Tag Archives: startup

Startup Standup Startup

standup-iconsI’ve been coworking at a nearby town and a couple of us decided to try to help encourage each of us in our startups.

Being a startup junkie and an Agile Coach, I thought, “Why not a startup standup?” Each week we meet in person. There, each of us announces what they accomplished in the last week, what they’re planning in the next week, and what they’re number one problem is. No classes, no group-gropes, no fluff. Immediately after the ten-minute standup we can each help each other if one of us has an obstacle that we know about. Plus we can help each other position our work mentally in order to focus more on the right stuff and less on the wrong stuff.

So how to describe what we should be talking about?

I pulled down a couple PG essays, a blog on the Lean Startup concept, and some notes Derek Sivers made while reading the Lean Startup book. But heck, it was still too much verbiage. Put together, it was WAY too much to expect noobs without context to plough through. I decided to cut a bit. So here’s an effort to make a crash course in what you should know and talk about during a weekly report of your activities in a startup. I liberally edited for clarity and brevity.

1. What is a startup? (From PG’s 2012 essay)

Not every company is a startup. Millions of companies are started every year in the United States. Only a tiny fraction are startups. Startups are companies that make something people want that have the ability to scale rapidly. They may or may not involve technology.

For a company to grow really big, it must (a) make something lots of people want, and (b) reach and serve all those people. Barbershops are doing fine in the (a) department. Almost everyone needs their hair cut. The problem for a barbershop, as for any retail establishment, is (b). A barbershop serves customers in person, and few will travel far for a haircut. And even if they did the barbershop couldn’t accommodate them.

Writing software is a great way to solve (b), but you can still end up constrained in (a). If you write software to teach Tibetan to Hungarian speakers, you’ll be able to reach most of the people who want it, but there won’t be many of them. If you make software to teach English to Chinese speakers, however, you’re in startup territory.

Most businesses are tightly constrained in (a) or (b). The distinctive feature of successful startups is that they’re not.

 

2. Do you need a cool idea?

No, you do not.

3. What are you concentrating on and talking about while you are developing your startup? You are creating and testing value and growth hypothesis. A value hypothesis is a concrete way to determine what you are doing has value to your customer. A growth hypothesis is a concrete way to determine how you gain new customers. These are both measurable, and you have to have real results that indicate success or failure for your hypothesis. That means heavy, direct interaction with the people you are supposed to be making things that they want. More Lean Startup goodness from Sivers’ notes:

Startups are human institution designed to create new products and services under conditions of extreme uncertainty.

The stories in the magazines are lies: hard work and perseverance don’t lead to success. It’s the boring stuff that matters the most.

Startups exist to learn how to build a sustainable business. This learning can be validated scientifically by running frequent experiments.

The goal of a startup is to figure out the right thing to build – the thing customers want and will pay for – as quickly as possible.

Too many startup business plans look more like they are planning to launch a rocket ship than drive a car. They prescribe the steps to take and the results to expect in excruciating detail, and as in planning to launch a rocket, they are set up in such a way that even tiny errors in assumptions can lead to catastrophic outcomes.

The customers failed to materialize, the company had committed itself so completely that they could not adapt in time. They had “achieved failure” – successfully, faithfully, and rigorously executing a plan that turned out to have been utterly flawed.

Instead of making complex plans that are based on a lot of assumptions, you can make constant adjustments with a steering wheel called the Build-Measure-Learn feedback loop. Through this process of steering, we can learn when and if it’s time to make a sharp turn called a pivot or whether we should persevere along our current path.

Validated learning is the process of demonstrating empirically that a team has discovered valuable truths about a startup’s present and future business prospects. It is more concrete, more accurate, and faster than market forecasting or classical business planning.

Learning is the essential unit of progress for startups. The effort that is not absolutely necessary for learning what customers want can be eliminated. I call this validated learning because it is always demonstrated by positive improvements in the startup’s core metrics. As we’ve seen, it’s easy to kid yourself about what you think customers want. It’s also easy to learn things that are completely irrelevant. Thus, validated learning is backed up by empirical data collected from real customers.

