Category Archives: Learning

The first step to disciplined experimentation is to capture all possible ideas

When you have a great startup culture and hire awesome people at your startup, you will attract a talent pool that has tons of ideas all the time. Many of those ideas may not be relevant to your startup, but I firmly believe that it is not only the product managers, engineers or marketing folks that can have ideas that have an impact on your startup.

If you create an environment that encourages active listening, experimentation and risk taking, you will have a good mix of innovation all around at your startup.

One of the most effective ways to encourage is the impromptu “Lets just chat” weekly sessions that I see at many new startups. These are not larger company-wide all hands sessions, but smaller sessions usually hosted by a very junior, but engaged individual at your startup.

Most times they are held with 5-7 people at your kitchen or during lunch or casual drinks in the evening. The ideal size of the team is less than 10 is what I have found.

Ideas pop into people’s heads at all times. I tend to get most of my ideas when I run. Many people get them when they are stressed, others during vacation, and still others in the shower.

Ideas require a stimulant, and while I have not read the research yet, I believe one of the key ways to stimulate ideas is to exercise or rest your mind.

Capturing these ideas to whoever it occurs is possibly the best start you can have. Many people use idea management software like User Voice or Brain Storm.

I think more people are starting to use Slack for idea capture at their startup. I have seen it with 3 different startups and it is starting to become a thing.

Slack for Ideas

Slack for Ideas

The challenges with Slack are that idea rating, idea management, voting, tracking deployments are pretty challenging.

I would highly recommend you use the one app / messaging platform that EVERYONE in the company uses (possibly email, and if you have Gmail, then use plugins to manage emails to ideas) and put them into a single place.

The best way to review the ones that will have impact is to understand the value of that idea in the context of your key milestones. Some of them will impact your milestones immediately, others will improve aspects of your stated goals. Still others may do neither.

The most important framework I have used is to understand the effort and impact.

Impact versus Effort Matrix

Impact versus Effort Matrix

I think putting the ideas generated into the matrix and focusing on the ones with most impact and low effort (has to be delegated) tends to give you the ability to have good value.

A framework to think about experiments for your startup

Experimenting is at the core of building and tying new ideas. A opposed to having a clear problem to solve, experiments are designed to “try” out ideas that you have and yet know if they will work or not.

At most startups, I notice two primary “ends of the pendulum” issues. Most (over 90% of startups) dont run enough experiments. The rest (< 10%) run too many experiments in parallel.

If you fall into the first category, then my only suggestion is to think about experimenting and commit to doing one. The AirBnB blog is a great place to start, in terms of understanding the user experiments they run. They actually have a experiment reporting framework, which shows how evolved their thinking is in terms of this facet of work.

I also am a fan of the “test and learn” mindset. Since I believe that working on your startup is more a journey in self realization than of markets, problems and customers, it is important to keep learning. I do also believe the best way to learn is to try and do small experiments which you can scale.

I have been a fan of disciplined experimentation.

This post is about the < 10% who run too many experiments in parallel. That’s the biggest challenge I see with startups that hire amazingly entrepreneurial talent for their first few hires.

Since each of the first 5-10 employees are entrepreneurs themselves, they all tend to run multiple experiments, either with product, marketing, customer acquisition, sales, etc.

The framework I have for thinking involves 3 “sets of steps”. I call it “Trail, Nail, Scale”.

The “Trail” comprises of 5 steps, the “Nail” comprises of 3 steps and the “Scale” comprises of 2 steps.

Here is a visual to think about it.

Trail Nail Scale Disciplined Experimentation

Trail Nail Scale Disciplined Experimentation

Obviously this is very early thinking, but I’d love your feedback.

The way to think about experiments is you to pass through gates and assign the appropriate resources at each stage and have a “rough sense” of what you are trying to achieve. If you know exactly what you want to get out of your experiments, you are not “experimenting”.

What I have noticed is that the 3 stages end up being a funnel. There are many experiments you run, a few of them you will nail and a fewer of them you will scale.

If you have 100% of your “experiments” when you start, (on the left of the graphic), then 20% (or less) will be nailed and 10% you will scale.

In terms of allocating time and resources (if you dont have a large team as a startup, allocate your time), 10% is spent on “Trailing”, then twice that time or 20% on nailing and 70% on scaling.

