referral

HOW REFERRAL PROGRAMS DRIVE NETWORK EFFECTS

Customer referral programs are essential to growth. In fact, I think they are one of the most underrated ways to unlock the positive network effects needed to achieve product/market fit.

Network effects relate to the phenomenon that increased usage by any user increases the value of the product or service for other users. I think about this a lot, particularly in the context of my new venture. What’s often missed about network effects is that they generate a positive feedback loop and as a consequence, growth.

Network effects 101

There are five broad types of network effects. The tactics that companies employ to generate network effects in the hope of tapping significant growth are often seen as interesting conveniences to their customers and users. The ‘Sign up to be a driver’ message in the Uber app or the ‘Import your address book’ feature on LinkedIn, are the tactics that directly or indirectly increase the value of the service to others. Airbnb, Facebook and Atlassian (and many other software companies) also employ now iconic tactics to drive network effects.

The trick that founders often miss is that while the concept of network effects is relatively easy to grasp, they think they can emulate Uber, LinkedIn or Instagram’s tactics to generate similar growth trajectories. That almost never works for three reasons.

First, time moves on. There was a time when many people wouldn’t have thought twice about clicking ‘Import’ and allowed LinkedIn to ingest their entire address book in exchange for a broader reaching and more comprehensive online professional network. Today, providing any kind of information to a third party site has people pausing to consider the implications.

Second, the tactic doesn’t match the context. Just because LinkedIn grew thanks to people importing their address books doesn’t mean that function will make sense (or be useful) to your customers and users. Still, founders look at the iconic companies and think if they can do it, we can do it too!

Third, early adopters are more selective. The world has now experienced a decade of mobile consumer apps and services. Companies like LinkedIn and Facebook were early to the party and able to woo early adopters and leverage their interest using tactics that drove network effects and growth. The world has changed and early adopters are more familiar (and resistant) to these tactics.

Network effects come from two things

When I design network effects into business modes, I reflect on how Reid Hoffman describes them as coming from two things: leveraging existing networks and virality.

Before I talk about leveraging existing networks, I think it’s important to break down a common misconception about virality. When you hear that a piece of online content or a product has ‘gone viral’, people can sometimes think that word-of-mouth was responsible for its rapid accession into people’s consciousness. As a result, they start deconstructing what made the content or products word-of-mouth so potent.

As Alexander Jarvis says, word-of-mouth is just that, a human telling another human about something of interest. Whereas virality is a product phenomenon that is engineered by thousands of little optimisations requiring product design, a growth hacker like mentality and a keen understanding of human behaviour.

It’s important to understand this distinction. Founders should also be clear on the reality that vitality is inherently easier to achieve with free and freemium business models and as a result, better suited to software products.

Referral programs and network effects

Referral programs leverage existing networks and as a consequence are one of the most potent drivers of network effects. Unlike shares and likes, referral programs can build on a person’s interest after they have signed up, downloaded or paid for a product or service. And when done well, referral programs accelerate growth by reducing customer acquisition costs (and therefore increasing margins that can be reinvested into growth), exposing new customer segments, creating competitive moats and increasing k-factor (more on that later).

Many founders talk a good game when it comes to network effects. Unfortunately, there is often a wide gap between talk and execution. I look at the quality and attention paid to a venture’s customer referral program to see how wide that gap actually is. For the most part referral programs, if one exists, are bolted onto the customer experience and that’s not a good thing.

My theory is that founders pay little attention to referral programs for two reasons.

First, they are too busy building their product and are overly confident in their ability to market and distribute it. This is often characterised by founders thinking, ‘you can’t sell if you don’t have a product’ or that they’ll get to customer acquisition later and believe paid advertising will solve their distribution challenge.

Second, they think of customer referral programs (if at all) as just another marketing channel and like building the product, they think it can add it as a feature.

I find this mindset ironic given how many startups fail due to poor product distribution. In any case, these responses are symptomatic of founders not properly understanding their customers or how to drive growth.

Why referral programs fail

I can think of seven reasons why referral programs fail, all of which are linked to a lack of personalisation.

  1. One-sided offers: You’re asked to share a product or service with your friends and network and while referee may get a financial incentive (e.g. a discount) or a non-financial inventive (e.g. early or free access) and the company may get a new customer, you get nothing
  2. Links look and feel like SPAM: In this case, the link you are asked to share is a long and random looking string. It’s 2018. Why would anyone click on a link that looks like SPAM? I think the Trello referral link is the best in class. It’s personalised and notwithstanding the quality of the product, it encourages me to share it: https://trello.com/philhsc/recommend
  3. Nuclear is the only share option: Social only share options in referral programs are the best way to kill sharing and are the best way to demonstrate that your referral program is bolted on. And there are some that reinforce this over time. I recently purchased a direct-to-consumer biotechnology product, shared the referral code on Facebook and now each month, I receive an email from the referral program provider, not the biotechnology company, that no one wants to take up the offer. Really?   
  4. A clueless offer of value: The classic example of this reason why referral products fail is that when the incentive is in a value or language that the company understands but which makes absolutely no sense to anyone else
  5. One ask too many: This tends to happen when physical product companies ask new customers to refer them to friends before the customer has received any value. Customers have searched for the product, invested in setting up an account, paid for the product and then been asked to commit an act of referral. All while not yet having received value. Timing is everything.
  6. Locked-in incentives: This is more a mindset issue where founders set and forget the referral incentives (or they think the incentives can’t change). In the first scenario, the referral program was considered a feature to buy (or build) and then ship as part of a product release. The incentive is fixed and nothing changes. The scenario at the other end of the spectrum is that the incentive is so successful that founders are reluctant to adjust it, even if they are haemorrhaging cash or cannibalising their customers or users in the short-term. In both cases, the cardinal rule of product development applies; always be learning and course correct based on data
  7. It is actually bolted on: In this scenario, the referral program is so obviously bolted on that you are redirected to a page which could not be a bigger departure from the page you were just on.   

While these points are important, they are only part of what you need to consider before designing a referral program.

Know your k-factor

While ‘k’ as the designation for k-Factor remains a mystery to me, its importance is not.

K-factor is borrowed from virology where a virus is said to be in a steady state, not growing or declining when k equals one. When a k-factor is greater than one (which can be 1.00000001) indicates exponential growth while a k-factor less than one suggests an exponential decline.

This biological framework helps when it comes to marketing and referral programs. The math to estimate k-factor is relatively simple:

k = i x c where i is the number of invites sent by each customer and c is the percent conversation of each invite

If each new customer invites 10 friends (i = 10) and if two invitees convert to new customers (c = 0.2), k-factor = 2.

While there are additional factors that help hone the k-factor, like market size and churn, focusing on the basics when designing a referral plan is a good start.

Build on an advantage

I mentioned earlier that one of the reasons that founders pay little attention to referral programs is they think they are but one of many marketing channels. It is only one marketing channel but I suspect that that one to one relationship is based on a perception that a referral program can only ask one question. In other words, the link you ask users and customers to share can only ask them to sign up in exchange for an incentive.

Well, that’s not true.

Depending on your company and business model, you can consider a multifaceted referral program which can include:

It all comes down to imaging, in vivid detail, the best experience you want your target customer or user to have. And then going two steps further, imagining how that experience makes them feel and then capitalising on that feeling by encouraging them to be your advocate.   

One last thing...

I love a well-designed customer referral plan because it tells me a lot about how a company is thinking about its customers.

I also think it’s important to be clear on what a referral program is and what it’s not. Compelling referral programs help people invested in a product or service to introduce it to others again and again. However, referral programs will not help a company grow if their product fails to meet a need.

The main point I’d like you to leave with is that a referral program should go live the moment a product is launched. It can start with founders manually emailing a personalised referral code from a spreadsheet to new users and customers. Design it to avoid the seven factors that would otherwise make it fail.

When executed well and continuously improved, a referral program can help reveal new customer segments and provide clues as to why a product isn’t growing as organically or as quickly as you had initially hoped.


pivot

HOW FOUNDERS SHOULD THINK ABOUT THE PIVOT

Every industry has its cliches and the term ‘pivot’ is one that is used ad nauseam in startup and venture capital.

Pivot has become synonymous with a spectrum of decisions and acts committed by founders.

A minor course-correction can be classed as a pivot. A change of heart by a founder can be referred to a pivot. And then there is the data-driven, wholesale change in company strategy due to a lack of product/market fit which is, in fact, a pivot.

Every once in a while a conversation about a topic is started by people with deep, lived experience. That happened this week about the pivot. Two VCs, Fred Wilson and Hunter Walk, shared their perspective on what it means to pivot. I have reposted their thoughts below because I enjoyed their perspectives, am aligned with their philosophy and think more founders should consider their advice.

Fred Wilson on the pivot

The Pivot is celebrated in startup land. Huge successes like Twitter and Slack are all the results of pivots. So surely pivoting is a good thing, right?

Well, I am not so sure. And I certainly don’t want entrepreneurs to think that pivoting is the right thing to do when their original idea fails. It may be better to let the failing startup fail and start over again from scratch.

I am not talking about the slight pivot; making a change in business model with the same product, selling a slightly different product to the same customer, going up market to a different customer. Those are not really pivots, they are evolutions that every startup company goes through.

I am talking about the hard pivot. Changing the product, market, and business entirely. Essentially starting over from scratch.

And I am not sure hard pivots are good for anyone.

Here is why.

If you raise funding for a startup idea, you will take some dilution and you will have a bunch of investors who backed you and your idea and are believers in it. You will have assembled a team that you built with the original idea in your mind.

If that idea fails and you pivot into a new idea, you will take all of those investors, team members, and dilution with it, whether or not they are excited about it.

You can always swap out old team members for new ones, and so the team issues are real but probably not as significant as your investor and dilution issues.

If you choose the pivot approach, you will have investors for the life of the pivot who did not choose to back your new business and may have no interest in it other than their financial interest.

But the bigger issue is the dilution you take into your next startup. I have never understood why entrepreneurs would want to use a company and a cap table that they no longer own 100% of to do a new startup. They are just carrying baggage that they don’t have to and probably should not carry.

I understand the argument that starting a new company by pivoting with cash in the bank and a team that is already built is attractive and giving those back and starting over from scratch is harder. But the harder path is often the best path.

And the easy path is often the harder one.

If you were able to do a startup from scratch once, I would imagine you can do it again. And doing it again allows you to keep a lot more of the new company and custom build it from scratch, putting together the ideal team and the ideal investor group.

I have always suspected that entrepreneurs also choose the pivot over some sort of loyalty to their investors. If that is the case, I would like to say that this investor does not want any of that misguided loyalty.

The truth of seed and early-stage investing is that the failure rates are very high. We write off investments in failed companies in every one of our funds at USV, usually multiple times. The Gotham Gal, who invests much earlier than USV, writes off investments at an even higher rate.

So early-stage investors are used to failing. It is built into our business model. What we want in return for accepting this high rate of failure are the spectacular successes that we get when everything clicks; the right idea, at the right time, with the right team, the right investor group, and the right execution.

And while pivots can deliver all of the “rights”, I am not sure that they do that at the same percentage as the startup from scratch, given all of the baggage that they are carrying.

And there is nothing I dislike more than carrying on with something when I’ve lost interest, and worse, the founders have lost interest.

So my view is if you’ve failed, accept it, announce it, and deal with it. Shut the business down, give back the cash, and rip up the cap table. Then do whatever you want to do next. If it is another startup, do it from scratch and keep as much of it as you can. If it is something else, well then do that too.

Startups are not indentured servitude. And I have been around some that feel like it. That sucks. I would encourage everyone in startup land to reject that approach and focus on a better one. There are so many options for things to work on that everyone should make sure they are working on the right thing and excited about it. Anything that gets in the way of that is suboptimal in my view.

Hunter Walk on the pivot

Fred Wilson’s ‘Pivot or Fail‘ post earlier this week was especially timely for me. Now that my friend Jason Jacobs shared his own experience of winding down Two Way Labs, I can more easily contribute my opinion with a specific example. As Jason wrote:

I made the hard decision at that point to give the remaining funding (~87% of the initial capital) back. This was not an easy decision. And I feel terribly for the false start. But if I was feeling this run down already (which I was), and this confined and uninspired, there was no way I was going to have the stamina to see this process through to a successful enterprise. If I hadn’t made that hard decision, I am convinced the outcome would have ultimately been the same, only with me a lot more run down, the team more frustrated, and ultimately returning even less investor capital. Sometimes the hardest decisions are also the ones that are most necessary to make.

Across our first 45 core investments (Funds I and II), we’ve had three wind-downs which come to mind. One was the result of a cofounder breakup. The other was a combination of struggling to find PMF and the realisation by the CEO that she didn’t want to run this type of business. And most recently, Jason’s, which he describes in the link above. All three were very much the right decision.

Only Jason’s was in the “hard pivot” category that Fred describes (“Changing the product, market, and business entirely. Essentially starting over from scratch.”) but we’ve definitely had some “soft pivots” which probably should have just been shutdowns and some “soft pivots” which resulted in tremendous successes. When they’re at seed stage, we’re deferring to the founders’ decisions but also trying to help them understand the challenges associated with a hard pivot if their cap table isn’t supportive of the direction.

Sometimes founders think their VCs want the hard pivot – that the goal is to keep the company alive no matter what – or that if they don’t show ‘grit’ they’ll never get funded again. My opinion? Startups are really hard. If you don’t have a mission or problem you’re passionate about, where investors are aligned on the business, and it’s still early stage, you’re better off returning the cents on the dollar. We’re prepared to take the risk and redeploy.

At the same time, investors should give the founders some space to figure out if they want to push on or not. A “hard pivot” sometimes requires laying off the rest of the team and getting back to the garage days of idea generation. Doing that for 30, 60, 90, 120 days isn’t a waste if the founders are inspired and want to continue working together. But I’d suggest at the end of that they “re-pitch” their lead investor(s). If they’re not supportive it can be easier to restart the business altogether with the new idea than it is to push onward.

One last thing...

Expect to course-correct on most if not all aspects of your company as you learn but don’t mistake those evolutionary events as pivots.

Pivots are data-driven, wholesale strategic changes that require calculated consideration. They are painful to live through but they can catapult a company to success proving the timing is right, luck is in your side and as Reid Hoffman says if you slash and burn everything that isn’t working.

I don’t often repost content here but I hope you found these different perspectives as useful as I did.


answers

FABRICATING ANSWERS AND WHAT FOUNDERS SHOULD KNOW

Founders are expected to have all the answers. Some consider this a reasonable expectation. They are the people who see entrepreneurship through the lens of founders delivering well-rehearsed pitches on stage. Founders and founders-turned-investors know this is a long way from the truth.

The reality is that on most days we are faced with more questions than we have answers. These questions come in different forms depending on the person asking. Prospective partners and customer have specific questions. Team members have different ones. Every investor has their favourite questions to fire at entrepreneurs. And accelerators and their Entrepreneurs-In-Residence have different ones again.

And while the rate at which founders learn is a superpower, there is a dark side to the expectation that founders should have answers on demand.

The punchline is that it’s easy to develop a habit of providing answers on the fly.

The answers I’m talking about are the ones that help smooth over conversations.

They are a sugar hit for the founder and to those in the conversation who take the answer on face value. And why wouldn’t it be? In the universe of unknowns, it’s nice to have (or at least think you have) some of the answers.

These answers could downplay the seriousness of a business model issue, over exaggerate the capability of your team or technology, or present overly optimistic timelines.

Left unchecked these seemingly harmless answers have a sneaky way of finding their way back into companies. And what comes next can be a slippery slope to cultural mayhem.

The slippery slope

Startups are about momentum. This, in turn, relies on a large set of problems being solved in a short amount of time. And every day is different.

Founders are forever selling, hiring, fundraising and developing their business. Much of this hustling requires the ‘puffer fish’ effect. In other words, making whatever you’re building look more significant, more exciting and more impactful than it probably is.

It’s the combination of ‘puffer fish’ effect and delivering answers on demand that founders need to be most wary of. And one encourages the other. The more people who respond positively to the claims within the puffer fish component of the narrative, the more likely a founder is to hardcode this into the proposition. This hardcoding is accelerated when a founder is asked a question for which they don’t have an answer but provide one anyway, and it is well received.

This experience, which is akin to receiving dopamine hits, can come to grinding halt in one of three ways. First, when founders excitedly debrief their teams about what they have ‘sold’ and the team responds with disbelief. The look on their faces says, ‘You said we could do what? Why would you say that?’ This often then requires the founder to course-correct the team’s priorities or the expectations of the person to which commitments were made. In any case, the founder risks losing credibility.

Second, the team finds about what’s been sold through another party (not the founder). This scenario is the most awkward for the founder, and it can happen when a partner, customer or investor inadvertently mentions that they are excited about the new thing that the founder has committed to. Regardless of the magnitude of the change, the team can start questioning the founders logic and more importantly, if they are on the same side. After all, it is a reasonable expectation for the team to believe they are in this together.

Third, an investor, partner or journalist declares in an open forum that they don’t believe your thesis.

These three scenarios beg the question: What should founders know, so they don’t have to fabricate answers?

Answers that founders should have

Fred Wilson does a great job of addressing this.

