swombat.com

daily articles for founders

Detailed case study of validating a project idea  

Rob Fitzpatrick works through a detailed example of idea validation, using an idea which he's currently working on as the example.

You should go and read the whole thing, but here are a couple of pull quotes:

This simple cycle is the core of all startup strategy:

  1. What are the biggest assumptions and uncertainties baked into our idea?
  2. What’s the fastest, cheapest & easiest way to answer those questions?
  3. Do it.
  4. Measure it.
  5. What are the biggest assumptions and uncertainties still baked into our idea? And so on.

And:

Note that I didn’t write a single line of code until I was up to assumptions 4 & 5, by which point I was confident in my problem, value proposition, and customer segment. The total time spent coding to date is still well under 20 hours — a single long weekend or a week of late nights after work.

More on this approach here.

Paid iPhone apps vs in-app purchases  

Tony Wright investigates the economics of paid apps vs in-app purchases, and finds that IAPs are where the money is.

So why are free apps outperforming paid apps? That deserves its own post. In brief, it comes down to ARPU (average revenue per user). Farmville-style games can pull in an ARPU $5 or more per month. In fact, there are reports of $13 ARPUs. Per month! Per user! Average!

How is this possible? Virtual goods elegantly fill up the demand curve for an offering. In other words, they accommodate customers who can happily spend hundreds or thousands of dollars (“Whales”, in Vegas parlance) without having to give up mainstream users (who can still be valuable as evangelists beyond the fact that they give the whales someone to play with).

This shouldn't be a huge surprise. After all, there's a good reason why SaaS is such a popular business model: a low monthly price tends to generate more revenue than a higher up-front price (for most types of products). IAP's throw in the advantages of an app-store like model where people can keep buying more without entering their credit card details.

In conclusion: if you can make your app charge via IAPs (but that's not always possible or advisable), do so, because it will make a significant difference to your revenues. In particular, as Tony suggests, try to ensure that if a customer turns up who, for whatever reason, feels like blowing $500 on your app, give them a way to do so.

The town is no longer friendly for business  

Great analogy from Reg Braithwaite about the spate of website shut downs in the US in the last year or so (the latest being JotForm, which appears to be back up, btw).

Closing an entire mall for a case of fraud is the kind of thing that creates a ghost town. As the anger recedes, you know that in a few days you will get your mall reopened. You start placing calls to PR firms to get stories about the mall in the papers and on the news, you need to pressure them into reopening the mall and fix the damage to your reputation, fast. You also call a meeting with the firm you hire to scout for new locations. You won’t be expanding here.

This town is no longer friendly for business.

Read the whole article here.

Is the US truly "no longer friendly for business"? I think that might be pushing it, but it's certainly slowly driving there. I haven't travelled to the US in the last few years, even though I would like to, and I'll continue to avoid doing so in the future (unless I really need to for work), because of its insane anti-traveller attitude. I moved all my domains off GoDaddy after their debacle (but they're not hosting user-generated contents and they're on what I believe is a somewhat better host, DNSimple). My servers are in Germany.

Ultimately, the apparent abundance of capital in Silicon Valley will remain a draw for startups for some time, but smart startups would be well advised to host somewhere else.

To raise or not to raise  

Joe Stump, founder of SimpleGeo, has written a pretty solid article examining whether people should raise capital or not. It's a balanced view that looks at both angles instead of dismissing or praising fund-raising outright, and mostly matches with my views on raising investment:

I look at capital, whether it comes from an angel, a VC, or a traditional bank loan, as an accelerant. It’s like gas. Sometimes your fire is burning nice and bright. You’re warm and have plenty of heat so why pour more gas on the fire? Sometimes, however, you’d like to start another fire, or maybe you’d like to burn down a house, or, possibly, you’d like your little glowing embers to be a fire more quickly than is otherwise naturally possible. These are all great reasons to reach for the can of gas.

Joe lists a number of good reasons to raise or not to raise. Reasons to raise:

  • Your business is capital-intensive.
  • You're at an inflection point and the capital will help you grow 10x faster.
  • You want to get some money out. (I find this one dubious - just pay yourself a better salary!)
  • You can't afford to keep working on your startup. (I disagree with this one, that's using investment as a cushion)
  • It'll give you access to a lucrative partnership.

