Quora: the best source of secondary market and competitive research

Yesterday I met an entrepreneur who has built his company in a suburb of Seattle, completely bootstrapped and without any outside investors. He is growing 30% YoY and the most amazing thing he taught me was that he gets all his questions answered on Quora.

This led me to take another look at Quora to understand where any entrepreneur could use it. Turns out there are a lot of use cases. Most people use it to get specific questions answered, but I know that Jason from Storm ventures has used it to build the SaasTr brand, another entrepreneur uses it for lead generation, etc.

One of the first places I got to these days to get an understanding of any market is Quora. It turns out many of the questions, competitive information and relevant market numbers are largely available on the Q&A site.

In fact here is a list of things you can use Quora for, but it is such a good waste of time as well, so I still recommend you Google your question and get to Quora than search Quora alone. When you do get to your question, browsing relevant questions within that topic are really valuable.

1. To understand what problems need to be solved that people face

Quora for Digital Marketing Problems

Quora for Digital Marketing Problems

2. To validate key features that are needed.

3. To understand competitive products

4. To learn about the key influencers in the space.

5. To keep up to date with strategies for growth hacking

6. To look for new people to hire (especially non developers)

7. To get a new source of daily ideas

Quora for Ideas

Quora for Ideas

8. To pick a list of questions to answer for your company blog

9. To learn about strategies that will help you sell and get your first few customers

Quora Sales Questions

Quora Sales Questions

10. To get ideas on which investors would be the most relevant for your startup.

Quora for Investing Advice

Quora for Investing Advice

The board level discussions in the US that are affecting #startups in #India

Over the last 4 months I have been able to talk to over 30 Chief Innovation Officers and VP’s of Marketing or Technology who are customer’s of Microsoft. These have been largely 30-45 min sessions, followed or preceded by a 30 min call. The main purpose of these session is that “Innovation” and “Disruption” are now a board level agenda.

A brief, but short history. Innovation has always been about a major “theme”. During 1960-80, inside out innovation was the mantra. People were carrying books from Peter Drucker – Innovation and entrepreneurship and every person in the large company was asked to suggest ideas and help the company be more innovative.

Innovation Peter Drucker

Innovation Peter Drucker

Then between 1980-2000, the Japanese innovation and optimizing manufacturing, measuring outcomes and building networks were critical.

Japanese Innovation

Japanese Innovation

In the early 2000’s the Blue Ocean strategy took shape. The concept of “Outside In” innovation, talking to customers and having customers drive the innovation process became the vogue.

Blue Ocean Strategy

Blue Ocean Strategy

From 2010, Clayton Christensen’s book on the Innovators Dilemma is the most quoted book by innovation teams. The idea of “disruptive innovation” is in its peak.

Innovators Dilemma

Innovators Dilemma

So, if you are in a large Fortune 1000 company, you look at startups like AirBnB and Uber and get concerned that these and other companies will “eat your lunch” and change your entire industry with software and technology.

Which is why you see a huge spike (year over year) in the number of new corporate venture capital teams.

CB Insights Corporate Venture Capital Deals

CB Insights Corporate Venture Capital Deals

There are many tactics that larger companies are using to foster more innovation:

1. Starting offices in Silicon Valley, even if you are a mid-west retailer.

2. Opening a new innovation, analytics and venture funding organizations.

3. Partnering with startup accelerator programs to engage with early stage startups.

4. Starting your own accelerator program, even for a baseball team.

5. Announcing API’s that are available to startups to build applications on top of – even for government.

6. Running hackathons for Epilepsy to help learn about new ideas startup entrepreneurs come up with.

7. Partnering with your competitors to support startup innovations.

All of these and others, are a reaction to the extreme disruption that software, technology and mobile are causing to other larger, more established companies in all industries.

In talking to most of these Innovation officers, though I get a sense that they are “trying lots of things” to see what sticks.

What they are finding is that:

1. Silicon Valley is more expensive and hiring there is a big problem. Competing with Google, Facebook has many of those companies rethink that option.

2.  Innovation is now dispersed in China, India, Israel and other countries as well. Over 50% of the “unicorns” are from outside the United States.

3. Unless they go deeper to learn with the startups, they are unable to change the internal culture, which is where most of the work needs to happen.

Which leads them to India, particularly.

Many of the executives are keen to tap into the talent pool in India, but are concerned about high prices (what a surprise) and also attrition rates.

Most are trying to understand if they need to open Innovation and startup center’s in India instead of the valley.

So, for B2B, enterprise startups the next few years would be great with many of their target customers “coming to India” to source startup, instead of the startups that have to travel outside to get customers.