I look for founders to know that nuts and bolts of their business or at least their hypothesis on what they will be. Broadly this means they should have answers to 11 questions:

  1. What problem are you solving (why does it matter)?
  2. What is the solution (are there existing alternatives)?
  3. What is your unfair advantage?
  4. Who are your target customers (is it a big opportunity)?
  5. How will you distribute product to your customers?*
  6. What is the business model (what is the history of the business model)?*
  7. What is the riskiest assumption in your business model?
  8. What tech stack is the engineering team using to build the product?
  9. What is your key growth metric?*
  10. What are the top three insights you have learned to date?
  11. What talent are you missing in your team?*

While these questions are important (and presented in no particular order), I place additional weight on the answers given to those four with an asterisk. They provide me with proxies for the venture’s self-awareness and the founder’s rate of learning.

Prior planning and preparation prevents…

Look up how this phrase ends if you’re unsure. The critical and often understated value of preparation when it comes to pitching or presenting a business is that it helps to surface questions that might arise during meetings. Identifying these questions, formulating answers and then rehearsing responses is essential for two reasons. First, a well-considered answer is as obvious as one that has been made up on the fly. The difference is the former generates credibility while the latter erodes credibility.

Second, formulating and rehearsing answers (and pitches more generally) with team members not only leverages their subject matter expertise but it also brings them closer to hustle coalface. This ultimately means that teams have a clearer understanding of what is going to be said and how tricky answers will be managed. This also means that they will be less surprised if a course correction needs to be made as a result.

I make this point because I often see co-founders blindly trust what their colleagues will do and say when pitching their ventures only to be disappointed that there is a mismatch in expectations. Obviously, trust is vital in co-founder relationships. Preparation and planning close that expectation gap and unsurprisingly, deepens trust.

We don’t know

It’s OK to declare you don’t know. Many founders don’t believe this because they fear it could abruptly end or add awkwardness to a conversation. I empathise with this reluctance and would like to offer a tactic that makes saying ‘we don’t know’ as productive as providing a well-considered answer.

‘We don’t have an answer for that at the moment, but our hypothesis is…’

I make this statement because it demonstrates point blank that I don’t know the answer but that I am preparing to learn more about the issue. I also often find that framing a response in this format inspires others in the room to offer their suggestions, the by-product of which also demonstrates that as a founder I am open to collaboration and partnership.

One last thing

Don’t be a handwaving founder. These are the people who, despite their best efforts, have very little subject matter expertise, use non -specific language which pitching (and answering questions), and make bold yet unsubstantiated claims. And while it’s true that natural selection will play a role in removing these founders from the consideration set of investors, partners and hires, most early-stage founders start with little more than hustle and vision.

The antidote to being seen as a hand waving founder is to know the fundamentals of your business and knowing how to say ‘we don’t know’. Fundamentals mean understanding the nuts and bolts of how your product works and how you capture value as well as the insights you’ve gleaned from the journey to date. Along with a bold vision, these are the ingredients that make for productive, momentum-generating conversations.


assumptions

WHY YOU SHOULD REVISIT OLD ASSUMPTIONS (AND HOW TO DO IT)

Assumptions are the basis for most startups. After identifying opportunities, founders use assumptions to begin piecing together a narrative to communicate their vision. And it’s just expected that each assumption in a startup’s business model will get tested and iterated over time.

The reality is, however, that there are assumptions that don’t get tested. Some of these are linchpin assumptions, ones that are critical to the business model that founders are selling to customers, investors and partners.

The punchline is that founder's risk building a ‘house of cards’ by relying on untested assumptions.

And there are two reasons why founders press on with untested assumptions. One is legitimate, the other convenient.

The legitimate reason is limited time and resources. Assumptions live on a semi-prioritised but nonetheless messy Trello board and you keep hearing yourself say ’I’ll get to them’. I’ve been there many times. As a side note, and while resource constraint is a legitimate reason, I recommend you putting your mentor(s) to work to help prioritise assumptions. This will bring them closer to your business (which they will enjoy) and you get help from a ‘friendly’.

‘Convenient’ untested assumptions are more dangerous because they:

  • Are important to the business model's viability
  • Are difficult to test (and may reveal a fatal flaw in the business model when tested)
  • Receive the most positive feedback when a founder declares that the assumption is under control or well understood    

The third characteristic is as subtle as it is important.

Consider this. You pitch to your first potential investor. They query a few of your assumptions and in the haste of wanting to appear like you have your act together, you offer a response. It is plausible and the potential investor accepts your answer. The meeting finishes and you agree to meet again shortly.

You meet another prospective investor (or partner or customer) and they ask the same question as the first investor. You offer the same answer. They accept it, the cycle continues and it gets reinforced when the founder raises money using the same thesis.

Hustle or false economy? (It’s the latter)

I’m all for hustling (and I’ve been in the situation above) but the issue is that over time these acceptances can result in a strange feedback loop.

The more a founder explains away assumptions and the more her/his answers are accepted, the easier it is to believe that assumption is all but solved or worthy of de-prioritisation. Even if the assumption was once important or a linchpin.

The follow-on effect can be a founder that becomes overconfident and shrugs off the assumptions.

For all the effort that goes into creating cultures that sense and respond to user and customer signals, startups remain, for the most part, their own bubbles. There is no doubt that the speed at which we generate and test ideas is a superpower. But that power is significantly degraded when founders become proficient at batting away convenient assumptions. And that can manifest at a team level when founders forget to mention or deprioritise an assumption because of the feedback they have received.

At its most benign, this behaviour can result in missing opportunities e.g. crafting a truly unique and impactful referral program to help unlock viral growth. However, at its worst, this behaviour can lead to a vote of no confidence in the founder(s) as their teams start to receive directions that seem to lack details about would ordinarily be considered important assumptions.

Time moves on

Most founders agree that they should retest assumptions from time to time, particularly the ones which helped them achieve early momentum. This is because time moves on and for startups, this means among many other factors, that the attention and preferences of customers shift.

The question is how do founders develop a discipline and tempo for retesting and validating assumptions amid other competing priority?

The reality is that there are a lot of things you can’t control in a startup. But there are some things that you can. Revisiting and validating assumptions is one of them.

3 ways to revisit old assumptions

Here are the three tactics I use to deconstruct, understand and validate old assumptions. As you will see, this doesn’t rely on the founder to do all the heavy lifting. Team members, particularly new hires, can play an important role.

1. Set a twice-annual assumption alarm

As corny as that sounds, this will remind you and the team to have a session where you can actively reflect on the assumptions that were in play six months ago. I do this by looking at the pitch deck or sales collateral I was using six months earlier. This can sometimes be confronting given how quickly business models and products evolve. Nonetheless, ask three questions, both of which begin with, ‘In hindsight, what…’:

  • Number or claim did we make look bigger than it really was?
  • Insight(s) about our product or market position did we overplay or underplay?
  • Was the riskiest assumption in our business model at the time?

Answering these questions requires honesty, self-awareness and a desire to agree, as a team, how that assumption should be characterised in the future.

2. Ask new hires

When a new person joins the team, either as a paid audition or as a permanent hire, ask them what they believe to be the riskiest assumption of your business model. A fresh pair of eyes can be powerful. The opportunity (and challenge) for founders is to listen, and digest their response.

3. Give permission to query history

An alarm goes off in my mind when a founder refers to an ancient experiment or the earliest user feedback to respond to a team member asking, why?

And the longer the duration between the experiment or user feedback and being asked why? the louder the alarm. As I mentioned earlier, time moves on. Using dated assumptions is one of the clearest signs that a ventures rate of learning has slowed and is on its way to stalling.

The remedy is to not only give your team permission to ask why but to quickly spin up experiments to revalidate (and update or invalidate) old assumptions if the only answer a founder can muster is outdated data. And as a general rule, I consider customer experience data or insight to be outdated if it’s more than 12 months old.

One last thing…

Old assumptions that are left unchecked can be dangerous. They can see founders build a company based on a house of cards that can come crashing down. While I cringe (and chuckle) at the first versions of the pitch decks I’ve written, they do reveal the assumptions that we hoped would be validated and as a result help unlock the value of our ideas. But there are also some which persevered because we wanted them to be true.

It takes courage to objectively validate an assumption which could bring your business to its knees. But what would you rather prefer, understanding and course-correcting based on reality or investing time in an idea which is all smoke and mirrors?


nurture

NURTURING EARLY ADOPTERS

There is an art to nurturing early adopters. These people bring a unique mix of intrigue, patience and forgiveness to new products. And their motivation ranges from supporting a friend or underdog to basking in the glory of being the first to discover, use or share a new product.

Early adopters are essential to demonstrating early traction. They are also often to first to deliver detailed feedback that helps shape product roadmaps seen in seed phase pitch decks.

The reality is that startups fall into two camps when it comes to early adopters.

There are those who genuinely nurture early adopters and those who, well, pay them lip service. And it’s easy to tell which startup is which.

If you have ever been on the receiving end of an email from a startup which starts with something like ‘it’s been a while since our last update, we’ve been heads down working on product...’

This is a lip service email.

I have sent those emails and I don’t anymore because they are a cop out.

It might be true that a team has been busy working on product and everything else that needs to get done. But it also suggests they are disorganised and don’t value the investment early adopters make in signing up to support their journey.

In contrast, look at startups that nurture their early adopters. They create community, trust and a sense of ownership and evangelism, all of which are key ingredients to growth.

How they achieve this level of buy-in is based on a simple algorithm designed to nurture.

Its implementation takes a little effort but the payoff can be enormous. I say ‘can be’ because while the underlying product or business model may not resonate or hit the mark, the voice of early adopters may help the founders realise that there isn’t a there, there. As a result, they can kill the idea quickly and move onto the next idea. Without that input, startups are likely to miss these important cues and keep drinking their own Kool-Aid until they run out of cash.

Of course, if the Kool-Aid is flowing thick and fast there is a good chance that excuses for not engaging with early adopters will also be in large supply.

Objections or excuses?

One or a mix of these objections usually gets raised when starts ups fall off the early adopter nurturing wagon.

  • We don’t know what to say because we don’t know what’s next and don’t want to appear vulnerable or miss delivering on expectations
  • Early adopters don’t have time for what we’re sharing
  • We can’t commit to a schedule of communications
  • Competitors might have signed up and were worried about giving away trade secrets or momentum
  • There’s only so much value an early adopter will or could bring to product development
  • We haven’t communicated with our community in a while so why start again now

Each of the excuses above has one thing in common. They demonstrate how insular the company is thinking. And I’m willing to bet there is a strong correlation between the speed at which a company learns and how well they nurture and engage with early adopters.

Whenever I hear these excuses I say this: First, early adopters wouldn’t have signed up for your mailing list or backed you on Kickstarter if they weren’t interested. Until they tell you differently, they are invested in your journey.

Second, early adopters have supplied you with their attention for free. At the very least, and to create an exchange of value to grow the relationship, you need to demonstrate that their investment was worth it.

Third, early adopters can help you solve problems. There are very few people who will step up to help solve problems when you are a young company. Apart from your team, family and investors (if you have them), who else are you going to ask for help?

Finally, if you are worried about the competition learning about your progress from a regular email update, you are worried about the wrong things. The way that one startup defines and solves a problem is usually very different to another. In any case, you are in motion on your business model and regular updates to early adopters don’t include a startup’s secret sauce.

The nurture algorithm

Nurturing early adopters and trust share a similar foundation. They require consistency over time. And in the universe of factors that startups cannot control, the consistency with which they engage with early adopters IS one they can control.

The nurture algorithm I use involves seven components.

  1. Habit - Updates are sent using a precise and regular tempo, a bit like how this post arrives every Sunday at 0800 AEDST. This develops an expectation and habit in early adopters’ minds. This step alone is remarkable i.e. people will talk and refer to people who are consistent because it is often hard to find companies (and people) who maintain a tempo and consistently deliver.
  2. Humour - Updates are clever and/or don’t take themselves too seriously. They understand an early adopter’s life isn’t solely focused on their product and use humour to reacquaint people with their product or circuit-break and awkward or unexpected turn of events.
  3. How to use - Updates overtly remind early adopters on how to use a product. This is not only useful to remind people to restart using their product but also reinforces the startups understanding that their product may only play a small part in the early adopter’s life.
  4. Today - Updates highlight features or products that have been released and what they are designed to accomplish
  5. Lessons - Updates reflect on what’s been learned since the last update. This may include lessons gleaned from other early adopters, changes that have happened in the industry or lessons that have been uncovered from history that affect the startup
  6. Tomorrow - Updates note what’s coming and provide early adopters with an inkling of what’s to come (even when the startup isn’t 100% sure it will be delivered)
  7. Help - Updates make a specific ask (e.g. give us your opinion on a feature) alongside the request to share the product with one other person.

Scaling the nurture algorithm

I think about deploying this algorithm in two ways. In other words, I think about what’s scalable and not scalable when communicating with early adopters. Email is scalable. Having a phone call or face to face meeting with every early adopter may not be.

However, these options are not mutually exclusive. You can do or be ready for all of these options. It comes down to how you think this community will want to engage.

A large proportion will be happy to read and respond via email. Some will relish phone conversation or a Zoom meeting.

As a founder, I think it’s essential that we crave engagement through whichever channel an early adopter, user, customer or partner wishes to connect. So while email is scalable and you will often see the founder's personal email addresses on an update, it is very important that we also make time to call and meet community members or ask that they send us a voice or video messages which we commit to responding to. It’s the only way to get rich insight.

Case in point - Seneca

The reason for writing about nurturing early adopters is that I recently received an update from a venture I have an interest in. It caught me by surprise because the update captured nearly all of the nurture algorithms components. The company is called Seneca and here is a link to the update.

One last thing...

When nurtured, early adopters are the ones who help you develop momentum, raise capital, hire great people and scale. Recently I wrote about how, as a startup, love is all you need. I was talking about the value that early adopters can create but I didn’t talk about how.

Think about early adopters as highly valuable people. Think about the nurture algorithm as an investment in unlocking that value and as a way of saying thanks to people who didn’t need to back you, but did.


instructions

WHY I WRITE INSTRUCTIONS BEFORE BUILDING PRODUCTS

Instructions are hard to write well. And the punchline is they should be written well before you start building the product.

This will make sense if you’ve had to resort to instructions for products that don’t just work out of the box.

This will also make sense if you’ve been surprised by the inclusion of instructions with products that you think are very intuitive.

Instructions expose gaps in design

When we were building AirShr I remember my friend and co-founder Opher commenting that we should have written the instructions first. We both laughed when he said it. And he was right.

Our investment in design had taken us a long way but not all the way.

That’s because you use a different type of logic and communication style when drafting instructions.

Unlike sketching use cases to describe the functional aspects of a product, instructions force you to consider the expectations and biases you hold about people who you hope will use your product (and the instructions you hope they will read).

But it doesn’t stop there.

Instructions only exist on a fraction of the surface area of your post-it clad walls and whiteboards.

Instructions need to deliver a universal understanding of how to use a product. That can mean instructions are multilingual.

Most instructions also use diagrams and booklet style formats to fit inside the packaging. This introduces the idea of a product having a visual language. Most products don’t in their early days.

instructions
An early version of AirShr's product instructions

These are just a few considerations that come up when writing product instructions. And the analogue of this for software-only businesses is writing the screens and instructions you see as you first launch an app. In the same way that screens are designed when the product is ready for launch, they also expose questions that can stop a new user dead in their tracks.

Instructions as a minimum viable experience

Writing instructions before you start building a product forces the creation of a minimum viable experience that clarifies a product’s intent.

A minimum viable product can come next. If that sounds counter-intuitive, think about what usually gets shipped with a product (minimum viable or fully mature). Instructions.

I shared this point of view last week and a response I received was, ‘but I don’t know what I’m building?’

My response: Yes you do.

Any entrepreneur who is ready to talk to someone about their vision has also imagined what their product could be. They’ve usually been eating, sleeping and dreaming about their product for as long as they can remember.

Just to be clear, I’m not suggesting people use instructions as a substitute for a pitch deck or the first version of a product that helps solicit usability feedback.

I am saying that writing instructions will help add more value to early product design efforts.

The Michael Margolis Effect

My friend and internationally renowned story-telling coach Michael Margolis has helped me accelerate the development of product narratives. He has also helped me tell my story.

In the latter case, we went through a group exercise of pitching my story in 90 seconds to one person. After this, I had a 30-second to find the second person and pitch the same story. This time I only had 60 seconds to pitch the same story. Again another 30-second break. Round three and the same pitch but in 30 seconds.

I was amazed at how quickly the story became refined. Others in the group felt the same.

I’ve taken that technique and applied it to draw insights from the process of drafting instructions. Try this.

Write the first draft of your product’s future instructions in one go. Note how long this takes.

Share this draft with a teammate or friendly.

Take a 2-minute break and then repeat the drafting process. This time, restrict the available time to two-thirds of the time it took you to draft the original instructions.

Share this draft with a teammate or friendly.

Take another two-minute break and then draft the instructions a final time. This time only allow one-third of the time it took you to draft the original instructions.

Share this draft with a teammate or friendly.

The net effect should be more concise instructions each time thanks to two factors. First, the feedback from your teammate or friendly and second, the actual process of crafting the instructions.