There are many questions that this throws up, which I want to address over the next few days.

1. How many experiments should you run at the same time?

2. How do you define the success of an experiment?

3. How do you internalize and document the learning from your experiment?

4. How much “money” should I spend on trailing? How about in nailing?

5. How do I leverage lean principles into this thinking of Disciplined Experimentation?

Anyway, I’d love your feedback on this framework. As I share more of my work, which I am interviewing people in larger (Unicorn) startups at, I will also give you some case studies to see what they learned.

The first 5 steps to building your own SaaS application

This post is for non developer founders who want to build a SaaS application.

Software as a Service (SaaS) is a relatively small market – at $19 Billion in total revenues, it seems large, but compared to $250 Billion of the overall software market it seems minuscule. It has grown from nothing to this large number in the last 10 years. Similar to the eCommerce market, which seems large but is less than 15% of overall retail, the opportunities will start to be in the niches is my prediction.

The big question is when and how will it grow and where are the opportunities. While there are many specialist firms focusing on SaaS alone, the incumbent software companies (the largest of who are Microsoft, SAP, Oracle, etc.) are also making their own investments to move their businesses from selling licensed software to services.

One of the key opportunities I see is that ability for smaller, niche markets to be targeted using SaaS. Since the deployment model, time to value and cost are so much lower now than 10 years ago,  it is easy to build a niche product that can gain rapid fan following among the target customers and *if that customer base* does grow and end up having more budget it can be a lucrative market.

I do get the question often about the steps to build a SaaS business. Even if you dont intend to build a Venture funded business, the economics of SaaS are determined by cost of customer acquisition (CAC) and cost of servicing the customer (developing, operating and maintaining the software).

What I am increasingly starting to see is that most prototypes are either built by a developer founder, or outsourced (by a non technical founder) to “prove that the market exists“.

1. The first step I’d recommend before you start development, is to sign up 15-20 beta customers. Target people you know well who will stick through your crappy alpha, beta and version 1, so you can convince them that the value does exist when you iterate quickly.

For early beta customers, there are many techniques you can use including: a) setting up a launch page and promoting that launch page on social media b) setting up a launch page and buying Google adwords to drive signups and following up with signups via email c) blogging about the topic to share what you know about that market d) interviewing influential users before you launch or e) setup an email newsletter of great content for that industry and have many potential users subscribe to that newsletter.

2. The next step is to create an activity model and user flows.

User flow Diagram

User flow Diagram

This step is to ensure that you can know exactly what are the top 3 features you need to implement first which will make your product “must have” to solve the problem for your users.

In fact if you can identify the top feature (just one) that people will come back and use everyday, you should be good to go to the next step. Validate the top feature with your beta customer list, so you are building what they will use.

3. The next step is to create a mockup using wireframes. These are typically good to show the screens your user will go through and the experience as well. I would get a lot of feedback on the list of steps and screens before I build the prototype.

Iphone Wireframe

Iphone Wireframe

Typically in your first pass stick to under 7 screens would be my suggestion. That’s enough for a 45 second to 1 min “demo” and should give your users a feel for what the app will do. If they ask you for “one” feature that matters more to them than the ones you have, dont mock it up yet, but put it on your list until you have enough users interested.

4. Design your database schema. A database schema is good to share with your developers entities that exist in your application and what their relationship are. I tend to use DB Schema or just Freemind to show to fields without the datatypes.

DB Schema

DB Schema

5. Understand and select your “stack”. Even if you want to outsource your application development I’d recommend you talk to a few developer friends who can educate you on the stacks they use – what the front end languages and libraries would be, what the back end language would be and the database options. You will be more confident when you talk to your outsourcing company and also be able to help make tradeoffs when you need them.

A day in the life of a Micro VC – @jeff of @softtechvc tells me where he spends his time

Jeff Clavier

Jeff Clavier of SoftTech Venture Capital

At the 500 startups LP meeting and dinner last night, I had a chance to meet with Jeff Clavier. He is one of the first Micro VC funds (before they were a thing in valley). Their latest fund (Softech IV) is a $85 million fund. Jeff and I have known each other for years now, since 2005, when I first met him at a TIE conference and he’s still the same very approachable, friendly and simple guy – surprising given that he’s French – (sorry, Jeff, could not resist taking a dig).