See and Do: A very simple approach to building user flow and mockups

As a non-developer founder at your technology startup, there’s one thing you can do more than anything else.

A plan to acquire, nurture and grow users (customers) with as little no money.

Sometimes, though you just need to develop a prototype or mockup, which you can show to potential customers, and drawing it on your mind or writing it with words wont suffice.

In the 5 steps to building your own SaaS application, I outlined the list of things you need to do before you start the coding. After you have developed the day in the life audit, you should be able to come up with the objective of your app and the pain point it solves.

The next part is to take that pain point and translate it into screens and flows.

Any “app” screen comprises of 2 of the most basic and important elements – information and actions.

What the user sees is “information”.

What the user can do is “action”.

There are other elements as well such as navigation, input elements, errors etc. but for now we will ignore them.

See and Do Information and Action User Flow

See and Do Information and Action User Flow

Once you have the idea that your user to see something and do something, then regardless of # of screens, you just have to keep outlining the see and do in an iterative fashion.

After an user clicks on your mobile app or comes to your website, then they will see the splash screen and then “setup an account” for example.

 

Top 3 things users want from your app

Example of the Top 3 things users want from your app

So the information is your splash screen logo and the login is the action.

Then based on the action you have to show the next screen and next set of actions.

You have to keep iterating the see and do until you reach the list of top 3 things your user wants from the application.

State of US Startup funding, growth and regional preferences: Mattermark

Thought I should share this presentation about the state of financing and growth at early stage startups, Q2 2015 from Mattermark.

I have not done the analysis yet, but worth a review before I dig into the data.

One thing stood out.

There were more non venture backed IPO’s than those that were funded by investors. Food for thought.

Fewer Venture Backed IPOs than Non Investor Funded

Fewer Venture Backed IPOs than Non Investor Funded 

 

The #napkinStage of a company is the most fun

Over the last 15 years working with startups and entrepreneurs, I have finally figured out where I can add the most value and have the most fun as well.

I call that the “napkin stage” of the startup.

Napkin Stage Startup

Napkin Stage Startup

There are 3 most important reasons why I love the stage:

1. There are no bad ideas and no bad markets. They are all based on experiences and personal opinions. Which means I learn a lot of new things. I love learning about markets, sales growth and building scalable marketing channels, but after a while it gets to be more of the same.

2. If the idea is simple enough that you can express it on a napkin, instead of using a PowerPoint slide or need a complete prototype for someone to get it, then I get excited about the possibilities.

3. Entrepreneurs are most excited when they dont have to deal with hiring problems, marketing challenges, customer churn, etc. So, I get to work with them when there’s sunshine and roses all around. They have nothing but optimism at this stage.

There are challenges as well.

1. 90% of the ideas never “take off”. The market is too small, the customers dont need the product or the value is very limited.

2. The idea maze leads to a lot of churn, and many back of the napkin ideas really are a big waste of time.

3. Teams pivot constantly, are never settled and sometimes will change their mind to pursue a “job” if the idea is not appealing enough

I believe there are 5 most important things I bring to the table at this stage:

1. Customer development and validation. Getting early customer validation by talking to 10+ people and understanding the “real problem” excites me a lot. I have a decent enough network to ensure that I can call on 10 folks and get to understand any market in technology enough to understand if there are opportunities.

2. Market research and knowledge. Understanding, analyzing and projecting market needs is something I have enough experience with, and have done it for long that I really enjoy both the top-down and bottom’s up analysis of the markets and segmenting the customers.

3. Helping build your team, or finding a cofounder. Over the last 15 years, I have helped 19 startup founders find early (#1 or #2) employees, and about 11 founders find their cofounder. I love putting people together who I think might work well together and complement each other’s skills.

4. Build an early prototype, mockups or alpha version of the product. That’s the true use of the napkin these days anyway. I enjoy this the most. Reducing complexity and figuring out “Enough” to get by for a MVP is the most enjoyable experience in my mind.

5. Coaching the entrepreneur on structure of the company, financing landscape and whether they need to raise VC funding or make it a lifestyle business instead (which I actually have no problem with at all).

So, I am thinking about how I can help, add value and enjoy the ride with the “earliest” of early stages of a company – The Napkin Stage.

The most compelling reason why you should join an accelerator

Over the last 10 years there has been a dramatic growth in accelerators. While incubators such as ideaLab (Bill Gross, Los Angeles, 1990’s) had existed during the previous bubble, the absolute number of new age accelerators has gone from zero to over 300 in the US alone and from 0 to over 1000 worldwide. At the same time while, the number of early stage (less than $2 Million and company < 2 years old) deals have gone up significantly as well.