One last thing…

Instructions should be written first as a critical input for product development. This process alone can save time and reveal critical usability insights that can be missed because of a founder’s misplaced view that they are creating an ‘intuitive’ product.

Building an intuitive product is an ambition. No one gets it right from the beginning. I think it’s important to use every technique available to get off on the right foot. Writing instructions first has helped a lot and I hope it helps you too.


experimentation

HOW TO GET BACK TO MISSION-DRIVEN EXPERIMENTATION

There is a lot of talk about experimentation in startups.

There is violent agreement about its importance to momentum. The question is how do you tell the difference between interesting experiments and those which help advance company missions.

I decided to write about this today because a colleague recently noticed that I use a tactic I learned when I was a young soldier. I didn’t realise I was doing it and it took someone familiar with SMEAC (not surprisingly a military acronym pronounced smee-akk) to call me on it.

I will dissect SMEAC as it relates to experimentation in startups later in the post. Ahead of that though, I think it helps to understand how serious you and your culture is about experimentation.

Some know experimentation better than others

There are founders who know how to structure, execute and learn from experiments. They use experimentation as a means to accelerate knowledge and keep their instincts in check. I put my friends Nic Hodges, Gautam Mishra and Dee Deng in this camp.

And then there are those who talk about it without really knowing how it all works. Break these founders down further and two more groups appear.

The first are founders who really want to learn how to experiment and create a culture of experimentation. They have read everything there is about experimentation speed, how to identify the riskiest assumptions and how to pare down bloated tests. Although their level of experimentation expertise is academic, these founders are walking the talk. Launching experiments as often as possible and trying to gather data, they fossick for insights and learn as they go.

That was and to some extent still is me.

The second group love the idea of experimentation but hate the process. They have decided to stick with their intuition but at some point, their perspective changes and they turn to experiments to learn.

And those who don’t often end up needing to find a job.

Mission Driven Vs Interesting Experimentation

When I move past entrepreneurs who understand experimentation, I often find less experienced founders running rafts of experiments they find interesting.

And ‘interesting’ can be dangerous for the simple reason that interesting equals subjective.

Here’s an example. You discover something interesting about a customer. You share it with your team or community and do an incredible job of selling it to them. They buy what you’re selling and before long a feature or change is taking place just because you found it interesting.

No supporting data.

No objective corroborating insights.

Just an observation.

And now, thanks to your selling skills, a wholesale distraction for your already resource-constrained team.

I have caused these types of distractions in the past as have most first-time founders.

With the benefit of hindsight, I think there are four questions you can ask your team to make sure experiments remain mission focused.

Perhaps most importantly, these questions are self-reinforcing in a way that encourages teams to maintain mission-focused experimentation.   

Q1. What number are you trying to move?

I owe this one to Gautam. He always asks it and rightly so. This question helps people focus on the challenge to be solved or the opportunity to be captured. Whether you’re trying to understand a behaviour, accelerate growth or stem attrition, this question helps clear away the noise that can cloud and overcomplicate mission-critical objectives.

And there is a 1:1 relationship between the number to be moved and the experiment. In other words, if you need to move two numbers, each number needs its own experiment.

Q2. What is your hypothesis?

A hypothesis is your best guess with limited data.

I provide this simple definition whenever a team member or founder tenses up because they think they need to present a more scientific explanation.

That said, there needs to be limited data to accompany the best guess.  Otherwise what you’ve got is a subjective observation. If that’s what you’re presented with, ask for limited data so you can have a conversation about the future instead of a conversation about religion.

This question also builds on the first one.

Q3. How does this experiment support the core growth metric?

The core growth metric of most startups is (and should be) rate of revenue growth. Revenue solves a lot of problems and the faster it grows, the more leverage a company possesses. And this is the truest when young companies are seeking investment from angel investors and venture capital firms who seek more and more concrete evidence that founders are onto something.

I can almost hear people thinking that growth comes in different forms. That is correct and there is a time when investment-fuelled growth can be traded-off against revenue growth. But the days of companies raising rounds of financing in the hope that one day they will break even are over.

Moving the dial of a mission-critical metric using hypothesis-driven experimentation that ultimately ties to revenue growth can only put you on a winning path.

This then leaves the final question.

Q4. How does mission-driven experimentation become part of your culture?

Here is where SMEAC comes in. Also known as the ‘Five Paragraph Order’, SMEAC is the standard way in which teams in the military formulate and distribute instructions for exercises and missions. You can learn more about SMEAC here

In the context of building businesses, SMEAC presents a replicable format that addresses points of a plan that are often missed due to the cut and thrust of startup.

Here is the format. The descriptors are how I apply SMEAC to startup experimentation.

  1. Situation: This is the context. The background for why the team is thinking about this experiment is discussed here. The number you are trying to move, the hypothesis, and how this ties into the core growth metric are also mentioned here as are potential challenges and unknown factors.
  2. Mission: Who, What, Where, When, and Why about the experiment. In other words, if this mission statement is clear, specific, time-bound and measurable, you’re on the right track. For good measure, the mission statement is said twice.
  3. Execution: This is the ‘how’ and it can be the lengthiest part of SMEAC. Team members are presented with their tasks, contingencies are discussed and the desired end-state is articulated.
  4. Admin & Logistics:  Usually the tools and communication methods (including regular reporting) to be used during the experiment.
  5. Command & Signal: Who is accountable for experiment success and how they will feed progress and results back to the company.

For the record, my office isn’t a war-room.

I don’t have my team standing around mud maps and I don’t often use each heading (ie Execution) as I walk through each section.

This is a framework to help establish clarity on why we are investing time in an experiment.

By the time you reach SMEAC, three other important questions have been answered. This step is all about closing the loop on a hypothesis that (hopefully) increases your rate of learning.

One last thing…

If you are serious about increasing the speed at which your team learns, mission-driven experimentation is essential. And if you feel your team is not quite hitting the mark with their experimentation, think about asking them these four questions.

Finally, SMEAC may be new to you or you might think its relevance is restricted to the military. I can assure you that it works well in nearly all turbulent environments, largely due to how easy it is learned, understood and transmitted between leaders.

Like everything in a startup, getting good at experimentation takes practice and clarity on why you are testing in the first place. I hope you find these frameworks useful.


Intel

'INTEL INSIDE' AND A GROWTH PATH FOR STARTUPS

Before we talk about Intel and ingredient brands, I’ve created a tool to help short-circuit the time it takes to identify B2B partners. Keep reading if you’d like to download a copy (a web-based version is on the way).

So...

Intel is an ingredient brand. It is a unique example of one brand powering another. We know it best from the ‘Intel Inside’ label attached to millions of computers.

Most entrepreneurs discount how the Intel Inside story paved the way to an important and underrated path to growth. And that’s because it takes time to demonstrate that a product or service is worthy of being substituted in for a component of an existing product.

The best analogy I can think of to describe ingredient brands are the links in a chain.

Every product is made up of links (components). When you first build a product, each link will be strong enough to perform its function and integrate with other links.

Each link requires investment (whether it’s bought or built) to make the product work and due to limited resources, both in terms of talent capability or capital, each link is likely to be just good enough as opposed to being fully optimised to be best in class.

If your product is positioned as best in class, it has the potential to become an essential ingredient. And your brand stands to benefit by being introduced to new audiences as the link that makes a larger, well-recognised brand even stronger.

Intel's Ingredient Brand Potential

In the 1990’s Intel made computer chips. Their annual earnings were ~500M USD at the time. The Intel Inside label elevated the company from being one of many computer components to being the essential hardware ingredient in the eyes of personal computer owners. Intel reported earnings of 16B USD in April 2018.

And while Intel Inside was a branding masterstroke and created opportunities for Intel to grow and diversify, it also serves as an important example for entrepreneurs trying to build brands for two reasons.

First, building a consumer brand is hard. You just need to look at how much startups spend on Facebook and Google advertising to get noticed. And it’s not good enough to be happy with a small cost per acquisition if customers don’t stick around.

Second, while developing partnerships is the key to scaling a consumer brand, relationships where your product powers an existing, large-scale brand is many more times potent.

If the penny just dropped and you’ve just started thinking that your brand could be an ingredient, there are three steps you need to take to realise the growth potential as an ingredient brand.

Step 1: Understand Product/Ingredient Fit

I’ve spent a lot of time thinking about this type of fit, at AirShr, as I was helping to grow inkl and today, as I build a biotechnology venture. Three factors seem to help determine whether a product can be an ingredient.

The first relates to whether or not a product can be positioned as the best in the world. To claim this prize, the product needs to be sufficiently unique in its niche. I’ve also found that ‘unique’ doesn’t necessarily equal significant traction. Both AirShr and inkl had social proof but were still growing when the idea of becoming an ingredient brand became an option.

While developing social proof takes time, I think founders can be examining the ‘Product/Ingredient’ sweet spot from day one. I think this sweet spot is made up of the remaining two factors: Industry competitiveness and the number of components that make up a product or experience. The latter is best explained by thinking about hotels. There is a high number of constituent products and services that make up a hotel room experience. Each one needs to be procured and supplied at a consistent standard to make the experience work well.

Ingredient brands live in this sweet spot for three reasons

Intel

First, businesses that operate in competitive industries and deliver products with a high number of constituent components are often competition-focused and cost sensitive. This is because changes in the price of those constitute products (eg amenities in hotels) affect the margins of the end product. The larger the swings in cost across a range of constituent products, the higher the compression on margins, which in the hotel example is the profit from a room sale.

Combine this with a highly competitive market faced with disruption from new models (like Airbnb if we extend the accommodation analogy) and cost sensitivity increases. Ingredient brands, particularly scalable software products, can provide competitive price-stable offerings (thanks to their relative size) that increase predictably and take the heat out of cost sensitivity for the bigger brand.

Second, ingredient brands can take advantage of outsourced R&D and product development which has been institutionalised. In other words, ingredient brands can slot into the role of product provider because cost-sensitive businesses have a habit of reducing (or doing away with) R&D to reduce fixed costs. An alternative and equally valid motive is a decision to keep an eye out and leverage innovations that can come from startups instead of trying to build an internal team charged with the invention of new things. Either way, the shift from a ‘build’ to a ‘buy’ model creates this opportunity for ingredient brands.

Third, the startup halo effect is important to larger brands, particularly those subject to disruption, who look to startups as a source of differentiation.

I have also found this framework useful in thinking about why a brand has low ingredient potential.

Companies creating new markets (ie low industry competition) whose product is made up of a relatively small number ‘raw material’ constituent products is likely to have a strong focus on internal R&D, product development and growth. For the most part, this excludes most brands from being ingredient products.

Step 2: Identifying Partners

Identifying partners doesn’t start with going straight to LinkedIn and looking up who you might know at a ‘big brand’ and then trying to formulate an introduction.

It’s also not about blindly accepting suggestions from people on the sidelines about who your company should partner with. After all, unless they have specific introductions they can make, their ideas often add to the noise to company building.

I’ve come to rely on an 18 point framework to identify business to business (B2B) partners. It serves as a filter to save time and:

  • Ask fundamentally important partnership questions that often get lost in the ‘we should partner with [big brand]’ ideation process
  • Expose how incentives can be aligned with partners
  • Identify why a partnership should be avoided

Why you should partner matters

When I answer YES to the statements below, I'm usually convinced there is a there, there in terms of a partnership.

  1. We can access new markets and distribution networks
  2. We can generate revenue
  3. We can access specialised knowledge and expertise
  4. We might be able to access strategic investment or exit
  5. They don’t have resources to build what we've built (e.g. wanting to licence intellectual property)*
  6. Their brand benefits from partnering with a startup (innovation halo)
  7. They have a strong reputation/track record in partnerships*
  8. Both companies can share risks and benefits of testing new markets
  9. Both companies can make revenue*
  10. We can focus internal resources on core activities
  11. We can leverage the scale achieved by partnering
  12. We can positively change customer perceptions of our brand

However, these 12 factors shouldn’t be considered in isolation.

Why you shouldn’t partner matters more!

There are six factors that usually counterbalance why you should not partner with another company. These include they:

  1. Have similar/identical IP
  2. Aren’t financially secure or have credit issues
  3. Have a poor reputation/track record in partnerships*
  4. Have just been involved in a corporate transaction (disrupted near term)
  5. Are philosophically opposed to partnering at all (“did it once, disaster, never again!”)
  6. Don’t have values alignment*

There is nuance in both of these ‘for’ and ‘against’ partnership creation arguments as denoted by the asterisks.

There are three super incentive alignment factors under ‘why you should partner’. In other words, when YES is the answer to each of these factors, the chance of the partnership being productive increases significantly.

My most productive B2B partnerships shared these three factors. First, my partners had a clear ‘buy’ (instead of build) mindset. Second, they had a long history of partnering with smaller companies. Third, they were excited for both businesses to make money. And if I dig a little further into the last point, my partners wanted my business to be there for the long term as much as they wanted a small startup to succeed.

Red flags live on the other side of the ledger. Be aware if a company has a poor track record in partnerships. This is easily discovered by reviewing a companies last five press releases that relate to partnerships. Spider senses should start tingling if there is a spate of one-off press releases for new partnerships. Especially for companies that aren’t followed up by continued stories of partnerships growing.

If I’m unsure, I reach out to the founders of the businesses that have entered into a partnership with the bigger brand. Their view is often very telling of what you can expect.

Once you have a list of companies that are likely to be accepting of your brand as a key ingredient, it’s time to leverage every relationship you have to gain warm introductions that plot a path to decision makers.

💻 And here is the tool I mentioned at the top of the article. 💻

Feel free to use and share it, I hope it’s helpful.

Step 3: Make Your Partner Shine

Courting people in companies and helping them become your evangelist is mandatory to becoming an ingredient brand. Underlying these relationships is trust and while this is a journey, I start by over-indexing on being ready to create value out of the gate. This involves having a product that is ingredient-ready and understanding how my prospective partner thinks, behaves and is incentivised. Importantly, this also involves understanding how they perceive my behaviours and incentives.

As a founder, I expect them to know that becoming an ingredient brand is an efficient way to grow. They might not know just how important the deal is but they should know that my business is ready to take all reasonable steps to make the deal work. And I’m happy to make this clear if they’ve missed that point.

Being ‘ingredient-ready’ means being able to:

  • Plug a hole or be an effective substitute for a problematic product, feature or supply chain component
  • Possess ways to integrate rapidly
  • Use runway to absorb the time it takes to close the deal

Delivering on each of these three factors with regular, empathetic relationship management, including doing unscalable things (like travelling from Sydney to Washington for one-hour meetings), generates trust.

Making your partner shine is the next step and in a nutshell, it means making their life better.

This can involve tactical measures like being quick to respond to questions and issues. It may also mean providing them with first or early access to products, inviting them to launch events and improving their standing within their business by helping them ‘hit a number’ that’s important to them.

Expect that it will take time to negotiate the ego of the bigger brand. Expect them to operate at a pace slower than you hope as they work hard to differentiate in a mature industry. And expect them to grapple with the bold decision to introduce your startup as an ingredient into their supply chain.

Playing this long game pays off in spades. Especially for those who can understand and work within the context of their (prospective) partner.

One last thing ...

Time and patience are needed to claim the benefit and halo of an ingredient brand. But don't wait until your business is generating $100M in sales before opening conversations with potential partners. The speed at which big brands are being disrupted is accelerating.

Intel showed how valuable becoming an ingredient can be. Following the above three steps may reveal a similar path to growth for your venture.


history

BUSINESS MODEL HISTORY: THE MISSING SLIDE IN PITCH DECKS

Business models hide in history. They are obscured by pivots, course corrections and failures. Many live in startup graveyards. A smaller but equally important proportion live on.

These business models provide clues to the decisions their founders made as they navigated towards product/market fit. And because I subscribe to the notion that there is no such thing as an original idea, I look for those clues to short circuit the time it takes to build and grow a business.

The history blind spot

Blind spots emerge with the excitement of business building. This is because when focus increases, peripheral vision often decreases. Founders invest a lot of time convincing others of the value they want to create and while this is the right thing to do, it shouldn’t happen at the expense of learning from the past.

I’ve seen history blind spots grow under two circumstances. One is more prevalent than the other. However, both effect first-time founders.

The first, less prevalent circumstance is when a founder’s self-belief overrides their self-awareness. This can be at odds with the perception that entrepreneurs are in perpetual learning mode and usually manifests as 'blind faith'.

Not being able to see history is the second and more prevalent circumstance. This comes as a consequence of founders avoiding or not knowing how to go look into the past. In other words, they don't search Google Patents, ignore feedback and comments like, ‘Your product sounds like [insert similar product]’ and don't spend $50 to get a bias-free list of companies who might play in the same arena.

The nuance here is that ‘the past’ doesn’t just include a time when an idea or venture lived and then died. It also includes more modern history, when a venture started and continues to live on today.

These two circumstances also affect investors. Their incentives may differ from those of a founder but the thesis still holds true: the probability of an idea being completely novel is highly unlikely.

Question: What’s the history of this idea?

When I’m being pitched a new business I ask this question. I also prepare a response to this question when I’m pitching for investment or partnership.

