My Startup lessons learnt

After three years, burning through a pile of cash and God knows how many work hours, here is my startup story from:  (1) Finding an idea and sticking to it, (2) Getting a commercial product out the door (3) And  then iterate/pivot to a product-market-fit (a must have product).

This video was recorded during a ‘Opportunity recognition’ lecture at Nottingham University and kindly filmed by my good friends at Skeleton Productions. These video’s are nicely divided into six easily digestible sections. If you only watch one, see PART3 – ‘Finding the perfect new business idea..’

PART 1 – About Nick Barker, Opportunity recognition and a quiz on famous tech startups that pivoted

PART 2 – Overview the three Opportunity recognition and development challenges. About Aware Monitoring

PART3 – Finding the perfect new business idea, lack of time and search for customer value proposition

PART4 – Building out a product, funding and pivoting the service

PART 5 – Competitor differentiation, lean startups and getting to product-market-fit

PART 6 – Continuous process of iterating and pivoting a product. Learn more about Nick Barker

Startup Opportunity Identification 2.0

The difficulty with customers is that they don’t really know what they want until they see it! This creates a nightmare for any startup or corporation trying to build a new product – What do you make that people really want and are willing to pay for?

To find the answer startups have to commit to an idea and  move quickly, and cheaply  through to a Minimal Viable Product .  You are looking for a ‘must have” product. This  requires continual iteration around customer needs. The ultimate test is  getting customers to profitably pay for your solution i.e. a higher lifetime value of a customer to the cost of customer acquisition.

We’ve had three product ideas in our startup before we found the one we’re working on now. Creating a new startup product moves through three successive stages starting with ideas development and finishing in a successful product/market fit.  Currently our startup is trying to get to product/market fit.

Last  week I gave talks to MSc and  MBA Entrepreneurship students on identifying entrepreneurial opportunities (above deck) based on these three stages:

1. Ideas development – We spent a  very long  time researching and looking for the killer idea. We were trying to find the perfect opportunity – a gap in the market between existing suppliers in a new growth market. We went round and round in circles looking for the perfect opportunity. In the end we ditched our first real idea because the customer ROI was weak in the economic downturn. We then,  much more rapidly, came up with lots of new  ideas and committed to one – external website monitoring. Unfortunately research takes time and as a startup without revenues you don’t have time. You have to commit to an idea even if it’s not perfect –  NOTE: there will always be competition!
2. Product development & release – Without perfect knowledge on customer needs and competition you have to make many product  assumptions. Right from the  start  we were testing our assumptions with potential customers at network events, in meetings, online and during our Alpha/Beta. It’s not easy to get real answers without a shiny product to sell.  A prototype helps. You have  to rely on your gut instinct. During  this feedback we switched our app from internal systems monitoring to external web monitoring. We found potential customers more receptive to this offering. This early engagement process also helped us to develop our sales messages, sales funnel and  go-to market strategies.
3. Market/product fit –  If you’ve made it this far the really hard work starts.  You’re now looking to make your product a ‘must have’. The challenge is its very hard to be heard by potential customers. You’ need to get the product in their hands! Only then can they make a true judgment on its value. They’ll also compare your product to  substitutes and alternatives in the market. You therefore need to differentiate and deliver a much better product to get them to change! The sales message and product needs constant refining until you have a measured product/market fit. Only the can you pull the sales trigger.

As startup founders we think we know what customers want and the problem they want solving the most. Unfortunately we’re probably wrong. We then  waste huge amounts of time building a product around that  perceived need. It’s hard for many founders to admit their ideas, product and dreams are incorrect. The ideas which formed the startup were based upon a assumptions.

You have to know when to quit an idea, re-form it or find a new idea as assumptions are tested.  Flickr (started as on-line games), Youtube (Hot or Not) and Blogger (project management) are all great examples of product ideas which iterated to a different final product. As startups we don’t have the comfort of time and must move rapidly through an idea, production and iteration. Unfortunately non of this guarantees success but it sure helps!

