Found a technical co-founder

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So I have been a little light on the blog posts of late but that is because I have shifted more from thinking and theorising to doing, which is no bad thing. Since I last blogged there has been some significant progress.

I spent last weekend locked up in a flat in sunny Largs with a potential technical co-founder. While I wasn’t actively looking for a technical co-founder-I have previously blogged about the issues of being a non-technical founder- I was very much open to the idea. Michael approached me after reading this blog. Michael had been working on a similar project assessing how the internet could be used to deliver learning and teaching resources to teenagers studying biology at school. When Michael read the blog he was coming to the realisation that the market was too small to build a sustainable business on.

When we initially met for a coffee it seemed that it was a good connect and there was definitely potential for a partnership. I am not precious about my idea and my mantra has always been that I am happy to include anyone in the business if they can add real value. However, no matter how technically incompetent I may be I was in no rush to go jumping into bed without doing some personal ‘due diligence’. As such we went away for the weekend to discuss the idea in more detail but ultimately to establish if we could work together over the long-term. As Michael so succinctly articulated it- “It’s my objective to find out if you’re a cock!”. No doubt there will be some challenging times ahead but ultimately we got on really well and have a shared passion for delivering on the idea and now have a clear idea of what we need to do in the early stages to make this a success

What all this does mean is that work on the Minimum Viable Product can really start to ramp up and we should have something up by the end of next week at the latest.

I have spoken to numerous people who have had both successful and unsuccessful experiences of getting involved with co-founders that they don’t know. In my experience there are so many unknowns in the business at this early stage and rather than trying to work out everything at the start the most important thing for me is to ensure that there is alignment over the key issues. Thanks to Peter Jaco at Cloud Tomo for his advice to write everything down and agree on everything that has been discussed (you should see the size of the mind map from the weekend!). Another key learning point is don’t make quick, easy decisions at the start because you don’t want to rock the boat…eventually these will come out and when they do there will be a lot more to lose. Face any difficult issues face on from the start- whether these be around equity, roles and responsibilities.

I have heard many people comparing the process to finding a ‘lover’ or a marriage  but since we have just been away for the weekend together I decided to steer clear of this analogy!

If you are going through similar process I would highly recommend reading the relevant chapters in The Founder’s Dilemmas by Noam Wasserman, it really opened my eyes to some of the problems that can occur later on in the business based on decisions made at the very start.

Now to get back to some real work….

The importance of building relationships with investors from the start

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Following a great comment by Ian Stevenson on my previous post of ‘When Should a Startup be Looking for Investment?’ it has prompted me to write this short blog post.

One element I had left out of the diagram was the importance of relationship building in the investment process. Ian’s point was that while a startup is going through the process of establishing product/market fit that they should be building relationships with investors so that when it does become time to raise capital to accelerate the business that they have a good understanding of you and your business.

I am in the position where I don’t require investment at the moment but will need to start assessing the possibilities in the future. I think this sounds fantastic and I have always thought that it is a good idea and in my interest (I wil be along at Engage Invest Expoloit hosted by Informatics Ventures on Thursday); but I have always been unsure if the investment community are willing to invest their time and effort in getting to know very early stage businesses. I have been to a few of these events now and the investors only seem to be interested in talking to companies that are looking for money now and offer high rates of return.

I started writing this blog primarily to raise awareness of myself and my business and to share experience and learning but hopefully some people in the investment community take notice and this can be the beginning of a relationship…

Thanks for bringing this to my attention Ian, if you are an investor or are a startup going through this process I’d love to hear your thoughts and opinions and if you’re at EIE give me a shout.

How this blog can help test some assumptions

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When this idea started out it was very much focused on delivering personal development to individuals. As I have spoken to more people I have recognised that it is about effectively changing behaviour and habits in our daily lives across a wide range of areas to try and reduce the gap between what we set out to achieve and what we ultimately end up doing.