The reason I prepare for this question is that the consumer internet has been around for more than 20 years, some would argue longer. There is a high probability that the idea or business model has been thought of, patented or tried somewhere in the past. It might not have been successful but that’s not the point.

Founders stand to learn an enormous amount from those who walked before them. They also stand to benefit from demonstrating their curiosity and showing how open they are to de-risking their business using lessons from the past.

But perhaps the most important benefit is that the founder reduces the chance of being blindsided, now or in the future.

Instead of being asked halfway through a pitch about a company that shares similar characteristics, which a prospective investor or customers know about, the founder can engage in a considered conversation instead of looking sheepish and underprepared.

And just to be clear, when I talk about history, I’m not talking about competition or how to determine if a market is crowded. Other slides in a pitch deck will tell me that. I’m looking for a slide with four bullet points per company whose history has a significant bearing on your business, like this:

[Company Name]

  • One line company description
  • When it existed
  • Why it failed (if it did)
  • Key learning(s)

By way of example, Theranos features in my pitch deck on the Business Model History slide.

One last thing...

Some entrepreneurs believe they can convince investors that what they’re building is novel. There are others whose conviction stems from capturing value by evolving an existing model or reorganising components to create a new proposition.

Regardless of which camp you fall into, expect investors to know more about history than you. Be prepared to discuss history and how you plan to leverage it.

I continue to ask after the history of business models. I encourage investors to do the same and for entrepreneurs to be prepared to engage in a conversation that can only earn you respect from the other side of the table.


tools

TOOLS TO START A VENTURE

The number of tools available to start and grow a venture is overwhelming.

Although roadtesting tools can be fun, it's a time sink that takes people away from the main game: validating their business model.

I've written this post to help the MBA candidates I teach at AGSM @ UNSW to get started with their entrepreneurship project and I hope it's useful to you too.

Here is a list of battle-tested tools to help you start. And stop wasting time looking for, well, tools.  They will help you make the first versions of business models and many of them are free, except one which is paid (*). 

The punchline: Run towards business model validation. Be in motion.

To Communicate (within and outside your team)

  • Slack - Messaging for teams and a great alternative to email. Slack also has a built-in video calling service (like Skype). On the free plan, this is limited to person to person video calls. Team video calls are only available on the paid plan. Another advantage of Slack over other communication tools, like WhatsApp, is that you can organise conversations into channels while also uploading and sharing most file types you can think of. And did I mention it reduces email...
  • Zoom - You could use Skype but the audio and video quality of Zoom for calls are excellent. Zoom's recording feature is also very useful to create a record, with the permission of the person your calling, of product research and development conversations. I also use this to record my podcast.   

To Ideate

  • Google DocsGoogle Sheets - Those who already use these services understand how potent they are when it comes to collaborating on a new document, building a model or analysing product usage. I still remember seeing five students in a lecture simultaneously adding their notes to the one Google Doc as a means to fast-track knowledge collection. 
  • Draw.io - Images and wireframes do a lot to convince people of a product's future value. The underlying challenge for startup teams, however, is mapping out in detail how people will use their product. Draw.io is a great process mapping tool that helps teams to visualise each step in the user's journey.  

And although not mandatory, I recommend using Gmail. It ties in seamlessly and enables high-speed collaboration with the other Google tools I mention here.

To Plan, Track and Store

  • Leanstack.com - This is easily one of the most important tools for entrepreneurs. After creating an account you will be asked to answer nine critical questions about the business model you want to build. Each answer should be in bullet point form and can be evolved as you learn. 
  • Trello - Getting organised and managing projects is a lot easier with Trello. And never underestimate the impact that moving cards from one list to another have on a team's momentum (you'll see what I mean).
  • Google Drive - The alternative is DropBox and I use both but only because I came late to (Google) Drive. If you use Google Docs and Sheets, I recommend Drive to further accelerate collaboration.   

To Design Version One

  • Squarespace - This is the only paid tool on this list and for good reason. Squarespace offers unmatched quality when it comes to firing up a landing page or building a site. It integrates with platforms to capture email addresses, sell products and provide all the data you need to understand the who, when and where people are coming from to visit the site. 
  • AppCooker - If you're designing an app for iPhone and iPad (+70% of Australians use iOS devices), this is the place to go. Design it, add interactions and send the file to people who can test it in real time.  

To Market The Idea

  • Canva - This platform makes it incredibly simple to create marketing material to help tell your business model's story. 
  • UnSplash - 'Beautiful, free photos. Gifted by the world’s most generous community of photographers'. Their words, not mine. And they mean every word.  
  • Good Email Copy - Stop angsting over what to say to new users and potential customers. Unashamedly borrow from the best in the business. 
  • Yet Another Mail Merge - Connecting with and providing regular updates to early adopters is essential to creating a community and movement around your vision. YAAM integrates with Google Sheets and Gmail to make spinning up an email campaign super simple. 

To Collect Feedback

  • Calendly - Speaking with people who are roadtesting your product is the best way to solicit feedback. Calendly puts an end to trying to find the right time through back and forward emails.
  • Typeform - While they shouldn't be used exclusively to measure new user intent or progress, surveys have a place in collecting information. Typeform is the leader of the pack. Google Forms is a solid alternative.    

It's also important to be available to people who want to talk to you about your product. Add your cell number and email address to all your correspondence. And before you think 'I'll be inundated with calls and emails', take a breath (to humble yourself) and remember you are there to serve people who want to buy what you're selling.

My phone number and email have been on tens of thousands of emails. The number of unrequited calls I've received as a percentage of total useful calls is less than 0.0001%.

To Analyze Feedback

Google Analytics - Match people's anecdotes from using your product with data. GA is easily added to most websites and apps and should be interrogated as part of understanding people's behaviour.

To Pitch The Idea

Microsoft Powerpoint and Google Slides are good options. The key message here is to deliver your pitch in 10 slides. Here's how to do it (under Point 8) here.  

Two last things ...

First, introducing tools is one thing, knowing how to use them is quite another. If you want to accelerate your upskilling on how to develop a business from the ground up, there is one online, self-paced course that you need to start. It's called Business Development For Startups and Tech Companies.

It contains 30 hours of important content (19 hours of video), available on mobile and at the time of publishing this post this course is 14.99 USD with a 30-day money back guarantee. I have no affiliation with Scott Britton, this course just made a big difference to me a few years ago.

Second, being in motion on an idea and building momentum to learn is the main game in a startup. Playing with fancy tools won't get you there. Engaging with early adopters will. So use the tools that are proven to make that happen.

 


patience

BALANCING PATIENCE AND URGENCY

LISTEN AND READ

Patience is the most difficult mindset to master when you are naturally urgent. It doesn’t come easily to me or many of my colleagues. And the irony that entrepreneurship is equal parts patience and urgency isn’t lost on us either.

I have found that while you need to be urgent and patient simultaneously, the mix of each one changes with time. The issue is you only realise that in retrospect.

In the early days of a venture, founders are in full control of their time. They can design and tinker in the relative privacy of their development environments. Urgency is high, patience can be low.

As ventures grow and expectations on investment and growth start to take hold, that mix should change.

And it might. Slightly. From say a 90% urgency, 10% patience ratio to 80:20.

This slight increase in patience is afforded to internal activities where larger teams take longer to collaborate and get things done. And for the most part, the activities the team are focused on are relatively contained and controllable.

The nuance here is that growth also comes with additional external dependencies, all of which take time.

The one thing that founders never want to think, hear or embrace is that despite their best efforts to create urgency, the world outside their venture’s walls moves at its own pace.

Partnerships take longer to form, consumer marketing takes time to optimise and product development needs to respond to a broader audience.

The cumulative effect of these realities puts obvious pressure on runways. It also creates stress on the already limited bandwidth of small teams and narrows the universe of available tactics to extend the time in market.

Urgency:Patience

I think the urgency to patience ratio is an important mindset to help founders manage teams and think about time (this would be advice I would want to hear as my younger self).

This ratio is not about having an amount of patience and a separate amount of urgency to deploy.

The point is that you have a finite amount of energy to deploy. And you can choose to deploy it being urgent and being patient but it’s impossible to be 100% patient while being 100% urgent.

Think of the changes in the urgency to patience ratio as the gears that change in a car when you accelerate. To create motion from a standing start urgency is high and patience is low. Urgency is still required over time but as momentum starts to propel the venture forward, the need for patience increases as the next level of products and partnerships are built to fuel growth.

The urgency:patience ratio changes over time and being aware of it is half the battle won.

It’s also important to understand what stops founders from moving from one gear to the next. The way they think about leverage usually has a lot to do with it.

Pursuing leverage

Markets are made by creating products that few companies can make and that many people love. The scarcity of supply creates a number of advantages. One of them is leverage.

In most cases, leverage allows suppliers to scale and charge (more) for their products.

What makes decreasing urgency and increasing patience more difficult to achieve, agonisingly so, is a lack of leverage.

And in startup leverage is the one thing you never have in the beginning.

As most founders (and investors) comes to realise with time is that the tide on leverage only turns if you stay in market long enough to crack the code of value for large groups of people.

When leverage takes longer than expected and founders get stuck in a high urgency, low patience gear, they tend to commit a cardinal sin of building a business: mistaking ambition for leverage.

Don’t get me wrong, ambition is to be admired. It will convince a lot of people of future value.

But there is a line that should be approached with caution.

And that line is crossed when a founder is so convinced of the (future) value of their product that they try to make a prospective investor or partner feel as though they have no choice but to engage.

In other words, they use leverage they don’t have to force an outcome.

This is a bummer because the founder loses twice.

Not only do seasoned investors and decision makers see this coming a mile away and disengage, teams also see this behaviour and start to question their grip on reality.

Take these fundraising and partnership scenarios as case in point.

In an investment round, this can look like a founder saying that they have commitments for a large proportion of the capital being raised and that demand is so strong that it looks like the round will be oversubscribed.

All it takes is for the investor to ask for the term sheet and tell the founder that they will be the last money in.

In a partnership negotiation, this can look like a founder trying to play two companies in a duopoly or close-knit industry off against each another.

All it takes is for former colleagues to make a call and ask if the founder's story is legit and if it’s not, the game is over.

It's not worth overplaying leverage

As a hustler from birth, born impatient and known for enjoying ‘the thrill of the chase’, I can tell you I’ve visited, and on a couple of occasions crossed, the ambition line just to fall flat on my face due to a lack of leverage.

It’s up to each founder to know when they have leverage and when they don’t. Just know that investors and partners know when you do and know when you don’t.

Either way, be honest about the leverage you have at any given time and adjust the urgency to patience ratio accordingly.

How to be urgent and how to be patient

I think about the component parts of the urgency to patience ratio like this:

Being urgent means:

  1. Getting product into the hands of users and customers as quickly as possible (and being embarrassed because you think it’s not ready)
  2. Being continuously and constructively dissatisfied with the status quo
  3. Learning as quick as possible by creating a rapid experimentation tempo on sales processes, product platform and features, marketing and culture
  4. Planning for the long game while creating and capturing value in the short and medium term to increase momentum. In sales, this means maintaining your strategic and run rate businesses.
  5. Forcing time in the week to stop, reflect and (if need be) course correct

Being patient means:

  1. Maintaining what it means to be urgent, PLUS
  2. Increasing the discipline of planning and precision of delivering on the plan
  3. Over-communicating the context of the company and progress across all areas of the business
  4. Creating more value for allies at prospective customer businesses and also subtly reminding them that timing is everything for a startup
  5. Finding ways to help fanatical users or customers share their love for your product

Urgency:Patience in action

I use time as the guide to adjust the ratio. It’s not a hard and fast rule, and there are exceptions, but it’s served me well.

  • 100% Urgent 0% Patient: First six months. Side project. No co-founders. Learning through experimentation. Focused on pre-sales.
  • 85% Urgent 15% Patient: Six to 12 months. Start working with potential co-founders. First version of a product in the hands of users. Iterating like mad to deliver on pre-sales.
  • 70% Urgent 30% Patient: 12 to 24 months. Raise first round of financing or cash flow is small but growing and stable. Building a team. Managing growing pains.
  • 60% Urgent 40% Patient: +24 months. Clearer than ever that there is a there, there. Enter and exit multiple troughs of despair. Capital is raised and invested. Teams expand and contract. Sales and business development activities evolve. Business pivots (and pivots again).

Three last things … 

People don’t often associate urgency with marathons but if you understand building a great company takes ~10 years, you’re likely to recalibrate how you organise your time and lead and provide air cover to your team. The idea of urgency can be misunderstood for a high level of activity. Don’t make this mistake. Momentum isn’t created by output, it’s created by results.

Second, and while mentors can be very helpful, I find having a small tribe peers who operate in similar roles huge help in trying to work out how patient I should be. They provide the moral support and real examples that you can relate to. My tribe has people who work in senior business development roles at Xero and Cisco to name a few. Assemble your tribe, you won’t regret it.    

And finally, rest.

You and your team will be running hard for a long time. Give permission to your team to rest. At AirShr the entire team, founders included, stopped work at 12 pm every second Friday and did whatever they wanted. There was only one rule: Don’t be working. Perspective increases when you have time to stop, decompress and reflect.

It will also help you work out if the urgency to patience ratio is on the right setting.


mission

COMING TOGETHER ON VISION AND MISSION

The first time I get a sense of a startup’s mission is when a founder describes the problem they want to solve.

If I relate to the context of the problem, I quickly start calculating how a business can be built around the opportunity.

This is also how co-founders and early hires initially band together.

They galvanise around a problem and believe they can play a role in the solution. They may also have a sense of the opportunity’s size.

My theory is that if you ask 80% of new teams, ones who are yet to take a product to market or have released their first version, they won’t articulate the same vision or mission.

That’s because creating a clear and compelling vision and mission is difficult. And the time it takes to land on the right set of words is universally underestimated.

You want co-founders, first hires, partners and investors to be instantly captivated by what you stand for. But how do you do that when you don’t know if your starting hypothesis is correct?

In other words, how do you nail a vision and mission statement when you don’t know if people are going to buy what you plan to sell?

I don’t think you can.

Some will disagree. They will claim it comes down to sitting down and methodically working through a framework.

And I understand that people can feel paralysed without guiding principles to start a journey.

But many startups I see and mentor face this challenge and it usually plays out in one of two ways.

The first way involves founders having an interesting idea and creating a prototype. Shortly soon after they receive an enormous amount of conflicting feedback which (ironically) bogs them down. Their response is sequential. They pause on product development and spend time defining their vision and mission.

The second way is founders spend a large chunk of time defining a vision and a mission in a vacuum. They write without any real feedback on their business model and as a result, they (often) end up with generic, noun-rich statements that do little to inspire, much less provide clarity to the job at hand.

I have fallen into both of these traps. And even with the help of the branding agencies, we could afford at the time, clarity on something that should instinctively be simple to nail still felt miles off.

That said, there is a way.

The LinkedIn standard

I have long admired LinkedIn. One of CEO Jeff Weiner’s first orders of business when he joined the company, 6 years after it was co-founded by Reid Hoffman, was to codify LinkedIn’s vision, mission, value proposition and values.

Vision - Create economic opportunity for every member of the global workforce

Mission - Connect the world's professionals to make them more productive and successful

Core value proposition - Connect talent with opportunity at massive scale

Values - Members first; relationships matter; be open, honest and constructive; demand excellence; take intelligent risks; act like an owner

These statements are elegant, simple and inspiring.

And I have an admission.

I spent hours trying to deconstruct and (somehow) re-engineer LinkedIn’s messages in an effort to achieve clarity for my own ventures’ guiding principles,

Jeff proved that formulating compelling strategic narratives is doable.

However, he has a vastly different experience set to most founders. Jeff also benefited from arriving at a company who already had momentum and clues about how they would change the world.

For the most part, early-stage founders won’t have access to this experience.

Instead of putting the brakes on product development to focus on vision and mission or trying to define them in a vacuum, consider another option.

The third way

Here are five steps that have helped me to craft the dream (vision) and the overarching objective for the business (mission).

And while I don’t have your context, I assume you have read this far because you are frustrated and tired of not having strategic clarity for your venture.

1. Go back to basics

Coming together on vision and mission usually elongates when founders develop an obsession for word-smithing these statements. In doing so they also often disconnect from what inspired them to start in the first place.

Go back to the experiences that inspired the venture’s genesis and then look objectively at the three ingredients that need to exist in order for a business to operate:

  1. Science - Do we understand and can we communicate the discovery or insight that was uncovered?
  2. Technology - Do we understand and can we communicate the processes that mean the discovery can be repeated efficiently at scale?
  3. Business model - Do we understand and can we communicate how to create and capture value from the technology?

At the very least there should be a hypothesis behind answers for each of these questions.

2. Keep learning

If you’re not learning you’re wasting time. Keep working to validate the hypotheses you have around your science, technology and business model.

These experiments will continue to inform vision and mission. And the alternative (no learning and postulating in a vacuum) isn’t useful and a surefire way to kill momentum and enthusiasm.

3. Add minds to the challenge

I’ve written about thinking publicly before and this is the next level.

Open a Google Doc (like this one).

Share it with your co-founder(s) and/or selected mentors.

