Getting to "yes" in a world of "no"…

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2013 Startup Manifesto

I Am An Entrepreneur

While they laughed at my ambition
the world around us changed.
They may not be ready for me,
but the world certainly is.

I am neither pirate nor cavalry,
neither saint nor sinner.
No: I am a surfer, alert and fast,
atop the wave that will wash them away.

I will build a tower ten miles tall,
where each brick is a customer.
Customer service is my trowel
and goodwill is my mortar.

2013 – bring it on!

Starting up in 2013…

 

build_your_own_death_ray_or_stop_moaning

Through 2012, you may well have seen a fair number of examples of UK entrepreneurs ably demonstrating two key skills they apparently have in abundance:-

  1. Moaning how US startups are plainly in a vast unsustainable funding bubble (but can we have some of that here, please?)
  2. Moaning how UK startups are plainly in a vast unsustainable non-funding lull (and why-oh-why can’t the government fix it?)

Yet as we move into 2013, both of these are ringing quite hollow. Unless you’re trying to get a refund on an unflattering top from a department store, moaning does not give you any kind of competitive advantage. Moreover, moaning about something that isn’t actually a problem is just pathetic.

For example, the real reason US startups are in a funding bubble is because (a) an unbelievable number of startups try to start up every year in the US, (b) US entrepreneurs are actually quite good at getting startups going, and (c) they genuinely try to create A+ startups with a real possibility of scale, for which ambitious VC-class investment is a sensible path. Contrastall  that with UK startups’ business plans, most of which seem to be based around C-grade social media hacks. Somewhat unpopularly, I would argue that it is UK entrepreneurs’ collective lack of ambition and vision that has made an effective seed-level VC sector pretty much untenable in the UK.

If you want to change this whole game, aim higher, go bigger, and astound the world.

But it is the non-funding lull moaning that makes me even more annoyed. Too many entrepreneurs assume that their only possible way to make a workable company is via a financial leg-up from someone else’s money. Yet the entire business landscape has changed: have they not noticed eBay, Amazon Marketplace, and a hundred other diverse routes to market that have opened up in every crack?

In fact, I would go so far as to say that a 2013 business plan that specifically relies on someone else’s money to make things happen is nothing short of dead in the water. Rather, a workable 2013 business plan says:

  1. Here’s how my company is making money right now in niche sector A
  2. Here’s the size of the much, much larger market B it can address if you come on board with £300K
  3. Let’s get to it…

The most damaging thing about seeking funding is when it absorbs so much of your time and effort that it ends up costing you your company. So don’t do that: the sexiest thing you can put on a whiteboard is ongoing sales. Prove that you can both sell and deliver, and people will want in, big-time. Make that your goal in 2013, OK? 🙂

The Unwritten Lean Gospel…

To my eyes, the whole Lean Startup thing seems to be little more than a nicely crafted piece of contemporary rhetoric, that sings an alluringly timely song engineers desperately want to believe is true… that through the magic of fast iteration, their crappy little startup can prosper despite knowing nothing about positioning, sales, marketing, buyer psychology, or indeed human nature.

Essentially, Ries sells a kind of techno-pipedream that Yes You Too can build a purist company that doesn’t need to sully its hands with all the grungy, old-fashioned business kruft (that every other business book ever insists you need to have as some kind of grounding), because by experimenting fast on eager early customers, you (supposedly) get to find out what works.

Put it all like that, it should be clear that this fetishizes incrementalism (i.e. ‘if made rapidly enough, many small steps can carry you far‘), and is in fact the opposite of (software and hardware) engineering as a discipline, sales as a discipline, marketing as a discipline, pretty much anything as a discipline… it’s anti-every-other-kind-of-knowledge. Put “The Lean Startup” on your bookshelf, and you should surely be able to throw all your other books away. Beguiling, isn’t it?