Growth in Seed Round Financing

Growth in Seed Round Financing

The chart above from Benedict Evans shows the growth in seed rounds, which indicates that the number of early rounds have increased relative to $3-6 Million rounds.

At the same time, the average amount of money invested in early stage rounds is going down. That makes sense since it is cheaper to build an early stage company and “try to find a product market fit”

Size of Early Stage Rounds

Size of Early Stage Rounds

There are 2 charts missing from this deck. First, how many of these early stage deals are going through accelerators and what is the size of the deal for companies going through accelerators versus those that are not.

Fortunately, thanks to folks like CB Insights and Mattermark, we do have access to that data. I will upload the charts in a few hours / tomorrow since I am running late to my meeting this morning.

1. Accelerator funded companies make up 13% of the total number of seed funded companies, and have been steadily rising. Obviously from zero in 2005 to 13% of total seed funded deals in 2015.

2. Accelerator funded companies raise 20% more in the seed round than non-accelerator companies.

Finally anecdotal data from Microsoft accelerator companies over the last few years alone, I can infer that accelerator companies have 25% better survival rate than those that did not go to an accelerator after the first 2 years.

How did we get this information?

We got over 250 applicants in the first cohort (Sep 2012), 450+ in the second (Mar 2013), over 600 in the third (Aug 2013) and over 1000 in the fourth (Feb 2014) in India alone. Of these, we picked 10 in the first, 12 in the second, 13 and 15 in the third and fourth cohorts.

We then tracked the remaining companies. Of them 5, 3, 11 and 13 got into other accelerator programs such as GSF, Tlabs and Kyron.

Of the remaining startups, 31%, 14%, 22% and 12% have shutdown. That compares to 20%, 10%, 22% and 0% so far.

So, if you are part of an accelerator program, you are likely to get more money, survive for longer and likely to get funding versus not.

Those are the biggest reasons to join an accelerator.

The single most frequent mistake #entrepreneurs make during the #customer #development process

There are many assumptions we make about the product or the customer problem, which makes us develop solutions that may be really more complicated than required.

A friend and fellow entrepreneur I met on Friday was showing me a prototype (HML mock up with transitions, with some simple functions implemented) of this SaaS application. He had used a developer on hire at UpWork to develop the initial version. After speaking to and confirming the mockup (wireframes) with 10 different users he was off to develop and deliver the MVP. Overall he had spent about $8000 in design and development and had taken about 13 weeks to develop the MVP. Most of the time was spent back and forth with the design team for the HTML / CSS and the development team for confirming features and transitions.

Cognitive Biases Field Guide

Cognitive Biases Field Guide

Of the 13 weeks, his development team spent 2 weeks just implementing a sign up process, a user cancellation process, a payment process, a refund process, a login process, a password retrieval process, etc. Which he did not realize was the tax of developing a SaaS solution. Instead he took the 5 step approach to building a SaaS application and followed it religiously.

The critical mistake during customer development that most entrepreneurs make is to lead with the solution or product instead of spending time learning about the current solutions.

When he was showing it to potential customers, he found that most of them liked the product and said they’d use it and pay for it, if they could find value in 2-3 weeks. He was pretty happy given that most users were ready to pay for the product, which he did believe would solve a critical problem for them.

After developing the MVP and letting his users know about the product, he followed up by asking them to start to use the application. The first two days were great, with lots of feedback and improvements that they gave him about the product.

Then for the next 3 days there was radio silence. Even after his prodding and cajoling, most users were not using the application.

Instead of talking to users face to face, he instead decided to spend time with them (3 hours each user), shadowing them to understand why they were not using the application.

Turns out most of the users needed his product, but either A) did not remember it existed or B) were used to using their workaround – largely using a combination of email and cut and paste into Slack.

The biggest barrier to his adoption and usage was their existing process (although inefficient) was something they were used to and so were able to “optimize” it to make it quick and “fast” for their own usage. So much that they felt that using his product (which I can assure you would be vastly superior) would slow them down.

He then pivoted his product (not idea) to implement the one feature they all wanted as a Chrome plugin. Which worked like a charm.

He then had to remove the top 3 features and undo all the user login and management, infrastructure code and other remaining features, just to support the user behavior for their existing process.

The big takeaway for him was that when you have a hammer, everything seems like a nail.

The biggest takeaway for his wife (who is his cofounder) was not over engineer the solution.

The big takeaway for me was the failed customer development process. With all our biases (which all of us have) – we always tend to lead with the solution (“let me show you a demo”), instead of understanding the problem better to focus on delivering the one feature that matters, without all the bells and whistles.

Image From:  http://www.ritholtz.com/blog/2010/05/the-visual-guide-to-cognitive-biases/