Give them permission to add their versions of vision, mission, value proposition and values no matter how half-formed their thinking is.

Ask these same people to refine their thoughts each month.

You will be surprised at how this level of collaboration will help.

4. Practice

I was speaking with two mentees recently, Nick and Tristan, co-founders of Sempo.ai and they shared a valuable habit that has helped them advance their vision and mission: Apply for pitch competitions and accelerators once a month.

The point is to practice, regularly.

And if you’ve just asked yourself, “what if we win?”, you’ve missed the point.

5. Interrogate the feedback you’ve already got

I remember hearing a regular piece of feedback from AirShr users (our previous venture, this Shazam but for anything you hear on the radio).

“Your product makes me listen differently to radio”. We had provided a way for people to hold on to moments on the radio that they liked and wanted to dive deeper on or share while they were driving.

Over time we realised that listen differently was an important part of the value proposition and our users were telling us that from day one.

The moral of the story: Your users and customer have probably already given you your value proposition (and a key ingredient to help articulate vision and mission).

One last thing …

I understand how fatigue, waning cash and feedback paralysis can make achieving clarity feel like an insurmountable task.

Clarity comes with time.

I subscribe to the idea that learning and practical collaboration with people trying to achieve the same objective IS the way to craft clear, compelling and inspiring business strategy.

However, it’s one thing to be fatigued and frustrated at the lack of vision and mission and quite another for your heart not to be in it.

Every entrepreneur knows the difference.

If it’s the former, I hope these five steps help. If the latter, chalk it up to learning and move onto your next hero’s journey.


businesses

LESSONS FROM GROWING BUSINESSES THAT FAILED

LISTEN AND READ

Last week I was asked about the lessons learned from growing businesses that failed. At the time it felt like a loaded question but after probing, the person asking the question was curious about why you would do it again. I'll get to that in a separate post.

When I closed my first business I wrote a letter to those who followed the journey with 11 reflections.

Each one is born from an experience that came about through painful lesson or surprising revelation. And in a startup, it’s sometimes difficult to tell one from the other!

In any case, these reflections-turned-mantras are how I answered the question and have held true regardless of the business model and industry I’ve been involved in since.

1. Have conviction around your vision

Conviction is infectious and it can capture the imagination of the staunchest critics.

I’ve also come to learn that conviction and urgency are not only related, they provide entrepreneurs with a potent force multiplier effect.

And you can easily tell the level of conviction in an entrepreneur. It’s when they’re dog tired and at the far edge of sustained fatigue and they spring to life when they’re asked questions about they’re venture. They can’t help but be excited and that excitement is fuelled by conviction.

2. Always surround yourself with outstanding people

While this sounds obvious, few of us get hiring right every time so I put this thought into action in two ways.

First, by always asking myself if I would work for the candidate if the tables were turned. If yes, keep talking. If no, call it.

Second, I always start any working relationship, no matter how good I think the person is on paper or how excited I am about their potential to add value to the team with a paid audition.

Here’s the playbook I wrote on implementing paid auditions.

3. Telling the truth matters, especially if it is unpalatable

Beyond change, there are few constant factors when you’re building a company. One of them, however, is reputation.

It’s hard to earn and easy to lose.

The way reputations are usually tested in startup comes down to how founders (and by extension their teams) respond to surprises.

And there are the daily we-can-deal-with-this-product-issue surprises and there are the holy-shit-this-could-destroy-our-business surprises.

Investors and key customers and partners don’t like surprises so if you see one brewing on the horizon, act early, tell the truth and work through it.

Taking the alternate path just isn’t worth it.

4. Industriousness, intrinsic curiosity and strong values are the most important traits

You could be the best in the world at your craft but if you don’t have these, your value is limited. I look for these traits in co-founders, future hires and investors. And not surprisingly, my friends and colleagues have these qualities in spades.

5. If people don’t see the future, build a product to convince them otherwise

I remember the look on user’s faces when they realised the potential of AirShr (think Shazam but for anything you hear on the radio). I couldn’t code. What they were experiencing was a $400 iOS prototype I had made by a freelancer in Canada.

Unifying people around an experience usually eliminates the need to interpret a story or pitch deck. It also unlocks a whole new avenue for feedback and learning.

6. Move as quickly to generating revenue as possible. Rising capital isn’t a business model.

Business models can change over time but it’s a mistake to start a venture without knowing how to make money. At the very least you need hypotheses for how it is likely to play out.

Raising capital is a useful path for many ventures but as the old adage goes, revenue solves a lot of problems.

7. If an industry doesn’t feel they have a need to change, they won’t (…until it’s too late)

There is an alarming precision and inevitability with which industry disruption plays out. I wrote about those five steps a while back. And even if they conceptually know they need to change, there’s a solid chance that their romance with how money is made today will keep then anchored in position. Until it’s too late.

8. There are people who work each day to push their industry forward with a desire to innovate

Look for the resistance. They are there. They know the playbooks, the tunnels to crawl through and the ways to get stuff done. Create value for them first.

9. Invest in the fanatical lovers of your product

Reid Hoffman talked about this in episode 17 of the Masters of Scale podcast. His thesis is that the true seed of scale begins with a tiny kernel of die-hard fans.

I think he’s right.

And I broke down how I do this recently in a post called Love Is All You Need.

10. Be global from day one but start small, dial in the product and proposition and then scale

I remember simultaneously selling into distinctly different geographic markets at both at AirShr and inkl. It’s been a lot easier with inkl for a number of reasons and it's now is used in over 210 countries, sure doesn’t feel long ago that it was just available in Australia.

11. Don’t go it alone

This is probably the most important lesson of all. Building a business is hard. There are too many bases to cover yourself. Find co-founders. Have mentors. Create value with people you love working with to spread to the load.

One last thing...

The underlying lesson, perhaps #12, is that the most important measure for an entrepreneur to monitor is their rate of learning. The rate of learning (in my view) is proportionate to a founder's quality of decision making. One goes up when the other goes up and the reverse is also true.

Find ways to learn. For me, that includes writing, without which I might not have been able to recall these lessons.


bullying

REVERSE MENTORING & BULLYING

Mentoring is a secret weapon for entrepreneurs. It’s often the ballast needed to crack difficult problems.

Two weeks ago I said this on Instagram:

 

One of the many responses I received was from Rhonda Brighton-Hall, the founder and CEO of MWAH. Making Work Absolutely Human.

Rhonda and I met via Inspiring Rare Birds where we both mentor women entrepreneurs.

Our relationship strengthened as I began mentoring Rhonda and her co-founder and husband Michael on how to accelerate MWAH’s growth.

Rhonda’s advice on bullying changed my frame of reference. It also changed how I planned and executed a strategy to help a retirement village full of elderly citizens.

They have sustained systemic bullying for over a decade by its management which has consequently sent some broke and prevented families whose parents had passes away from achieving closure (due to an inability to sell deceased estates).

I’m going to share Rhonda’s advice in more detail but first, I think it’s important to realise that access to Rhonda’s perspective and wealth of knowledge came as a consequence of mentoring.

A 'One Way Street' Perception

From the outside, the mentor/mentee relationship can look like a one-way street where the mentee is always the one asking for help.

And it’s easy to understand why. For a large part of our early lives, we are formerly taught by teachers. And this process reinforces a knowledge dynamic where only people with experience can be the teacher.

However, the mentor/mentee relationship IS very different because, in order for it to work, both parties know that time and attention, the two most valuable assets, are being exchanged.

And the reality is that agreeing to mentor isn’t born out of obligation or just the desire to pay it forward. It also provides two new opportunities to learn.

The first is much like the way writing works. When you’re asked to explain or teach a concept, you have to find ways to make what you know useful and digestible. The more practice you have at explaining a concept, the clearer you become on what you know.

Second, mentoring broadens your knowledge horizon by exposing you to new ideas and products. Some may sit in industries adjacent to your own while others genuinely stretch your mind.

Mentees benefit in a different way. And while they are often very grateful for the investment in time, they detect inequality in the exchange of value.

They want to return the favour, they just don’t know how.

If this is you, relax.

Most mentors understand that value reveals itself in the long term and as a result, they are more than happy to reach out and ask for help when the time comes.

Today I mentor 17 founders and I’ve reached out to most of them with a genuine request for help. Their responses have been invaluable.

This is called reverse mentoring and it’s not uncommon.

Dealing with a bully

Bullies only respond to force. This is a popular opinion. It’s also an emotional response. And it’s the message I receive most often when I talk to people about bullying.

Unfortunately, it’s wrong.

Bullying is deeply misunderstood, largely because it is such an emotional issue.

And thanks to Rhonda’s expertise, backed by years of research, case studies and supporting governments, companies and everyday people on bullying, she brought remarkable clarity to an emotional issue.

Here are my three key takeaways:

1. In nearly all circumstances, bullying is multigenerational.

People are exposed to bullying behaviour within the first eight years of life. This behaviour usually comes from someone who the child has significant exposure to, which may or may not be their parents.

By the time the child is 12 years old, they are competent bullies. By 40, they are specialists and by age 70, with 65 years experience, they are experts. And the cycle repeats.

I never thought about bullying in terms of a capability until this point.

2. Emotion is a bully’s power base

From a young age, bullies see the effect their behaviour has on others and as sad as it is to say, they thrive on it. The greater the emotional response they elicit, the more control they wield. This is why force and violence usually don’t work and have little lasting impact.

3. Bullies don’t change

Bullies must be removed from the situation they created. They will not change because their behaviour is so ingrained. And it's for this reason that it is also important to realise that compassion, empathy and being reasonable do not resonate with bullies. These are identified as emotions that can be exploited.

One last thing…

There is a simple way to apply these three principles. If you need to manage a bully consider an emotionless and deeply overwhelming campaign of fact-based questions.

It acknowledges the multigenerational nature of bullying, removes the base of power and as the answers to the questions are revealed, it will result in the bullies removal from the situation.

It saddens me to think of how bullying begins but the impact of their behaviour, in startups, big business or retirement villages is unacceptable. I hope Rhonda’s advice is as useful for you as it has been to me.

If you would like to reach out to Rhonda, do it here.


love

LOVE IS ALL YOU NEED

Punchline: The need to grow companies quickly means founders sometimes prioritise acquiring anyone who likes their product instead of people who love it. They fall for the ‘like mirage’ which is often terminal.

Love is all you need

Love is all you need is the title of a recent episode of the Masters Of Scale podcast (highly recommended).

Sam Altman from Y Combinator, the world’s most successful incubator for technology startups, is renowned for backing companies with small groups of fanatic customers or users very early in their business lifecycle.

They talked about the difference and effects that come from people liking a product or service versus those who love it.

I was literally stopped in my tracks during an early morning run while listening to this episode.

I realised hadn’t been obeying a cardinal rule in entrepreneurship: Love always trumps like.

The ‘like’ mirage

Let’s be clear on what ‘like’ means. It’s a signal of interest and it may even provide a clue of future intent to commit or buy.

But it’s transactional and often a fleeting reaction to stimulus.

Think about the last time you clicked on a headline or pressed the heart below a picture on Instagram.

Marketers will argue that although fleeting, these interactions build awareness.

They’re right. You need to be interested before you buy.

And while converting interest into revenue is the main game, founders must first grow to show momentum.

This means getting people to like and then use their product. And usually, any user will do.

Herein lies the beginning of the ‘like’ mirage.

First-time founders often believe that once they have the interest they can work on generating revenue.

Without giving too much thought to the conversion experience and how difficult it is or how long it takes to get right or at what point they should start actively converting interest into revenue, founders can get hooked on spinning likes (or an equivalent) as the main measure of momentum.

And by ‘spinning likes’ I mean trying to use any vanity metric to show growth.

While most companies eventually work out how to convert interest into revenue, many leave it far too long due to an obsession with the like mirage.

The companies who don’t run out of cash spend much of their time trying to increase the conversation of people who they think are interested in paying.

But why aren’t we growing faster?

Increasing the number of people who like your product and increasing the conversion rate of people who pay is a journey.

At the end of the day, and if you’re experiment and data-driven, this approach will help unveil ways to increase conversions and revenue.

It takes time and it will deliver some growth but I bet there are many founders who are baffled by why growth isn’t happening faster.

I’ll bet they’re also wondering why their company hasn’t yet benefited from the features they built into their products that were designed to create network effects among their users.

Leaving aside big shifts in demand that can come from wholesale industry changes, I think this lack of expected growth comes from thinking two things.

First, that optimising the sales funnel is the entire game i.e. finding more people who like the product and converting them into customers.

It’s not, it’s 60% at best.

And second, that those people who ‘like’ your product will somehow magically turn into fanatical lovers.

They won’t.

Look for love

The stress that comes with the realisation that growing the number of people who ‘like’ your product isn’t translating into revenue is intense.

And this frustration can lead founders to ignore or place little value on the fanatical lovers.

And why care about this subset of users?

Because they are the ones most likely to share your story and lead two other people to your product!

Here’s how I look at this opportunity and it starts with understanding what makes someone a fanatical lover of what you do.

Step 1: Get to know your top 10% most active users

Fight to understand the facts. And this is important. Don’t hypothesise why they act or who they are. That will come later.

Instead understand when they signed up, how often they use your product, what happens when they do, when they last used it and for how long. Look for time of day/week/month trends.

This isn’t an exhaustive list but it’s a good start.

Step 2: Add demographics and social cues

If you don’t capture basic demographics like age and sex, but you have a clue about their name through their email address, look for ways to find them online and then add these details to their profiles.

It’s a bonus if you can find social cues for your product. In other words, look for mentions of your product (by name or hashtag) on social media.

I also include any verbatim feedback from the 10% most active people, it adds colour to the numbers.

Remember this is for 100 people if you have 1000 using your product.

Step 3: Do these lovers match your target user and customer?

I wish I had a dollar for every time a founder discovered that their target user or customer was vastly different to those who actually use their product.

Undertake this step and let me know how you go.

Prediction: You’ll be surprised and it will inspire a pivot or new product idea.

Step 4: Contact them and ask one simple question.

What is the one thing we could do to make [Product Name] awesome?

The insight from these four steps are the ingredients to create an experience for people who are naturally inclined to introduce two new people to your product.

What's not to love? :)

Two last things...

Fanatical lovers that fall exclusively into one group can be a red herring for founders.

Reid Hoffman the host of the Master’s of Scale podcast provides an interesting example about how at one point in LinkedIn’s journey there was a growing group of people who believed it was OK to connect with everyone on the platform.

These people, known as LinkedIn Open Networkers, believed that everyone would want to connect with them.

Not true.

LinkedIn moved passed this by looking into multiple groups of people who loved the platform.

Follow LinkedIn’s lead if you find your fanatical lovers are all saying the same thing. Love don’t come that easy!

The second thing to note here is that if you don’t provide your fanatical lovers with easy ways to share their experience, get rewarded for bringing people to your product or in any way make it difficult to share their love, you can kiss them goodbye.

Don’t fall for the ‘like mirage’.

Get up close and personal (pun intended) with fanatical lovers of your product.

And make it simple for them to share the love.

What did I miss?


How To Validate An Idea in 30 Days

HOW TO VALIDATE AN IDEA IN 30 DAYS

Where do I start with my idea?

I get this question a lot and those who ask usually possess infectious excitement about an idea, are new to product development and remain convinced that their addressable market of customers is massive.

The irony is that 90% of people who ask where to start, don’t.

Deep down they know why and it usually comes down to three reasons.

Fear is the first reason (and there's an antidote)

The first reason is fear. People fear what they don’t know and more specifically, people fear what others will think of their ideas.

I don’t like venturing into motivational territory because what’s usually said isn’t practical but in this case, I’ll offer two thoughts that always prove true.

The greatest triumphs live just on the other side of one’s fears.

And when you break it down further, fear only plays a significant role when the person believes that the only way forward is all-or-nothing. When it comes to building a company, it’s rarely ‘all in’. The reality is that it’s a series of small experiments and a few successes for every ton of failures.

Here’s the second thought:

The only person who cares enough to be anxious about your ideas is - you guessed it - YOU!

And here’s the antidote for fear in entrepreneurship. Just ask yourself two simple questions:

On the downside, if going from idea to business isn’t all-or-nothing and it’s a series of small experiments, what have you got to lose?

Then on the upside, what happens if someone is willing to pay it?

Feel free to post a photo in the comments with the ‘oh yeah, he’s right’ look on your face 😉

Time is the second reason

As I often write, time is THE most valuable asset.

The idea of ‘finding the time’ is the first quandary that soon-to-be founders have to negotiate and I understand that adding a new experiment to juggling family, work or study just adds to the trade-offs of each 24-hour day.

But I can tell you from experience that founders who work in their businesses full-time spend much of their life optimising for time. And the reason they do this is because they’re driven by a deep interest in the problem they’re trying to solve. The sooner they learn, the sooner they’ll achieve their end game.

You can’t know why time is so important until you start.

And, it’s all talk

This is the third reason why people don’t start.

These people romanticise startup culture. They are the groupies. They may harbour fear but more often than not, they are looking for a tribe, not a problem to solve.

The 30-Day Challenge. Are You Up For It?

It’s time to think differently about how to validate an idea and here’s the punchline: The sooner someone pays for your idea, the better.

