No, you don’t need an app

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App Store iconsIt seems like everyone who’s starting a business nowadays wants an app. They want to go “mobile first” and launch an app – maybe just on one platform too. Because, you know, thats how you launch a ‘lean startup’ right?

“I want it to be like Uber crossed with AirBnB” or “the way instagram launched on only one platform…” If you’re thinking about your app in this way, you’re doing it all wrong.

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Startups need a problem, not a solution

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If you have an awesome idea for a new startup, stop. Write down your solution, put it away and start by identifying the problem that you’re trying to solve.

Contrary to popular wisdom to “Always focus on the solution not the problem” building a startup is not about knowing what you want to build up front. It’s about knowing what problem you want to solve and constantly evolving the solution to better fit that problem.

The surest way to fail at building a startup is to try and build a product. Chances are, no one is going to really want it and, like 1000’s of other really well designed & built products, it’ll be a dead end. Look no further than Google Wave, Minidisks (MD’s), Microsofts WebTV or  Facebook Home: They’re some of the most popular, highly funded failures that overlooked a need for the customer. They were great concepts and products, but they didn’t originate from a customer need.

What you need to focus on is the problem that you’re solving. 

The difference is that when you focus on the problem, it frees you up to constantly test and improve your solution to better fit your customers. They’ll help guide you to build a product that people actually want and in doing so massively improve your odds of success.

If you focus on the problem (getting from A to B) there may be many simpler ways to solve it. If it’s a big enough problem, even a basic solution will take off. *

By trying to approach the problem with a fixed solution in mind, you look for evidence that supports it. You have a hammer and everything looks like a nail. As such, you’ll find yourself going down a certain path without actually ever validating that it’s the best one, or continue to build out features as customers don’t want it *yet*. The worst thing you can do at this point is raise lots of money to build your solution as it’s only going to delay the fail and be infinitely more painful further down the line.

The best way to build a solution is to go to your customers with a problem and ask them how they’d like it solved. “What about if you had this”, or “would they prefer if they had that”. Look at how they’re currently solving it (and I hope they are if its a problem) and build out an offering from their feedback. Thats when you build an MVP – the absolute minimum that you can do that will solve your customers problem (at least in a small way).

By focussing on the problem it helps you:

  1. Continually evolve your solution to be a better fit. This should continue as you grow.
  2. Focus on your customer and getting feedback. “How can you solve it better?”
  3. Find much more innovative solutions by asking “what if…”
  4. Find cheaper ways to test your idea. Everyone wants to build an app/website/device to solve a problem. Most times, if it’s a big problem, you can test it by solving it manually and seeing if people want it.

So next time you think up an awesome gadget / service / device / thingy-ma-jig thats going to change the world, stop. Focus on the problem and rather build something really useful that customers are telling you they want. ‘Cause thats how you build awesome things.

 

*Image credit: http://fastmonkeys.files.wordpress.com/2014/06/howtobuildmvp.gif?w=500

The value disconnect

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Don't get caught by this!When you’re looking at starting a business, the one thing that you need to be very careful of is who has control of whether you succeed or fail. One of the most common (and most fatal) flaws in a startup business model is when they don’t control the value that they provide – and as such aren’t in control of their futures. This is surprisingly common!

TEST: Any business that cannot provide it’s primary value to only one customer runs this risk.

You’re guilty of this where you are dependent on someone else providing information, a service, a deal, opportunity or product. Any time that you cannot control the value that you are selling to your customer. This (seemingly obviously) poses a difficulty when trying to find a way to make money. Continue reading

So you’ve got a startup idea. Now what?

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I come across a number of people who have an idea and want to be entrepreneurs, but have no idea where to start. And most ideas remain just that, ideas. Knowing how to get to where you want to go is the part where the most ideas fall flat. Thats what this post is about: the steps you need to follow in turning your idea into a business. It’s not rocket science, but there is also no silver bullet. The steps below are just a guide where the details will depend on your idea, market and a whole bunch of other factors. This is just a place to start.  Continue reading

A small business is NOT a startup!

The phrase ‘startup’ has become very trendy and is heavily overused. With governments and incubators touting ‘startup support services’ and ‘growing the number of startups’. Everyone seems to think that any early stage business is a ‘startup’, which, in my opinion is very misleading. Most of the time what they’re talking about is a business starting up.

Every business needs to start somewhere and at some point it will be small. Does this mean that all small business are ‘startups’? NO!

Let me clarify. A ‘startup’ – in the sexy trendy sense – is a small business with high growth potential. They’re highly scalable and can be very profitable. Small business that remain small business or grow slowly into medium size businesses are not this. (i.e. just a business starting up) NOT a startup (in the sexy, Silicon Valley, big potential kinda way.

