Startup Advice - its all wrong (thoughts for StartMate 2013 teams)

Most days there is an endless stream of startup advice and to a lesser extent war stories.

So much so, I am waiting for a startup to appear that just curates startup advice**

Anyway, this post adds to the noise by providing advice to ignore all advice. So you can ignore me now :)

Mentors hope to add value during the StartMate process by doing stuff like:

• providing access to their network
• asking probing questions
• providing guidance that challenges a startups assumptions.
• suggesting a possible next step

For StartMate teams, each week you will pitch to different mentors and get feedback. The next week you will pitch and get diametrically opposite feedback.

This is natural.

For any one startup there will be many paths to navigate and many options. The mentors are going to give you a perspective from their experience. But its all wrong.

All advice is:

• based on the past
• based on circumstances that suited their unique place in time.
• has a shade of confirmation bias mixed in (e.g there were probably some important pre-cursors to some anecdote that have been forgotten). 

Things change fast now and so some gangsta technique that worked before might be fine or it could be passe, this is particularly true of gaming social networks. I think the idea when receiving advice is to "listen but don't obey".

Over the years I've obeyed advice from board and advisors with mixed results:

• "you need to build a shopping cart so people can buy your $25k product over the web" (bad)
• "who cares you are out of cash - you need to fly to Singapore for this one hour meeting" (good)
• "hire this guy" (meh)

You're running your own show and you will make lots of mistakes, the best CEO's I've worked with absorb a phenomenal amount of input and opinion, process it and make it their own. This sometimes mean they take advice and sometime mean they ignore it. Its not personal.

"listen but don't obey"

** maybe thats HN's voting system.

ask for money (thoughts for StartMate 2013 teams)

TL;DR 

• This post is not about asking investors to drink your Kool-Aid.
• This post asserts that asking prospects (during customer development) to pay ($$$) you for the product is a critical and valuable step.
• Doing this in person is a perfect complement to just running a web A/B test.

In my first startup**  I was too naive to think products could exist without paying customers. So I went out and asked a few enterprise prospects: "If I built this enterprise email filter - would you pay for it?"

They said "yes" - so I built it. Things turned out well.

At ThreatMetrix (we started out as "SpamMatters") we made the mistake of only asking one prospect and so we only made one sale for our first product. It was a big-ass sale that funded the next product but effectively it was a consulting project. This talk covers the early pivots in the ThreatMetrix adventure. Things turned out well.

At StreetHawk we only talked to consumers who wanted to use the product but we didn't spend enough time (initially) with retailers - who would pay us for our fashion aggregation app. The net result was a product that consumers were using but no way to fund an engine of growth. So we asked what product they would pay for and they told us they wanted the same technology packaged differently - dah! (So thats what StreetHawk does now. Things _should_ turn out well).

So, I've learned painfully that one of the best customer validation questions is when....

...you look deep into their eyes and ask for money:

• "Would you pay for this?"
• "How much would you pay for this?" 
• "Will you pay me now and if I don't deliver in 3months I will give you back the money?"

are the type of questions that can save you months of time (and cash).

People are happy to blow smoke up your nether regions whilst their pecker isn't on the block. But once you ask them to pony up some cash the conversation shifts into honesty. This is a skill that most sales people understand but technologists avoid.

Why?

Sales People

Sales people understand that closing a deal is about surfacing and overcoming objections - so the good ones aren't afraid to get "buyers objections" because it really shows the potential customer is internally convincing themselves to not buy the product. The good salesperson can then counter the objections and help the prospect get those issues addressed and emotionally ready to buy.

Technologists

I'm not lecturing on this - I've done this more times than I care. We (technologists) avoid this scenario, because its damn confronting. The embarrassing moment when they tell you your baby is ugly and not worth a lousy $29.95 per month. Its even more embarrassing because technologist's are not trained to handle rejection.

But you arn't selling

The good news is that you don't have to sell - you are just "asking for money" to reframe the discussion more honestly. In fact selling during customer validation is wrong - it means you aren't listening. Your goal is to capture the objections and find what key features/benefits matter****. The debate still rages when you should believe validation answers (Ries) vs when you should 'go with your gut' (Jobs) but if you are hearing "yes I will pay" from multiple people then you are heading in the right direction!

Sounds too "old school"?

Many businesses will argue that a better statistical validation is achieved with a landing page and call-to-action measurement. I think you still need to stare deeply into a few eyes to get the real response (and feel the discomfort) - otherwise you are just piling assumptions on top of assumptions. This is particularly relevent for enterprise or B2B startups - and a logical extension of Blank's 'get out of the building'.

