Category: Startup

Why are startups hard?

David Goehring

Is it because we’re trained and educated in to a different way of thinking or are they inherently hard?

This post from Derek Sivers C Dixon got me thinking. From the first day of school we are trained to think in a certain way. Essentially, we’re all managers or at least that’s what we’re expected to become.

Be a part of the machinery. Optimise it, tweak it, but don’t disrupt it! That’s what school teaches you.

But we know that entrepreneurship is different. Steve Blank, Eric Ries and the rest of the lean startup movement have taught us that a startup is a completely different beast than a company with an established business model and product.

Instead of optimising you should be experimenting.

Instead of tweaking you should be pivoting when the experiments fail.

And disruption is on top of the agenda.

With the lean startup process we now have the manual (sort of) for doing it. But it’s still so darn hard. The manager within us keeps holding us back.

So, I wonder: are startups hard because we have to fight the instinctive urges that one and a half decade of management thinking training (aka “school”) has programmed us with or are they hard because, well, it’s simply hard? What do you think?

Summer is coming

Even though the winter winds of February has a tight grip on the Nordics, summer is getting closer and closer. My goal is to be ready for launch with my side project before the summer. It’s frustrating not being able to work full time on it, but I don’t want to repeat the mistakes I’ve done in the past and not have enough of a buffer before starting.

I started with the #blogg100 (one blog post a day) two weeks ago and for some strange reason I actually started another project at the same time: a change of diet (low carb, high fat). These two will both run until summer, I hope.

So that’s my goals for the spring:

  • Launch my side project
  • Blog once a day
  • Lose weight by following a new diet

So far I’ve lost about 3 kg and I’m on my 15th blog post. I’m writing code for my side project almost daily so moving forward there as well. Let’s revisit this in a few weeks and see where I stand.

So many questions

Photo by: USFS Region 5

It’s never a straight path. Get used to it.

While working in an established business certainly can be a challenge sometimes, I don’t think it compares to the constant uncertainty of a startup.

There are just so many open ended questions that keep popping up. Let’s just try and list a few from an early stage startup project.

What idea should I focus on? Can or should I do more than one startup project at once? What co-founders do I need? Should I look for outside investments? Should I take a bank loan? Should I quit my job? Should I try and do a high risk/high reward startup or a lower risk/lower reward lifestyle business (the difference can be nothing more than the amount of marketing dollar you have)? What markets should I target? Do I need a mobile app if I have a web site? Do I need a web site if I have a mobile app? How should I price my product? How should I receive payments? What cloud platform (if any) should I use? What technical platform is best suited for my product? Should I hire someone? What should I name my startup? Do I really need a .com domain?

Phew. I can go on like this for a long time. And this is just from the very beginning of the startup. No wonder so many people gets stuck and never take the plunge to get started.

What phase is your company in?

The post about speed paradigm got me thinking about how a company changes over time.
Entrepreneurship research speeks of three main character types needed in different phases of a company’s life:

  • The entrepreneur.
  • The manager
  • The leader

Going through the different stages:

  • In the startup phase, the company is looking for scalable business model. This is where the entrepreneurs feel right at home.
  • Once the business model is established your focus must be: growth. You need to build a team and an organisation. In this phase the entrepreneur should phase herself out in favor of a leader. It’s actually a difficult phase because you need all three types at once, and often at a rapid pace as well. Few entrepreneurs can take this step by themselves.
  • The next phase is calmer in a way. It’s about optimising. This is where the managers come in. This phase can last for quite a while, in some companies for decades. Meanwhile the entrepreneurial spirit of the company gets weaker and weaker and the ability to handle change is diminishing. All leading to…
  • Decline and crisis. Once again it’s time for the leaders to step in. Tough decisions must be taken. Pet projects must die. Focus and profitabitity is of the essence. But the time of crisis is also a good time for new ideas.
  • If you’re lucky you’re able to restart the business and once again build something new. The entrepreneurs will do the building and the circle continues.

Looking at this: what stage is your company in? Do you have the right people at the top?

Everyblock shutting down

A little surprised to see Everyblock close the door. Everyblock was a site in the superlocal category, focused on neighborhood news. I am myself working on a side project in the same area so I’m following this with interest. Hopefully they’ll write a full post mortem.

Competitor Nextdoor is probably celebrating today but the question still remains: is superlocal news a viable business model?

The incredible Mojang and the acceleration of disruptive innovation

Photo by: Elias Gayles

It’s not every day you see a news article in Swedish on Hacker News, but the latest profit numbers from Swedish indie game maker Mojang came in yesterday and the startup community of Hacker News jumped in to discuss them.

It’s simply amazing that a small one man company can grow so rapidly. It wouldn’t be possible without the disruptive power of the web behind it. Everyone has a global audience by their fingertips (although it’s not easy to reach it).

If you’re working in a larger, more established business there’s an important lesson from the team at Mojang AB: your most fierce competitor may not even have moved out of the garage yet, but they can overtake your market faster than you can say “TPS report”. They can hit you where and when you least expect it. The only remedy is to embrace change and become an innovator yourself.

That’s the thing that fascinates the Hacker News community. Everyone (well, almost) in that community wants to be the one taking down a large company and disrupting their market. There are thousands of smart people out there working on something that may totally change the rules of the game YOU are playing right now. Watch out for the Mojang of your market.

The trillion dollar startup

By: Antti Kultanen

Steve Blank recently wrote a blog post about how Facebook is killing Silicon Valley. His argument is that too much money is “wasted” by being invested in startups with relatively trivial ideas and designed to make you click ads. The huge and rapid growth of social media has created enormous wealth in record time and the money is following at the expense of more long term investments like the cure for cancer.