A Micro VC fund has a much smaller team, is the first thing you notice. While larger funds like A16Z have over 100 people and even a a large fund such as Menlo might have over 20-30 people, a $50-$100 million fund, cannot afford more than 5-7 folks. Typically there might be 2-3 partners, and 2-3 associates or Vice presidents.

Which means you are pressed for time. Jeff, mentioned that he’d ideally like his time spent in thirds.

1/3rd of his time spent on sourcing new deals and working to build a pipeline of opportunities, by meeting new entrepreneurs and trying to help them even if he wont invest.

1/3rd of his time portfolio management, which includes spending time helping them with execution and operations, thinking about fund raising and helping make key connections and finally helping open doors to potential hires or prospective customers.

Finally a third of his time is spent managing the team, investor communications and networking with other investors at events, judging startup hackathons, and learning about new areas to invest in.

Each of the 3 partners at Softech VC does 5 deals a year, so they do 15 deals in the 3 years of investing in the fund. To do 5 deals a year, they end up meeting about 250-300 entrepreneurs he said, and roughly 2 times that many introductions are made to him from others.

Digging deeper, the first 1/3 of the time sourcing new deals begins largely by getting warm introductions, which were built by the years of working with other investors, and helping other entrepreneurs who have been the best source of his deals.

The 2nd third of his time is disproportionately taken up by warm email introductions and strategy discussions with his existing portfolio on fund raising. Typically Jeff stays on the board for 2 years, ensures that they company has a very good series A investor and then hands the board seat to them, keeping in touch with the entrepreneurs if they need his help. Which, according to him makes it all the more important to ensure that you think about later stage investors

Finally, the last third of time time is for “everything else” – which includes fund communication, meeting with new potential Limited partners, attending startup events, connecting with other entrepreneurs, discussions with potential M&A targets for teams and mentoring his own team, to discuss opportunities.

The first thing that strikes you is that this is a full time job. Many who claim that the the life of a General partner is mostly golfing, 2 hour lunches, 3 hour dinners, attending events, spouting knowledge about unknown markets and “networking”, dont appreciate the amount of time that it takes to source, manage and attract high quality partners who can help you connect with great entrepreneurs.

Second, unless you spend time (and lots of it) building good relationships with good potential downstream (assume that a series A investor is downstream from a seed investor) Venture capitalists, then you will have a hard time helping your companies raise more money and feel confident that your invested dollars are in safe hands with folks looking for the best interests of the company.

Tomorrow, I will touch on a topic that he and I talked about – how many “warm introductions” to potential investors, does it take to get a funding round done for an early stage startup.

How the 6 digit Apple passcode requirement wastes $6.551 Billion annually

Apple this week announced that they are going to require 6 digit passcodes instead of 4 digit passcodes for the lock screen.

Newer ipads and iphones will require the 6 digit passcodes. That’s apparently more secure than 4 digit passcodes.

The only reason to go to 6 digits is when your phone gets stolen by someone who can brute force 10,000 codes (with 4 digits). Well, apparently, most people use pretty common passwords, so if you only try 27 known passcodes (such as 1111) then your chances of unlocking the phone are at 67%. That means only a third of the people actually use complicated passcodes that will take more than 15 minutes to crack.

If however, you have 6 digits, then the combinations are a million (versus 10,000+) so, it should take longer and more effort to crack your password.

I doubt that. 90% of people will go with 111111 instead of 1111 is my guess, or 123456 instead of 1234. Now, your stolen phone will take 22 minutes to be unlocked instead of 15. Yay!

Apple has sold 512 Iphones to date and about 200 million iPads. Of those, about 75% or 534 Million devices are still in active use. 83% of them run the latest version of iOS.

I am going to assume that most people will upgrade to the new OS version so about 500 million (534 million to be exact) iOS devices will be upgraded to 6 digit passcodes.

The median salary in the US is about $42,000 and the median iPhone users salary worldwide is higher – $53,000.

90% of the iPhone users move to 6 digit passcodes and each user actually unlocks their phone 50 times a day (given that most users glance or unlock their phone 150 – 500 times a day, it is a reasonable assumption).

The extra two digits will cause 1 second more to unlock is also a fair assumption to make.