I have started to think that this blog offers a great opportunity to test some of the theories I have around the delivery and implementation of theory and concept. I still need to think through a few of the points but think of this as an early stage test of the theories and some of the delivery methods.

Even among those who are aware of the theory behind the Lean Startup movement there is poor implementation of the basic principles. I have lost count of the number of startups who have told me they have spent the past x months (or sometimes years) developing a product without so much as discussing it with anyone never mind customers or “I know it is a good product but I just don’t know who for…”

The way I see it is that I am already writing the blog and I have wanted to tidy up the delivery any way, so it makes sense to try and add a little structure around it and hopefully increase the value delivered to readers. When I look back on this blogs short history and my experience of implementing the principles I can see that there has been a lot confusion around what exactly it all means.

This is still a massive learning experience for me and I don’t pertain to be an expert by any means and I welcome as much input from readers as possible. I truly believe that we will be more successful if we work together. Hopefully we can continue to change the conversation both among founders and between investors and founders.

I will explain in more detail tomorrow what I am looking to achieve and how I will go about doing so, until then…..

A wee update…

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So it has been a rather hectic couple of weeks but I just wanted to give you all a little update on where I am (it is as much for my benefit- to keep me focused and on track).

I need to set aside some time to focus on pulling out all the info from the initial Business Model Generation session and develop a summary of each segment of the Lean Canvas clearly articulating the hypothesises and the experiments to test those assumption.

I have started lining up some formal Customer Discovery interviews for the week beginning 7th May  across the three potential customer segments: individuals interested in personal development, coaches and training providers and businesses/organisations.

If you fall into one of these categories and would like to be involved in the process I’d love to hear from you.

In the meantime I have had a number of very interesting informal conversations that have both challenged my assumptions at the same time as validating some of my thinking and introduced a few new issues.

It has amazed me how many potential customers get whole Lean Startup approach to business and are very excited to be part of the whole process. What is interesting is that I have always thought of the process as being of great value to the startup but as we chatted it became increasingly apparent it as a great potential opportunity (if conducted properly) for the customer to help mould a solution to a problem they are having.

The second interesting thing that has happened is that I have met a potential technical co-founder who has been working on a similar idea but in a very narrow niche that has proven to be too narrow to build a business around. It is still in the early stages and while he really gets what it is we are trying to achieve we need to spend some time getting to know each other and make sure that we can work together. To that end I have suggested that we get away for the weekend next week and spend the weekend getting to know each other solidly focusing on the idea and planning how we are likely to proceed.

Now that I am starting to find my feet a little with the blog I am having some thoughts of how I can improve it (other than the design and sorting out the rss feed) that I will share with you tomorrow.

Exciting times ahead…

When should a startup be looking for investment?

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Following my post yesterday on ‘What Investors Really Want’ I have been speaking with a number of people about the issues around funding and the stages that a startup moves through.

I drew the diagram below as a means of crystallising my thinking (you will begin to notice that I like whiteboards) and thought you might be interested in having a look. It outlines the process that is advocated in Running Lean and was alluded to by Sandy McKinnon (the VC) on Tuesday night.

This seems to be the common approach in the startup scene reflected both in the literature and what investors are looking for, however in my short experience I have spoken to a lot of startups and a lot skip right over the 1st stage.

While I am nowhere near looking for funding this is the plan I intend to follow. However, I would love to hear from those who are more experienced and who have gone through it on both sides of the fence (investors and startups) as it throws up a number of questions. Is this too theoretical? Is this how it works in real-life? Is this the way it has to/should be? Do startups risk their potential for success looking for investment too early in the process i.e. before they have achieved Product/Market Fit?

Where in the process are you?

The learning continues….

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What Investors Really Want

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As someone who is new to the startup scene in Scotland it was very interesting to head along to the iVentures talk last night on ‘What Investors Really Want’ with representation from the Angel Community in the shape of John Waddell of Archangels and Sandy McKinnon of Pentech Ventures LLP in the blue corner for the VC’s.