Reasons not to raise:

  • It's hugely distracting.
  • If you raise too much, you might get hurt in later rounds.
  • If you raise at too high a valuation, you'll be taking early exit options off the table.
  • You give up control of your company.
  • Even after raising, investors are a huge distraction.
  • You may not get the attention you want or need from your investors.

Finally, Joe offers some tips about do's and don'ts of fund-raising, but you should really just go read the article to find them out.

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"...


GoDaddy and JotForm  

Startup JotForm has had their site suspended due to some user-generated content that someone complained about. This is a big deal for them. If the domain stays down long enough (and it probably will), their business is toast - all this based on some random complaint from "the secret service" that they seem not to have had a chance to answer.

Wait a minute, you say, I thought SOPA didn't pass?

Actually, if you host your domain with GoDaddy, you live in a post-SOPA world already where your domain can be taken down without due process based on complaints about user-generated content.

As someone on Hacker News put it:

Seriously. I was prepared to be sympathetic until I saw GoDaddy's involvement. Jotform chose to use a despicable company with a long history of behaving in this way. They shouldn't be surprised when they're the next to get screwed.

That's perhaps a bit strong, as are the calls to use only non-US registrars. I don't think the fact that they're US-based is the main factor. If Google was a registrar, you could probably trust them not to bend over at the first request to shut down a domain.

That being said, hosting with GoDaddy is pretty silly given their repeated offenses against both decency and free speech. If you're hosting with GoDaddy, transfer your domains off today.

Is it the right idea?  

Paras Chopra offers three key questions in determining whether an idea is worth pursuing. He calls them "validation", but I hesitate to accept that, since validation is external, whereas the questions Paras picks out are basically introspective angles on an idea:

  • Do you think what you are providing is creating significant value for anyone? Value should be so significant that people should curse you if you take that service away from them. Do you think it could happen?
  • Do you think there is big enough market for the service AND the market is easy to reach (without spending bootloads of money)?
  • Are you enjoying doing this? Do you see yourself doing this for several next years?

Notice the "do you think" angle. Validation questions would be "Are people telling you that what you are providing creates significant value for them?" and the answer to that question would involve data. An idea is not validated just because you think you know the answer.

That said, those are three important questions to consider before throwing yourself into an idea. If you're providing no value, the market is too small for your ambitions, or it's not an idea you feel passionate about, it's probably not the right idea.

To the space between failures!  

One of the most hilarious quote from the otherwise appalling Indiana Jones and the Lost Skull: "Where did they go? Space?" "Not into space. Into the space between spaces." Anyway, I digress.

Chris Dixon:

His main concern, he said, was: “What if we end up being the next MySpace instead of the next Facebook?”.

(...)

Mainstream culture seems to depict startups as either being complete failures where everyone loses their shirts or else huge hits like Facebook. But the reality, as usual, lies in the middle: in 2010, according to Dow Jones, there were 522 venture-backed exits with a combined exit value of $53 billion – implying an average exit price of around $100M.

What's missing from this picture? How about all the many tens of thousands of small businesses that don't exit, or even exit for much smaller amounts, but still provide a comfortable level of income for their owners. Chris outlines the best reasons to work for a startup at the bottom:

The best thing about startups is you get to work with great people on interesting projects, and can be successful by conventional metrics, even if no one outside of tech has ever heard of you or what you’ve built. There’s great stuff between failure and Facebook.

There's even more great stuff between failure and those VC-backed startups.

How designers and developers can work together  

Matt Gemmell has written two excellent articles recently, aiming to help developers and designers to work together:

Both are solid and worth reading. The key points for developers:

  • Know what you want
  • Examples are helpful
  • Trust your designer
  • A sketch goes a long way
  • Consider sample data
  • Present all the work up-front
  • Remember design constraints
  • Be responsive
  • Don't assume it's easy
  • Don't micro-manage
  • Use the same tools
  • Speak the same language
  • Allow use as a portfolio piece
  • Pay on time
  • Don't condone spec work
  • Understand the model
  • Source code is extra

And the key points for designers:

  • Use an intelligent method of version control
  • Keep your layers
  • Name all your layers meaningfully
  • Use groups, and do so sensibly
  • Prune unneeded layers
  • Use Layer Comps
  • Keep everything as vectors, and scaleable effects
  • Learn how to preserve rounded corners while resizing
  • Design at 72 ppi
  • Snap to whole pixels
  • Always use RGB mode
  • Asset-preparation is part of your job
  • Be careful with fonts
  • Mimic the platform's text-rendering (where possible)
  • Be sure of design dimensions
  • Use the platform's idioms
  • Design once for landscape, then design again for portrait
  • Design for each major screen-size, and their contexts
  • Use genuine or at least realistic content
  • Consider localisation
  • Respect the global light source
  • Make navigational or organisational constructs explicit
  • Export cut-ups without compression
  • Ask about shadows
  • Understand how buttons are constructed

Read, bookmark, and remember.