This equates to $6,551,388,888.89 in productivity loss every year.

iPhone 6 digit passcode Migration Wasted Productivity

iPhone 6 digit passcode Migration Wasted Productivity

With no discernible added security. All for a feature going from 4 digit passcodes to 6 digits.

There were 1.6 Million phones stolen in 2014. The average price of the stolen iPhone was $250, equating to a $400 Million market.

End note: I know the value of a stolen iPhone to a user (especially if there is a loss of life tragically in some cases) is much more than $250, but a 6 digit passcode is not going to change that for the better.

What do you do with all the advice you get as an #entrepreneur?

I had the opportunity to meet about 20+ entrepreneurs at the Plug and Play Tech Center, an accelerator and coworking space in Sunnyvale. This cohort was 2 sets of companies in the IoT (Internet of Things) space. Companies ranged from those in wearables, healthcare, connected car and home automation spaces. There were none in the industrial or commercial IoT area.

The startups were trying to get a sense for the changed funding landscape for startups and how to manage the new set of investors they had to deal with. Many in the connected car space were also talking to “strategic investors” such as the automakers themselves to get a sense for their interest to fund startups.

There was a question that one of the startups asked, which was they were adviced by a mentor who was a venture capitalist that “If we get funding from a strategic investor, then it will be viewed as toxic (sic) since we have to build to their needs”.

I am not sure of the context of that discussion, neither do I know about that investor’s background or intent, but this seems like poor advice at the outset. With more context and analysis I might learn more, but at the first glance, this is poorly construed.

I have written about conflicting advice for startups before and also a framework for entrepreneurs on how to take advice.

I think the best way to deal with experts who provide advice professionally is to resist the temptation to dismiss it rightaway or the desire to take it at face value and implement it rightaway.

Surprisingly I have found that most entrepreneurs actually “forget” the advice and seek out to experiment and find their own answer. That’s goodness, but it begs the question, how do you remember to seek what you learned?

So the problem as most people realize is that (like with storing and sharing good things at home) the problem is not storing, it is retrieving.

How can you recall the right advice when you need it?

Some decisions we make are fairly quick and provide us with very little time to process. Most decisions we make as entrepreneurs take require a longer lead time than a day.

The best way I have found to recall information an advice is to ask it again in context, instead of trying to remember what was said before and assume no judgement or bias before asking for a framework to think about the decision.

That way it gives you the ability to recall in context.

This surprising tactic means you should ignore all the advice you get and filter most of it as entertainment.

Which, if you are an entrepreneur is a much needed distraction.

The ultimate list of competitive analysis landscape charts with 7 complete examples

Depending on the audience you will be asked to show a “competitive landscape chart” of your domain and the major players in the market. The main purpose of the competitive landscape chart is to position your company or product against others in the market. You need not to go into details, but, will be required to provide enough clarity for the audience to make out the differences between you and others in the market.

There are 2 important things you need to consider when putting together the competitive landscape analysis chart –

What you show (Features, Customer Segments, Market Requirements, etc.) and

How you show it (Visualizations such as Venn Diagrams, Harvey Ball Table, Process Map, etc.)

I follow a 3 step process to come up with the competitive analysis landscape:

Step 1: Identify: List all potential and possible competitors on a spreadsheet – one for each row

Step 2: Analyze (What you show): Start putting a list of features that you can claim you have they don’t, or segments of market which are market determined or a list of capabilities you intend to build which your customers care about or any other set of capabilities you can distinctly and objectively bucket each offering by.

Step 3: Visualize (How you show it): Look for patterns to showcase a small subset, (2-3) of the key dimensions you can differentiate and then choose the right visualization.

From the many hundreds of competitive analysis charts I have seen, here are the 7 most frequent.

  1. Market Size – Dimensional Bubble

Market size analysis is typically good for early stage investors (institutional). The size of market tends to be a big determinant for many investors, so if you can show the potential size on a chart featuring bottoms up numbers in the X and Y axis and the cumulative size of the market as the size of the ball, you will end up giving them a sense for the potential of your company. In the example below I have shown the # of users and Price per user in the X and Y axis. The size of the bubble is (not to size) will then indicate size of the market.

