Tag Archives: entrepreneurship

Top 5 tips on how to come up with milestones that are measurable for your startup

Most founders will come up with following variations of milestones when they get started with their company.

1. Ship beta version of the product by Dec

2. Raise $XXXK in funding

3. Get to $YY in revenue.

Unless there is a team that’s large enough to have each person take on ownership for each of the milestones, the founders are the ones that are responsible for them.

This means that there is little else you can do other than focus on these milestones.

Lets assume you have a cofounder and you split the roles into technical and business.

The technical person takes responsibility for the beta version and the business person for the funding and revenues.

Now a few months in, a new set of responsibilities come forward including managing your board, your mentors, talking to potential partners and others.

Your team has not expanded to take on the executive level challenges, so you still have the 2 cofounders taking on more.

Some of these new tasks are enjoyable – having conversations with partners or mentors for example, so you get “distracted” and the top 3 goals no longer get enough time. That’s when you realize you need a to-dont list.

A few weeks go by and you hopefully realize you are behind and try to catch up, this time removing the new tasks on your list and replacing them with items on the top 3 milestones.

The problem is getting to the new items is tough until you have enough folks on the team who can take on the high level, cross functional priorities.

Here are the top 5 tips I have learned to come up with milestones that you can manage. You may have heard about SMART goals, so I am going to skip that portion and assume you already do that.

1.One person per milestone. You cannot have joint owners for a milestone. Even if you and your co founder are “two peas in a pod” and “complete each others sentences”, have only one person assigned to each milestone. You will achieve greater accountability that way.

2. One milestone per person. If you have more than one milestone assigned to a person, reduce the number of milestones. Obviously if you are a solo founder, that means work on one thing at a time until you have a management team to help you take tasks off the plate.

3.  Milestones cannot be overloaded. Milestones need to be specific enough for one area of work. If your milestone reads “raise a seed round and ship version 1 of the product”, that’s 2 different milestones with responsibilities for 2 different people.

4. Milestones need to have a specific date, and be reviewed weekly. To track your progress, I have found that a weekly review works better than daily or monthly. During the weekly review, you need to understand the tasks and projects that make up the milestone and understand where the blockers are with an “plan B” for any blocker.

5. The owner of the milestone needs to have cross-functional authority. You may have silo functional ownership of roles but most milestones, if they are important have cross- functional impact. So if you need to ship a beta version of the product, the owner of the milestone may need to get customer access from another person and market data from a 3rd person. Even if they are peer’s for the success of the milestone, the owner needs to have full authority to help get the resources to get the milestone done on time. This ensures that even if you have to transition from a role of control to a role of influence, you still have the ability to execute on the milestone.

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Everything I learned about entrepreneurship, my mother knew already

My mom

Happy mother’s day. I still miss my mom. She passed away a couple of years ago. Most everything I learned about entrepreneurship over the year’s she knew already and tried to tell me but, I had to learn it on my own, making my own mistakes. Here are the 5 things I learned from her.

1. Have a bias for action: My mom was not one who would talk too much when you needed help or if you needed to get something done. She’d lead by action and focus on “doing” not saying. Her actions truly spoke much louder than her words. When you are working on your startup, it is likely you will have advisers, board members, investors and mentors who will provide you will all the advice you need. The best advisers have a bias for action.

2. Be helpful and give generously: Before “Pay it forward” was a big deal, my mom would practice it. I follow a similar but more selfish approach to paying it forward – Dig your well before you are thirsty. My mom would help others, without expecting anything in return. Do that before you start your company and it helps you when you build your startup. Take as many chances to help others as you build your startup – if you have some time to help, dont pass up the opportunity. Whether it is to help a fellow entrepreneur recruit, critique their website or help the trouble shoot a problem with their technology. It will come back twice as fast and return you twice as much.

3. Your attitude matters more than your state of being: My mom’s attitude was “always sunny”. She would carry the weather with her. Not in a way that made you think things were not difficult, but she’d never get you down because she was in a troubled spot. Her attitude was one where she’d focus her energy, when she was down towards making others feel better. She’d remind me that most people will remember how you helped them feel when they were down.

“I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” - May Angelou

 

4. Focus on things under your control: My mom would obsess over the salt in the sambar, the right sized cuts on the okra and the temperature of the rice before she served it. She would focus on things she felt were under her control and many times the little things. As an entrepreneur, I have found that even if you set the vision and mission, the strategy and plan right, if you dont execute the small things well, you will do poorly. If you worry more about the competition than your own product direction, you will do badly.

5. Turn your biggest challenges into opportunities: My mom’s attitude towards adversity was enlightening. Although her first instinct was to run from it, she would tell herself that it was going to be better because of her bias towards action. She could find ways to optimize the way to make the biggest challenges into her opportunity to make a difference. As an entrepreneur, you will find customer development challenges, hiring challenges, fund raising challenges, etc. The best way to overcome these is to find a way to accept the challenge and brainstorm to execute the plans you lay out toward eliminating them.

If you have a mom, you should call her today (as often as you can every day) and tell her how much you love her, and thank her for bringing you to this world. I did not do that enough, hopefully you can learn from my mistake.