Using advisors to raise money  

Very interesting article by VC Nic Brisbourne, examining the usefulness of advisors in raising startup money. Some interesting numbers:

Advisors are typically small partnerships, or individuals, who help startups raise money from venture capitalists. They usually charge some form of retainer, and then a success fee of a percentage of funds raised and perhaps some options. Retainers normally range from £5,000 to £10,000 a month, the percentage of funds raised between three and five per cent, and options up to 0.5 per cent of the business.

These retainers sound expensive, but, as Nic later points out, if using an advisor is right for you, and you're dealing with an experienced advisor with a close-to-100% success rate, this can certainly be worth the money.

Nic also advises startups who are considering this route not to bother with unknown advisors:

If you are going to use an advisor, then for heaven’s sake go for one who is well respected, well known, and has a wide network. Otherwise you might as well email the VCs yourself.

More in the article.

Management is a support function  

Here's a great article from Joel Spolsky, which makes the point that management is not about command and control, but about providing support:

Thus, the upside-down pyramid. Stop thinking of the management team at the top of the organization. Start thinking of the software developers, the designers, the product managers, and the front line sales people as the top of the organization.

The “management team” isn’t the “decision making” team. It’s a support function. You may want to call them administration instead of management, which will keep them from getting too big for their britches.

While there is certainly plenty of decision-making required at the "top" (mostly about strategic direction and key hires), the decisions on what to do to react to specific daily business situations should be driven by those closest to those decisions.

The sad thing is, management gurus like Peter Drucker have banged on that drum since the 50's, and yet many businesses still operate as if centralised decision making was viable to build large businesses. It's not. As Spolsky (and, a few decades ago, Drucker) point out, centralised decision-making is simply not scalable.

That being said, of course, "building a large business" is not everyone's aim. If you don't want your business to get big anyway, you can probably sustain centralised decision-making until your business gets to a few people or so.

The YC undeground  

This is a relatively silly graph (and, according to HN comments, pretty inaccurate) but it's interesting to think that, as time passes, the YCombinator value proposition is slowly but surely shifting from "we'll give you a bit of money, a lot of advice, and a lot of top quality investor introductions" to "we'll plug you into the most powerful startup founder network in the world."

YC alums count the founders of startups that have achieved all levels of success, from billion-dollar Dropbox and AirBnb, to large acquisitions like Heroku, and many others. I'd wager that there isn't anyone worth knowing in the startup world that isn't within the immediate network of one or more YC alums/founders.

Email options

I've added some more granularity to the email subscriptions.

Change your options!

First of all, there is now a "change your options here" link at the top and bottom of every email (which you can see now if you're getting this by email). This enables you to set one of three flags:

  1. Receive full length articles
  2. Receive linked posts
  3. Receive reposts

By default, only the first one is enabled. This is because I suspect that most people who subscribe are interested in the full length articles, and don't want to receive more than 1 email a day. Over the last week I realised that one of the things that slowed down/stopped my posting was the fear of spamming email subscribers with articles that weren't "important" enough. The full length articles never have that problem, but the shorter ones... well, it feels more risky.

If you want to get the linked posts as well as the full articles, you need to change your options now.

If you want a full blast of startup articles every day, just turn on all the options. You will get at least 4 reposts emailed to you every day, and probably 1 full length article and up to 4 linked posts. A sensible setting is probably to get just the full length articles and linked posts.

A new sender

I've also updated the "sender" of swombat.com articles to be daniel@swombat.com rather than the highly impersonal subscriptions@swombat.com. Feel free to reply if you have some thoughts about any article that is being posted, linked to or reposted!

What's still missing?

Daily and weekly batching is still on the todo list. It will happen, thus giving you the option to get all of your swombat.com in a single daily or weekly email. Give me some time, though, I've been incredibly busy for the last few weeks.