However, there are many other foolishly impractical messages I suspect The Lean Startup implicitly preaches, but which may not be immediately obvious:-

1. Hope big, dream small.

2. Fail fast, learn little.

3. Self-fund till you die. (For who on earth has a Sugar Daddy rich enough to fund such open-ended stuff?)

4. Alienate lots of early customers by testing lots of rubbishy iterations on them.

5. Don’t trust anybody’s goddarn theory, just iterate instead.

6. If you can’t A-B test if something works, don’t do it.

7. Customers are test subjects for your experiments, not people you have business relationships with.

8. Keep on iterating while the market changes around you (invalidating all your earlier tests).

9. It’s not a product business or a service business, it’s an iterating business.

10. Oh, and don’t forget to A-B test people on your team, that’d be a great way of [mis]managing people, right?

Have I missed any?

“These boots are made for walking”…

The longer I work in the world of startups, the more I realise that most revolutionary inventions have to be delivered to their markets wrapped up in equally radical business models for them to succeed at scale. And the reasons for this are many and varied:-

  • If your new widget is half the price of existing widgets, by putting it on the same shelves as them you run the risk of its being seen as a me-too cheap Chinese clone quality-killer (by end-users) or a make-less-per-sale-on-that margin-killer (by retailers). Yet by finding a different route to market to your competitors that your new widget’s dramatically lower price-point enables (say, corner shops, service stations, mobile phone shops, etc), you can get to walk all over your competition.
  • If your new widget has 2x or 3x the working life of existing widgets, by putting it on the same shelves as them you run the risk of its being seen as a mystifying product variant (by end-users) or a sale-complexifying variant (by retailers). Yet if you instead give your new widgets away and live handsomely off the super-long support contracts, you can get to walk all over your competition.
  • If your new widget is 2x or 3x as powerful as existing widgets, by putting it on the same shelves as them you run the risk of being seen as a “Rolls Royce” (by end-users who are looking for Mondeos) or as an overfancy version of what’s already on sale (by retailers). Yet if you find a real-world application that that extra power suddenly makes possible and can get it to people’s attentions by other retail channels, you can get to walk all over your competition.
  • If your new widget is far, far more configurable than existing widgets, by putting it on the same shelves as them you run the risk of being seen as a confusing product variant (by customers) or an unnecessary support headache (by retailers). Yet if you build an online scripting forum and active user community around it, you can build a direct connection with your market and so walk around the the need for retailers at all.

Hence if you are running an innovative startup, remember that on its own your invention is no more than a pair of shoes. But if you find a route to market & a business model that actively reflects the key difference they have over the competition, then they become a pair of boots that can walk all over your competition. Hence any time you need some direction, let Nancy Sinatra (or Jessica Simpson, if you really insist, *sigh*) show you the right way forward for your young business:

“These boots are made for walking, and that’s just what they’ll do
One of these days these boots are gonna walk all over you.”

Building a startup is like building a boat…

out of flotsam, while swimming alone in the middle of a vast ocean. By the way, it’s cold out there, really cold.

So, how are you going to do it? Well… government grants are leaky lifebelts that help keep you afloat (but only for a short while). Oh, I should mention that to get them, you have to swim 50 miles and back, leaving your part-constructed boat behind you to sink ignominiously beneath the waves. EU grants are the same, except that you need to swim 1000 miles while also collaborating with people building their own sinking boats in different countries. then you’ll probably be turned down anyway.

You’re not swimming completely alone out there, though. Business angels enjoy motoring past in their speedboats to see how your funny little tech construction project is going. Even so, they rarely bring along anything of use with them: most are content to have a chat with you over a cup of (salt watery) tea, and to share their reminiscences about how difficult they found it to build their own first boat way back when (at a time when, curiously enough, banks were happy to lend to boat-builders). Then off they motor, leaving you freezing in the water, scavenging nails to fix passing planks together.