With that in mind, the 30-Day Challenge has a basic hypothesis: An idea should be pursued if someone (you don’t know) pays to pre-order your proposed product or service.

The way to go about validating this hypothesis isn’t rocket surgery.

It’s not about building out an entirely new product or service.

It’s about learning and evolving as quickly as you can.

You have 30 days starting today.

This timeframe is designed to acquaint you with the value of time and how much you can learn in a month.

During the next month, there are three major steps you need to take. Each step reinforces the other. In other words, the first step informs the second step and so on.

There’s a high chance you’ll go through this cycle (i.e. step 1, then step 2, then step 3) at least five times during the 30 days. This is because you’ll develop a habit of iterating as you receive feedback on each version of your future product or service.

Step 1: Get Clarity On 1 Page

Go to leanstack.com and use bullet points to answer, as precisely as possible, the questions asked in their business model canvas.

This canvas is the first version of your business plan.

It’s all you need.

And yes, it’s a waste of your time writing a multipage business plan at this stage because you don’t know if there’s anyone willing to buy what you’re selling.

And in the spirit of tough love, if you’re a first-time entrepreneur and you think you’re focused on what matters to move an idea into a money-making business, just look back at the number of ideas you had in the last 48 hours and the distraction that’s caused.

Get clarity on your business model by spending 20 minutes answering these questions and then share it with two other people you know, who have started a business before, and ask for their feedback.

Refine the canvas based on their feedback. This will be the first of many refinements.

PRO TIP: Get someone else to research your idea.

If you can’t do this, the next steps won’t be of much help.

Step 2: Learn as much as possible

This step involves learning from two different groups of people.

The first group are ‘friendlies’ and the second group are customers.

Get your friendlies on board

  • Create a list of 10 people who you think will provide you with rapid and honest feedback about your idea 5 times in the next month.
  • Send each ‘friendly’ an email asking them to be part of your idea development team for the next 30 days. Give them permission to be brutally honest with you on every level of your idea. Be sure to tell them that they can expect five emails from you in the next month and that you would appreciate a response within 24 hours of receiving the email.
  • Make them an offer to return the favour.

This is your way of setting expectations with people close to you. Expect 5 of the 10 people to respond to each email. If the other five respond that’s great but don’t expect it, life will get in their way.

The schedule of emails I send to friendlies usually includes:

Day 3

Thank you and request for feedback on business model canvas (share it from leanstack.com or download and send PDF copy)

Day 6

Request to review version one of website (more on that later)

Day 10

Request to review version two of website

Day 13

Request to friendlies to share website with five friends who might find proposition of interest to themselves or other friends

Day 23

Insights discovered and one final request to share

And finally, at the end of day 30, send a thank you email and let each friendly know that you’ll be in touch in the next five days to share what you learned, how many people pre-ordered and what you plan to do next.

Step 3: Pre-sell

The second group you’re going to learn from is customers.

The pre-sell is THE most important signal of buying intent of a new customer. And Apple has been using this technique for well over a decade to determine the demand for its products.

Their formula involves an elegant explanation of the ‘coming soon’ product and the promise to be ‘one of the first’ to experience it if you pre-order.

I use a similar approach and I encourage you too as well with a couple of exceptions. You won’t be building a product in the background and you won’t be taking pre-payment from new customers.

Instead on Day 3 (as you start receiving feedback from friendlies):

  1. Visit Godaddy.com and buy a domain for your product that ends in .com (don’t spend more than 20 AUD)
  2. Visit Squarespace.com and set up a single page website (here’s an example), the investment is 22 AUD for the month
  3. Connect the domain to your website.

The example website I’ve used here is one we use for an inkl product. The proposition is clear and the call to action is booking a call with me!

In the case of pre-selling, you can use ‘Get your pre-order code’ as the call to action.

When this button is pressed, the person will be asked to enter details into a form (name, email address) and when they press ‘submit’ they will be thanked and be told of the next steps. And you will receive an email with their details.

This is a proxy for a pre-sale!

But I’m not a coder...

Me either! The reason for suggesting tools like Squarespace and GoDaddy is that they are specifically designed for people interested in building out ideas, so all you need to do is give it a try.

And, if you have questions, just shoot me an email.

Closing thought

Entrepreneurship is about growing a product or service through learning. Before you spend a fortune talking with lawyers and accountants or sink a bunch of time writing a business plan that gives you (and no one else) comfort, start learning if someone will pay for what you’re selling.

It’s easier than you might think and you’ll get a Go/No-Go decision on your idea based on insight and not just intuition.

And one last thing. You might be thinking, I can validate an idea in less than 30 days. Let me know if you do by leaving a comment below.


HOW TO FRAME OPPORTUNITIES

Founders are never short on opportunities. For the most part, however, opportunities are red herrings. The ones I’m talking about are those that arise after you’ve started building product.

‘We’re looking at a couple of different opportunities’.

This statement by a founder triggers a red flag in my mind. And if the founder’s follow-on statement describing the opportunity is loosely defined, we start moving into DEFCON territory.

The reason I react this way is that every moment spent exploring ideas is time you’ll never get back and runway you can’t recover.

It’s always all about time.

Always.

Just Focus

It’s easy for bystanders to urge focus but any founder will tell you that such a statement is easier said than done.

Entrepreneurship by definition requires exploration and discovery. Each day is chaotic and uncertain. Ironically, this is compounded by the nearly continuous flow of opinions from people closest to the founder; spouse, parents, friends, co-founders, advisors, mentors, customers, users, investors and channel partners.

Not surprisingly, founders usually want to process and apply each person's feedback.

And while it’s true that an entrepreneur’s secret weapon is the speed at which they adjust and execute on massive opportunities, there is an all too familiar reason why many founders end up spreading themselves too thin and running down dark rabbit holes just to be greeted by a dead end.

The Need To Be Desired

Desirability is at the heart of why opportunities are instinctively appealing.

The need to feel wanted is human. And when you’re building a venture and fatigued after prolonged periods of uncertainty and resource constraint, the smallest signal that your product has piqued someone’s interest can be deeply appealing, if not intoxicating.

As ventures develop their notoriety, these signals increase and it becomes difficult to make decisions on which feedback are signals and which are noise.

The main message here is to be very aware that the need to be desired can be a distraction.

The other reality that can compound this issue relates to strategy.

Early stage startups usually don't have strategies, they have pitch decks. Each version of a pitch deck is an approach that will be subject to continuous iteration based on the signals that founders receive.

Speaking from experience this combination of signals, noise, and strategy (or lack thereof) can have founders scratching their heads about which opportunity to pursue and which to kill.

It’s all about T.T.I.M.E.E.

It’s always about time. See what I did there. 😉

This is the acronym for the six questions I always ask founders (and myself!) each time an opportunity presents. They carry equal weight and there’s a good reason why these are closed questions (i.e. Yes or No only). The T.T.I.M.E.E. framework is specifically designed to assess an opportunity as quickly as possible. As such, each question should be answered quickly and honestly.

My general rule is if YES is the answer for at least four of these six questions, consider it an opportunity.

1. Time - T

Will it help someone regularly reclaim time? This is a proxy for habitual use and if an opportunity isn’t likely to regularly save someone time (and therefore convenience), it’s not likely to work.

Take inkl, the venture I’m helping to grow, as an example. We’ve built features and engagement strategies around helping people save time each day as they understand the essential news from a diverse array of the world’s highest quality publishers. Gone are the days of jumping from website to website trying to get across the news. It certainly helps explain why inkl is used by people in more than 180 countries.

2. Testing - T

Can you be testing the idea or opportunity within a week? Answering YES means your team has developed a culture of rapid experimentation. It doesn’t mean you have all the answers on the specifics of how you’ll test. It just means you’ll find a way to start within seven days.

If the answer is NO, it could be that the opportunity is too complex but it’s more likely to be a cultural issue as most founders find ways to break down and test the component parts of an opportunity.

3. Idea History - I

Are there at least three examples that show how this opportunity has been pursued? Ultimately the answer to this is YES, if like me you believe there’s no such thing as an original idea. Whether successful or a failure, there is always something to learn. Answering NO just means the person doesn’t know how to use Google in which case this might help.

4. Market - M

Do you have experience or unique insight about the market within which the opportunity lives? If NO, can you acquire that insight in the coming week? If not, the answer to this question is a  definite NO.

5. Experience - E

Is the experience you need to create to nail a pain-point crystal clear? In other words, do you understand the pain-point? This is one of the trickier questions to answer because it requires the suspension of personal biases. Where you can, look to data to support the answer.

6. Economics - E

Is the unit economics for this opportunity known or easily determined? Answering YES means that you know how much you’ll earn, what it will cost and the time period over which you expect this to take place.

Answering NO significantly increases the chances of time and resources being burned up. I don’t like giving people a free pass on this question but if it seems overwhelming ask if ‘the path to the first dollar of revenue is clear’, and go from there.

But Is It B2B or B2C?

One factor that often complicates how people assess opportunities is whether the opportunity is business-to-business (B2B) or business-to-consumer (B2C). I'm also surprised about how often it's ignored altogether!

B2B sales and business development often have a higher per unit payoff but take longer to execute and involve negotiating a complex network of stakeholders. In contrast, B2C products and services usually, but not always, have the opposite characteristics.

Although the B2C / B2B trade-off is important, start with T.T.I.M.E.E. and stop being paralysed by every opportunity that comes knocking.

If you learned something new, let me know by leaving a comment below. Thanks!


MENTORING FROM ZERO TO ONE

One of the most satisfying parts of my work is mentoring.

On Wednesday I heard pitches from the new batch of founders moving through the H2 Ventures Accelerator Program and I was reminded of how much first-time founders have on their mind.

My job, and that of my mentor colleagues Aurora Voss and Ben Heap, is to help teams fine-tune their path to mission success.

At the end of the evening, Ben asked for my closing comments and I shared four thoughts.

1. Make Time Your Priority

Value time above anything else. Be conscious of how it's spent because supply doesn't increase.

2. Fight For Insight

Fight to capture and apply insights from those people you're trying to serve as quickly, thoughtfully and consistently as possible. This is the lifeblood of product development.

3. Leverage Mentors

This is as much about taking advantage of the lessons learned from those who have walked before you as it is about being vulnerable and saying 'I don't know what to do next'. We've all been there.

4. Love it

Many aspire to be part of the startup movement. You opted in and now have the unique space to create and do your life's best work. It's hard. It's stressful but it's an incredible amount of fun.

So in the spirit of reducing the time it takes to move from zero to one, here are six posts that early stage, first-time founders have told me they found most useful.

The Entrepreneur's Roller Coaster

The Pyramids Aren't As Tall As You Think

Moving From Friends To Co-Founders

The Best $50 I Spent As A Founder

How Do I Raise Money For My Start-Up

11 Things You Don't Know About Raising Capital The First Time Around

If you learned something new, let me know by leaving a comment below, thanks!


HOW HISTORY CAN HELP ENTREPRENEURS

History is easily forgotten.

It's an unfortunate reality in many aspects of life. And whether it's ignored due to ego or unknowingly dismissed, waste is the byproduct.

At one extreme, waste can mean bloodshed and loss of life when public policy is enacted in the absence of history’s wisdom.

For founders, waste takes the form of lost time and money, neither of which they can afford.

https://twitter.com/philhsc/status/904238708236271616

Assuming History Is Understood Is A Mistake

I’ve listened to hundreds of pitches. Those who deliver well-rehearsed presentations can often seem to have a handle on the history of their business model.

Nine times out of ten this will prove incorrect. This is because their perspective is usually grounded in the current market conditions they can see.    

I ask about history for two reasons.

The first is that it exposes how passionate the founder is about their topic. Good ones always seek to learn from those who have walked before them. This is a leading indicator that they are predisposed (and impatient) to de-risk their business model by leveraging prior knowledge to accelerate traction.

The second reason is that there's no such thing as an original idea.

As a result, there is a very high probability that an idea has been at least thought of or attempted at some point in the past. Anyone who disagrees can't use Google properly.

I’ve seen founders dig in about this and protest that their idea is entirely novel even in the face of suggestion (by potential investors) that they are aware of something similar.

This isn’t smart if you’re trying to build rapport with future supporters.

It's Easy To Make History Part Of Your Culture 

The history of any idea or business model should be part of the decision to move forward (or kill and move on). Here are four ways to make history part of your organisation's culture.

1. Make it mandatory

If your organisation uses business case templates add a history field and mark it mandatory for completion.

2. Create a ‘History’ slide for each pitch deck

I’m not saying this slide should be included when pitching, there won’t be enough time alongside the other 10 slides that need to be covered. However, this slide should be included in the deck that’s emailed to prospective investors and detail how the history will be leveraged in the near future.

3. Phone a friend

When I wrote about the best $50 I'd ever spent as a founder I referred to getting someone else to find historical evidence of an idea online. This one act has saved people a lot of time and effort.

4. Just ask

If the founder has a compelling answer consider this a good sign.

- - -

The bottom line is that understanding and acting on history reduces the waste of time and money.

Do you agree? Let me know by leaving a comment below, thanks!


5 STEPS TO MAKING A PODCAST WHEN YOU'RE CLUELESS

LISTEN AND READ

I say I had no clue. That's not entirely true but it's not far from the truth either.

I knew why I was creating a podcast, I just didn't know how to make it happen.

After researching best practice, I ended up with a 60 episode podcast. I also walked away with priceless lessons to share, answers to my questions and this playbook.

Step 1: Know Why You're Doing It

When I decided to make the Founder To Founder podcast it was to conduct research for a book I'm writing.

The book is called In Between and along with blogging, it’s one of the ways I increase collective wisdom. In Between is about how to move between ventures and projects in ways that help entrepreneurs become more effective in their next play. Think of it as a way to manage and grow stronger from grief in business. The founders I interviewed on Founder To Founder helped me to evolve the frameworks that I have come to rely on.

Step 2: Make Sure The Content Will Help At Least One Person

I’ve written about the 51% rule before and this step is an extension of that rule. And although I had an ulterior research motive when I started Founder To Founder, I still surveyed 100 people my weekly email list to see if mishaps and learnings from international entrepreneurs would change their life for the better.

86% said yes. And today I have hundreds of messages and emails that prove this podcast was helpful.

Step 3: Design For The Desired Experience

This is a podcast designed for commuting. And it’s purpose-built for those who want to learn about what it takes to build extraordinary products and companies without the sugar coating. That’s why the tag line is Real Founders. Real Talk. Real Advice.

I also thought carefully about the average commute time. It turns out that it’s between 25 and 45 minutes. This guided average episode duration. Although not every episode lands within that duration, I remained very aware that I was competing for attention and the longer the episode, the more likely I was to lose listeners.

Finally, understand where your podcast will be heard.

iTunes is by far and away the most popular destination for podcast listeners but a hint for new players; Each episode’s audio files don’t live on iTunes. They live on a hosting service.

I started hosting on SoundCloud and I recently moved to Whooshkaa for four reasons. First, it's free. Second, it’s the only podcast host with tech that has a native Facebook audio player. Third, Whooshkaa is Australian made and fourth, their customer service is amazing.

Step 4: Use A Replicable Format

I used a five question interview format as the content strategy for Founder To Founder. Listeners have written me saying that they appreciate the consistency and it also (selfishly) made my research easier.

And in terms of structure every episode has four elements:

  1. Introduction which has the same cool music I bought on Premium Beat for $49 and the same voice over my friend Dee from Right Hook Digital recorded late one night.
  2. 'The What' a short custom introduction providing context to what you're about to hear. I asked my friend Katy Golvala to help with this and she’s done a great job
  3. Interview featuring the guest founder
  4. 'Outro,' also voiced by Dee, which closes out each episode with a call to action (which in my case is to visit my blog).

Step 5: Get Help To Create The Podcast

I don’t know the first thing about producing a podcast. There’s a good chance you don’t either. And if you just thought “I can learn this, how hard can it be?”, stop kidding yourself.   

Get help.

Introducing Fiverr where I met Joel North (press play on the episode above to hear what he’s got to say).

I didn’t spend a cent before I started recording. We chatted about how to record on my computer and how to do virtual conversations using teleconference software (like Skype or Zoom).

Soon after we set up this workflow:

  1. The intro and outro were stored in a DropBox folder
  2. I wrote ‘The What’ script and emailed it to Katy which she recorded. She then dropped that file into the same Dropbox folder
  3. When I finished the interview with the founder I downloaded the audio recording and put it in the same Dropbox folder
  4. Joel then took all these ingredients and produced a finished product (free of ums, ahs and other weird stuff) which he put back into Dropbox
  5. I uploaded this file to Whooshkaa and they also magically took care of it appearing on iTunes

Episodes cost between $20 and $50 to get produced, depending on episode length.

And that’s it in a nutshell. I used my MacBook, the microphone in my iPhone headphones, Zoom and Fiverr to bring Founder To Founder to life. It really was that simple and I really enjoyed the experience.

- - -

I hope this was useful. If you learned something, let me know by leaving a comment. Thanks!


3 QUESTIONS TO HELP FOUNDERS NAIL GROWTH

On any given day there’s a lot to think about as a founder. This only increases as a business grows and while you get used to juggling priorities, it gets overwhelming from time to time.

