign that focusing on this game will make you progress in the game of self. If you're consistently winning, you're probably not learning as much.
Chess is perhaps the ultimate example of a game that rates highly on all three scales. No matter how much you play it and how good you are, you can always find someone who will beat you in novel and interesting ways and force you to think, and learn, and grow.
Life is a game of mechanics, people and self, and the multitude of artificial games humanity has concocted over the centuries can help teach you how to be better at all three dimensions.
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Thursday, 13 June 2013
Will you make it past being a founder? ✶
Great article by Marc Barros. From my own current experience, it is a hard transition:
Being a CEO is a very different role. Still the visionary and champion of culture, they are the ultimate leader. Yes a founder is a leader, but this type of leadership is not the same thing. What works as a founder to lead by example, has the opposite effect when you are the CEO. Leading not by doing, but by inspiring, enabling, and holding people accountable. Everyone has a slightly different definition, but I have found the following to be key areas of focus.
My most important and foremost principle over the last year is: delegate everything you possibly can. It's the only way to survive and create the time and space you need to think.
Marc's article is full of advice that resonates with me. Worth a read if you're lucky enough to be in this tricky situation!
Wednesday, 12 June 2013
Fertile Ground ✶
Do you listen to opportunity when it comes knocking? If you're an iOS developer, the time might be now, according to this article by Marco Arment:
Apple has set fire to iOS. Everything’s in flux. Those with the least to lose have the most to gain, because this fall, hundreds of millions of people will start demanding apps for a platform with thousands of old, stale players and not many new, nimble alternatives. If you want to enter a category that’s crowded on iOS 6, and you’re one of the few that exclusively targets iOS 7, your app can look better, work better, and be faster and cheaper to develop than most competing apps.
Whatever your reaction may be to whether this is good for consumers, this is certainly an opportunity worth noting if you're in this game.
Thursday, 06 June 2013
The cost of funding may be your freedom ✶
This article by Kirill Zubovsky underlines the point I made on Monday about the difference between Entrepreneurs and Startup Founders.
I was free; free to think, free to learn, free to do whatever I wanted, as long as it didn’t require money. Sure, there was a question of what would happen when I ran out of money, but that question was for the future, and I didn’t concern myself much with the answer. Life was simple and life was good!
Then Kirill raised money.
The way I see it, I am now responsible for the dreams of my team, and that’s not something that should be taken lightly. I don’t mind the pressure, I love it, actually. But No one tells you about the long tail, when you start a side project, dreaming of it to become the next big success story. Keep in mind that starting is easy, but you will need to have the energy and the dedication to keep going. If you start a company, be ready to commit to the lifestyle.
And the money line:
I promised our team that we will solve certain problems together, that they will get to work in an environment we’ve created, and as much as achieving these goals is everyone’s responsibility, I have promised and I cannot fail. This is my strongest motivator to wake up in the morning.
Taking funding (which, once again, I think is valid for some businesses) makes a big change to your attitude, to your life. From freedom to commitment, from profit to promises, from responsibility to yourself, to responsibility to others.
If one of the things you want out of running a business is the independence of making your own decisions rather than being beheld to someone else's opinion (and I know a fair few serial entrepreneurs who are fiercely independent in this way) don't take funding.
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Tuesday, 04 June 2013
Startup advice by Sam Altman ✶
Interesting list by Sam Altman, of YC, though to be taken with a grain of salt, and thoroughly understanding Sam's (valuable) vantage point.
Like all good advice, many of these can hurt you or your startup very badly under the wrong circumstances.
Caveat Emptor, but worth thinking of as a great collection of aphorism which will remind you of useful things if you've got the experience to understand them.
Tuesday, 04 June 2013
There are more than a few falsehoods within the world of startups. Most are not worth worrying about, but some are very damaging. Some have side-effects that can ruin or kill people.
Every once in a while, the debate about "startups vs lifestyle businesses" recurs. It's one of those never-ending debates, with one side, let's call them the "scalable startups", bemoaning the lack of ambition of the "lifestyle businesses", and the other bemoaning the hare-brained, risk-it-all attitude of the startup crowd.
This is not the main contradiction I want to address in this article, but it's related.