Counter Intuitive: To have a successful customer development process startups should qualify out prospects

There are many counter intuitive things that happen during a startup’s life. Many have been out there already – a) initially do things that dont scale b) focus on culture more than skills when recruiting, etc.

When I was in sales early on, I used to get this advice from my manager all the time – the objective initially was to qualify out customers.

That seemed rather bizarre. The whole objective of customer discovery is to find the right customers for your product. Or did we all get it wrong?

Turns out before customer discovery, there is actually a problem discovery step.

Before you find the customers for the problem you are trying to solve, you are trying to find out if the problem really exists.

There are many contours of the problem, and one of the best people I have seen articulate this is Manu Kumar of K9 ventures – he talks about Frequency, Density and Pain

To find a problem worth solving these 3 criteria are important.

So when you do find a problem, your next step is to find the contours of the problem along these dimensions. Are potential customers having this problem, how much of a pain it is and how often is this a problem?

Now the hard part of customer development and qualifying potential problems is that we all have cognitive biases which makes us want to fall in love with our idea. Instead, the best way is to try and find ways that you should not do this (idea) versus something else.

This is why I maintain a to-dont list. (pdf) Apply that to your problem discovery process.

The entire goal of customer development (after problem discovery) is to ensure that you only get those customers who have the 3 qualifying criteria of frequency, pain and density.

You will find initially that to make the problem “solvable”, you will need to focus on one feature or one part of the problem which is the “most painful”. Your potential customers are willing to sacrifice scale, failure, lack of bells and whistles, etc.  because it solves the one piece of the problem which is the most excruciating.

Deciding which is the most excruciating part of the problem is hard and tricky. You will get many head fakes from many of the people you talk to who could be potential customers.

If you are an introvert and don’t like talking to new people (which is most of us), then your initial customer development list is relegated to colleagues, friends, family and acquaintances.

Most of them don’t like to disappoint you, so even if your product is not solving the problem or not solving the real problem they will likely say things to ensure you are not discouraged. Which leads to you thinking that you are actually solving a real problem.

Which comes back to customer discovery and the goal of meeting every potential customer – it should be to qualify them out as a potential early user. The problem you are trying to solve may not be as relevant, as painful, as intense or as immediate as others.

You want to qualify them out. Early, often, quickly and constantly.

That’s very counter intuitive.

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.

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.

Yahoo’s Marissa Mayer is redefining the future of tech careers: #startups #entrepreneurs

I think of careers as a set of 3 phases of 12-15 years each. From 21 to 36 you are in the rapid learning phase, from 36 to 51 you are directing and from 51 to 66 you are guiding. These are broad brushstrokes. I am going to focus on the first “trimester” of your career in this post.

Why 12-15 years? Generally speaking, it takes most people 2 years to get a handle on anything meaningful (build a network, understand how things work), then two years to master it, and a year to start being in “the zone”. Boredom hits usually at the end of the “zone” when the juices just dont flow doing the same thing for 5 years. I am going to call this 5 year period as “doing a (one) job”.

Then most people tweak their role or go for a dramatic change in their “job” after 5 years. During the younger years most people I know are eager to learn, discover and grow their knowledge. So, they go through 3 sets of 5 year periods or “jobs”.

For most people the age of 35 (or in other cases 40) typically becomes a “mid-life crisis” point. 15 years of working can do this to anyone. That’s when a “career” change is explored.

I get about 5-7 emails and requests for calls / discussions with mid-career executives each week who want to brainstorm and get my thoughts on their career.

After the obligatory, landscape review, many realize there are few options for those who have achieved a lot by 35 – they are VP’s, Directors, Managing directors and suddenly they realize it is going to be one long haul after this.

Most folks fall into 3 buckets at this point.

1. Some decide they like “mentoring” younger people and continue to find a challenge to help others within their company grow and thrive. These folks have made enough money but not enough to leave the luxuries that their position offers.

2. Others decide they need a hobby (or want to follow their “true passion”) that will keep them occupied because work tends to be on cruise control. Many take up teaching as a side profession since they believe they have learned enough to share.

3. Still others want to venture out on their own. Having heard about entrepreneurship and always having a “bug” to startup, they usually come to seek my help on the choices and get some advice on their idea.

This is when the fun part starts.

When I present the stark reality of entrepreneurship (it is very hard, they will likely fail, though they will enjoy the ride and to build something awesome will take them over 5 years), there are 2 reactions.

The first person had not thought about it in this context and ends up understanding that they are not ready to take the risk and goes back to one of the two previous options before. They will usually say “I always wanted to start, but I kept pushing it out, since I was getting promotions, got married, had kids, school, mortgage, etc. Now it looks like it is too late”.

The second person realizes this, and understands that it is “now or never”.  The overwhelming dissatisfaction with their job pushes them to leave their high-paying, easy job to the unpredictable world of entrepreneurship. They end up taking a LOT more risk later in their career, which they can ill afford it, than when they are younger.

If you are an Indian or have many Indian friends, you will know a term that parents use (typically after they graduate) – “Settle down”.