Venture capitalists, rapid IPOs, ‘overnight’ success stories only happen when you’re swinging for the fences and aiming for the sky. This is not the trajectory of normal businesses. No matter how you are funded, you must be thinking big to call yourself a startup.

There is nothing wrong with starting a normal small business, wether it’s a lifestyle business or not. But not distinguishing between one that has real potential and one that is just mediocre is a grave mistake. You have to approach the 2 totally differently in every way. Your strategies are totally different. And if you don’t distinguish what you’re aiming for well enough, you’re always going to do it badly.

Be careful taking advice on your startup

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Founders generally fall in the category of knowing enough to see an opportunity, but not enough to see the obstacles. Which is normal, as otherwise they wouldn’t start in the first place, but this means that they need to rely on a community of people to get feedback, guidance and to learn from others experiences.

I’ve had a couple of instances of late where entrepreneurs with very viable businesses are told that their idea is not feasible, not scaleable or not worth their while. It normally comes from a VC (or incubator). The advice is not wrong – possibly misplaced – but the one thing you need to be very aware of is the motivations and perspectives of the person giving you advice.
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Entrepreneurs are Artists

I’ve never really thought of myself as an overly creative type, more of a logical problem solver or realist. Having said that, I’d say that it’s more accurate to categorise entrepreneurs as artists than as businessmen.

The term “business”, brings to mind a corporate office, managers, suits and a hierarchal environment and structure. It’s the rat race. The political process called ‘the corporate ladder’ and it speaks to long repetitive hours of grind as you steadily move your way up.

Entrepreneurship is different. Continue reading

Best location for startups? Cape Town or Jozi

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Which is a better environment to launch a startup? It’s a good question and to get a general idea, the best thing to do would be to look at international standards of how startup locations are measured. There was a recent report the the Startup Genome Project who listed the top 20 startup locations around the world. Cape Town and Johannesburg both made it into the top 40 (not 20) but I thought it would be interesting to measure them on the same metrics used in the report and see how they compare:

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How to find a domain and name for a startup

The hardest part about finding a name for a startup is finding a decent free domain. In most cases,  the available domains is one of the main determining factors for which name you choose. With an awesome domain normally going for over $10 000 US it’s no wonder why startups are looking for variations away from the norm. The global village doesn’t help much either…

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Why startups are hard: It’s all you.

One of the hardest things about a startup is that the buck stops with you.

With a very small team and a brand new product/service, there are no balls rolling and there are no pressing deadlines – until you create them. Clients not calling? Call them. No one coming to your website? Promote it more and get it out there.

It’s this responsibility that makes it so frikken hard to start a company. They call it the hustle. And all you do, all day, is hustle hustle hustle.

One of the most important things for a tech startup is to get your product in front of customers. (It’s that whole Product/Market fit thing that you’ve got to try and work out as quickly as possible.) If you don’t have a product yet, pitch the idea. See if you can get people to sign up or agree to terms then go and build it. Fast. Cold calling really sucks but it’s one of the best ways to start talking to people about their needs and what you can do to solve them.

This is one of the biggest hurdles to get over in the early days of a startup. It’s because you don’t have a benchmark and have nothing to compare what you should be doing to. It’s those awkward moments when you’re talking to a customer and have never had to pitch it in this way before. You’re making it up on the fly and everything you are saying is a test for the person’s reactions. Say one thing wrong, price it too high or mention the wrong features or benefits and this potential customer is about to become another failed lead.

One wrong step and you fail. Then you pick yourself up and try again. (Probably to fail again.) It’s this cycle that makes it hard. When it’s a slow moving corporate cycle, it’s even worse.

Keeping motivation through the first couple of months is a serious challenge. Don’t underestimate it. Just remember that it’s all up to you – and get on with it.
[Note: These are my thoughts. If you want the real deal, I recommend reading this post by Paul Graham on ‘What startups are really like.‘ or browse WWPGD.com]

Why idea’s (+NDA’s) are worth nothing

Knowledge is not power. If that were true, then universities and libraries would rule the world. It is only the application of knowledge that leads to power – that is why businesses rule the world.” – Napoleon Hill, Think and grow rich.

It is one of my favourite quotes, and one that I find myself repeating more often than not. Every time someone tells me about this fantastic idea they have all worked out, but haven’t even got a paying customer (or sometimes even a minimum violable product worked out) yet. Continue reading

oh, the places you’ll go!

So, I’ve recently left my position at BrandsEye to reach out on my own and start a new company with some friends. It’s always trying times, taking the leap, and someone very special to me shared this poem by Dr Seuss with me. Apparently it’s normally read at graduations – but I think it’s even more apt for the early days of a startup. I really enjoyed it, hope you do too…

Oh, the Places You’ll Go!
 – Dr. Seuss 

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What to (not) put on a CV for a tech startup

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It’s been a while since my last post but one of the things that’s been keeping me busy is hiring staff for the tech startup I work for.