The falsehood I want to address is exposed when you look at the terms in the title: startup founders, entrepreneurs. Pretty much all startup founders believe they are entrepreneurs. They consider themselves an exclusive, elite subset of entrepreneurs who start an elite subset of businesses: the scalable tech startup. They therefore naturally look down on the wider world of entrepreneurs, who do business in a less fashionable, sometimes less scalable manner.
However, that belief is a falsehood. Many startup founders are not entrepreneurs.
What is an entrepreneur?
It helps to start with a good definition for entrepreneurs. Here I am not concerned with the dictionary definition, which is based on usage. I want a useful definition.
An entrepreneur is someone who sets out to find business opportunities and create business systems to exploit those opportunities for financial gain.
I have deliberately excluded "internal entrepreneurs" at large corporations, and "social entrepreneurs" who aim for social good rather than financial gain. I believe those should be considered as separate categories. Although many successful businesses lead to social good, making social good the primary objective of a venture makes it a social venture rather than an entrepreneurial venture.
This definition is useful because it is broad enough to include anyone who genuinely tries to create viable businesses, but not so broad as to include anyone who does anything of their own initiative in the vague hope that maybe some day it might make some money, however unlikely. Creating a blog or site which perhaps some day could make you money through advertising does not make you an entrepreneur, neither do owning a good domain name, having ideas for cool products, or registering a dormant business. Those things may lead one to later becoming an entrepreneur, but they are not, of themselves, sufficient.
However, the definition does include anyone who tries to find business opportunities (through pot luck, determined research, personal connections, etc) and do useful work (themselves or via employees) that results in substantial enough amounts of money being made that the enterprise has a chance of becoming profitable at some point.
There are many tens of millions of entrepreneurs in the world, perhaps hundreds of millions, or even more. In poor countries, many people have to be entrepreneurs to survive. They spot business opportunities and exploit them to make a living. Because the opportunities tend to be small and conditions are very uncertain, they are never able to scale those businesses up, but the person who runs their own clothes shop in Liberia under incredibly difficult circumstances is every bit as much an entrepreneur as the one who starts a global fashion brand in New York.
Startup founders
Many startup founders are in fact entrepreneurs. I consider myself to be both, for example, though only since launching GrantTree.
Startup founders are, quite simply, people who found startups. They register a business (maybe) and create something that might turn into a business at some point, or even do turn it into a business successfully. So far, they sound a lot like entrepreneurs.
One difference is the goal. Entrepreneurship always has a financial motive. For startup founders, though, that motive is often secondary. They usually want to change the world, build cool products, become famous, have a big exit - oh, and perhaps, if it's socially acceptable at the time, enjoy the money that they've made as a side-effect of their chosen career. The money motive is often discouraged as a primary driver.
The even bigger difference comes when considering the concept of closing the loop. A business is not viable until the loop between creating value, delivering it to customers, and being paid for it, is closed. For entrepreneurs, closing the loop is essential, the main task on their task list until it is done. There is no business until the loop is closed. For startup founders, closing the loop is often secondary, perhaps even toxic (since if the loop does not generate large profits as soon as it's closed, funding will often dry up).
This is not to say that closing the loop is the only way to build a business. Erstwhile startups like Facebook, Google and Twitter, show that it is possible to build huge businesses, some of them very viable, without worrying about making money for years. Success stories like Instagram, Tumblr or Youtube show that it is possible to achieve a billion-dollar exit without having ever closed any viable loop whatsoever.
In Silicon Valley, it is even plausible to make "the loop" be the creation and acquihire of the startup itself. That is a valid model for investors, and even for some founders, though it presents a lot of downsides that I believe most first-time entrepreneurs wouldn't accept if they were fully aware of the alternatives.
The downside of being a startup founder
As I mentioned earlier, most startup founders believe they are entrepreneurs, even if their startups are completely divorced from the financial reality of business. Cushioned under a blanket of (relatively) easy VC money, surrounded by the hype bubble, drenched in startup articles from Hacker News, one could be forgiven for thinking this is the only way to do business in the 21st Century. Meanwhile, the rest of the entrepreneurial world looks on at this incredible machine that takes unviable businesses, pumps them full of venture money, and sells them on for stratospheric valuations.
It's a wonderful system for the savvy investors who know how to play it, but what about the founders?
