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Within entrepreneur groups, there seem to be lots of questions about when you should quit your day job and go full time on your new startup idea. Generally, I am a fan of keeping your day job as long as possible as everyone needs money to live and having a day job means you keep that income and reduce the stress of paying rent and buying beer and pizza. In addition, when you start your new company, you are likely to be working nights and weekends so training yourself, your friends and your family on this new lifestyle is a good thing. Also, by having very focused time on your new startup (part-time vs. full time) you will focus on the most important issues, the “critical few vs. the important many”. Finally, you will find that doing your new idea will take alot longer than you planned, so letting that time play out while you have an income is a good thing. Here are some rules that I would apply;
- Spend at least 3 months on your new idea – this means telling people what you are working on, finding customers, finding other people to work on it, making prototypes and getting comfortable that this is the one…
- Develop a workstyle that involves at least 3 nights/week and 1 weekend day, preferably with other people who you want on the team. This will get you into a rhythm. You might try to do some specific things on each night (product dev, customer dev…) and get you/your team into some form of Agile sprint process where you can define meaningful progress on all relevant aspects of the business. Get into the hard working habit.
- Consider having 6-12 months of living expenses in the bank and discuss this with your family/partner/roommates…you need to know how you will pay the bills while you do the startup. Depending on your progress, you could be courting investors at this time so that investment in the company is a trigger to quit your day job.
- Have a commitment of 3 people who will join you and quit their own jobs and understand their parameters ($, focus, understanding of equity stake…) – to build a big idea, you need people and having them lined up before you jump it will be important.
- Try to get verbal commitments from at least 10 customers (for b2b companies) or 100 consumers on how they would pay for your solution. This is the hardest one to get, but if you are working on a big problem and you know where the market is, you should be able to have a group of people who are begging for the solution. Sometimes not having a real product yet is even more powerful in the early days, but keep working on customer development, it will be critical. Steve Blank has written about this extensively in his book The Four Steps to the Epiphany and you should read it.
If, after all these steps, you still have increasing excitement about the customers, problems, solutions and team, you can really consider taking the plunge.Read More
Over the past month I have had the privilege of attending or speaking at a StartupWeekend in Boise, TechStars “for a day” in Seattle, TechStars New York, Microsoft Kinect Accelerator in Seattle, TechStars Boulder (with Jason Mendelson) and finally mentoring at a Startup Weekend in Medellin, Columbia. It’s been great to meet so many new and aspiring entrepreneurs in so many cities. In the process, I’ve heard lots of pitches and coached many on how to make their presentations better. Here are a few tips;
1. Find the emotional hook (pain is better than opportunity) - most great companies solve a painful problem and as an entrepreneur you should be able to characterize the user/pain in a way that the audience connects with. People should hear the pitch and say, “damn, that is a massive pain and I hope they can solve it” and the more they feel it the better. Bonus points if the pain has some social benefit or very direct and quantified monetary cost.
2. Compelling data points – For a good pitch you need to have 3-5 strong data points that make the audience think, “wow, that is a big space”. This is usually the number of users who will be affected, the “cost” of not having the solution and a few examples of similar companies who have been successful solving a similar problem. Pick the data points and weave them into the story vs. showing complicated graphs and forcing the audience to guess the meaningful numbers. For example, the winning team at SUW Medellin focused on the thousands (they had the real number) of women in Medellin who reported being the victims of violent crime last year and provided them a quick way (the red button on their phone) to report their position to police via sms and Twitter.
3. Show the solution – screen shots, live demos or video of the product are way more compelling than a verbal description of the solution. Show vs. tell. Worst case, make realistic screen caps and/or real wireframes of the product, but make it visual as if it really exists. The closer to working product you can get the better! Keep the demo to ~30-45 seconds and/or have an animated screen-cap version that you can narrate.
