Ideas for entrepreneurs

Nothing beats having been in the trenches according to Steve Blank. And because starting a company now requires less than a year and $500k, he suggests to make it part of the VC-partner training program.

Cut your losses or pivot? Great question... And a really really hard one to find out. "Errare humanum est perseverare diabolicum."

 

In this post, Tom Romero details the product / market fit flaw of his product he analyzed and decided not to fix. should you be always analytical in that decision? Can you be? 

 

There are situations when you won't be able to analyze. For instance, when it's about pivoting to a totally different project - as we did pivoting form Goojet to Scoop.it - you don't have data or facts to analyze. You just have the motivation, the inspiration or the feeling that it's the right thing to do. Startup history - from Paypal to Slack and Instagram - shows us that some total reboots have succeeded to create unicorns. 

 

But Tom definitely has a point. To take our same example, we tried to fix Goojet multiple times before giving up and rebooting to a total pivot. Could we have cut our losses earlier by understanding Goojet - as a product and not as a team and company - could not be fixed? Most probably. 

A/B tests are statistically significant only with large numbers. You can play with Optimizely's tools (picture) or use this one by RJ Metrics or even this other one. Doing that, you'll rapidly convince yourself of a simple mathematic truth: it takes a lot of events to achieve 90% confidence - something early stage startups usually don't have. 

 

tom Tunguz makes some great points but the other mistake I've made (and see other do) is to believe you can A/B test a whole UX. A/B tests are good to determine the impact on a direct conversion: typically whether or not landing page A converts better than landing page B. But when you start to look at indirect events like retention or activity level, it becomes very hard to tell. What's worse: it even gets polluted when you have a lot of activity. 

 

So while A/B tests are great and should be used, they're not the way to find product / market fit - interviews and qualitative research are - and they're not the magic answer to everything even at a later stage when you're trying to optimize revenue, usage and retention.

It's so hard and time-consuming to understand everything about Silicon Valley while you relocate and run a startup with a part of your team back at home. Cross-boarder startups needed an acceleration program badly. Now they have one thanks to Geraldine Le Meur, Carlos Diaz and Pierre Gaubil. Well done, guys and go Refiners!

Big data correlations at work :-)

JB from our engineering team shared this today and it's a must-read post for any entrepreneur and early-stage startup team member as finding product/market fit is one of the toughest things to do. 

 

Making assumptions about your market and customers is easy, proving them with the least amount of resources and time is hard.

There's a saying that goes: "don't sell the bear's fur before killing it". But there's one that I prefer and that applies to entrepreneurs: "why bother killing the bear if you haven't sold the bear's fur yet?"

 

When I became an entrepreneur 16 years ago, building technology was not as easy as it is today. No AWS, much less ready-made Saas software, etc... So we didn't have the temptation "to build it and they will come".

 

But today, as Bram Kanstein explains in this post, it's easy to forget about doing your research and rush to building a product. 

 

He makes an essential point about understanding the problem solved, current alternatives, etc... and his post is a great read. 

 

But I'll go even further: for a lot of entrepreneurs, finding and building a community and an audience first can be a very valuable exercize. If a successful product can only be built by researching and understanding very well a precise problem and need from a group of people, then identifying that group and making useful connexions within that group is a great first step. In other words:

 

- Don't [build a product] > [find the problem it solves ] > [find the target group that has the problem]

 

- Do [connect with a group that have things in common] > [understand their #1 challenge] > [build a product].

Thourough explanation on the various ways to calculate churn but that's the end of the post which is the most valuable to me: what is the churn you can avoid vs the one that's really unavoidable?

 

It's easy to think churn is unavoidable but unlike death and taxes, a lot of churn isn't certain. Some of it can't seem easy to avoid but analyzing it can inspire you new actions with positive outcome for you startup.

 

For instance, I've been through the realization that many very small businesses end up failing - one of the examples Steli mentions in his post. Realizing this made us consider moving up market which tend to be more stable but also have bigger budgets which is how we ended up creating our B2B version alongside our freemium plans. 

Couldn't agree more with what Jordan Stone explained at the Launch Festival as covered by my friend JD Lasica in this post.

 

Why should early stage startup do that?

 

Consider the following: what do you do as a customer of a product when you're reasonably happy vs when you're excited beyond expectations?

 

In the latter case, you'll do a lot more than use the product again: you'll go out of your way to tell your friends about it. You'll post on Facebook, you'll share the excitment. 

 

As a French guy who lives in the US, I have to send money back and forth regularly. Which means EUR/USD Fx transaction costs and wire fees that used to be up to 10%. Recently I discovered TransferWise, a peer-to-peer foreign exchange service that cuts these 10% to 1% or less. And provdes a super smooth experience. What did I do? I posted on Facebook with my community of European expats and of course this generated a lot of attention as they all have the same problem. I'm pretty sure a number of them will use the service. 

 

Would I have done that if I thought their service deserved a B or even an A-? 

 

No. 

 

That's why you should launch an MVP and then iterate based on your power users.

As a startup founder, it's easy to get distracted by competition. We're in a fast-moving world and yes, other people make stuff too.