I absolutely loathe that term.

“Settle down”.

What does that even mean? Actually I know what that means, but I guess I detest it so much, that when folks mention it, I get upset and “forget” the meaning.

Settling down is for ground coffee. You ask hyperactive kids, who have had a candy binge to, “settle down”.

Settle down to a 21-30 year old strikes me as the worst advice you can give.

[Side note: To my american friends, settle down means, get a steady job, buy a house, get married, have kids immediately, buy a car and go for Art of Living classes – all within the span of 10 years].

Why would anyone wish that on their children?

Here is what I think will happen in the next few decades.

Thanks to rapid “softwareization of work”, most people wont get a simple “middle class job” which pays well enough to “get married, buy a house and a car and have kids” all within 10 years.

Instead I think parents will have to start telling their college grads to take risks early. Jump into entrepreneurship right after college.

Why?

Simple.  Most roles at large companies will start to resemble small entrepreneurial team roles. We are already starting to see that in larger software companies and I think the pioneer of that model is –

Yahoo!

Yes, Yahoo!

That’s the future of careers and hiring. Check out their buying binge since Ms, Mayer has been the CEO.

I am positive that the impact Marissa Mayer will have is more on careers, hiring and the future of entrepreneurship than on advertising technology which is Yahoo’s business,

To all the CEO’s sitting on piles of cash and need to hire awesome teams – here is the playbook.

[Ed. That they have not produced any meaningful new products at Yahoo is not lost on me. Give them time. Innovation is never linear.]

So what does this have to do with careers?

Most parents for the next 10 years are better off telling their kids to start a company, be an entrepreneur and get acquired by someone like Yahoo. Here’s why:

Option 1: Be awesome at school, take on a $30K -$50K student loan when you graduate, then get a job – at Yahoo! – to get paid $60K / year as a starting salary.

Option 2: Start a company. If you succeed, sell it to a Yahoo-like company for $ Millions. If you fail, get acqui-hired by someone like Yahoo for $hundreds of thousands. If you fail miserably, get hired for at least 25% more than your peers who took option 1 straight out of school. Voila! You are ahead anyway.

Either way, option 2 is worth the risk.

Tell your kids to be an entrepreneur.

Settling down is for old geezers. By that time – the risk is clearly not worth it.

The reason why #startups fail in India is different from why they fail in #silicon valley

I read the interview with Steve Hogan yesterday about the reason for failed startups. Take a look at the #1 reason why startups fail according to him.

Hogan says, is that they’re sole founders without a partner. “That is the single biggest indicator of why they got in trouble,” he says, adding that it’s especially common for sole first-time founders to fail.

Sole founders.

#2 was lack of customer validation and #3 was “company ran out of time” – or money.

From our India data, I can tell you that among technology startups, solo founders make up less than 35% of the companies. We track now in our database about 15,000+ entities.

If you look at the reported closure rate, they are not significantly different from entities with multiple founders.

In fact in my own personal experience with 33 startups that I have closely observed in the last 12 months at the accelerator, the #1 reason for startups to close in India has been mis-alignment of founders.

Let me give you some examples that I am not sure are uniquely Indian, but occur in India a lot more than in the valley.

First was a team of founders working on a B2B marketplace.

Two founders we interviewed and accepted were related, but chose not to let us know about it. In the first 2 weeks at the accelerator, in multiple meetings they would often contradict each other’s views of their target customer’s pain point. One founder was a self-appointed “domain expert” and another was the “technical founder”.

The domain expert was an expert primarily because of the fact that she was not technical. She did not really have a background in the field, and neither was she all that experienced dealing with the potential customers. They had both stumbled into the problem while they were working in their previous jobs that were not related to their startup. After the first few weeks of multiple disagreements on the direction of the product, they chose to “keep their relationship intact” than to work on their startup.

Second is a team of strong technical founders.

Both these founders were among the smartest hackers I have met in India. Pound for pound they would be among the best developer teams you have ever worked with. They had worked with each other for over 5 years at a large MNC and came highly recommended. Their pedigree was excellent as well.

The problem they were addressing was real and fairly technical, and you were compelled to go with the team just given their background and the problem they were solving. The trouble was their answer to every customer problem was build more code. They were loathe to talk to real customers and after multiple fits and starts decided to split a few months ago. They still remain friends, but chose not to work on their startup.

Third was a strong team of founders, who had worked together for a year at another project.

They were also folks with excellent backgrounds, great Ivy league college degrees and were solving a real problem that many consumers had in India.

After a year of working together, building what I considered a good team of 5-10 folks and an alpha, then beta product, they chose to go separate ways. In discussions with both founders after the split, each blamed the other for not “delivering”. One person was the designated CTO and the other was CEO and chief sales guy. They did close a round of funding, but the product went through multiple fits and starts. The problem they were solving was real and even I was an early user of the product.

In all three cases, I found that having the co-founder was the big part of the problem.

Lack of communication, inability to stick through tough times and different visions for the company / product were the biggest causes for failure.

I’d like to understand from you what about our culture, our maturity as a startup republic and our progress with technology makes these problems more prominent in India.