Process cults  

Alex Payne writes an insightful attack on the idea that dutifully following a process will get you a successful startup:

Process Cults form around a set of business practices that, when judiciously applied, are supposed to yield a profitable, successful business run by shiny, happy people. The startup segment of the business book market has its favorites:

  • Eric Reis’s lean startup and associated book.
  • Steve Blank’s customer development and associated book.
  • 37signals’ methodology, as expressed in the books Getting Real and REWORK.

I have read all of the above. I don’t necessarily agree or disagree with their contents. What I disagree with is the notion that anyone should start or operate a business in the explicit mold of someone else’s experience, as reduced to a couple hundred pages padded with illustrations and diagrams.

I believe processes are in fact helpful, but only when supported by a solid set of skills backed by painfully earned experience.

Importantly, a process can help you avoid some common mistakes. Processes are like recipes, but they are not recipes - they are much more open-ended. Yes, every business is different, but most businesses fail in common and avoidable ways and following a well-tested process will at least reduce the chance you fail in a boring way (though it may not increase the chance you succeed).

How to create your own video  

On the one hand, this article underestimates the tremendous effort required to put together a good video, especially if you're not a visually talented person (i.e. someone who can scribble stuff and make it look good). On the other hand, Woobius managed to put a number of videos that looked fairly professional, all on a zero budget (see here and here and here), so it certainly is possible.

If you have access to someone (a cofounder or even simply a friend) who is visually talented, this article can take away some of the mystery of putting together a video for your product. Since videos do tend to increase conversion, this may well be worth doing.

I'd say there are two points in a startup's life where it makes sense to throw together your own video. One is before coding anything, as part of a "video MVP" to test the market. There, it's really important not to invest too much time in the video, since it's really just a simple test of the market demand.

The other point is when you've got a website up, and you're trying to increase conversion rates. There, it makes sense to invest a bit more time into the video, but you may still be at a stage where cash is tight and you don't want to spend thousands of dollars on a "proper" video, especially if you don't know whether it'll actually help conversions in your case.

Later on, when you have the financial resources, hiring professionals to put the video together is a better option.

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.

Tough choices

We all have priorities in our evaluation of different aspects of life and business, whether conscious or subconscious. When we make decisions that respect those priorities, we tend to feel at peace. When we make decisions in conflict with those priorities, we feel that something's wrong. In some cases, being forced (by circumstances, someone, or one's own lack of awareness) into making such a decision can leave one very distraught.

Very often, the right choice can be found by simply "feeling" for it. You can rationalise it all you want, and even come up with elaborate, sophisticated and very convincing arguments for why it's right, but cheating on your partner (to take an obvious example) feels wrong, and that's your subconscious telling you this is not the right choice according to your priorities.

Unfortunately, life also throws much tougher choices at you. Making decisions is (comparatively) easy when there's a right choice and a wrong choice, but in many situations, it feels like there's no right choice - just wrong choices. In those situations, no matter what you do, someone will lose out on something and they'll be pissed off at you for making that choice. These are what I call "tough choices" - they're tough, because all the options feel wrong.

This happens particularly often in business. Tough business decisions are inevitable. Whether it's dealing with a fallout between cofounders, firing an employee that's not performing, negotiating a tough deal, or even assigning shares in a new business, businesses seem to have an almost magical way of providing an endless series of tough choices. To make matters worse, many startups are like pressure cookers that heighten emotions and drama and make all those decisions seem even more important and personal to those involved.

I've had my share of these tough choices (though there are no doubt many more to come), and I've come to realise that there are some very fundamental principles that can help with those situations.

1. Be aware of (all) your options

Most of the "tough choices" in life are artificially limited. "You have no other choice," says the authority figure in the famous Milgram experiment. "Oh, I have a lot of choices", replies one of the very few subjects who resisted this artificial narrowing of possibilities. Watch it for yourself here. It's inspiring.

Life and business throw many real "tough choices" at you, but the first thing you should do when faced with one is not to make a decision, but to see if the landscape of choices can be expanded. Many times, it can. In particular, it is always worth being suspicious of the menu of choices on offer, when it is offered by someone else. Chances are, consciously or not, the choices on that menu will be crafted to lead you to make the choice that someone else wants you to make. That is one of the most common ways that you can end up making decisions that conflict with your internal compass, and which you end up regretting.