The downside of this system for the founders is pretty simple: the risk and pressure are enormous. In order to succeed at this game, the game usually requires the founder to tie the startup to his identity. The failure of the startup and the founder's fate become closely tied. Importantly, the outcome, success or failure, is only known years into the venture. Youtube succeeded in a lightning-fast 1-2 years, but they are the exception, and even they must have been under enormous stresses approaching the exit event (Youtube was, I recall, being sued by content holders when Google acquired them). It could have gone very badly very quickly for them. Tumblr was running for 6 years before being acquired, and had, from the sound of it, a failing business model. Imagine the stresses David Karp was under.
Any startup where you're going to have to raise lots of money, make lots of promises, hire lots of people and generally tie your fate to the startup very publicly, for years, before you can find out if you're successful, is going to be a pressure cooker for the founders.
The result of such a game is tragedies like Jody Sherman and Ecomom. While tying the two together remains speculative since Jody left no note, it is fairly credible that the two were strongly linked.
Even if the outcome is not so dramatic as a suicide, such stresses take their toll. Binary outcomes that can change your life from heaven to (subjective) hell are always extremely stressful.
A funded startup always carries with it the possibility that you will exit as broke as you came in.
An alternative
Despite its apparent anti-startup stance, this article is actually not an attack on startups and startup founders. I believe that the startup game can be a valid way to create businesses. Some day, I will probably venture down that road too.
However, it should not be painted as the default or superior option. Choose the startup founder path if you want to, but choose it in full knowledge of what you're doing.
The alternative is to do business the way it's been successfully done for millenia: find business opportunities and exploit them to make money.
There is much less risk in this approach (you know whether the business is working out within months, if not sooner), and it is more rewarding emotionally and financially. The skills are also more transferrable. You can apply the skills of the entrepreneur anywhere in the world, whether there's war (Milo from Catch 22 and Oskar Schindler come to mind) or peace. The startup founder path is only truly viable in a few places in the world right now - most of them in or near Silicon Valley. It could close up quickly if the historically rare, 60+ year long period of peace we're experiencing comes to an end.
And lest someone thinks entrepreneurship is destined to create only smaller businesses, there are many giant companies out there that started as level-headed entrepreneurial ventures - including such Tech household names as Apple, Microsoft, HP and Cisco. There was no guarantee that any of those would become the behemoths they are today without additional capital, but even if they had ultimately failed, their founders would have retired wealthy.
Conclusion
Either path is viable, and if you're determined to go down one path or the other, no article is ever going to stop you.
But if the thoughts in this article are news to you, I urge you to consider which option is more suitable to you at this point of your life, and to remember that you don't have to restrict yourself to just one of those. You can be an entrepreneur today and a startup founder tomorrow, or both at the same time, or just a startup founder. Which of those three you pick will make a huge difference to the risks you take and the pressures you face.
My personal opinion is that if you're starting off from a position of weakness (i.e. you're poor and not famous), and especially if you're not in a startup hub like Silicon Valley, it makes a lot more sense to go down the entrepreneurial route than to go via the startup route.
And if you do, don't let anyone who's chosen the startup route tell you that your business is somehow less worthy than theirs. Both are viable approaches with different risk and pressure profiles.
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Monday, 03 June 2013
Product > Strategy > Business Model ✶
Fred Wilson:
One of the mistakes I see entrepreneurs make is they move to business model before locking down strategy. The way I like to think about this is get the product right first, then lock down the strategy of the business, then figure out the business model.
The article makes a good case, but something feels odd or missing. Ah yes, context. From the very first comments on the article:
reece: pre-requisite: investors who are willing to take that path with you.
Fred Wilson: correct
This article may be good advice for funded startups that can wait (potentially for years) to nail down their business model. It's deadly startupicide for first-time entrepreneurs looking to build viable businesses.
Context is everything.
Friday, 31 May 2013
Max Levchin's hiring tips ✶
Max Levchin's hiring tricks, put together by Bill Trenchard:
- If there's a doubt, don't hire them
- Hire people you know already
- Stay away from diversity early on (controversial!)
- Differentiate your company through its hiring process
The article is interesting. Sadly, I don't think it will help. Call me a cynic, but I think hiring is one of those things where people listen to the advice but then do their own thing anyway. Then they learn.
An interesting point from the article:
It’s easy to think you can’t possibly know enough good people from your network to build out an entire team. While in some ways that’s true, Levchin’s experience is that almost everyone actually knows more good people than they believe they know. The challenge is that most founders rule out top talent because they think they’ll never be able to actually get them to join their team.