 

But the reality is that competitions rarely kill startups. While lack of focus certainly does.

 

To quote Paul Graham: "If you make anything good, you're going to have competitors, so you may as well face that."

 

So should you keep your head buried in the sand and not pay attention to the outside world? 

 

Aboslutely not. 

 

My own method for dealing with competition is to focus on customer needs: understanding not just their short-term needs but also their long term ones as well as their challenges is the best way to stay relevant and not having to worry (too much) about competition.

Great recap of what moving to Silicon Valley can mean to your startup. Note that Emil doesn't mention "raise money more easily" as one of the reasons for moving. But the wealth of talent and experience is impressive. And can indeed make you go faster - like gravity does.

Though this is admittedly biased as measured on exceptional companies (27% of which were actually pre-revenue), the TL;DR version of this is:

- you need to show significant MRR traction;

- you need to show more now than was required last year.

Better get your growth model right then.

Great and crystal clear presentation on all the key metrics to master Saas growth - or really subscription-based revenue. Of course, this is all very nice when it's all numbers - the difficulty being to fix the numbers when they're not good.

5 years ago, when we started Scoop.it, my current company, I quickly realized that shooting for profitability was a bad thing to say among my peers or venture capitalists. When money is available, prioritizing profitability certainly can mean under-optimizing growth. In a world where not even Anazon wants to be profitable (because it can still grow), being a profitable early stage startup somehow denoted lack of ambition. With he recent corrections in unicorn and public tech companies valuations, Tom Tunguz notes that the historical BATNA (negotiation leverage) founded had by having several term sheets from competing funds is quickly disappearing. Another way to create leverage for founders can then be to be CFBE. Not so unambitious anymore, then.

An interesting way to think about what it takes to make a startup successful. While the odds are slim that your venture will become the next Facebook, the domino effect theory shows how small wins can accumulate into bigger success.

What it means for entrepreneurs is that you shouldn't be afraid to start by doing things that don't scale. By being excellent at one thing and achieving outstanding results, you'll get a chance that this domino helps tumble the next, bigger one. But by embracing too much, you might just be hitting a wall.

A fun recap of what many first-time entrepreneurs are irrationally scared about: talking about their startup idea.The thing is there's no better way to fail than keeping things secret. The momentum you get by feeding your initial thoughts with feedback and new ideas is just priceless. So. What are you working on these days?

It's amazing how much things changed in the past 5 years for the French tech startup ecosystem. This is an energetic recap and shout-out by my friend Romain Serman who details very clearly how and why things changed. 

 

I'm of course very interested in this topic, having been successful with a first start-up in France before failing a second one and relocating to San Francisco for Scoop.it close to 5 years ago now. As I detailed here, I didn't relocate because I felt the French or European scene wasn't good nor because I found it hard to be an entrepreneur in France. But mainly for market reasons. 

 

5 years later, there are still many things that are not as efficient in France or Europe as they are in Silicon Valley, particularly the efficiency of late stage financing and the absence of an equivalent to NASDAQ. But as Romain articulates in this post, French entrepreneurs and VCs have understood how to work around these obstacles and with Silicon Valley.

Great points made here and #2 is probably the most important (hence #3 as well). When we sold Musiwave, we first received inbound informal interest for a €30-€40M range. We ended up selling at €100M + earnout: not because we had supernatural powers but because we moved the conversation from one interested party to 3 competiting companies. 

Understanding whether you truly have product-market fit is one of the topics I see entrepreneurs get delusional the most often (and yes, that includes me). We all have a tendency to believe in our own dreams and apply wishful thinking. These 8 questions are a great tool to keep us honest and understand where we still might have work to do to get customers locked on our product and our startup reday to scale. 

These simulations will get you thinking. But who knows how short your payback period is when they start? Not many. The thing to focus on though is what you control. You probably can't change much to reduce your cost of acquiring customers but have you thought about the situations where you leave money on thre table when winning a deal? Segmenting your customers by size or needs and having offers to match can give you a much higher lifetime value for the same customer acquisition effort. 

Interesting lessons learned from the team of eShares after completing their $7M Series A. Key insight (but also a dangerous one): it's often not your pitch which is wrong but the VCs you are pitching to. It's dangerous because it's easy to never listen to feedback and what's wrong with your pitch. But it's often true that VCs have investment strategies, preferences, pre-conceived ideas and many other biases that will make your pitch a success or a failure before it even started.

An excellent answer by former Hubspot's Jay Acunzo. His best piece of advice is that entrepreneurs should think of their blogs as answering the same problem their product does. This is exactly what I've discovered as we developed Scoop.it (and our blog): just like the only reason your startup should exist is to solve a particular problem for a particular group of people, your blog should only exist to provide useful content to this same group of people on that same problem. You can even take this further and consider the followings:- your blog might be the best way to start your company: there are a more and more successful companies that started by building an audience before building products. Copyblogger is a good example. - If you can't add value to people by telling them how to solve their problem, it's very unlikely your product will. Blogging helps you not only tell things which your product don't necessarily does well but also understand your customers' needs and pain point.