Occasionally a VC cruise liner will sashay past you, sending bloggy ripples that confuse and annoy. Their captains wave, but never actually stop: though you can see all the waste food being chucked over the side, seagulls get it all before you can reach it. And although it’s sometimes nice to dream about building your boat in a shipyard (the way that VCs claim to do), sadly that’s not an option for you either.

Coaches tell you how to dive deeper to find the nails you need: while mentors tell you which planks they’d choose to build with. But even with all their “help”, your best case startup scenario will almost always be a leaking,hacked-together contraption that is barely sound enough to keep itself afloat, never mind keep you afloat as well.

Errr…. do you still want to be an entrepreneur?

* * * * * * * * * *

OK, I completely accept that all human endeavour is, to a very large degree, no more than an attempt to create small bubbles of order in a vast ocean of entropy and doubt: and that in those terms, starting up a company is no different to any other exercise. But all the same, what is the sense of having such a complicated network of non-funding funders, inept financial gatekeepers and pointless service providers when so few young tech companies ever manage to start up both successfully and scalably?

Has nobody actually noticed how unbelievably cold it is out there? Even if you are an experienced ice diver, you may not arrive in port…

How to pitch your startup…

The #1 way to pitch your startup is with a high-speed presentation, that…

  • can use numbers to get its point across, but is not actually a numerical argument.
  • is a selling aid, not a business-school case study
  • is a glossy brochure made flesh, filled with richly-saturated emotional appeals to the audience.

And just in case you haven’t worked it out already, the brochure is you and the audience is potential investors.

But before you try out your pitch on anybody who might conceivably be able to respond, write it all up in a shiny four-page brochure format. If you find yourself unable to do that, be very afraid (because it probably means you’re lacking some important sales skills) – and then immediately find someone who can do it for you. And in fact, lots of people can – the hardest bit is admitting that you can’t do it, and that you need their help.

So, if you find that this is the case, don’t be proud, be effective – see what you’re missing and find a way to beg, borrow or buy it in.

In fact, there are three big reasons for doing this:

  1. Many potential investors respond better to shiny glossy material in their hand than spoken stuff in their ear
  2. Many people you pitch to will pass the material on to other investors they know (for a whole variety of reasons)
  3. Finding effective soundbites for your brochure will help you do the same for your pitch presentation

But what are you actually trying to say? Actually, a pitch says nothing more than:-

This is the world I see, and it looks totally money.

Overall, if you’re saying much more than this in a pitch, you’re probably trying too hard. The point of a pitch is to find people who agree with you that what you see is indeed “totally money“, i.e. a great big juicy, succulent, mouth-watering opportunity for everyone involved to get rich several times over. So, work out what the top three reasons why investing in your startup is a fantastic, solid-gold, never-to-happen-again, buy-in-or-kick-yourself-for-the-next-decade good idea, and spend whatever time you have getting those three reasons across to your audience.

A pitch is not the place for carefully-constructed, highly-detailed rebuttals overcoming various sales objections you’ve encountered along the way, it is a place for enthusiasm and excitement. In modern movie terms, it is a Call To Adventure in the Hero Investor’s Journey: given that the second stage is called “Refusal Of The Call”, it is your job to find ways of dragging people past that Refusal by connecting them up with the gift of Supernatural Aid that propels them into your adventure. For example, this might be an article in the Financial Times bigging up your sector, or a shared LinkedIn connection that strongly endorses you at precisely the right moment.

However, what is arguably most important in a pitch is the way that you say all this. If you have never sold anything before in your life before trying to sell shares in your startup, be afraid. Few salesmen are particularly good at selling big-ticket items – and, let’s face it, a startup is (even at this early stage in its lifetime) a very big ticket item, making it a very hard sell.

So if you’re an entrepreneur trying to do this, look over at your bookshelf. If what you see says “Agile Development With Rails (4th Edition)”, “Linux Device Drivers, Third Edition”, “Programming Perl” or (dare I say it) “The Lean Startup”, I can only suggest that you consider broadening your repertoire… and fast. Say, “Close Every Sale” by Joe Girard, “Secrets of Closing the Sale” by Zig Ziglar, “Presentation Zen” by Garr Reynolds, “Mastering the Complex Sale” by Jeff Thull… you get the idea.