Levchin learned early on not to make this mistake. When PayPal was founded, he sat down and created a list of potential engineering hires. When he was done he had a single name written down. Levchin recounts demoralizing exercise, “ Peter [Thiel] sat me down and he made me write down every smart person I knew in college personally. Turned out to be a list of about 30 people and we ended up hiring about 24 of those.” You can’t rule potential hires out just because you don’t think you can win them. He went on to note, “We had this cascading effect where our team would be forced to write down everybody smart they knew that they were absolutely confident they could never hire. We then went after them like banshees and they would eventually crack."
Enjoy the read.
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Thursday, 30 May 2013
Letter to a young programmer considering a startup ✶
Excellent article by Alex Payne. It points at several fundamental issues with the startup industry, and is worth a read for pretty much anyone, whether you're new to this game or just getting into it.
The machine doesn’t care about you. In fact, the machine is designed with the understanding that most startups will fail, or at most offer unremarkable returns to investors. The majority of the companies in many VC portfolios are acknowledged duds. One or two “10x” companies prop up most portfolios. At best, startup founders who fail get another pull of the slot machine. At worst, their failures drive them to desperation.
There is nothing inherently disruptive about a venture-backed startup. The startup system is just another system; an alternative to the corporate ladder with just as many rungs to climb. Some startups may end up dramatically reshaping a market, but then so might an incumbent player or an active regulator.
I have a lot of thoughts in response to it (some of which I already drafted in another article a few weeks ago, which I haven't published yet), so I'll make a fuller comment later, but in the meantime, this article is a must-read if you care about the systemic issues in the startup industry.
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Tuesday, 28 May 2013
Tuesday, 28 May 2013
Most of my colleagues in GrantTree do not know how to code.
That's fine. Their job does not involve programming computers, and although there are, I believe, always tangential benefits to knowing how to tell computers what to do, programming is not essential to their jobs and they can be brilliant without knowing how to program.
However, one of the side-effects of the explosion of startups all around the world is that several of these colleagues have already expressed some interest towards various courses that claim to teach someone "the basics of programming", whatever the hell that may be, for a nice round sum like £500 or £800 or thereabouts, in a single day.
The magic wand of bollocks
I know I won't raise any eyebrows in the actual tech scene with this article. Anyone who's learned how to program knows that there's no magic wand that will miraculously teach you how to program in a day, not for £500 or for any amount of money. You can't teach someone to program in a day any more than you can teach someone to ski or write or ride horses in a day. Those things take time. Lessons might help, but at £X00 a day you'll be broke long before you know how to program.
But there are a lot of people who don't know this. This article is for them. If you know someone who's thinking of spending a large chunk of hard-earned cash on the happy-shiny promise of learning to code in a day, please send them a link to this article.
Here's the simple, friendly, warm truth (it's not cold or hard, for once):
Learning to program doesn't cost any money.
Ok, let me qualify that - you might need some kind of programmable device. Any old laptop will do, no matter how decrepit. There are many people who learned to program on calculators. Even the cheapest netbook you can find will do. There is zero correlation between how powerful the machine you're learning on is, and how quickly you will learn. In fact, there might even be an argument to be made for learning to code on an older machine, one from the early 90s with MS-DOS on it. Back then, things were a lot simpler to understand.
Beyond that one programmable device, and a way to access the internet to read up articles about stuff, you don't need to buy anything at all.
Of course, there are many people who will happily try to sell you instant-programming-knowledge-in-a-pill, but they will not be able to deliver, because learning to program is a 10-year engagement and you will not get anywhere useful down that path if you feel you need other people to teach you stuff.
Ultimately, however, no one can teach you how to program in a day. And whatever sliver of tangential, programming-related knowledge they can teach in a day is, in my opinion, absolutely not worth the vast amounts of money requested. The reason is that the only point when you're really going to start to learn to program is when you start teaching yourself to program, and you can do that for free.
How to learn to program
There are many ways that you might teach yourself to program. The paragraphs below outline just one such way, which is the way I usually suggest to people who approach me and say they want to learn to program.
In my view, there is one factor that anyone who wants to learn how to program well must have: a sense of fascination at the idea that you can tell computers what to do.
Steve Jobs called computers a bicycle for the mind. If you can get yourself to the point where you find really awesome the idea of doing brain-work faster by telling a computer what to do, then you will learn how to program. Nothing will stop you, nothing can get in your way, not lack of hardware or lack of knowledge.
