Category Archives: Entrepreneurship

The rise and rise of coding schools – a tale of #entrepreneur opportunity

Over the last 5 years, nearly 100 coding schools – both offline and online have sprung up in various locations around the world. Most of the students that attend coding schools are from one of 3 backgrounds:

1. They have been involved with technology – as a marketing manager or a designer or a customer service rep, and see the opportunities in their company and others to get a higher paying job by doing development

2. They are from a completely different career – pizza delivery, real estate, stay-at-home-mom, and want to get into coding and technology.

3. School students with majors outside computer science who realize that the jobs in their field of study are no longer paying well and are moving to studying coding.

A typical coding school in the US charges about $8000 (average) and promises 16-20 weeks of intense bootcamp style practice and work to get you placed at a job in a company that needs “junior developers”. Starting salaries are usually $50K to about $75K.

Who are the ideal companies that hire these hacker school graduates?

It used to be startups were the prime target, but increasingly folks like Facebook and larger companies as well who are looking for junior developers are making up a good part of the hiring – 30% vs. smaller startups – 50% and rest go to non technology companies requiring developers.

Right now we are in one of the biggest booms of technology startups so coding schools are able to guarantee 80% placements or above. When the tide turns (which I cannot predict) then I suspect that the winner-take-all approach returns, which means coding schools will take in fewer candidates since the demand for developers will become lesser.

The coding schools themselves are a great case study in entrepreneurs solving entrepreneurs problems. Which is the microcosm of an industry with its own “microclimate”.

The first few coding schools started to solve the “hiring” problem of many startups who were unable to hire good talent and were instead competing with the larger companies to hire the best. Then folks like General Assembly, Coding Dojo and others started. At about the same time, folks like Udemy, Code Academy also did to help new entrants to learn how to code.

Unlike offline schools, the online academy’s were seeing a significant drop-off in students – most folks were just not completing their courses (90% drop offs were typical).

Now, however having been to 10 coworking spaces which all have a coding school attached to them, I can see the natural fit for these spaces to want a school in their facility.

Over the last 5 years, the number of graduates from coding schools has gone from 500 per year to over 20,000 annually. As far as I can see the demand for developers will not slow down for the next 5 years. Even if there is a slow down in the startups hiring coders, the larger companies will pick up the experienced coders from failed startups, and that means new (maybe fewer) startups will end up having to hire from a hacker school.

So what type of a person actually is a good “coding school candidate”?

I think the only thing coding schools are looking for are motivated individuals who have some sort of inclination towards programming. That’s it.

Everything else is secondary.

In attending a coding school last week and speaking to the students, I found that most were excited about learning the trade, but were solely focused on getting a job, not necessarily learning programming for passion.

So, that means when the economy for “other areas” picks up I suspect many will go back to a higher paying job which they are passionate about, leaving more room for newer candidates who want to join the programming revolution.

Which is why for the next 5 years as well, I can see a constant growth curve for most coding schools and I suspect they would be a good investment as a franchise or a business if you are so inclined.

What ingredients do you need to run a successful school – a good pool of potential companies “looking to hire local junior developers”, a set of part time developers “who are passionate about teaching the craft of programming” and a large pool of talented candidates from other fields willing to learn programming and raise their salaries from their current jobs.

Kickstarter is the new “beta” customer, “social proof” and “friends and family” round all rolled into 1 for #entrepreneurs

I had a chance to meet an amazing entrepreneur on Tuesday at Utah, Tammy Bowers, who the founder of LionHeart Innovations. They provide a mobile platform to help caregivers of kids with chronic conditions. Think of it like a coordinated platform that everyone who cares for the kids needs to ensure they are all in sync – the mom, the dad, nurse, doctor, nanny, etc.

Their son has a health condition so their startup was born from that experience. Now, after many months of working with health organizations and other care givers, they are ready to launch their mobile app.

A decade ago, options for Tammy would have been to talk to a lot of potential customers, then raise a small “friends and family” round and then look to get some marquee investors / advisors agree to be associated with the company – to provide social proof.