During these periods even the most experienced entrepreneurs will temporarily retire to their ‘safe place’.

If product is your thing, you’re likely to tinker with features.

If you’re a business development ninja, you might retire to LinkedIn to identify new leads.

And if you’re a software engineer, there’s a good chance you’ll have a play with your side project.

These are forms of personal survival, and I'm guilty of all of them. But no matter whether I'm advising a business or helping to grow one, when it comes to surviving growth as a company, three questions are always in the back of my mind.

1. What was our last OODA Loop?

An OODA Loop (observe, orient, decide and act) is a decision cycle designed by US Air Force military strategist, Colonel John Boyd.

Traditionally used by pilots to develop a habit for quickly adjusting to changing flight conditions, this cycle is also useful in two startup contexts.

First, this framework helps growing teams to galvanise around a learning and action orientation. This is particularly useful as growing teams usually consist of people who have different points of view on what action means and how quickly it should happen.

OODA Loops also create a record of learning. These lessons can be shared with new hires and across the company to strengthen culture.

They can also be shared with prospective investors who often use ‘rate of learning’ as one factor to determine investment potential.

2. How else can we extend what we’ve already built?

It’s rare that a business model only has one application. In other words, even if founders have strong conviction around Product A that is designed to serve Customer B, the right perspective from an outsider will more often than not help to unlock an opportunity that can be captured tweaking Product A.

This is how inklpay, one of the businesses I’m developing, had its origin.

It obviously takes time in market to build the initial versions of a product and then have the confidence to leverage what’s already been built. And speaking from experience it’s difficult to see these other opportunities from the get go.

The key takeaway here is to continue engaging with mentors and trusted outsiders as the core product is being built. Keep asking them how else your product can be leveraged

3. How do we communicate wonder?

Products and services that lack a narrative don't survive. The ones that win embed a sense wonder in their narrative.

If you’re wondering what I mean, think about the last time you said “that’s so cool” in response to a new product experience.

I’ve written about this before and it’s easy to point to Apple as the master of this domain. Their product design and clever reductive language is inspiring. It’s also been perfected over 40 years. It’s never that easy in the beginning and founders agonise over it.

I agonise over it.

And as much as I hate to admit it, communicating wonder takes time. It often relies on how someone outside your organisation describes what you do after they’ve been inspired by your vision. That’s why I often ask people “how would you describe what [company name] does if you had to explain it to a friend at a bar”.

- - -

As Paul Graham once wrote, startup equals growth.

Remember to consciously keep learning, find ways to create more value from what’s been built and fight to communicate wonder. This, and regularly connecting with mentors and founder friends, is the best medicine for growing pains.

Thanks for reading. If you learned something, please feel free to leave a comment.


disruption

BRINGING A KNIFE TO THE DISRUPTION GUN FIGHT

Disruption comes with two inconvenient truths.

The first is that it's happening every day, in every industry, in every sector. And while you think disruption is a cliche, the reality is that if an industry hasn’t already been displaced or isn’t grappling with how to respond to new threats, it’s very likely that it lacks the self-awareness to appreciate that its future exists on borrowed time.

In the last month, I have twice presented a perspective on how disruption plays out. On both occasions, the audiences were companies who are responding to disruption. They were looking for advice on how to innovate. Instead, they were greeted with the second inconvenient truth; that failure drives innovation.

The irony, beyond showing how disruption plays out to organisations being disrupted, is that there IS time to fail and by extension, time to innovate.

And here’s the grossly obvious, frog-in-boiling-water punchline: The longer an organisation postpones decisions to refactor its core businesses, the shorter the available time it has to experiment and learn (through failure) and ultimately benefit from reinvention.

Disruption doesn't happen overnight, but it will happen.

It takes time for disruption to play out. It can decades but more recently, decades have become years. And there are usually two reasons why it takes this long.

The first is that new threats in the form of start-ups, led by enlightened industry veterans or naive entrepreneurs, need time in the market to refine their proposition so that they can deal sufficient damage to incumbent business models.

The second reason hails from the romance tied to how money has been made in the past. The human addiction to familiarity and relative stability for the ‘tried and tested’ more often than not drives decisions that favour the status quo and more importantly the misdiagnosis of threats.

This combination of sustained ambition from entrepreneurs, fuelled by vision and the size of the prize (which isn’t always financial) and slow speed of appropriate response from incumbents sets the stage for inevitable disruption. And by the time spectators feel confident to call out that a company or industry is facing disruption, the horse has already bolted.

The fascinating idea here is that incumbents were once start-ups.

There are 5 steps to industry disruption

There is an alarming precision with which these steps play out. Transportation, retail and media are the popular case study but take a moment to consider just how practical these steps are and the fact that the closer you get to the fifth step, the smaller the available time to experiment, fail and reinvent.

Step 1: Competitive response

On realising a threat has emerged, incumbents create a short term competitive response, usually price driven, to flex their market muscle. This is designed to discourage start-ups or new entrants for proceeding but this is like bringing a knife to gun fight. It never works. Not only does it provide new players with competitive intelligence on how incumbents react, it’s usually the only response they have which isn’t sustainable.

Step 2: Underestimate the full scope of disruption

“It’s just an app.” How many times do you think these words were spoken by management teams at Budget, Avis and other car rental companies when they first learned of Lyft and Uber? That romance for how money is made is also responsible for narrowing how people analyse trends, meet needs and do business. After all, their rewards are tied to delivering in the short term.

This is disastrous because it means the full breadth and depth of the pending disruption is either ignored or completely misunderstood.

Step 3: Invest in the wrong innovation

Setting up a corporate venture fund to invest in startups is in vogue. However, the hard truth about these funds is that they invest in interesting startups that aren’t likely to resolve the core issues of the parent company. In other words, these investments don’t create capabilities that the parent company can use to out-manoeuvre threats.

Step 4: Cut costs

There’s only so many times you can cut costs.    

Step 5: Look to consolidation to drive sustainability

The cumulative effect of the first four steps drives companies to the brink where the only real option for survival is joining forces with or being acquired by another company.

The Red Pill And The Blue Pill

With disruption taking place everywhere there are two options to consider.

The red pill: Discard disruption as a fad and take your chances with the five steps of industry disruption. That’s it. Good luck.

The blue pill: Accept disruption is normal and become a badass innovator. Here are the six behaviours that these people live by:

1. They value time

They know it’s the most important asset and they treat it as such.

2. They think in public

There is next to no value in an idea that no one knows about and people don’t (often) steal ideas so learn by getting your idea to people that can help you learn and evolve.

3. They experiment in short cycles

There’s something wrong if you’re not learning something new every week about what you’re building. The faster the learning cycle, the faster the progress.

4. They celebrate lessons (the byproduct of failure)

People fail. Products fail. Markets fail. That’s reality and how humans learn. Celebrate the lesson learned and be ok with the idea that failure and learning are inextricably linked.

5. They are aware of luck

Whether you like it or not, luck has a role to play in just about everything. Innovators and entrepreneurs know that. They don’t rely on it. They just know it exists and that helps when the unexpected, good or bad, happens.

6. They create air cover

It’s wrong to assume that leaders are the only source of air cover for divisions and teams. Colleagues and teammates are the primary sources of air cover and this comes in the form of having their backs while at the same time living up to high shared standards.

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At the end of the day, there's no reason why you can't take the blue pill and it's also important to be aware that it's not just David's fighting Goliath's fighting it out. Start-ups are also disrupting start-ups. Game on!

Here's the audio from MediaCom's ComX 2017.

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If you learned something, let me know by leaving a comment. Thanks!


prototyping

HOW TO AVOID THE 4 BIG PROBLEMS WITH PROTOTYPING

Yes, there’s a problem with prototyping and here it is: People expect to use products that ‘just work’ out of the gate.

As a startup, you’re not going to have one of these. You’re going to have version one. It’ll be a hack. It will be a brave first step for which you should be congratulated.

But there are four reasons why you’re not going to get the feedback you want (or need) with this first version or the next one.

1. Threshold expectation

Try comparing the laptops, handsets, operating systems and apps that we used a decade ago to what we obsess over today. Millions of hours have been spent in refining how to welcome you into a new experience, where buttons appear and how they act, and how quickly you can become connected.

Today we expect an app or service to just work and this learned behaviour has decreased our patience to explore further or empathise with the maker’s intent. What happens next is simple: If it doesn’t ‘work’ people delete the app or service in the same time it took to download.

2. People generally don’t know what to do with a prototype

Friends, family and colleagues are usually the first group of people who are ‘invited’ to experience initial prototypes. It’s a safe play but those people will often struggle to provide candid feedback for fear of hurting your feelings. Of course it’s also helpful to introduce prototypes to people who are likely to habitually use your product.

In both cases, these people won’t have the background or context that inspired the prototype in the first place. Even if you invest significant effort in videos and emails to explain everything the likelihood of the intent being well understood is very small.

As a consequence, your prototype will be downloaded/opened, used and then closed.

Now what?

Testers might click on that link to email you their thoughts. They might even call you but will they be able to describe their experience sufficiently to be useful in product development…

3. Time is more valuable than you think

It might only take a few minutes to set-up or login to a prototype but even people who volunteer to be your testers usually over estimate their availability.

4. What people do is different to what they say

When you ask for product feedback not only are you asking someone to recall their experience, you’re asking them to articulate how they felt AND package their thoughts in a way which is useful and constructive.

This is tricky because people generally believe their memory and recall is sharper than it is. The bigger problem here is that articulating an emotion (like disappointment which is easily seen on someone’s face) is really tough.

This means that despite best intents, any response to feedback is going to sanitised and this can affect product development decisions.

How significant is the impact of these problems?

The short answer is ‘very’.

The reality in many cases is that there will be a very, very small amount of people who show interest in (and know how to examine) a prototype. Their limited feedback will be captured over a longer than expected timeframe and then used as an important input to validate a product hypothesis.

That sounds harsh but this is an unfortunate reality of prototyping in a startup.

And I say this as someone who believes deeply in prototyping as the only way to make products that create habits and change people’s lives.

Building a crack team of prototype testers is the answer

Innovation is messy. And that’s why in early product development you need to get the first five versions of your product into the hands of people who know how to handle and work with prototypes.

The ideal team is four people (two females and two males) who agree to connect to discuss each prototype version.

In addition to having a strong emotional tie to the problem you’re solving, each team member will be characterised by at least one or more of the following:

  1. They have studied engineering or science — these disciplines teach and value trade offs; or
  2. They have formal design training; or
  3. They work at or are alumni from firms like IDEO; or
  4. They have backed at least five Kickstarter projects — so they are familiar with how long product development actually takes; or
  5. They have built and shipped products at ventures; or
  6. They are founders.

A cross-functional team with this experience will not only bring patience and empathy to product design, they will ask right questions and be able to articulate detailed observations while respecting that time is your most precious resource.

So where are these people?

If you’re wondering where to find these people, start with your network on LinkedIn and ask your relationships for an introduction to potential candidates.

In my experience, people are generous with their time and flattered to be approached. And how should you reward each team member? They might like a bragging-rights title (like ‘Advisor’), permission to use their time with you as a case-study or well, pizza. There’s no set model at such an early stage so just ask them!

Prototyping will help you validate your hypothesis but remember that time is your most valuable asset.

Build a team that helps you capture insight quickly so you can build a product changes people’s lives or move on to the next business model that will!


FEATURE

RESPONDING TO: 'THIS IS A FEATURE, NOT A PRODUCT'

'This is a feature, not a product'.

This comment can paralyse founders. It suggests that you’re a long way off from having customers or a business. And in the absence of traction (the only antidote to combat this comment), investors will usually make this observation for one of three reasons.

Reason 1

The investor believes what you’ve just pitched is novel but they invest further up the value chain and as a result they perceive that a business they’re involved in could integrate what you’ve got as part of an existing product.

Perhaps the most famous public example of this came from Steve Jobs after Dropbox founder Drew Houston declined Apple’s advances to acquire his file sharing service. Steve Jobs claimed Dropbox was nothing more than a feature (that could be part of iCloud) and it would die. Drew’s position in the value chain suggested a different outcome and today Dropbox is valued at $10b.

Reason 2

The second reason is that investors know that an incumbent product manufacturer who applies a relatively small amount of effort could build what you’ve just pitched and get it in their customer’s hands with ease.

I’m always wary when a venture’s premise is based on a statement like, “we thought wouldn’t it be great if [insert Apple / Google / LinkedIn / AWS / SalesForce / Facebook / Pinterest] was able to do [insert function]”. There is a growing trend of companies affording teams time at work to explore side projects that may drive innovation and value.

And for this reason alone setting out to build a business based on creating a small improvement or a not yet available component of an existing product from the outside (and worse still, which relies on the incumbent product to function) is dangerous territory for any founder to find themselves.

And there is no way to know if or how far away that small improvement or component is from being brought online by an incumbent product manufacturer. Investors intimately understand how this confluence of issues is likely to play out. Not well.

Reason 3

The final reason is the simplest, investors just want to see how you handle confronting feedback.

Before responding, understand the basics.

Features lead to products which lead to platforms

It’s easy to understand that a product is a collection of features. It’s also relatively straightforward to grasp that a platform (like LinkedIn or Facebook) is the base from which multiple products can be built and deployed to users. But very few know how to define where this all starts — with a feature. 

In other words, a person will be able to describe how a small element of a product made the experience better (or worse).

In this context remember that:

a) Value isn’t always financial. In fact, where early features and products are involved, value equals how regularly and how deeply people use your collection of features to create a habit that changes their life; and

b) It’s difficult to immediately monetise a feature because it usually only goes part of the way to solving a pain-point.

To add colour to the definition, think about Dropbox soon after launching in 2007. Sharing files via the cloud was a useful feature but it didn’t completely scratch the itch enough to pay for it. Fast forward to today. 500M registered users think sharing, syncing, reviewing and editing files across all devices with different tiers of storage is pretty good. And I agree.

So how should you respond when an investor says, “this is a feature, not a product”?

No matter whether an investor uses reason 1, 2 or 3 (above) as the motive to make this comment, your most powerful defence is traction and knowledge about the investor’s context.

So, if you do have traction:

Step 1:

Ask why they made this observation and note that you’re keen to understand their context and perspective.

Step 2:

Re-confirm who your target users are, add qualitative or anecdotal feedback about why they like what you’ve built.

Step 3:

Remind the investor of the month on month growth in new users, revenue, product engagement and churn (to begin with).

Step 4:

Re-confirm the size of the prize and that you have a compelling plan to take XX%, if not most or all of it.

Step 5:

Be a sponge for feedback and listen carefully to what the investor says next. They may change their perspective (i.e. you have more than just a feature), in which case the conversation will likely dive deeper into your future plans and objectives. Or, they may not, and in these cases, valuable product and market advice usually ensue.

But what if you don’t have traction?

See Step 1 (above) and then listen carefully.

You’re probably about to receive feedback you don’t want or agree with but it’s worth hearing it.

Add it to the signals you’ve received from beta testers, friends and colleagues.

It’s never easy processing feedback that contradicts your vision but without the ability to embrace different perspectives, the probability of success only decreases.


This Is The Least You Can Do When You’re Pitched An Idea

In January I joined Gautam Mishra on a quick around-the-world trip to connect with investors. Gautam recounted Inkl’s origin story in each meeting and one act he performed religiously in the early days in response to each pitch struck a chord with me.

If a new venture is in your future, you should follow Gautam’s lead.

But first, what happens when you’re pitched an idea?

For starters, you’re facing another human who has mustered the courage to share the vision they’ve been obsessing over for weeks, if not months.

They practice their pitch before going to bed, in the shower, countless times during their day and again before bedtime.

The opportunity that awaits, in their mind, is crystal clear. The value to be captured is ripe for the taking and the path to the way ‘things will be’ is just a few steps away.

It’s that simple.

Or it is until they pitch it to you.

Watch closely as they start their pitch. They’re summoning 99% of their energy to communicate the most compelling set of messages they hope you’ve ever heard. The remaining 1% is focused on simultaneously processing your every cue, from the notes you jot down to your facial expressions. Don’t be surprised if some of these acts result in slight corrections to the intended messages.

Right now the person opposite you is as vulnerable as their fledgling vision, which could very well be the next big thing.

They don’t have your context or experience and you don’t have theirs. All you need to do is listen hard, suspend judgement and hold onto the questions you’re itching to ask and the comments you’re desperate to make.

“Thank you, any questions?”

The pitch just ended. Here’s where you come in.

You’re about to draw on your experience and context to respond to what you’ve just heard.

And if like me you’re an optimist, you’ll hunt for value in new ideas and business models and try to help evolve the current thinking of the entrepreneur and their team. This might take the form of diving into unit economics, business development or looking at ways to accelerate traction (or anything in between where you can add value).

Of course, it’s also just as easy to rattle off a long list of reasons why you think it will fail.

You might see the latter as lacking empathy but the truth is it’s probably a little more valuable. And this insight became Gautam’s super power as he set out to build Inkl.

In every early meeting, Gautam sought to intimately understand, from news publishers and readers alike, why Inkl would fail.

After formulating his vision he set out to systematically solve each issue that his prospective partners and customers said would lead to failure. The rest is history and today Inkl’s marketplace metrics continue to impress.