Once you have been bitten by the passion bug, you will learn how to program.
So, any early activity should be aimed at finding that bug and getting bitten.
How to get bitten
Each person will naturally be different, but here's a simple approach that should work for most people.
First, find someone in your entourage who does know how to program - ideally someone who's already quite good at it and who's reasonably people-friendly. These days, that's not so hard, as there are many of us "competent programmers" out and about.
Talk to them. Find out why they're fascinated by programming. Find out how the bug bit them. Find out more about why they care, in short. Get interested. Then, when you're starting to feel like what they say sounds pretty damn cool indeed, ask them what they'd suggest you do to get started doing that.
Chances are, whatever they just said is out of your reach, even if it's not particularly complicated for a competent programmer. But they should be able to suggest something you can work on now to get closer to being able to do that yourself. For example, if you want to build your own blog from scratch, someone might suggest that you first learn some basics of programming using one of the Learn X The Hard Way books, and then introduce you to a platform like Ruby/Rails, Python, JS/Node or some other similar thing, and then point you towards the appropriate tutorials and books about how those technologies actually end up producing a website you can deploy and then browse from any computer.
Your path will be entirely unique to you, but the starting point, the initial spark of interest, is what will propel you down that path.
That's all you need to learn to program. A spark. And it doesn't cost any money at all.
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Wednesday, 22 May 2013
All startup advice is wrong? ✶
Evan Williams says startup advice is wrong because it's often not proven properly since it's impossible to A/B test startup advice, and all advice depends on context.
He's right. And wrong. I guess that's ironic? Hah. Anyway.
As I covered in my article on how to write good startup advice articles, when giving startup advice, the two most important points are:
- Avoid over-generalisation
- Provide context to personal experience
If you avoid over-generalisation and provide context, then people can work out if, and how, your advice applies to their situation.
Obviously, if I dish out advice like "only hire A players", then my advice is wrong. But that's just because it's crappy advice. If, instead, I say: "in a company like the one that I'm running (include description), in this context, I found that hiring in this way worked better for me than hiring in this other way", that's advice that is valuable because it includes the context needed to figure out how and when to use it.
The best advice is disastrous in the wrong context. Startup advice is never universally right, but that doesn't mean it's universally wrong.
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.
Four pricing principles ✶
Excellent points by Des Traynor:
- Charge earlier than you're comfortable
- Charge more than you're comfortable
- Justify (or kill) your lowest plan
- Plan on changing prices
Each of those deserves highlighting, but Des already does a good job of discussing them in the article, so I'll just comment on the last one.
Pricing is a very tricky thing to get right the first time. Yet, in a world where we are willing to A/B test so many things, we are strangely reticent towards changing our pricing around dramatically. Yet the stories of startups that changed their pricing schemes (not just their prices, but also the structure of the way they charge) and multiplied their earnings abound.
Learning how much your product should cost to maximise profits should be very high on your list of hypotheses. Therefore, start testing prices early, rather than late. This will also help ensure that you fit your product to the right market.
Tuesday, 21 May 2013
Sometimes, failure is your best option ✶
Brad Feld:
I strongly believe that there are times you should call it quits on a business. Not everything works. And — even after trying incredibly hard, and for a long period of time — failure is sometimes the best option. An entrepreneur shouldn’t view their entrepreneur arc as being linked to a single company, and having a lifetime perspective around entrepreneurship helps put the notion of failure into perspective.
Entrepreneurship is a career (and a safe one at that). But that doesn't mean that every startup you start has to succeed for you to be successful.
Quite the contrary. Both of my first two startups failed. My third company is now successful, highly profitable with 11 employees and growing, and so I am generally considered a successful entrepreneur now.
The only constant about declaring that your startup has failed seems to be that everyone wishes they'd done it six months earlier. It's easy to know when you're succeeding, it's much harder to know when to quit and try something different.
Tuesday, 14 May 2013
Corrosive Acquihires ✶
Acquihires are not that much of a problem in London. There are a lot of talented people available for hire, and for a Google or an Amazon, it'll be more productive to poach great software engineers from the financial services world (you probably don't even need to pay them as much as a bank would) than to pay massive premiums by acquiring startups.