Now there’s indegogo and kickstarter. Tammy put together an early funding campaign on the tool to see there were many other parents who were also interested in the tool to keep their folks in the know. Word of mouth, thanks to the indegogo campaign also got her a lot of press among bloggers, media and news outlets.

For entrepreneurs in smaller cities, getting the attention of Silicon Valley angels or investors is very difficult if not impossible. Many local investors are willing to help, but they lack the ability to validate the problem, the need and hence tend to invest in “things they know very well” or “those things that generate revenues quickly.

Enter crowd funding. If you thought it was for hardware programs alone or for creative ideas, then you need to look at indegogo and other platforms again. 7 of the 10 companies in the accelerator program at Seattle raised money on these platforms. Some of them raised $50K and others more than $350K.

There are 3 things a successful crowdfunding campaign gives you:

1. Customer validation: People (real customers, though largely early adopters) put their money where the mouth is. Not just “likes on facebook”, they commit dollars to your program.

2. Funding: If you can put a little money into your campaign, typically the crowdfunding dollars can help you generate more money to ship your product.

3. Social proof: I would highly recommend you talk to a few “influencers” who can back your campaign on these platforms, but if they dont and still notice it, then the campaign can help you generate some press, which is good social proof if you can get folks to share the press.

I am a huge fan of these programs not just for creative movies, music and hardware “maker” type products, but also for software products that are niche initially.

There are 3 important elements of a successful crowdfunding campaign, which other folks can tell you more about:

1. Create great content assets – video is usually essential.

2. Engage with potential influencers before your campaign so they can back you when the campaign launches.

3. Provide quick and constant updates to your backer so they can help champion and be evangelists for your startup.

A #contrarian view on how the customer validation phase should fine tune your #startup business model

The trend from users (businesses and consumers) wanting to buy services – software enabled services, instead of software is accelerating more than ever in my observation. Previously things that most folks would sell as software is now being packaged and sold as a service that solves a problem and is a solution than a packaged piece of software.

In the 90’s and 00’s the solution to a business problem was to develop, deliver and sell software, which was either sold as a license or an annuity. SaaS then came about to provide a change in both the pricing model and the deployment model.

The trend is more pronounced in the consumer portion of the business. Let me give you a few examples and then go into detail of one case study that I discussed with some entrepreneurs Utah.

Take the case of Uber. A decade or two ago, the prevailing model would have been for Uber founders to build the software and then try to sell it to taxi companies and help them service their customers more efficiently. They instead chose to be a “full stack” company and own the consumer experience and recruit drivers to their program.

Another example is Zillow. Instead of providing software to real estate brokerages or individual brokers, they turned the model on its head to go direct to consumers and be a lead generation engine for brokers.

Finally on the enterprise side, HackerRank is a product as an example that a decade ago, would have sold software to companies that helps them manage, deliver and attract software developers with challenges. They prefer to directly attract software developers to their platform and then engage with potential recruiters to help match the top puzzle solvers with companies that are looking to hire them.

Note that in all these cases, the companies are purely software companies, but their business model is predicated not on selling packaged software, but a set of services to end consumers.

I speak to entrepreneurs worldwide, who have heard the phrase “software is eating the world” and then immediately assume that the only way to deliver software and build their business is to sell either a subscription business to the hosted solution or to sell packaged software (yes, there are still folks that think this is the way to go). That is no longer the case and you will find in most instances, investors will prefer full stack companies to software business models in the next decade.

Only hosting your product and providing a SaaS solution does not make your business model different.

That begs the question, how does one go about creating and building a service business instead of a purely software business?

I think the most important phase of your startup journey to figure this out, is when you do your customer development and validation.

During the customer validation phase you will find many potential customers not willing to buy what you sell them (software). That’s usually because they don’t have the problem you articulated.

There are two types of problem articulation strategies. One set of folks articulate the problem they think customers have and another set share examples of the questions potential prospects have.