So HTFU and just ask for money***. It will save you time. Do it soon. Do it yesterday.

** - that became part of surfcontrol - now websense
*** - yes, I was tempted....but decided to leave this is a jerry maguire free zone
**** -  I assume everyone belongs to the religion anyway so I won't rave on that.

pitching (thoughts for StartMate 2013 teams)

TL;DR

• pitching is a Darwinian skill. You need to be great to take the next step in company evolution. Otherwise greater chance of extinction.
• be prepared to lose 4+ hours/week to pitching
• don't assume that one team member (not you) will pitch
• pitching is a muscle you build
• you are pitching a company - not a product
• your business is not your product

---

One of the best things about being a StartMate advisor is the alumni mailing list. As opposed to skynet, it started self-aware (mostly) and continues to evolve its intelligence (at a less than exponential rate). 

Everyone on the lists gets smarter from the collective insights.

Last month - with the 2013 group selected, the alumni kicked-in with practical advice about matters of housing/accomodation and what the StartMate experience will be like. For example: great posts here from Chris and Jindou:
http://chrisrickard.github.com/ascii/startup-accelerator-braindump
http://www.jindoulee.com/i-got-in-the-final-20-for-startmate-help
(this tip is gold: "getting all the features done before Startmate commences!")

Meanwhile, behind the scenes, the alumni email list also started to crank away with tips and advice. A standout example: Stuart Argue from 2011's Grabble*** produced a great list of 24 points (which I won't leak), but here is one that I wanted to cover in this post:

"16. Keep refining your pitch deck when in pitch mode"

This is the main point of this post. You pitched pretty well to get into StartMate....but its not good enough. When you hit the US, you will be getting one shot to amaze potential investors - you want to make those few minutes count.

I can't guess how Niki will run the 2013 schedule, but its likely ALL Tuesday afternoons will be allocated for team pitching. Its an unspoken rule that ALL teams (and ALL team members) show up and support each other. Different mentors will come in each week and give feedback on pitches - generally diametrically opposite to the previous weeks advice :)

In StartMate 2011, we were too relaxed - we just had a quick update and elevator pitch.
In StartMate 2012, teams pitched every week their full pitch deck (5+minutes). Then got feedback.

The result is that teams of 2012 were far superior in understanding the business aspects of their company and preempting objections from potential investors. Just like hitting the gym; through repetition and feedback you build a muscle that technologists don't usually have. (StartMate is biased to selecting technologists).

An example of 2012

ScriptRock had a very specific valuable enterprise product but the team had no clue how to communicate the value to people outside their sector (most technologists start by describing features not benefits - then words like "awesome" and other purple farts*****). This was a major fail because NO INVESTORS will understand your business - nor can you educate them (bottom-up) in 3-8minutes.
So ScriptRock iterated a lot and got massively better. The "a-ha" moment was when Alan (coder) took the lead in pitching from Mike (hustler) - it had velocity, clarity, crispness and attitude.****
The important thing here is not WHAT evolved but that they listened, iterated and evolved. They weren't afraid to try new things and they developed pitching muscle.

EDIT 1:

Alan from Scriptrock let me know that point #8 in his own post is pretty relevent. Thanks Alan!

"Competition drives excellence"

Entrepreneurs are competitive, so when teams see others getting better and better (in a collegiate environment), friendly competition emerges. So the net result was some pretty funny creative theft of pitching ideas (more flames!) and all teams increased their skills.

Pitching ain't stealing time from coding

Its likely that some of you will resent losing 4+ hours weekly to pitching when there is so much pressure to work on your product. This is natural: the geeks and product guys think that the product will sell itself. The twisted logic in a coder's mind is like: "If I just sort out this UI issue, then we will have solved world hunger".  But:

Your business is not your product.
Your business is: product + recruit customers + make them pay.
Think about this - the best way to get across your business is by getting brutal feedback fast and often - so pitch weekly but also pitch people on the train and bus. Get used to describing the business in 20 words, 1minute etc. I'll do a separate post on selling pitches vs validation and "listen but don't obey".

Where to start

There's a bajillion pitches to view on the web and different approaches (e.g "tell a story", "problem/solution", "product/traction/team" etc) but just for simple discipline of knowing the answers to questions investors will ask, then Pollenizer's Universal Pitch Deck is a great start point.

Collegiate Environment

a quick side-note: By far the standout difference of 2012 (in comparison to 2011) was the collegiate environment created at ATP via the generosity of Hamish and Andrew (they are much cuter than their profile photos). ATP supported 2011 as well but for some** reason(s) the teams did not commit to the location and largely worked independently. Working together just seems to accelerate quality of all the teams - the value of easily sharing technical and business savvy is often underestimated.