“Why do you think [venture name] will fail?”

There are three reasons why it’s important to ask this question each time you pitch from now on.

1. It gives your audience permission to be candid

Time is valuable. The quicker someone believes they can be honest about their thoughts, the quicker you’ll have insights to examine and action. Without permission to speak candidly people can have the tendency to sugarcoat feedback and that’s less useful.

2. It demonstrates you’re prepared to learn and grow

Investors look for entrepreneurs who have the mettle to rapidly process and adjust to feedback signals. It’s a precursor to understanding how well they will perform when the going inevitably gets tough.

3. It gets people thinking

I’ve found that people who accept permission to be candid on why a model or venture will fail are the same people who offer up additional insight after the initial conversation. This has come in the form of ideas for product features, offers to test and introductions to other interested parties.

Next time you’re pitched an idea, think about responding with a constructive list of reasons why you think it will fail and ask if they’ve received similar feedback. It might be the most valuable email they receive this week.


FREELANCERS

15 MISTAKES I'VE MADE HIRING FREELANCERS ONLINE

I believe in learning quickly. I also believe that prototypes help their maker express their vision and determine if a new product appeals to its target users.

There often comes a time in product development when diagrams and presentations need to give way to higher fidelity prototypes. And I’ve been there many times just to be reminded that I lacked the technical skills to ‘build an app’.

A skilled workforce is closer than you think.

In the last decade, my technical skills gap (and that of many entrepreneurs) has been closed by online marketplaces that offer to connect you with the talent you need without entering into a traditional, long-term employment contract. I’ve used Upwork, Freelancer, Fiverr and Toptal, to name a few. None of these platforms are new. They continue to evolve to deliver on their visions and as more people rush to supplement their incomes with freelance services, each of these platforms are improving how they manage supplier quality and job timeliness to encourage repeat use by customers.

AirShr would not have started if it weren't for a software engineer I engaged on Freelancer to build the first prototype. Many ventures start this way. And keep in mind that software engineers are only one of many freelance skills you can hire. I’ve accelerated workflow by hiring experts to draft press-releases, create logos, brand identities and voice-overs as well as outsourcing administration to personal assistants.

I remember my first time.

I remember pressing ‘Submit’ on my first freelance project. The anticipation was palpable.

Would anyone respond?

Who would I end up working with?

This is going to be awesome!

How do I protect my intellectual property?

What IF someone responds!? … Whoa, someone just applied!

Time is your most valuable asset.

Here are the 15 mistakes I’ve made in no particular order when hiring freelancers. Some will seem obvious. Some are embarrassing in hindsight. Embrace each one so you can begin learning as quickly as possible to build and ship a product people will love.

1. My idea is awesome and freelancers will be just as amped as I am to make a great product.

For the most part, online freelancers are inspired to develop a strong reputation based on being paid to do great work. And although this is a solid basis for a working relationship, before the project kicks off you are a complete stranger to them and vice versa. Understand that it will be nearly impossible for them to be as excited as you are about your vision.

In my experience experienced and engaging freelancers will want to understand as much as they can, as quickly as possible, to meet and even exceed your expectations. They don’t need to embrace your vision the same way you do so approach relationships with freelancers as ones which will help advance the pursuit of your vision. Anything else is a bonus.

2. I will hire a freelancer on the basis that my IP will be stolen.

This is THE most common concern I hear from aspiring founders following a tech vision. Here’s what I tell them:

  1. No one cares about your idea as much as you do and even if a freelancer does, they have to muster all the passion you have to pursue it. In any case, there is a very very very good chance that they are freelancing to build the resources to follow their own passion, not hijack yours.
  2. You don’t know enough (yet) to know if you actually have IP. You’re building a prototype to learn, i.e. validate a hypothesis about a need and opportunity. If a need and opportunity have been validated it’s more likely that you would be building a team to develop the IP as part of taking a product to market. What stage are you at right now?
  3. Your idea isn’t new. It’s a discouraging statement, I know. Here’s the rationale.

Many find these observations confronting. And I appreciate that the desire to protect IP is based on the need for trust between two parties but the bottom line is that you need to be real about whether you actually have IP or not.

Here’s another way to think about it.

In the very early stages of an idea, how is someone supposed to help you build a prototype if they don’t understand the situation or use-case they are solving for…? They are there to help you build a product prototype that people will (hopefully) habitually use to improve their lives. And every product needs a business model to be successful. Does the freelancer need to understand the business model to build a product prototype? No. So reveal what’s required to build the product prototype and get learning!

3. Freelancers have done this task before = we share the same context.

Nope. The best freelancers are masters of their craft and can (usually) apply their knowledge to your brief. This doesn’t mean they’ve spent all the time you have on researching/understanding/designing your future state. The project brief should include as much context as will be useful to developing a shared understanding of the objective.

TIP: The best freelancers will ask you questions which in their experience expose the right level of context for them to understand what’s required and how to get started.

4. Collaborating and iterating the product design is part of the deal.

Every version is perfected with iteration. In non-coding projects like drafting press-releases or creating voice-overs (and many others) freelancers will usually include working on iterations as part of the deal. After all, they want you to be happy!

In projects involving coding/software engineering, you will inevitably want to evolve a design or a feature as you have the opportunity to test versions that your freelancer sends to you. This is where being clear on expectations and milestones is essential.

Your project is designed to get you to a learning outcome, not a perfect product. When your prototype functions in a way to help you learn and you’re embarrassed to send it to people to test, you’ve achieved a minimum viable experience — ship it and get learning!

TIP: If you expect, without discussing prior with your freelancer, to keep iterating on your initial design one of two things will happen:

  1. It will become expensive because the freelancer will charge you the standard hourly rate; or
  2. Under a fix-fee project, your freelancer will become frustrated and possibly quit because they are being asked to do more than the original scope.

5. The freelancers' hourly rate is the proxy for quality.

Not necessarily. When assessing the quality of freelancers on face value I look at (in order):

  • Number of projects/hours worked and the corresponding average rating
  • References provided by their customers
  • Price

I favor freelancers with a large number of projects/hours and a 90%+ rating with favorable customer references.

During any freelancer review, I also look for RED FLAGS including:

  • 100% rating across a small OR large number of projects/hours worked — no one is perfect.
  • A large proportion of one-word or templated customer references — doesn’t inspire me with confidence that these customers are real.
  • Price is too cheap — If a price is too cheap then quality will almost always be compromised and philosophically I believe it’s important to pay people what it takes for them to do their life’s best work.

6. Freelancers must work at Apple / Google / LinkedIn / Facebook / Pinterest /… by day and freelancer by night.

Um, no. People who work at these companies aren’t generally freelancing on the side.

7. Cultural differences won’t be too big an issue.

Do not underestimate the value of a different cultural perspective when building a prototype, it can be enormous. However, clear communication is the essential ingredient to progress and when this is compromised speed to delivery and therefore the speed of learning slows.

If communicating during the interview process with a freelancer is difficult, consider this a sign of things to come.

8. The platform (ie Upwork, Freelancer, Fiverr and Toptal) vets every freelancer.

Each of these platforms has a continual focus on increasing quality but don’t mistake this to mean they comprehensively vet each freelancer. In some cases the platform will promote certain freelancers due to their sustained high performance with customers or they may even have a dedicated concierge service to help you find the freelancer(s) you need. Ultimately, who you hire is up to you. Hire wisely.

9. I’ll work out who to hire when I see which freelancers have applied to work on my project.

It’s dangerous to be guided by the quality of applicants who have applied to take on your project. Be clear on the qualities an A-team freelancer should possess before you submit the project online and measure candidates against that expectation. It seems simple but it’s easily forgotten.

10. When I agree to hire a freelancer it will an exclusive working relationship.

Don’t expect this. The economics of freelancing usually means that a freelancer supports many clients simultaneously. This only becomes an issue when a freelancer does not apply the appropriate level of focus to projects. The core of this issue can usually be traced back to a lack of realistic, clear and agreed to project milestones.

11. Freelancers working for agencies are the same as freelancers working independently.

Not true. The agency model usually involves a very articulate and convincing business development person securing projects which they then hand-off to other people to deliver. Unfortunately I’ve had very low success with this approach and as a result, prefer working with independent freelancers.

12. As soon as I press submit (to publish the project) I’m committed to hiring a freelancer.

The project only starts when you hire the freelancer and not before. You can always withdraw the project from the platform without hiring.

13. The only way to hire a freelancer is to wait for them to find my project.

In many cases, you can reach out to a freelancer you have identified as a potential fit and encourage them to apply.

14. Email is the best way to communicate with my freelancer(s).

There are a variety of ways to communicate with freelancers. My preference is to use Skype for regular check-ins if the project term is longer than one week and then use a messaging service like Slack to go back and forward on other questions.

The bottom line with communications is to use whichever medium is going to accelerate progress and reduce ambiguity.

15. Skill = skill proficiency.

Freelancers generate business by selling their skills. They will market the languages they code in, the programs they design in and the disciplines they bring to the table, to name a few. Remember that this is marketing. Possessing a skill and being highly proficient in that skill are two completely different things. In addition to their online reputation, check their education credentials where possible, it will give you a sense of their pedigree.

Also, be aware that many freelancers are self-taught. This can be a good and a bad thing. Good because people can develop and monetise new skills; bad because they may not possess foundational knowledge taught as part of a formal education. This can manifest in different ways but ultimately quality can be compromised.

Is your experience the same?

Update: 1 October 2017.

The team at Hubstaff Talent reached out and wanted to build on my experience using this handy infographic that goes into more detail on how to hire freelancers. Enjoy!


founder

THE BEST 50 DOLLARS I'VE SPENT AS A FOUNDER

It’s intoxicating to have a new product idea as a founder. All of a sudden you begin to envision how it will look and feel and how it will change the lives of millions of people.

The speed at which your mind makes calculations to help you imagine the future of your product is nothing short of amazing.

It’s important to remember that your mind is also naturally biased to your knowledge and experiences. This is why your initial product idea will temporarily ignore the practical aspects of what it will take to build a great company.

This early stage of operating in a 90% visionary, 10% practical go-to-market mode is normal and obviously, these ratios change as you move to test, learn and evolve from your initial hypothesis.

Googling Isn't As Easy As You Think

At this early stage there is one thing that first-time founders nearly always do (and get wrong!): They search for competitors.

Sound counterintuitive?

After all, it’s a necessary step to completing a business model canvas and it provides early validation that your idea is sufficiently unique that it has a chance of achieving product/market fit, right?

When a first-time founder starts Googling for competition at this early stage they are likely to:

  1. Identify wrong competition
  2. Ignore obvious competition
  3. Miss previous pioneers

Personal bias plays a significant role when you begin Googling for competition because you base your keywords on a product idea that doesn’t have a clear value proposition.

As a result, you search based on what comes to mind. This can lead to clicking through pages and pages of search results to companies that may not actually be competition (1). Similarly, the lack of value proposition clarity may cause you to ignore obvious competitors because you convince yourself that your product is somehow different (2).

There is no such thing as an original idea.

As discouraging as this statement may appear, it’s one that I’ve subscribed to for some time. Using this as a starting point (even if I’m wrong) reminds me that it’s very likely that someone, somewhere has tried to build the product that’s just come to mind (3).

It may be out there for sale right now or it may not. One way or another clues do exist that can plug into your thinking. Searching for competition usually focuses on very recent history and ignores previous pioneers — one of the most powerful inputs to product development.

An outcome which I’ve heard many times before, which is a by-product of identifying wrong competition, ignoring obvious competition or missing previous pioneers is this: “No one is doing what we’re doing.” If you land at this perspective, remember this from Guy Kawasaki:

This is a bummer of a lie because there are only two logical conclusions. First, no one else is doing this because there is no market for it. Second, the entrepreneur is so clueless that he can’t even use Google to figure out he has competition.

Suffice it to say that the lack of a market and cluelessness is not conducive to securing an investment. As a rule of thumb, if you have a good idea, five companies are going the same thing. If you have a great idea, fifteen companies are doing the same thing.

The best $50 I’ve spent as a founder

Each time I’ve had a new idea or looked at investing in a venture, I’ve asked a trusted colleague who is disconnected from the idea/venture (and who is a straight shooter) to spend one hour Googling for similar products.

I pay them $50 for their time and they provide me with a summary of links / brief explanations as to why the links are relevant. The value of this approach is three-fold:

  1. Increased Value Proposition Clarity — You’re forced to articulate (as best as possible) the value proposition of the product idea so the search can take place.
  2. Decreased Personal Bias — Your personal bias is removed and whilst it may be somewhat replaced by that of the person conducting the search, they won’t have your baggage you do.
  3. Wider Insight — Following on from the point above, I’ve repeatedly found that asking a trusted, straight-shooting colleague to conduct this type of search has returned rich insight about competitors and previous pioneers which I was probably unlikely to uncover.

One last thing ...

This tactic has increased my rate of learning on numerous occasions and I encourage its use whenever a new business model is being contemplated. It has saved me an enormous amount of time and I hope it helps you too.


Take The Call

Here’s the punchline: If you’re a start-up founder, make sure you’re a point of contact for help and support requests. It’s essential to your venture’s future. If you’re a leader in a large organisation and not spending a few hours each month in a call centre listening or taking calls from people your company serves, there’s a better than average chance you’ve lost touch with your customers.

My first job after leaving the Army was as a call centre consultant at a bank. I helped customers answer simple questions about their personal finances many times each day. After leaving this role for one in the bank’s ‘corporate centre’, direct contact with customers was rare. I missed hearing about their needs first hand and why the service we provided helped them live their lives.

Without these interactions, reports that presented summaries of data collected in customer satisfactory surveys became the primary source of knowledge about customers. I soon realised that organisations over rely on this data and use it as a key input to make decisions about strategy, marketing and product development.

Two years later I had the chance to return to the call centre for a day to jump back on the phone to customers. The calls varied as they used to be, some people were happy and others were frustrated and disappointed.

That day reconnected me to the people I was ultimately paid to serve and reminded me about the importance of preserving empathy for customer needs, no matter how far you might be from the front line.

Although most startups don’t have vast call centre operations to support customer service, the more compelling ventures have made user or customer support a core capabilityAirShr is no different. We want to be known for being responsive to ideas and think that can make AirShr essential to the lives of many. That’s why my co-founder Opher and I are the people who receive and manage all support communications from radio broadcaster (our customers) and radio listeners (our users) in addition to everything else that we do. Our obsession with user experience means that each time someone reaches out, we focus intently on the issue or feedback and move to address it as soon as possible with our engineering team. This approach has helped us uncover new product ideas and manage unexpected bugs that had the potentially to affect large audiences.

Here are three things we’ve done to create value from feedback and better connect with the people we serve:

Be grown up about dialogue

Gone are the days where having a support@ or info@ email address is sufficient. Today the expectation is that a conversation will take place soon after an issue has been raised with a human not a queue or an autoresponder. “But what if people know my contact details? I’ll be bombarded with calls and emails”. As absurd as this statement sounds, I’ve heard at least 10 first-time founders make this comment only for them to find the opposite when they start responding to support requests which include their contact details.

My friend and serial entrepreneur Adam Theobald taught me the value of this years ago when I sent him feedback via his BeatTheQ app. Only four to five minutes passed before I received a personal email from Adam addressing my issue. Impressive. Our contact details are made available in each of our responses to broadcasters or listeners who reach out to us. In fact, the more people that hear directly from Opher or me, the more we are greeted with

Our contact details are made available in each of our responses to broadcasters or listeners who reach out to us. In fact, the more people that hear directly from Opher or me, the more we are greeted with surprise that a company leader would make the time to respond. The truth is that this is one of the only ways for us to get raw feedback and we love it. Even if the call is difficult because the listener has been let down for some reason, we can understand the issue and make quick decisions to resolve their issue.

This played out for us just last week as one listener helped us understand that our Android app wasn’t playing nicely with the Galaxy S7, Samsung’s new flagship handset. This issue affected a portion of our audience with the same device and thanks to that listener engaging in a dialogue with us, the issue is a long way to solved.

Organise support workflow

It’s never been easier (or cheaper) to receive and respond to support requests from people using your product has never been easier. UserVoice and zendesk are two platforms that do this very well. We use UserVoicebecause it also helps us receive and organise new product ideas from people wanting to champion new AirShr features. Listeners can reach out to use from inside our apps or via our website and our customers can ask a question or suggest a feature right from within our online broadcast platform. And importantly we can access and respond immediately to any contact from our iPhone. Simple.

Spread the word

All team members need to understand why customers celebrate your product or why they recoil from its use. That said, not all feedback is gracious and constructive. It can vary from being complementary to abrasive and everything in between. One thing is for certain; for every person taking the time to contact you, there is a larger number of people who decided not to. So we make it a point to characterise each issue that we see via UserVoice. This typically involves having a call with the person who raised the issue, attempting to replicate the issue and then designing a solution if one is needed. This process involves the entire team which means we get to leverage the combined creative talents of the team to dissect and understand what we’re up against.

If all of what I’ve said sounds completely foreign, do yourself a favour and take three customer support calls in one day. What did you learn?

And remember, glowing references about your business don’t count :)