I’ve been through almost 600 CVs for four different positions in the last few months and there are some definite trends on what to do – or not do. During the process I’ve been making notes of some of the more common ones, as I really think that it will be useful to people applying.

Disclaimer: I’m not an HR specialist. I work for a tech startup and all of my advice is tailored towards that. This is not true in all cases, but it is what I’ve found relevant in my case. Use at your own risk…

Ideal format:
There are many schools of thought on how long a CV should be.  I’d recommend a short 100 word paragraph in an intro email with a CV attached. (This depends on what they ask for, but is a pretty safe bet.) The CV should only be two pages. No more. And I don’t care what you’ve done, make it two at a max. Page 1 should be all your personal information, enough for me to gauge what type of person you are. Page 2 should be a summary of your work experience.  Pick the most important stuff.

Short and sweet.
I want to know two things:

  1. Will you fit into the culture (i.e. hard working, smart and fun?)
  2. Can you do the job (do you have enough of the right kind of experience?)

Give me just enough info to answer those and I’ll ask for more info in the interview – bring a long CV then if you want.

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Funding Secrets Series: VC funding

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The first thing the VC will do is look over your business plan and if they like it, invite you in for an interview. If you manage to get through that they will want to do a due diligence audit* on your business. They will generally only invest once you have proven customers and want to ramp up your market traction and grow to own a market. Remember that most VC companies are in communication with each other so make sure to address the issues of one before going to another. They will normally cross check with other VC’s before investing.
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Funding Secrets Series: Tips and Resources

This is the Tips and Resources section of my Funding Secrets Series.

Tips:

– Fund the business as much as you can by yourself for as long as you can. Try to give as little away to investors as possible, but don’t be too cheap on giving it to people working on the business through an equity pool.

– Remember that every round of equity funding that you get will decrease your piece of the pie. Every round that you issue new stock to the new investors, the amount of stock that you hold becomes a smaller percentage of a larger pie.

– Do your best to meet the next mile stone, before the funding runs out as bridge funding gets pricey…

– Be frugal with your spending!
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Funding Secrets Series: Appendix: VC Returns on Investment Example

Here is a hypothetical example of what a typical VC portfolio could look like and why they need to invest only when they can see a potential for a 10 – 20 times return on their investment. The numbers are overly simplified (see notes) to demonstrate the point of why the Big Profits have to be such a high multiple of the initial investment.
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Funding Secrets Series: Seed and Angel funding

In the beginning you should be bootstrapping the business off your own money or maybe from FFF (friends, family or fools) This should get you as far through the idea stage and finding a founder or two to help you get started. Normally once you get to the point where you need to build a prototype, or hopefully just afterwards, you’ll need a round of funding to give you a boost. This is where you go look for angel^ funding.

This ‘first’ round of funding is generally called your seed funding. The purpose of this funding is to setup the business (get office space, register, apply for patents, etc) and to get you to the next milestone or further. Try not to spend all this money at once as there are bound to be many unforeseen speed bumps and delays along the way and time is one of the most valuable things to a startup.
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Funding Secrets Series: Types of Funding

I spoke recently at a Nucleus Talks on Angel and VC investing to student entrepreneurs in Stellenbosch. One thing that I realised is how few people actually understand the different types of funding and when or how to go about getting it. Now there is no cut and dry method or simple answer but I’ll share the little that I know and hopefully you’ll find a couple of tips that you will find useful.* Firstly you need to identify between the different types of funding:
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What does Silicon Cape do…. exactly?

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This is a question that I was often asked in my role as coordinator at the Silicon Cape Initiative. But it’s the wrong question – you should be asking what is Silicon Cape trying to achieve. Let me explain…

The Silicon Cape Initiative was formed on the premise that South Africans are generally very bad at advertising what we have and what we can do.

When you look at the various countries that have tried to stimulate innovation and create an entrepreneurial ecosystem there are 2 distinct camps. The first (read Russia and China) have tried to do it through building infrastructure. The have built large techno parks and tried to entice entrepreneurs to fill them with innovative companies. In most cases this approach fails, normally only after massive amounts of capital has been spent.
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The 5 roles you need in a startup

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There are a couple of key roles to fill in an IT startup. I’ve recently recalled a great blog on “5 People you commonly find in a startup” by John Sharp in a couple of conversations as I feel that knowing what your strengths are and what sort of team you need around you can be key to business success. The 5 types are:

 

Visionary – The person who come up with the idea. The type of person that identifies the problem that the team will solve and the high level look at how to do it.
Wizard – This is the operations side of the startup, the person who works the magic and makes the impossible actually happen.
Wiseman – They’re your investor or Advisor. They bring money and experience into the mix.
Willing Slave – One of the most crucial roles is the person who can actually build the product. Outsource this at your peril.
Deal Maker – This is the guy who can sell the idea. They get investors onboard, find customers and sells to clients.