4. Develop your “it’s like” metaphor - Everyone is busy and inundated with ideas, companies, products…so you need a simple hook that they can remember. Often this can be done with a “it’s like” which combines something they know with something new. Or, it could be a combination of 2 well known things. One of the compellig teams in Columbia developed a product that they described as “instagram meets graffiti” – without even seeing the solution, you could imagine what it does, why it would be cool, who might use it and even guess on a freemium business model where you could have virtual spray cans, fonts or other treatments. Check it out at http://www.behance.net/suavecolombiano/frame/4201023
5. Stick with one business model (and advertising is not usually very compelling) – I have seen countless teams pitch their idea with several business models (advertising + sponsorships + premium content + paid features…). Each of these models requires different things from the user and likely different feature prioritization in the product. Pick one and make a clear case on why it will work. If possible use other comparable companies in your space to validate that this model can work. For example, with Gist we focused on business professionals and planned to charge a monthly subscription fee. We based on model on the same users (sales guys) who already paid for solutions like salesforce.com and Blackberry that delivered them an information advantage. While we could have had targeted ads (like LinkedIn) or API licensing deals (like Full Contact) we wanted to stay very focused on one model. If you need help developing this, check out this post.
6 KISS – most good ideas are simple or at least sound simple of the surface. Under the covers, it is likely that there are lots of problems (small and large) that need to be solved, but if it seems simple, people can remember the solution and often they believe the solution can exist quickly vs. it being too complex, complicated and therefore hard to implement, communicate and get right with too many variables. Keep it simple, stupid.
7. Passion – You, as the entrepreneur, need to show your passion for the company, the problem, the users, the solution, the team…People want to connect with others who have passion and commitment. Passion will take you through the tough times, get your teams to work harder and keep your customers engaged when your product is less than ideal. Get excited, get loud and be passionate when you talk about what you are doing and how it is going to change the lives of your users (and potentially the world)
If you can keep these points in mind, your idea will come across as much more compelling for investors, your team and most important, users who have the problem!Read More
I get asked for my advice on new startups alot and I like to give it. I have also been very fortunate and had great mentors, advisors and investors. So, I can say that the best relationships are ones where the entrepreneur works hard to manage his advisors. This generally includes;
- very regular updates – I like to do every 2 weeks. This gives enough time for substantive progress, but not too much time to forget what is going on. It also gets an early entrepreneur on the right cycle for future board meetings (monthly). It can also usually be aligned with a software sprint releases so you usually have some good product news to share. Stay on schedule and do them religiously.
- provide the context as backup – sometimes I can give advice with very little context of the exact specifics of the business, but if I think I need more detail, provide me links to supporting docs, your thinking, the choices you are weighting (pros/cons)… You can also provide a summary of other thoughts from the team or other advisors to help me know the overall context of the decision.
- ask for specific help - investors and advisors are usually busy and yet they really want to help. So make it easy for them to focus their time, effort and expertise on the things you really need as an entrepreneur and where they have specific expertise. Laying out where you need help in an email, an update or a meeting is really useful to direct an advisors focus. And, if applicable or when sending out to a larger group, be even more direct and ask a specific person to do a specific thing for you.
- choose the right venue – sometimes email works, sometimes a call, sometimes a 1:1 and in many cases you are better off to get the group together to discuss a more complex or important issue. Choose the right venue with a focus on the most efficient and timely way to get the input you need and no more.
- keep track of time - most of us advisors have a mental model of how much time we have to give to any one company. This varies depending on our level of engagement and/or the specific needs of the company at any one time. But, as the entrepreneur, keep this time in mind and try to balance it across advisors and across a timespan so we can stay fresh and alert.
- give credit and say thanks – it is always nice to give public credit to people who are helping. it shows that you are listening, appreciate help and it often spurs other advisors to raise their game and do more.
Customer Development = The pursuit of customer understanding
Part of Customer Development is understanding which customers make sense for your business. The goal of listening to customers is not please every one of them. It’s to figure out which customer segment served his needs – both short and long term. And giving your product away, as he was discovering, is often a going out of business strategy.
The work he had done acquiring and activating customers were just one part of the entire buisness model.Read More