Let me give you an example of a company I met yesterday.

They are folks that run a theme park who had built software to better manage their park and generate better profits and returns. They were keen to sell software that helps manage a theme park to other owners of theme parks.

When they spoke to potential customers and said they had ERP software to help with theme park management, most potential customers did not care. Their customers did not have a problem that required software.  When we got talking, and drilling down to the real problem, it turns out that 20% of a theme parks budget annually was spent on renewing customers.

So, most park owners had a marketing and a renewal problem not a software problem. When they went to the customers with an end to end solution to help streamline renewals and still had software at the back-end to manage the renewals their message seemed more appealing to theme park owners. Suddenly the problem was not software for automating the theme park but a solution to help remove a key headache and a solution to one of their key problems – Renewals.

The startup still wanted to only be a software company so they were not too keen to take on all the hassles of renewal processes, so I suggested they outsource the other aspects of the renewal process to other companies.

Having control of the end to end renewal process, now gives the company the data and analytics to build another stream of revenue to help end customers get discounts on other services they would like and give the theme park owner a cut of that revenue.

That’s the future. Software enabled services will be the primary business model for the next decade or so. Instead of selling it as a software product (either SaaS or otherwise), I encourage entrepreneurs to look at business models in more depth during their customer validation phase.

How to solve the immigration problem for startups and income inequality problem for older Americans with one solution

Americans have 2 problems that are high on the list right now. Income inequality and Immigration.

So there are two alternative solutions:

1. Every year, Forbes publishes the best places for Americans to retire.

This is for the many folks who have made okay money but are not wealthy or ultra high net worth individuals.

So, in effect America is trying to export its retirees.

This is a small number right now, in the thousands. This solves the problem of healthcare for the old and also helps the older folk’s money go farther.

2. For the immigration problem we have solutions as well.

This is a slightly larger number, 65,000 each year. This solves the problem of new talent for companies and also helps young aspirants get a better shot at a better life.

Every year, America also imports new fresh talent.

Think of this like a balance sheet. Immigration imbalance occurs constantly. Right now America does not export as many retirees as it imports immigrants.

Which is why many folks are up in arms about raising the # of allocated H1B visas to foreign legal immigrants.

The reason we get so many immigrants is because it is attractive to be in America.

The reason many retirees don’t leave is because it is not attractive yet to live outside America.

Why is not so attractive to live outside the United States right now?

First, there’s a standard of living issue – access to quality services is just not as good abroad as it is in America,

Second, there is living away from friends and family, and finally

Third, there’s fear of the unknown.

Most older Americans move to Florida or a state in the south so they can get better weather and pay fewer taxes anyway. So, the living away from family is something they are quite used to and they actually end up making new friends.

If we help some of the countries in the “top places to retire” help to build better services, such as transport, healthcare and support, then they become more attractive.

To solve the fear of the unknown, I think the best solution is to educate older Americans on these countries and their culture, unique offerings, weather, etc.

Finally if we eliminate double taxation for Americans going abroad or “suspend” tax filing and payment when they spend, say, more than 80% of their time in their “retirement” country, then you make retiring abroad, more attractive.

That should increase the number of people leaving annually to say about 50K from the current 5K and help “keep the distribution even in the people import/export balance sheet”.

What do you think?

Finally a way for H1B visa employees to realize their dream of #entrepreneurship – unshackled

I had the chance to talk to Nitin Pachisia today about his new venture fund, Unshackled. He and his cofounder have started the investment arm, which focuses on opportunities created by H1B (and other restrictive work visas) entrepreneurs. I have talked about this problem before, but did not realize that it could be a potentially lucrative segment to invest in.

The problem is this. If you are in the US on a work visa that’s restricted (Optional Practical Training or H1B as an example) then leaving the company that “sponsored” your visa is a tough call since your new startup can a) “not pay the salary” you need to get a new H1B or b) other legal restrictions prevent you from leaving your job (your visa sponsor) for your own startup.