** some lessons we learned are now part of the StartMate filtering process.
*** Anthony used this headwear for negotiations will WalMart.
**** I don't know how they pitched in the US. Recently I saw Mike pitch and he was even better :)
***** “purple farts”—adjectives that sound impressive but carry no substance. Guy Kawasaki

New aussie mobile platform stats

Android on the rise - no surprise here but in AUS Apple's installed based still dominates. The Android growth will erode this, particularly as feature sets and screen resolution stabilize.

Talking with Asia, Android is the clear leader.

Compare and contrast with Mary Meekers Internet Trend presentation. iPads still crushing it.

Is the (SanFran) bubble over?

A friend of mine who runs a Sydney-based cash-flow positive early-stage business asked me: "Curious to hear your thoughts on this article: http://readwrite.com/2012/12/03/lets-all-shed-tears-for-the-crappy-startups-that-cant-raise-any-more-money"

Here is my response:

- In terms of trends do you think this article highlights a trend and that seed investment will be less readily available?

[DJ] I've certainly had VC contacts tell me that there will be a huge shakeout in angel funded companies that won't get SeriesA. The risk with angel is (and always has been) that there may not be "follow-on" money from the angels. Whereas if you get into bed with a VC they always have "dry powder" for follow-ons (in good and hard times).

- What will this mean in Sydney?

[DJ] 

On the funding side: I don't think it will affect Australia so much because there is little angel funding here - given that interest rates have only recently started to fall will high-networths move money into more speculative sectors (like high-tech)

On the engineer side: Articles like this are a good sales tool for companies like us who want to hire engineers and seek "some" loyalty from staff (for a period of time). We've been thru a period where every wally who can write a crud app over the weekend thinks they have an exit to Facebook in their future.

- He seems to think entrepreneurial types should go get jobs. I wouldn't hire me. What are your thoughts on hiring entrepreneurs? 

[DJ] per the above. There is likely to be a period where a subset of the wallies will be happy to get a job. They weren't entrepreneurs anyway they were technologists with an idea and hubris. So I think they are a different beast to someone like you who has built a portfolio of experience by working with others.

When I have hired - I usually look for signs that someone is going to be marking time until they get their own idea sorted (and in fact they want to work on it during lunch and maybe while nobody is watching).

Not necessarily a bad thing if you can expect to get 12-24 months out of them and give them leadership opportunities.

Re: "go get jobs": I have some young friends in the bay area who have opted for staying with big companies because they think they will (a) be better entrepreneurs by spending some time with real seasoned entrepreneurs. (b) can have a greater impact on society by being a cog in a well-funded machine.

I quite respect this position and one of those friends is working for a genetics company that could literally change the world (e.g put a SaaS API over your DNA - that is huge). The author also touches on "doing something useful"  - I love journalistic idealism - that would be refreshing :)

I LOLed and share his disdain for StartupBus (sorry Elias) and StartupWeekends - they are fine as a party trick but ppl get hypnotized that some crud prototype is a biz. (Zaarly is one of the high profile successes that has continued to pivot its business model and does not reflect the weekend startup that attracted all the hype).

Startups are sometimes characterised as a "marathon" not a "sprint". The reality its more like 20 heptathlons laid end-to-end. You need to have endurance, skills, endurance, people skills, endurance, conflict resolution skills, endurance....and the self-awareness to get out of the way when the business outgrows your skillset.
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Its also interesting to note other dynamics at play outlined by Mary Meeker.

Mobile interwebs to grow 26x over next few years.

http://latimesblogs.latimes.com/technology/2011/01/worldwide-mobile-data-traffic-exploding-nearly-tripled-in-2010-cisco-says.html

Google Latitude Checkin - fail

Google maps/latitude/places checkin misses a big point. The post below nails its problems and the underlying of repurposing maps data as opposed to 4sq's freestyle place creation. Case in point: both in 4sq and Facebook places have loads of people checkin to the local beach - on Google Latitude the beach does not exist nor can I create it. So Google has missed an entire use-case (social connection at non commercial properties).
More important to note is the number of checkins at the beach far outnumbers ALL the checkins for local businesses - including a pub!
So putting aside if checkins are useful or just a fad - Google would be advised to think of use cases that help the user - not just Google "local" revenue plans.
One approach would be to drop checkin metaphor and do friend-proximity alerts like Whereoscope.
Heres the post:
http://blog.arhg.net/2011/02/will-check-in-latitude-embarrass-google.html?m=1