Do student interns work for startups?

Interns are an attractive option for startups. The benefits are clear. They’re low cost, eager to learn and need the cash. We have two developer interns working for our website motioning startup right now. The alternatives to interns are either expensive freelancers/contractors, low cost but inflexible off shoring resources or permanent staff.  I’ve posted before about finding and working with freeelancers or off shore companies. Despite the benefits care needs to be taken in finding the right interns and setting an effective working relationship.

Potential interns? ‘The Young Ones’ students (Source)

Our experiences goes against Seth Godlin’s and Loic Le Meur’s. Seth believes “internships are overrated” and “we (employers) are doing them a favour”. We’ve found this is not the case if you find the right people,  pay them and work together on clear objectives.

1. Finding the right people – We directly approached 12 Universities and assessed 20 students. Our criteria was  they had paid work experience; were skilled in our development platform and they showed strong initiative.  We were lucky to find two motivated interns who had worked at Google and a London digital agency. We also thought it was better to employ two interns rather than one. With two they can share ideas and work out problems together.
2. Paying  interns – Despite being a cash strapped and starved  startup we think it’s better to pay interns. Paying them changes the nature of the relationship because they are expected to deliver on objectives. Also interns who have paid experience expect to be paid for their next project.
3. Clear objectives – Like all employees they need managing and trusting. Student’s aren’t dumb. Treat them as adults. Let the interns set their own objectives and work with them. If you’ve found the right interns trust them to solve problems and they probably will deliver.

Our experiences of interns so far is great. Yes, it does take a chunk of management time to get them up and running. But that’s OK, because if they’re good you will get that time back later on in the summer as they become more productive. I know several other UK startups including EveryCity and Huddle who also have employed interns. And they think interns are great too. Sam at Chinwag posted his positive experiences of their intern at Chinwag.

Our interns Dave King and Phil Howell have done an incredible job for us. I dread to think how far behind our software development would be without them. From our experience I would highly recommend interns. They bring new fresh ideas to the project and they’re eager to learn. But like all recruits you’ve got to find motivated, responsible and self disciplined individuals for it to really work. You can’t just blame them if it doesn’t.

I’m calling a ‘time of opportunity’ for London/UK internet startup industry

I’m getting very bored of being told we’re no good at Tech startup’s in the UK. I’ve calmed down since reading Paul Carr’s “I’m calling a ‘time of death’ for London’s internet startup industry” Guardian article, so this post won’t be a rant.  Admittedly Paul’s post is amusing , however he paints a very negative and bleak picture. If Paul is to be believed there’s no future for London/UK Internet startups. However, I believe there is hope and the UK Tech startup industry has great strengths.

Paul’s a journalist who once lived in London and is now housed in Silicon Valley. He believes “The London internet industry is increasingly, and terminally, screwed”. If Paul is to be believed shouldn’t we just give up! Why bother if  there’s no hope. While we are here lets cancel the 2012 London Olympics because the Beijing games were exceptional. There’s no way London could be the same. Just as we’re not Beijing, we are not Silicon Valley.

The Awesome Beijing Olympic opening ceremony drummers!! (Image source)

The investment funds sloshing around The Valley are huge compared to UK/European funds. The VC’s and Angel’s in the UK/Europe also tend to be much more risk adverse. Although these factors are changing  in the US with the credit bubble bursting. The UK’s limitations doesn’t mean we can’t produce a wonderful Olympics or make world class profitable web apps, we can. Huddle is a great example. Their ranked as one of the globe’s top 50 startups. Bebo is an excellent example of a very healthy trade sale. Sage a global leader was once a UK startup. The list of great UK startup goes on. Mike Butcher of Techcrunch Europe did a splendid job of correcting Paul on London’s startup profitability.