Apparently there are 750K restricted work visa holders in the US (and I suspect most if not all are from India and China). Each year, students and professionals who come to the US increase the pool by a few thousand.

If you apply the basic math, then about 10% of these (likely) will be keen to start their own company – about 7500 and that’s the target segment for Unshackled. They are looking to fund about 25 companies via their fund.

The way Nitin and team help get this done (I am simplifying) is to be the company that sponsors the H1B (as Unshackled can) for the entrepreneur. After they raise their funds to be able to sponsor their own visa, then the entrepreneur can leave and “join” their startup they created.

I think it is niche enough and specific enough for most folks to remember what Unshacked does and what they stand for. Nitin mentioned that over 60 investors have already committed to their fund and they were over-subscribed for their current round.

I am personally still trying to figure out if this is a large enough talent pool to get the quality winners that any fund needs, but it is niche enough and specific.

I do remember being in 500 Startups (#500Strong) a year ago, when they had 4 companies from India – Trade Briefs, Instamojo, WalletKit and GazeMetrix were all started by entrepreneurs who were in the US for the 4 month accelerator program on a B1 visa, but had to return to India, because they did not have a visa option to stay in the US.

This would have been an ideal solution for any of those folks.

I think anyone who is on a restricted work visa and is keen to start a tech startup should seriously explore this fund as a great way to get started. Nitin and his co-founder are based in Palo Alto and have setup partnerships with many local funds, legal and accounting agencies and other startup support organizations.

A data driven approach to dispelling the myth that planning for #entrepreneurs is “old” school

There is an ongoing meme that keeps popping up ever so often among tech entrepreneurs and gurus. That the “business plan” is dead and there is actually no sense in planning at all.

After all they say “Hands-on Entrepreneurial Action is all that is required to create a Business”.

I have enough curiosity to keep finding out which of these truisms are valid and which are not. Fortunately I also have a position that allows me to try these experiments given that I run an accelerator program.

TLDR: This is absolutely false. Poor or any planning is better than no plan at all for over 80% of startups. In fact, the earlier the stage of the startup, the more is the value of that planning.

Here is the data:

Over the last 3 years, I had the opportunity to identify, select, coach and help 87 entrepreneurs for over 4 months each. I spent about 1.3 hours per week with each entrepreneurial team. In the last 3 years, and in 6 cohorts, there have been a total of 4834 applications we have received and reviewed. Of these my team and I have talked to about 450+ (about 10%) and have met with (for atleast 15-30 min) about 250 of these entrepreneurial teams. A total of 87 of them made it into our accelerator and that’s the sample size. Of these, 89% were from India, and 11% from the US.

There are between 10-12 sprints we run at each of our 4 month acceleration programs. Customer development, technology, product management, design, go-to-market, sales, partnerships, and others. One of the sprints we also run is called the “Operating plan” sprint. I instituted this after the first cohort, when I learned that most investors did not care so much about the “demo day pitch” as much as what the company was going to do with their investment for the next 12-18 months.

So, I put together an operating plan template. Think of this as your blueprint for execution. It would spell out what you were going to do to hire, sell, develop, fund and grow your startup. I put together a template as well to help the companies think through the plan.

It stems from your top level goal first, which depending on your stage could be – get product shipped, get customers to use it, increase usage, drive sales, increase revenue, etc. The only constraint I put was to ensure that you had one goal only. Not 3 or 5, just one.

Then you want to tie in various parts of your company to achieve that one goal.

If you had to hire engineers to build product, then that needed to be spelled out. If that then requires funding, you need to spell that out as well and so on.

So each operating plan will end up having 7-9 sub “plans” for product, development, hiring, sales, marketing, funding, etc.

This planning cycle begins in the 3rd month of our program and lasts 2-3 weeks for the entrepreneurs. During this time, many entrepreneurs are busy trying to get funding and meet investors, which means they tend to have little time for “all this other planning stuff”.

Which makes for a perfect experiment with a control group and a treatment group.