I thought I would share a few of the key points as I saw them and offer a little opinion:

BUSINESS PLANS

There was a general agreement that a business doesn’t need a fully formed business plan to secure funding. What is important is that there is some degree of momentum and product/market fit. Sandy suggested that he’d much rather see a business model canvas with everything laid out on one page than a 60 page document. According to John the most important (and often overlooked) element is: what is the problem you are solving and what will it allow the customer to do? This is a sentiment hammered home by Dave McClure (and he’s seen a pitch or two in his time).

After the numbers the most important thing is the chemistry of the team involved. Do they have passion and belief with real clarity of what can be achieved?

Sandy suggested that there is a real lack of ‘hustle’ and passion manifests itself in a fear of failure among many Scottish startups. Startups need to get out there and move quicker, there is a general reluctance to get a product out into the market and into the hands of potential customers.

While skills such as accountancy can be learned by attending a course, you can’t buy passion and a relentless drive to make your vision a reality.

A SCOTTISH GOOGLE?

The question was asked whether a giant company was possible in Scotland and secondly whether it was actually desirable.

Sandy believed that it would be more advantageous to have many ‘large’ companies than one behemoth. Whereas John believes that it has already happened just not in the tech sphere and pointed out a list of very successful Scottish companies such as The Wood Group, Clyde Blowers (Jim MacColl will be speaking at the next iVenture talk), Aggreko and Stagecoach.

I think a large win in the Tech space in Scotland would provide an increased amount of ‘have a go money’ as Sandy referred to it. There is no denying that there are many successes in Scottish business but are the companies and the money that flows from them the right people to be investing in tech startups?

The question of why Scotland hasn’t seen the uptake in tech companies was raised and skirted around but not really answered.

There is no denying that there is a degree of friction between entrepreneurs and the investment community but as with most things in life there are always two sides to every situation. Scott Allison in Forbes stated that:

“The problem with building a startup outside of Silicon Valley is that the further away from startup culture, the less this is understood, by founders, investors, or any other stakeholder. Probably 99% of books written about business are addressing the issues of scaling, managing, and building an established business. As well as that, education and business support services are generally skewed towards that understanding of traditional businesses.” 

However, all too often I hear startups in Scotland talking about investors and the investment community not getting them. While the Lean Startup movement is very trendy at the moment and most startups (particularly in the Tech space) are aware of the concepts, I just wonder how many startups are rigorously following the principles laid out?

While there are a lot of things still to be done to realise the full potential that Scotland has to offer, there was a general optimism about the future of Scottish startup scene. There are lots of great things happening in Scotland with Entrepreneurial-Spark on the West Coast and TechCube launching soon in Edinburgh. While the increasing number of startup incubators and accelerators in North America is seen by some as a sign of a bubble, it can only be seen as a positive thing in Scotland.

I know that I am excited about what the future holds and although I am not 100% sure why, I left the event last night committed to dreaming bigger!

In search of a business model…

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The next step for me is to spend a little time brainstorming my business model. This is where the business planning comes in rather than a traditional business plan.

To do this I will be following the process initially laid out by Alexander Osterwalder in Business Model Generation. This is a great book but the process by which it all came together is more interesting, it is a crowdsourced book written with over 470 contributors in 45 countries. In fact I will be using a slightly modified version of the original aimed at startups that was developed by Ash Maurya that he has named Lean Canvas.

The aim of using a ‘canvas’ is to get an overall view of the business in one place and to encourage and challenge you to focus and distill your proposition on to one single page. You can see a picture of a blank canvas below but I will be experimenting with the best way of writing this up and sharing it.

In the first instance I will throw down everything on the one canvas and then break it down into an individual canvas for each customer segment.

The sections of the plan are as follows and I will proceed in this order:

PROBLEM (AND CUSTOMER)

Highlight the top 3 problems

What are the existing alternatives that people are using to solve this problem?