I and  many others agree that the Web 2.0 bubble is coming to an end. But the end is not death, it’s change. The Internet continues to deconstruct entire industries: advertising, music, newspapers etc. This change brings new potential innovation opportunities for existing and aspiring entrepreneurs alike. The Tech community has always been about and embraced radical change.  We are more adept at change than many other industries including Paul Carr’s Newspaper sector which Mike Butcher also pointed out.

The underlying Internet market continues to grow strongly. Ecommerce sales growth remains healthy even in the recession and the use of web applications are forecast to increase massively. The future of software is going to come from Internet based SaaS services and Open source. Again we have world leaders in the opensource sector with UK companies like Canonical and Alfresco. As entrepreneurs shouldn’t we take advantage of change to bring new opportunities. Or as Paul suggests should we give up hope and all the strengths that we have in the UK.

5 ingredient’s to make a great entrepreneurial story

The power of storytelling shouldn’t be underestimated! I’ve heard it said that great entrepreneurs are also often great storytellers. Both Seth Godin and Brad Sugars told many great Entrepreneurial stories at their recent talks.  A good story allows the teller to effectively capture the attention of an audience and leaves a memorable underlying message. Of course, storytelling is nothing new. That’s what probably makes it so powerful. But what makes a great  entrepreneurial story?

1. A Challenge – on a noble quest or hero’s journey. The story of David and Goliath for example. People like hero’s who have overcome the odds to succeed. Entrepreneurs like Richard Branson who took on the mighty British Airways.  Only time will tell how our startup story turns out. The odds are stacked against us: software startups take more time and money to return on investment and VC funding is 40% down. Just as well we like a bootstrapping challenge 🙂
2. The villain! This is closely linked to the challenge. Startups battle for survival in competitive markets. The entrepreneurial quest does not necessarily set out to fight mighty competitors but sometimes  they have to. The villain (BA is Branson’s case) then comes to embody the heroic challenge.
3. Delivery – Great storytelling is an art. Its not easy. Like jokes, good stories are often amusing and fun. The teller needs to deliver an outstanding pitch, tempo and tone. It requires talent, technique and practice. The story also must be authentic. In 2007 I heard Dick Costello of Feedburner (Now part of  Google) talk about building and selling his startup to Google. Dick told a great story. He had crafted his storytelling working as a comedian for five years.
4. A moral or meaning– This brings a personal and relevant meaning to the listener/reader. Something we can all relate to and learn from. The rights and wrongs of moral behavior are taught to us as children through nursery rhymes and stories. We continue as adults to look for the underlying meaning in situations.
5. ‘..and they all lived happily ever after.’ – The emotion of hope and a belief that who dares eventually wins. Dick Costello had five failed startups before selling Feedburner to Google for $60m. A happy ending for Dick.

A broken but triumphant
Shrek Gingerbread man

Seth Godin believes that  a ‘Wow’ product  and great story is vital for a business to succeed. However real stories can’t simply be made up, they have to be lived. Only then can the storyteller be passionate and real. To have an great story an entrepreneur most embark on a difficult and challenging business adventure.

5 Startup Steps to finding & working with freelancers

As there are just two of us (Simon Oxley – my co-founder and I) in our startup we need outside help. We’d love to employ full time permanent staff but without external funding or product traction it’s too risky. The challenge is to find high quality external resources and keeping them focused on the project. Find the right fit/match and your onto a winner. This takes time and a bit of luck.

Finding a good freelancer takes effort, requires teamwork & can be risky

So far we found freelance and company resources through our friends, Elance, 99Designs and LinkedIn. My friend Martin Wright at the new Web2.0 Surgery has asked me to post on our experiences working with freelancers:

1. Where to find help? – As a startup we don’t have a long list of trusted suppliers. Trust takes time and experience working together. The next best thing is to ask your friends or rely on marketplace reputation e.g. Elance. We’ve been making lots of new friends at networking events over the last year. Many of these contacts are now on our LinkedIn contacts. Through LinkedIn we identified 12 local freelancers for our front-end web design/dev work. In the end we chose Luc Pestille because he had the right skills and understood our needs.
2. Choosing right person? – Keegan is one of the best freelancers we’ve worked with. We found Keegan through 99Designs and used him for our logo, business cards, Launch page and a new blog for Bootstrapping. Why did it work so well? We’ve now experienced working with logo designers and Keegan is an experienced designer with flare. We explained succinctly what we wanted and he understood our needs accurately. A good freelancer really gets under the skin of the requirement and turns it into a great product.
   