In the last 5 cohorts, I have asked and then politely urged all the entrepreneurs to participate actively in the operating plan sprint. But 50% of the cohort would get another 30 min pep talk from me on its importance.

I’d urge them over a lunch or coffee the importance of doing the plan.

I would not discourage the others from doing it, but the other group I did not spend the 30 minutes with on taking the operating plan seriously. Some of them took it seriously without my urging and cajoling and most ignored it.

Now that I have the data for 3 years, I can confidently tell you that just the act of putting together an operating plan – however poor it is, increases your chances of funding and raises valuation.

I went back to the data to look for my own biases and see if the ones that I urged were “somehow better suited to raise funding and be successful regardless of my urging” anyway, and I think I have no way to really check that at all, but I am confident that the sampling error, if any, was minimal.

Of the companies that I did the extra selling to, 69% of them raised funding within 6 months of the accelerator, compared to 31% who did not.

Even the companies that took the operating plan seriously and put what I consider a poor plan, beat the ones that did not take the operating plan seriously at all by a margin of 20 basis points.

I totally understand that funding is a weak (and only one) measure of achievement (and not of success), but I also realize that it is the metric most entrepreneurs judge an accelerator by.

So, the bottom-line is this.

If you want to achieve any form of success, creating an operating (or business) plan, even if it is poor, is better than not having one at all.

The 5 emotions you go through as a #startup founder

I love tinkering and trying to do new stuff. It helps me figure out what entrepreneurs are going though. Whether it is learning a new language (Javascript again), a framework (Angular.JS) or new technique to get customers (Instagram FTW). Some of these projects take a few months and others a year.

For e.g. we are trying to build a periscope camera to help you take photos when you are a concert and are not tall enough or have arms that are not long enough to take them. This will be connected to your smartphone so you can look at the lens from your phone before you take the photo.

This project was my attempt to launch and manage a kickstarter campaign. We have 2 college students who have the capability to build the Raspberry Pi  based controller and I was the marketing and kickstarter campaign guy.

There’s a point in time when you fantasize about these side-projects becoming your “$19 Billion exit”. Then reality hits you daily every hour. Even if you have cofounders, you will realize quickly that being an entrepreneur is a long and lonely journey. That means you will have several conversations with yourself.

I tried to capture my own “self-conversations” or “selfies” over the last few projects to understand the moments of doubt, fear, exhilaration, stress, joy.

Lets start with the idea. Most people get exhilaration, but I get doubt as well. It seems to me that having listened to 1000’s of ideas as a judge, VC and investor, there are no new great ideas any more. Then again, if you are unable to sleep at night and want to write down, code or document all your thoughts, this is the best stage of emotion.

Then you get to joy – for me that comes from a shipped product (call it MVP, beta, alpha, anything). Not necessarily the point when customers or users are using the product, but just when you get it “out there”. The time when you can declare on your FB profile or on your Twitter stream that “Product X is live” or “Launched Product X”, followed by a call for people to try it out.

Fear hits next when you either a) get a lot of users and many complain on Twitter or a Blog post you have written that they dont “get it”. Most people rarely get version 1 of anything. You as a founder tend to then worry about whether all the time and energy you spent over the last few weeks / months / years was even worth it.

Stress comes after that when you try to pivot and change multiple times to figure out “product market fit”. The stress comes from your own internal battles to tune, fix, change and modify your project in a race against time to keep your “self funded” project from dying.

Finally this stage ends with doubt – on funding, market, customer validation, hiring, investments, a whole entire host of self critical analysis and paranoia that results in hopefully a finish that comes back to exhilaration – of the funding round, the customer traction or a new, smart hire.

Going by the numbers in my own entrepreneurial network, I’d say exhilaration post these 5 emotions is on the rise. That’s a good thing. A very good thing.

Is it a bubble? I have been asked. I usually reply – Who cares.

There’s an “orgy” going on next door (Silicon Valley) we are busy arguing the size of “condom” we are trying on. Dive in, the water is warm.