 

Market Size Competitive Analysis Dimensional Bubble

Market Size Competitive Analysis Dimensional Bubble

  1. Customer Segments – Multi Tier Axes

A good way to differentiate if you don’t have a different product is to differentiate by segment of market. You can segment markets by any number of ways, and the type of company / user / customer you are going after is a good way to show your competitive landscape. Most consumer companies tend to do this. As an example, Twitter is good for 30-45 year old males, Pinterest is good for 25-40 year-old women, Snapchat is for 20-30 year olds, etc.

It is okay to have an overlap of companies across multiple segments and the other twist I have seen is to show the value proposition to your customer on the other axis. In this example the key 3 capabilities of Price, Ease of Use and Integration is what I have showcased.

 

Customer Segment Multi Axes Competitive Analysis Chart

Customer Segment Multi Axes Competitive Analysis Chart

  1. Customers Process and Systems – Process Map

The Process map is best used when you have a lot of companies in the “space” but they all do different things for the customer in terms of their usage and solve different portions of the same larger problem. For example, when I was starting BuzzGain, the listening solutions were good to get an understanding of what was being talked about a brand on social media, but engagement products were used by customers to interact and respond and analysis solutions were used for market research.

This chart could be a double-edged sword. One on hand a customer or investor could see this as clear positioning of where you stand in the process map, but on the other hand they could see the other products wanting to build the different capabilities across the process, which leads to consolidation, which to them indicates, they should wait until the market settles, or buy from a “large vendor, who has a significant but not best of breed products across the spectrum of their process”.

 

Customer Process Competitive Analysis Chart

Customer Process Competitive Analysis Chart

  1. Feature Capability – Venn Diagram

Best used when you want to convey that customers need the best of 3 (or 2/4/5) different capabilities or features which all make the product unique. For example the fact that you have not he lowest price or the easiest to use product or integration alone will not rule your product out in the customers’ mind, but the fact that you have all 3 covered in the perfect blend makes it appealing to customers or investors.

The Venn diagram is best used when you can show that you have the capability to showcase you in the center and competitors on other intersections.

 

Venn Diagram Feature Competitive Analysis Chart

Venn Diagram Feature Competitive Analysis Chart

  1. Key Features – Quadrant by axis

The simple McKinsey quadrant is actually the most used in investor presentations. This shows 2 axes with opposite ends of the axis values for e.g. simple vs. complex and fast vs. slow on the implementation speed.

You want your company to be on the top right ideally and others to be at the other quadrants. The way this sometimes backfires is that investors believe that the person in the center will win because they have the “perfect blend”.

 

Feature Quadrant Competitive Analysis Chart

Feature Quadrant Competitive Analysis Chart

  1. Feature Spectrum – Silo Systems

Silos are best when you have a short list of 3-5 features alone to compare competitors with, and you have more than 3-5 competitors to show. That means a market where there are many competitors but few things to differentiate them by. Most used in rapidly growing markets, they tend to show why and how you can build a product or company quickly if you focus on a set of features that spans multiple silos.

Feature spectrum Silos are also very useful if you expect the number of competitors to increase. That way your investors don’t get alarmed when a new post shows up on a tech blog which has them sending you emails asking if we have a good plan “to compete against this new startup”.

 

Feature Spectrum Silos Competitive Analysis Chart

Feature Spectrum Silos Competitive Analysis Chart

  1. Feature details – Harvey Ball analysis

Customers prefer this landscape analysis best on the website. Sometimes if you are talking to corporate venture teams, they tend to like this level of detail as well. The Harvey balls indicate the “feature completeness” of each of your competitors versus your feature set. Typically you want to highlight features where you will be “complete” and those where others are “less complete”. I have found though, that if you do a more objective analysis and focus on which features your customers really want and show a ball or two where you are less complete than others, it will give you more credibility.

The other way to do Harvey Ball analysis is to provide a list of key scenarios where the customer has to choose one product vs. another. In this situation, you will find customers self-selecting one product because of their own situation.

The table format is the most detailed and most useful only if your audience is potential customers. Most investors prefer a high level analysis of direct competitors, potential threats and incumbents. Your customers are currently using some solution (even if it is manual) or an incumbent (old dinosaur company) as a solution possibly, but they are competitors as well, which you must acknowledge.

Feature Detail Harvey Ball Competitive Analysis Chart

Feature Detail Harvey Ball Competitive Analysis Chart