Still, interesting to read this analysis by Mark Suster:
You have been at Google, Salesforce.com, Yahoo! for years. You have worked faithfully. Evenings. Weekends. Year in, year out. You have shipped to hard deadlines. You’ve done the death-march projects. In the trenches. You got the t-shirt. And maybe got called out for valor at a big company gathering. They gave you an extra 2 days of vacation for your hard work.
And that prick sitting in the desk next to you who joined only last week now has $1 million because he built some fancy newsreader that got a lot of press but is going to be shut down anyways.
What kind of message does that send to the party faithful who slave away loyally to hit targets for BigCo?
I’ll tell you what is says.
It says if you want to make “real” money - quit.
One of the trickiest things as a business owner is to think through the unintended consequences of incentive schemes that you put in. It sounds like large companies need to do some thinking there too.
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Stop looking for a cofounder ✶
Dave Lerner:
Even without a co-founder, you can acquire skills and employ powerful tools to get to a minimum viable product all by your lonesome. In fact, it’s so easy and accessible, there really is no excuse not to. Imagine how powerful this is. You can generate a massive amount of value before even thinking about having to dilute your equity. Ironically, this is actually the best way to find co-founders, early employees and investors — just get a real business up and running by yourself!
I think "I just need a cofounder to get started" ranks up there with "I just need $100k to get started" in the list of invalid excuses and pretexts for delays.
Get started. You're most likely going to fail for a while, and eventually start succeeding. Some of those ventures will be with a cofounder, and others will be alone. If you can't implement an idea by yourself, and you don't know that person well enough yet, and you can't afford to hire that person, then the idea you're thinking of is out of your idea reach. Pick another idea.
Friday, 15 March 2013
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 £2,500 a month, net. By the time my involvement with Woobius ended and I started GrantTree, my personal, monthly costs were below £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 £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 £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.
In conclusion
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.
Good luck!
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Ultimate guide to dropshipping ✶
What it says on the tin. Dropshipping is one of the many ways you can build a modern business in 2013, but like many other tools it is not so straightforward as it might seem.
This guide to dropshipping, by Mark Hayes of Shopify, is probably a good starting point if you're thinking of starting this kind of business.
Wednesday, 13 March 2013
Zombie Startups ✶
Danielle Morill:
My greatest fear as a startup founder isn’t to fail, it is to become a zombie startup. Kind of like in the 6th Sense when Bruce Willis doesn’t realize he is dead and tries to have a nice dinner with his wife, there are startups out there who are still “operating” but might as well not be.
(...)
The first thing you need to do is acknowledge the reality of your situation. From there, figuring out what to do next is a lot harder and a very personal and contextual decision, but you should embrace it with vigor. Don’t waste single moment of your life, or the time of those on your team, to begin plotting the next step.
Danielle also points out that if your startup has failed, hard, don't shy away from calling it a failure and moving on.
Remember: impatience kills startups, but patience kills human beings.
Tuesday, 26 February 2013
Shutting down blaster.fm ✶
Continuing the topic of moving on from failed startups, Josh Sharp writes about his blaster.fm project and why he's shutting it down:
Choosing to let it go wasn’t easy. “Why can’t you just let it sit there and keep running?” I have been asked several times. But even though it doesn’t require active maintenance, it still exerts a mental toll. It weighs on me, the site-that-could’ve-been. The site that missed its opportunity to get big.
Yep. Moving on is good.
There's also a comment to be made about Josh's approach to building blaster.fm. Reading his article, I noticed a lot of "I built this" and "I built that", but not a whole lot of "I went and talked to people" or "I saw this opportunity to make some money". Perhaps that did happen and is just missing from the write-up.
However, on the assumption that it's not just a writing omission, this approach of building things and waiting for people to find them is perfectly fine for a side project, a hobby that may randomly pick up and become interesting, but ultimately it means that the project was fundamentally a lottery ticket. In this case, a lottery ticket that didn't win (the prize was acquisition by last.fm, it seems). One hopes that most of the enjoyment was derived in the building of the site and the learning that came with that.
In the long run, it's hard to get motivated about a project that sucks a lot of time and gives very little back. I believe in working on side-projects, but in my opinion, if you're going to do that, then you should probably err towards side projects that have at least some vague commercial potential beyond "a big company will want to buy it". I'm sure Josh would feel differently about blaster.fm if it was making even just a meagre $2k a month.
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