Another factor that often limits our choices is our own axioms of behaviour. "I won't break my word" is a common one, which is easily discarded in extreme circumstances, but which we hesitate to disregard in normal situations. I am an honest and sincere person, but if I was in Nazi Germany, and an SS was asking where the Jews are hiding (and they happened to be in my neighbour's cellar), I would lie to them without hesitation and not feel bad about it. In more mundane situations, we tend to ignore this option of evading our own behavioural axioms.

Now, I'm not suggesting that breaking your word should become a routine, daily maneuver (though I'm sure some people will misunderstand this... this is the internet, after all). However, when you have really tough choices to make, I believe it's important to consider all options - including those that involve behaviours that you would not normally condone.

So, the first tool at our disposal is to reject externally and internally dictated set of choices and explore the full landscape of choice. This should be an automatic reaction to a situation where a tough choice presents itself.

2. Be aware of your priorities

The second principle is to be aware of what your priorities are. I'm not talking about your business priorities, or your priorities as an entrepreneur, though both of those matter and you should be very aware of them. Ultimately, however, you will have to live with your choices as a person, as a human being. So what are your priorities on a personal level?

Everyone will have a different set of priorities there, and the point is not to judge whether your priorities are what they should be (that's a whole different exercise), but simply to be clearly aware of what they are.

Are friends more important than business? That's an important bit of internal compass to be aware of when you start businesses with friends, because you will probably end up being faced with a decision that hinges on this question, some day.

Is creating value for customers more important than making profits? Are employees' livelihoods (if you hire any) more important than your own financial outcome from the business? Is your family more important than your employees? Is being entirely honest more important than closing the sale, or is it ok to be mostly honest? Is your health more or less important than your achievements as an entrepreneur? Would you sacrifice your life to make that dent in the universe?

There are many such questions that you can ask yourself. They're tough questions, whose answers will often determine your decisions when faced with a tough choice. Yes, they seem more personal than business-driven, but that simply reflects the fact that business is (for now) conducted by human beings, not by impersonal processes. You have to live with your decisions on a personal level, no matter how you may try to justify them as "just business".

Many may look at these questions and say "well, I don't want to make that choice - I value both family and employees", or "friends are just as important as business, I don't want to screw up either". Fine, tell yourself that if you want to, but that's just denial (similar to a product manager ranking all of 50 items on the development plan as "highest priority"). Some day, you'll be faced with a choice where either your employees or your family will be disappointed with you, where you'll either hamstring your business or your friendship, and then you'll have to choose one of the two.

That the choices will come is inevitable. What I'm suggesting is that by spending the time now, when you're not facing a crisis, to clarify what your priorities are, you will find it much easier to deal with the tough choices calmly, without panic, and correctly, when they do come.

A worthwhile exercise, then, is to try and figure out what are your top three or five priorities in life. What are the things that trump all others, and in what order do you place them? Having done this homework (and redoing it when you sense that your priorities have changed) helps in both personal and business life.

This is the second tool to deal with tough choices: be aware of your priorities in life, so that you can use them when making tough choices.

3. Erring on the right side

Sometimes, even though you're aware of your priorities and the full landscape of your choices, you might be confused about which choice best supports them. It might seem that all the options disregard your priorities equally.

When priorities fail, you can still fall back on universally accepted human values. Generosity, mercy, freedom, love, peace, life - those values (and many others) are universally accepted as good, and, should all other methods fail, falling back to them is a final safety net to make decisions that you can live with.

This might seem melodramatic, but it is a powerful tool when faced with the really tough choices.

If all the choices seem to contradict your priorities equally, which of the options is more generous, more merciful? If every decision is a mistake anyway, we can at least try to choose so that our mistakes lead us towards a better world rather than a worse one.

That is the final line of defence: if every choice is an error, we still have the choice to err towards good rather than evil.

In conclusion

I've proposed three principles to deal with the tough choices that come with every business. All of them start by accepting that we live with our decisions as human beings. "It's just business, it's not personal" is a fallacy. Everything is always personal to both the decider and the ones impacted by the decision, and recognising that leads to a framework that enables people to make decisions that they can live with.

The three principles are:

  1. Reject externally and internally dictated sets of choices and explore the landscape of choices on your own.
  2. Be aware of your own priorities in life, so that you can use them to guide your tough decisions.
  3. If every choice still feels like a mistake, err on the side of good, universal human values.

I hope you find this useful the next time you are faced with tough choices.