CUSTOMER SEGMENT

Make sure to break it down into users and customers.

Continue to break it down to customer segments with shared behaviour and common needs

UNIQUE VALUE PROPOSITION

What problem are we solving and what value will we provide?

SOLUTION

Highlight the top 3 solutions

What is the simplest Minimum Viable Product that can test the problem and my assumptions.

CHANNELS

One of the key areas to establish that is often overlooked in the early stages of a startup is how do we get the product to the customer segments highlighted above?

REVENUE STREAMS & COST STRUCTURE

Will someone pay to solve the problem that we have highlighted? This is an area that needs to be addressed in the customer interviews.

What is the revenue model?

How much will it cost to carry out 30-50 customer discovery interviews?

How much will it cost to define, build and launch an MVP?

What is the burn-rate? Fixed and Variable results.

Once all this information is gathered it will give an idea of both the break even point and the runway.

KEY METRICS

What are the key activities I will measure to judge progress?

A common set of metrics used is Dave McClure’s pirate metrics: (Can you work out why they are referred to as Pirate metrics?

  • Acquisition
  • Activation
  • Retention
  • Revenue
  • Referral

UNFAIR ADVANTAGE

This is the thing that sets you apart from the competition, it is something that can’t be easily copied or bought. It is also one of the hardest sections to fill in at this stage and often only makes itself known in the face of competition.

While many people think the approach is ‘to simplistic’, I have shared this model with startup business and walked through the process with a few and every time I am amazed at its power.

A few pointers that I have to be cognizant of:

  • Do this in one sitting
  • At this stage it is ok to leave sections blank, this in fact can help highlight the potentially riskiest areas of the business and focus attention.
  • Be concise
  • Keep Ideas moveable- using post-it notes
  • Tell a story
  • Use colours and draw

I am hoping to have the initial draft of this completed tonight and then I will share with you where I am up to tomorrow. Wish me luck!

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What’s the difference between a startup and starting a business?

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We know that a startup can existing in a large corporations and we know that Lean Startup can be applied to non-web based business, a great example of this is Eric Reis’ work with the US Government. However, what is not so clear is how Lean Startup principles can be applied to starting up a business. As I have been going through the Lean Startup process and discussing it on and off-line I have been asked this question.

I may have lost you a little- the difference between starting business and a ‘startup’ is subtle yet often overlooked. I had already been thinking of this based on conversations with friends when I read Scott Allison’s first blog post for Forbes.

To re-iterate, the two most common definitions of a startup are:

“a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”

“a company in search of a repeatable and scalable business model”

While Scott Allison focused on the difference between the two, particularly focusing on what a startup lacks compared to a business- certainty and a repeatable, scalable business model.

All this week I have been focusing on the one thing they most definitely share in common- they are both based largely on assumptions.

All decisions one makes in the early stages of a business are based on assumptions- the biggest problem is that most businesses don’t have a process in place for highlighting and testing these assumptions and too often businesses don’t find out their assumptions are wrong until it is too late.

As with uncertainty the presence of assumptions is only more apparent in startups because most of the time nothing has been produced. It is a deadly trap for businesses to get into to think that because they have a ‘proven’ business model, some degree of product market fit and some paying customers that they have everything sorted.

Luckily I have had the chance to sit down with an early stage (off-line) businesses run by a friend of mine this weekend and get some first hand experience of this problem.

This business would not fall into the descriptions of a startup above but it is definitely facing uncertainty and was in danger of making significant and as it turned out incorrect decisions based on assumptions masquerading as facts.

By questioning the reasoning for actions, the assumptions these decisions were made on and how to test these assumption it allowed us to gain perspective.

I have far from gotten my head around this subtle but important distinction but this week has been really enlightening as it put a whole different perspective on my business outlook. This is an on-going project and I will continue to work with my friend and her business and as I start to shed some light I will share my experiences and learning.

I have found that this is a topic that generates much debate and discussion and I would love to hear your thoughts and opinions.