Put another way, you wouldn’t put yourself in the seat of an F1 car without a lot of training beforehand… and standing in front of a room of investors is a high-octane context where the stakes are high, one where people in the audience expect to be sold to vigorously (and to resist just as vigorously). And you’re just going to wing it, like you’re talking to some mates down the pub? Riiiiiight.

The big modern mythology that has polluted this whole discourse is that “some ideas are so powerful that they sell themselves“. Well… it may indeed be the case that this is true for one or two ideas in a generation. But please take this on board: it’s not personal, but the chances that your (say) urban social media hack falls into that extraordinarily elect group is basically at lottery-like low levels of probability. But you aren’t Mark Zuckerberg, your startup isn’t Facebook, so trying to achieve your success by emulating his outlier success is hopefulness bordering on idiocy. Let’s face it: you’re probably going to have to take a slightly different route.

If you’re an entrepreneur, 95% of what you do is now sales. If you don’t like that, tough luck – at some stage, you’re going to have to get over it, and get with the programme. Learn from people who really know how to sell. And then sell like you really mean it – because you do.

Influence, sway, pressure, persuasion, control…

For ever and a day, startups have written business plans – miserable, useless, charm-free slabs of cruft that serve no obvious purpose other than killing trees. Presuming that you did want to kill trees, of course (though personally, I try not to).

And so it should be no great surprise that I hate startup business plans, I really do. And though I have a hundred or more different reasons why this should be, they all boil down to one useless little lie entrepreneurs try to foist upon an disbelieving world: that they can control stuff in the outside world.

But they can’t – in fact, most entrepreneurs can barely control the stuff they’re building and/or doing internally, never mind anything roaming wild far beyond their work desk. Control falls in the realm of persuasion and politics (not in the sense of party politics, but of business politics), and we must have hundreds of ways to describe its shaded variants – influence, sway, pressure, give, push, shove, edge, nudge, wink, pull, yield, desire, want, need, hypnotize, beg, plead, offer, tempt, horsetrade, negotiate, and so forth. If you can’t outright control your customers’ behaviour, how do you plan to influence them? How do you plan to tempt them? How do you plan to sway them? These are things you really need to be honest about (both to potential investors and to yourself), because if you do somehow get funded (despite your rubbish business plan) these form the meat of what you’ll actually be doing for the next five years.

Yet how many times do you see any of these ‘shaded control’ words in a business plan in any way that that goes beyond mere buzzword bingo? Hardly ever, I’ll guess, even though these are arguably the key activities and forces which determine startup success and failure more than anything else. Given that (as I’ve long said) building a startup is a lot like trying to start a social revolution, it should be clear that these activities are in much the same way the basic political tools of the social revolutionary. Come the revolution, all your industry incumbents are like totally dead, mate.

Digging a little bit deeper, the underlying problem here is the (sadly widespread) misconception among tech entrepreneurs that they somehow wouldn’t need to engage with business politics because ‘people’ (some mythical perfect audience that’s never actually specified) will telepathically ‘get’ what they’re doing and start throwing gold coins the minute their crappy MVP website soft-launches in Guatemala. As if!

Recently, I’ve taken to saying that 90% of being an entrepreneur is sales, and that the phrase “tech entrepreneur” shouldn’t somehow fool you into thinking that tech is even 50% of what’s important. (At best, the “tech” part is 50% of the 10% that isn’t sales… i.e. 5%). But from writing all the above, I can see that what I’m reaching towards is more like this: that 90% of being an entrepreneur is business politics, of which sales is merely the most obvious manifestation.

So: while your pitch needs to be pure psychology (a passionate riff on hope, ambition, greed, and profit), your business plan should be pure politics. When will you start using shaded control words in your business plan? That’s almost certainly what it’s missing!