You don't need a million dollars

When people talk about starting startups, one of the implicit statements is the idea of making it big - of building high-growth, outrageously profitable businesses that will make everyone involved in them rich. And in fact, high growth is even part of my definition of "startup".

VCs, angels, and in fact all investors, have a vested interest in seeing lots of people trying to build big businesses. It is well known that startup investment follows a "hit" business model, where most of the returns of a fund are made by a handful of big hits, which make up for a lot of failure. So pretty much all the literature produced by investors pushes founders to think big, aim for the moon, and give it their best shot.

However, my experience of talking to a lot of would-be entrepreneurs is that most of them simply want to run their own business, to escape the clutches of the corporate world, gain the freedom and security of being their own boss, and so on. The advice to swing for the fences is completely inappropriate in those cases.

Even if you do want to eventually "make a million dollars", which is a euphemism for making enough money that you can maintain a comfortable lifestyle for at least a decade without needing to work for it, aiming straight for the million dollars is often not the right approach. The reality is, it's much easier to make a million dollars when you're an experienced entrepreneurs who knows how to build a profitable business, than it is to do so from a standing start, straight out of the corporate world or university.

A better approach

My advice to people who want to be entrepreneurs but have not yet acquired the skills to build and run a successful business is to aim first for financial independence, rather than try to make it big.

If you can create a business that pays a sufficient percentage of your current salary, but is entirely yours (no investors) and enables you to have full control over your time, you're much further along the way to success (however you define it) than if you're still bound in effective peonage to some employer who owns most of your time.

Entrepreneurship is a career

The tech startup world of Silicon Valley, with is stories of insane working hours, mind-blowing successes, and its dismissal of serial entrepreneurs as crazy people, has perpetuated the myth of the startup as a singular event. You "decide to do a startup", you go and do it, and then you exit and retire, having compressed your working life into a short period and dealt with the money issue once and for all. But that's not how it is in practice - at least not outside the Valley.

I look around at friends and acquaintances who are entrepreneurs, people that I know personally, and all of them, successful or not, are serial entrepreneurs, and happy to be so. What will they do if/when they "finish" their current business? Why, start working on the next idea, of course! I look at myself, and, having run my own business for the last half-decade, I wouldn't have it any other way. Running your own business is hard, but it's infinitely better than letting your soul slowly grind away in a job you find uninspiring. Being your own boss has a lot of perks in terms of lifestyle and personal freedom.

Despite its reputation, entrepreneurship also a much more secure occupation than having a job. Being a competent, skilled entrepreneur means having the ability to seek out business opportunities and make money out of them. No matter the business climate - boom, bust, depression, recession, or even war - there are always business opportunities and so there will always "be work" for entrepreneurs.

Entrepreneurship is the safest career there exists today.

When you see entrepreneurship as a career rather than a single-shot lottery ticket, you don't need to aim for a million dollars. It's enough to start by achieving the "survival" level of success, then make sure that each subsequent step takes you further up the ladder along whatever dimensions of success you care about.


The startup skill set

I went to LeanCamp London last Sunday. It was a blast - there were a lot of interesting people to meet, and one of the highlights was, of course, seeing Eric Ries answer a whole bunch of questions very intelligently and entertainingly.

Another key highlight, for me, was my own "workshop" talk, judiciously titled "Lean Startup Skill Set". Was it really specifically lean? Perhaps not, but it's a skill set that will help any entrepreneur trying to build a startup, particularly those that use Lean methods.

My premise, as I explained previously, is that success (at least to the "survival" or "comfort" levels) in the startup world has more to do with skills than with ideas. A skilled entrepreneur will achieve some measure of success even with a mediocre idea. An unskilled entrepreneur is likely to fail even with a brilliant idea whose time has come.

There are exceptions, of course, but you can't rely on being the exception any more than you can rely on winning the lottery. So the best approach as a new entrepreneur is to try and fill the glaring gaps in your skill set (via learning, partnerships and mentorship) so that if your startup fails, at least it will be failing for an interesting reason.

The workshop's purpose, then, was to discuss what those core entrepreneurial skills are and where to learn them.

For this article, I'll just list the skills we ended up with at the end of the workshop, along with a brief description. Over the next few weeks, I'll pick a number of these and cover them in more detail, including thoughts about what someone can do, concretely, to learn those skills. As I do this, I will update this article to include links to those articles, so the best article to bookmark is this one.