3. How much to pay? – The saying goes “If you pay peanuts, you get monkeys.” – James Goldsmith. As a Bootstrappping startup costs need to be kept down but cut too much and the job maybe be badly done. The deal needs to be a Win/Win outcome for both customer and supplier. Also remember that money is not the only motivator. If the company/freelancer is genuinely interested in the project and passionate about the work they will do a good job.
   
4. Rules of engagement – My co-founder Simon has done a fantastic job in the architecture and prototyping of our new website monitoring app. Unfortunately there is only one of Simon. So we’ve used an offshore company to do much of the bulky development work. All projects should have a job specification/scope in place including  project timescales, a payment schedule and copy write/IP transference.
5. Keeping focus – It is always useful to meet the people you are working with. This brings a personal aspect to the relationship which helps to work problems through. However its not always possible to met face to face when off-shoring.  Positive feedback is vital to keeping freelancers motivated. A note of warning: don’t interfere with the creative process once work starts. If you have done your homework and found the right resource get out the way. Otherwise you may do more harm than good.

We’ve benefited using freelancer by finding expert resources and only paying for them when we’ve needed their help. Its important to get alternative quotes because costs vary a great deal and be prepared to pay the going rate. A word of warning: don’t loose too much internal knowledge of your product. This knowledge brings the flexibility required to rapidly respond to customer needs and the ability to innovate ahead of the competition.

7 steps to the perfect Elevator pitch

We all need to quickly and concisely express our startup, company or job description when meeting new people. This week I got roped into giving an elevator pitch to a panel of judges :0. Although, as luck would have it two (Alex Tew of Million Dollar Homepage fame and Micheal Acton-Smith) of the three judges could be potential customers 🙂 You’ve heard the expression ‘elevator pitch’ but what is the perfect pitch in just 30-60 Seconds?

A perfect Speedy Pitch (Not to get the job)
from Spud in Danny Boyle’s Trainspotting

The Wikipedia definition for elevator pitches recommends a 30 seconds pitch with between 100-150 words. In a short video this guy suggests a succinct, easy to understand, greed inducing and irrefutable pitch. Startup Nation has 205 word example written pitch. Based on the example structure the 7 steps to the perfect pitch is:

1. Customer pain situation
2. What your product/service does for the buyer
3. Gap in the market (Niche)
4. How are you going to market product
5. Investment ask for and return
6. Your credibility
7. Your past relevant successes

My final Elevator Pitch went something like this:

“I’m Nick Barker and my company is Aware Monitoring. The global recession will dramatically increase leisure and business website traffic. This growth will push websites to their limits and cause capacity, performance and availability problems.

Our service helps prevent website downtime/slowdowns and the associated loss of revenues. The market currently has low cost basic products or expensive complex enterprise products. Our service focuses on a niche market using in-bound, word of mouth marketing with a ‘freemium’ model. The service is charged monthly.

We’ve been running and selling monitoring products for more than 10 years now. I’m the CEO with 20 years Tech experience and an MBA. My CTO co-founder has 15 years software Tech experience. In my last job I grew a monitoring startup into a global multi million $ service and we see the same high-growth potential for Aware Monitoring”

(Word count: 140 & 60Sec pitch time – But will they buy it?)

Note: There is no Investment ask for and indication of return.

In the end my live pitch was not perfect as I kept looking at my notes. Oh, well until the next elevator ride. Here is a link to a video of 5 Elevator Pitches in a Texas Elevator as part of SXSW 2009 (tech festival).

Good luck with your pitch! 🙂