While it can be argued that social networks that connect people really do add tremendous value to mankind, Steve has a point that we as a startup community can do better than generating clicks on ads.

Because, honestly, he’s right. You didn’t become an entrepreneur to sell ads. You want to change the world. Make it a substantially better place. Let us all aim higher!

The recent successful launch of the SpaceX vessel Dragon is a reminder of the fact that Big Ideas are still possible. The company Planetary Resources is another example of thinking big as are the driverless cars that Google is working on.

Technology provides us with so many potentially huge innovations. Somewhere out there is the first trillion dollar startup. Maybe it’s yours?

What do you think are trillion dollar startup ideas?

Take a step back


Photo by: F Delventhal

As an entrepreneur working with a startup at the early stage it’s easy to get fixated on one particular idea. The problem with this is that you’re basically laying all your eggs in one basket. If the idea doesn’t work, you lose the drive and the passion to move things forward. The startup dies before it even had a chance to get the wings in the air.

It is often a good idea to take a step and see the bigger picture. Your idea can be part of something much bigger.

For example, let’s say you have an idea for a location based game. You work hard to get the mobile app built and after months of work you finally release it. Soon you discover what most entrepreneurs discover when they launch after months of work.

Nothing happens.

No customers come running downloading your app.

No money come pouring in.

Don’t lose your spirit over this. Take a deep breath and a step back. Accept the fact that what you have done is just tested one possible direction out of many. What you need to do is find your larger mission. Maybe someone likes the app and tells you: “hey, I was looking for something like this for a birthday party for kids I was planning“.

This is an opportunity cloud! Making mobile apps for kids birthday parties – that sounds like a good, bigger mission. Now place your current app inside this box/cloud and treat as a part of a larger portfolio. Now you have a bigger arena to experiment in. Your goal is no longer to a build one app based on one idea but to become the leading provider of apps for kids birthday parties.

Of course you have to keep your focus and give the app some time to grow its user base but by having a larger mission you can go back and forward between different focus areas.

Some day you may have to pivot and choose another Big Mission, but until then, keep experimenting inside your opportunity cloud. And don’t let the disappointing user numbers of one particular app bring you down.

Look for cofounders, not ideas.

Dancing
It takes two to tango.

One of the consequences of the 5P-model for startup evaluation (Product + Problem + Profit + People = Potential) is that finding the right people is much more important than finding the right idea. So important, in fact, that you might as well begin with finding the right people before you even know what to build!

Why? Because of the 4 Ps that make up the potential (Product, Problem, Profit and People), the people P is the hardest to change once you get going.

You can (and should) iterate and improve your product.

You can (and should) validate and test your problem.

You can (and should) experiment with different business (profit) models.

But once you start, you can’t change the people.

Of course you can always fire co-founders but it is a painful and expensive process, much more so than pivoting on your problem definition.

So, instead of waiting for the right idea, go look for someone that complements you and is equally passionate about building something.

Then find out what to build.

(Discuss on Hacker News.)

My name is Erik Starck and I work for Lean Forward. We help enterprises and entrepreneurs with innovation and growth. Follow me on Twitter.

The Five P Model for Rapid Startup Evaluation

TL;DR: Product + Problem + Profit + People = Potential. Does your idea have what it takes in all five Ps?

Simon Klose presenterar
Simon Klose presenting at the hackathon TBD Malmö held in February 2012.

Recently, me and a couple of friends in Malmö have started The Startup Dojo, where soon-to-be-entrepreneurs can come and pitch their idea and get feedback on how to move forward. (It’s a very simple concept and you’re more than welcome to organise one in your own Town!) I have been part of organising a couple of different startup events like that over the last couple of years.

Organising these events have taught me a lot about quickly building value at the super-early stage of a startup. If you only have a weekend to build something, what do you focus on? How do you decide what’s the best idea to build?

For example, the latest batch of entrepreneurs at the Startup Dojo were very interesting in how different they were from each other.

The first gentleman was an excellent speaker and pitcher and had no worries about breaking in to a new market through sheer selling force. He also had identified a clear problem with a big market. However, his product was a little unclear and he lacked the skills to actually build it.

The second entrepreneur was a true inventor. He had designed a new type of shower meant to be used outdoors. He had made drawings and even 3D videos showing how it would work. But, it was unclear if there actually was a real problem on the market that needed to be solved.

The third entrepreneur had a proven product and solved a real problem on the market by saving money for farmers. A winner, right? Well, the problem was that the money it could save was far less than the cost for the product. So the business model didn’t hold and he asked the Dojo for advice on how to proceed.

IMG_9249.jpg
Hackathon Startup Sweden, Stockholm. December 2011.

As you can see the three different entrepreneurs had challenges in different areas.

One had identified a clear problem but lacked the product to solve it.

The other had a great product but was looking for an actual problem that the product would solve.

The third had a good product AND a clear problem yet lacked a business model that would unleash the full potential of the idea.

It seems a good and quick way to evaluate startups is to look on them through the same lens that we just looked at the these three potential startup projects.

You need a strong product that is technically feasible, sufficiently easy to use and scalable.

The product must solve a real market problem that sufficiently many people have.

The price of the product must be such that it leads to profit when costs are deduced.

Finally, and probably most importantly, you need the right people to execute the project.

Only when these four all work together will you reach the full potential of the idea.

So there you have it: the Five P Model for Rapid Startup Evaluation. The next time someone tells you they have a “great startup idea”, in 30 seconds you can pinpoint any holes in the idea and hopefully help the entrepreneur make it even better.

My name is Erik Starck and I work with innovation and growth for entrepreneurs and enterprises. Follow me on Twitter.

PS. We’re still running Startup Dojo in Malmö. Last Thursday every month. See you there?