The purpose of the startup skill set

It's worth noting, before diving into the list, that none of those skills are absolutely mandatory. You can (and founders do, all the time) build a successful business while severely lacking in one of these areas. However, what is clear about all those skills is that they help. Being at least baseline-competent in all the skills on this list will markedly decrease the chances that you screw up your first business in a really obvious and easy to avoid way.

One of the reasons it works that way is because the options you will see for evolving and adapting your startup will be directly related to your skills. If you are a programmer, then building a tool to automate part of your business is an option. If you know how to sell, then customer development is an obvious approach. On the other hand, if you lack those skills, those options will seem less appealing, so you're less likely to use them, even if they make sense. The landscape of your skills determines what choices you make when developing your business. The more gaps in that landscape, the more gaps in your business.

Some of these skills (but not all) can be outsourced or delegated. However, the sad reality of delegation is that you can only truly delegate work that you understand. So even if you plan to get an external designer to do your design work, you still need some basic design skills to understand and evaluate their work.

1. Client management and customer service

Being able to handle clients and support your products or services is an essential entrepreneurial skill. Early on, and perhaps for the whole life of the startup, the founders will be doing this.

In the B2B world, this skill essentially consists of being able to handle nice and not-so-nice clients, to deal with both professionally, ensure that clients are happy with your service, feel well cared for, well informed, and don't end up "blowing up" because of some avoidable mistake you made. It also involves knowing how to react to a client actually blowing up, how to handle them the right way so they turn back into a happy client.

In the B2C world this consists of being able to respond to support queries in a polite and efficient manner, always remembering that every customer interaction is an opportunity to delight. It also consists of being able to deal with pissed off customers without losing your cool and making a fool of yourself. On the web, great customer service is a differentiator - or even, in some cases, a price of entry.

2. Sales

Directly related, but very different, is the skill of selling things. Although I said that these skills are optional, if you're going to learn one skill, let it be this one. As the saying goes, "sales cures all management ills". If you screw up everything else completely, sales won't save you, but making enough sales can at least give you the time to learn the other stuff.

"Sales" is a big word, covering everything from selling a $10 subscription on your website to selling a million-dollar contract to a large corporation. Funnily enough, the two are not as unrelated as they might seem. Certainly, someone who is highly skilled in one of those will find it easier to learn the other than someone who is completely unskilled in sales.

Being able to sell stuff, online or in person, is also incredibly easy to practice, so long as you are willing to try unusual things, as we'll see in later articles.

3. Making things

"I make stuff" is the credo of the hacker-entrepreneur. My parents used to ask me, when I was a kid, "what can you make?" It is always possible to build a business without making things, or by selling other people's ability to make things, but having that ability yourself is a huge bonus as an entrepreneur. It makes it easier to explore ideas, and it makes it much easier to communicate with others who make things.

Making things is split into multiple sub-skills: programming, design, and even engineering (and, perhaps, in the future, biotechnology! "Click here to download this YC-funded DNA patch and grow a third arm!"). But all of those stem from an impulse to "make things", from the sense of wonder that comes from looking at "something" and thinking "hey, I made this".

Luckily, despite the neigh-mystical nature of "making things", all those skills can be learnt. You can't learn the passion, but you can learn enough to be useful. Designing and building a simple web-app is attainable for pretty much anyone, and a huge plus as an entrepreneur.

4. Measuring things

As Eric Ries puts it, entrepreneurship is a management science. And, like both science and management, it relies on being able to measure the right things and draw the right conclusions from those measurements.

Understanding what to measure, how to measure it, how to apply statistical (or other) analysis techniques to it to figure out what it means - all of these are very useful startup skills. If you completely lack them, you will be at a disadvantage in building any kind of business.

5. Communication

Entrepreneurs all need to be at least competent communicators. Communication can take many forms: written (via blogs or even emails), in person (presentations, pitches, networking, etc), vocal (on the phone) or even visual (diagrams and designs). All of these areas are important. Being "world class" at these skills is not essential, but a baseline level of competence is required. An entrepreneur who cannot give a presentation, write a good, sharp email, or close a sale on the phone, will be at a disadvantage.

6. Management

Eventually, most startups end up needing to employ others to achieve their goals of rapid growth, whether directly or as subcontractors. Some may think that subcontractors manage themselves. Those people are in for a surprise. Management is hard to learn, perhaps the hardest on this list, particularly when it comes to managing other people - and yet most entrepreneurs don't think they need to learn it! Management mistakes can cost as much as recruitment mistakes, if not more.