Now that doesn’t mean that every startup has to be 5 people, only that these 5 roles need to be covered. The Wizard can be the Dealmaker, or the Willing Slave or Wiseman the Visionary. Most times there are multiple hats worn by the same person.

I was recently looking at an opportunity with a friend of mine. It is a great idea with huge scope and lots of potential. I turned it down. Right from the beginning there was an obvious overlap in our skill sets. We were both Wizards, which led to big overlap in operations and decision time – something a startup just can’t afford.

Knowing where your skills fit in your startup is an absolute must. In the same breath, finding the right mix of people so that your startup covers all the bases is just as important. Especially if you are looking for funding.

I’m very happy in the knowledge that I’m about 60% Wizard and 40% Closer. Don’t ask me to come up with a world-changing idea, but give me one and I’ll draw you a road map. Where do your skills lie?

Why base Silicon Cape in Cape Town?

What does it take to recreate a Silicone Valley? This question has been looked at from various perspectives, but how does that relate to us? What will it take for Cape Town to build a strong entrepreneurship community and why is it preferred over Joburg? With this article I hope to re-ignite the discussion and to highlight some things that we, as South African entrepreneurs can use to build upon.

“The exciting thing is, all you need are the people. If you could attract a critical mass of nerds and investors to live somewhere, you could reproduce Silicon Valley. And both groups are highly mobile. They’ll go where life is good. So what makes a place good to them?” – PG

Here are a couple of factors that I perceive to be the most important things that the greater Cape Town area has going for it as far as attracting the types of people that you need for a startup environment:
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Can your hobbies make you millions?

What do Bill Gates, Sergey Brin, Richard Brandson and Steve Jobs have in common? Yes, they are all very rich and successful – they also all dropped out of school or college. But what is the reason for their success? Is it because they are drop-outs and being over educated is a restriction to success? As there are many college dropouts not nearly as successful, I think not.

Not having a formal qualification does put pressure on you to be more innovative, but I think that important thing that most people miss is that with all these successful guys that dropped out were moving onto something else. It was a side project, a dream, a hobby that they managed to make a business out of. Some other project in their life just became more important thatn getting a degree at that point.

Most successful people that I deal with are the types of people who have laods of projects on the go, or at least did before they dropped everthing else to focus on one specific project. When they werre at university they were involved in other societies, clubs, hobbies or businesses. Like Steve Woznaic who designed and built the entire Apple I and Apple II computers in one year… all while working a 9 to 5 job at HP. It was Sergy Brin’s hobby to “donload the whole internet” that lead to the PageRank script that was the foundation for Google’s search.

The fact that many wealthy people don’t have degrees has very little to do with the value of a degree or not. I believe it has way more to do with what they do in their spare time. Hobbies and side projects are far less constrained by the rules of society and are often far more out-of-the-box than the convential 9 to 5 job that you rely on. After all, the more side projects that you run the higher the chance that one of them might just work out.

So next time you meet someone interesting, instead of asking what they do for a living, ask them what they do in their spare time.

Inbound business model

I read a great book a little while ago, called Inbound Marketing, and it got me thinking. Where else is it relevant? How can you apply this to business? But first, the background theory…

Tradition marketing follows an Outbound marketing model where the company sends out the information of their product/service to potential customers in the hopes of making the sale. With the sale, the customer is given value and through use they create a relationship with your company. Hopefully this will lead them to come back. (All TV and radio ads, Flyers, newspaper ads etc)

Sale -> Value -> Relationship
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Young Word Rising [Book Review]

Saw a great book that recently came out, Young World Rising by Rob Salkowitz. Its on the new rise of the wave of new young entrepreneurs  and how they are bringing forth new changes to the global landscape. South Africa and Silicon Cape are one of the ‘New worlds’ in which this is happenning. Here is a piece taken from the facebook page in Rob’s own words:

In Young World Rising, I identify six hallmarks or characteristics unique to the next-generation entrepreneurial ventures I explored around the world. Young World entrepreneurs:

1. Blend social and commercial objectives
2. Creatively align public, private and NGO resources
3. Leverage communities and collaboration
4. Are well-adapted and sustainable
5. Embrace the globalization of the knowledge workforce
6. Solve systemic problems while meeting market needs.

In the next few days, I will be elaborating on each of these hallmarks. In the meantime, I am interested in hearing from young entrepreneurs and other interested folks: does this sound right? Does your business plan fit these criteria?

Sounds like some solid advice and is well researched. Its definitely made its way onto my “Must Read” list.