Management skills are also essential early on, when the startup is made up of only founders. A full-time manager would be a waste for a pair of hackers, but at least one of the two should be thinking of where the project is headed, setting goals and milestones, considering whether the team is working well together, and fixing process and people problems before they become too painful. That person is, implicitly, operating as a part-time manager. If they suck at it, or don't do it at all, the business will suffer.

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7. Recruitment

Management (the people kind) and recruitment go hand in hand, in that you can only really recruit with discernment once you have enough management experience to recognise how someone will be to work with. The point when you need to bring more people into the company because there's just too much work is not the ideal time to learn recruitment, particularly since most corporate jobs offer ample opportunities to get involved in recruitment.

Being able to recognise talented people with the right work ethic, and to convince them to work for you, is a crucial entrepreneurial skill once the business picks up, and early on, it cannot be outsourced or delegated to anyone.

8. Marketing, branding and PR

I've lumped these three together because they all relate to projecting the image of the company and getting people to hear about it and care about it. All startups have a brand, whether they know about it or not, and those founders that know how to present their business with the right "branding" will typically do better than those who don't.

Marketing and PR, the ability to get people to give a damn about your product and to come check it out and to trust you, are equally important for many kinds of businesses.

9. Networking

Some people would call this an activity rather than a skill, and they may even be right. However, having "networked" for a number of years now, and having observed both skilled (e.g. my cofounder, Paulina) and unskilled (they shall remain nameless) networkers in action, I believe there is enormous variation in the amount of "value" that networkers will get out of a meetup, and that variation is directly tied to skill.

Learning to network is not hard, but it takes practice and perseverance and a deliberate approach to constantly push yourself out of your comfort zone.

10. Research

There are truly incredible amounts of data available on the web. Most of that data is useless, but hidden in these mountains of straw are the needles that point the way for your business to go.

Being able to squeeze the right information from the web (and other sources) on demand and efficiently is a fantastically useful skill for any entrepreneur. And, like all others, it can be practiced.

11. Financial control

The ability to keep your business's cash above zero is a fundamental and often neglected entrepreneurial skill.

A startup CEO has three key responsibilities: setting and communicating the company vision, recruiting and retaining a great executive team, and making sure there's cash in the bank. Everyone gets very excited about the first two, but the last one is equally important.

In an age when most people live with humongous credit card balances, financial control is far from a given. If you don't know how to keep your own cash flow positive, chances are you'll screw up your business's too - with far more dire consequences.

Financial control for a business also requires an understanding of accounting, taxes, and the legal options for dealing with bad payers.

12. Fundraising

Depending on your perspective on business, investors, bootstrapping and so on, fundraising may be either the most essential skill of all or complete anathema. I myself prefer not to have to worry about investors. However, being able to raise money (from both private and public investors) if you decide it's appropriate for your business is a valuable business skill.

This is hard to learn in any other way than by doing it, though some elements of it can be learned separately.

In conclusion

This is a lengthy article (sorry about that) that will turn into a lengthier series of articles. Hopefully, they can provide a path for new or would-be entrepreneurs to make up for the skills gaps which they naturally have when first arriving "on the scene". Even knowing all those skills won't guarantee success. However, being competent in all these areas will certainly increase your chances of achieving some form of entrepreneurial success.

If you have other suggestions, please do let me know.

Update: Some people are suggesting that "persistence" or "willingness to take risks" are more important skills. Whether they are more important or not is debatable, but what I'll argue without hesitation is that they are not skills. So many articles are focused on character traits that correlate (or not) with entrepreneurial success. This article is about skills: things you learn, practice and get good at, not things you are born with, or which are properties of your personality.


Is your MVP really an MVP?  

Anthony Panozzo argues that most of what entrepreneurs calls "an MVP" is really a "version 1". Instead, an MVP is a tool to test assumptions. If you're not testing specific hypotheses, you're not doing an MVP.

So here are my new question for MVPs. If someone says they intend to “build an MVP” (the build part itself might be a tell), I am going to ask:

  • What are you trying to learn with this particular MVP?
  • What data are you collecting about your experiment?
  • What determines the success or failure of the experiment?

It's worth reading the article if you're unclear on this point.

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