Learn to see every startup in any industry as a grand experiment. The question is not “Can this product be built?” In the modern economy, almost any product that can be imagined can be built. The more pertinent questions are “Should this product be built?” and “Can we build a sustainable business around this set of products and services?” To answer those questions, we need a method for systematically breaking down a business plan into its component parts and testing each part empirically.

One of the most important lessons of the scientific method: if you cannot fail, you cannot learn.

A true experiment follows the scientific method. It begins with a clear hypothesis that makes predictions about what is supposed to happen. It then tests those predictions empirically. Just as scientific experimentation is informed by theory, startup experimentation is guided by the startup’s vision. The goal of every startup experiment is to discover how to build a sustainable business around that vision.

A minimum viable product (MVP) is simply the fastest way to get through the Build-Measure-Learn feedback loop with the minimum amount of effort. The goal of the MVP is to begin the process of learning. Its goal is to test fundamental business hypotheses.

Most entrepreneurs approach a question like this by building the product and then checking to see how customers react to it. I consider this to be exactly backward because it can lead to a lot of waste. First, if it turns out that we’re building something nobody wants, the whole exercise will be an avoidable expense of time and money. If customers won’t sign up for the free trial, they’ll never get to experience the amazing features that await them. Even if they do sign up, there are many other opportunities for waste. For example, how many features do we really need to include to appeal to early adopters? Every extra feature is a form of waste, and if we delay the test for these extra features, it comes with a tremendous potential cost in terms of learning and cycle time. The lesson of the MVP is that any additional work beyond what was required to start learning is waste, no matter how important it might have seemed at the time. [Which may include actually building anything at all]

(Dropbox:) To avoid the risk of waking up after years of development with a product nobody wanted, Drew did something unexpectedly easy: he made a video. The video is banal, a simple three-minute demonstration of the technology as it is meant to work. It was all he needed at first to test a value hypothesis. Many entrepreneurs refuse to spend any time in development at all until some initial value and growth hypotheses have been tested in the real world and they have real metrics from the tests. (Anecdotes, like “I showed it to twenty people and they liked it” are not real metrics)

MVP can seem like a dangerous branding risk. Easy solution: launch the MVP under a different brand name. Experiment under the radar and then do a public marketing launch once the product has proved itself with real customers.

Prepare for the fact that MVPs often result in bad news.

The solution to this dilemma is a commitment to iteration. You have to commit to a locked-in agreement – ahead of time – that no matter what comes of testing the MVP, you will not give up hope.

A startup’s job is to
(1) rigorously measure where it is right now, confronting the hard truths that assessment reveals, and then
(2) devise experiments to learn how to move the real numbers closer to the ideal reflected in the business plan.

The failure of the “launch it and see what happens” approach should now be evident: you will always succeed – in seeing what happens. Except in rare cases, the early results will be ambiguous, and you won’t know whether to pivot or persevere, whether to change direction or stay the course.

Entrepreneurs need to face their fears and be willing to fail, often in a public way. In fact, entrepreneurs who have a high profile, either because of personal fame or because they are operating as part of a famous brand, face an extreme version of this problem.

I recommend that every startup have a regular “pivot or persevere” meeting.

Remember that the rationale for building low-quality MVPs is that developing any features beyond what early adopters require is a form of waste. However, the logic of this takes you only so far. Once you have found success with early adopters, you want to sell to mainstream customers. Mainstream customers have different requirements and are much more demanding. A pivot is required.

Startups don’t starve; they drown.

Startups have to focus on the big experiments that lead to validated learning. The engines of growth framework helps them stay focused on the metrics that matter.

Companies using the sticky engine of growth track their attrition rate or churn rate very carefully. The churn rate is defined as the fraction of customers in any period who fail to remain engaged with the company’s product. The rules that govern the sticky engine of growth are pretty simple: if the rate of new customer acquisition exceeds the churn rate, the product will grow. The speed of growth is determined by what I call the rate of compounding, which is simply the natural growth rate minus the churn rate.

Focus needs to be on improving customer retention. This goes against the standard intuition in that if a company lacks growth, it should invest more in sales and marketing. This counterintuitive result is hard to infer from standard vanity metrics.

4. So formulating and reporting on hard metrics resulting from direct user contact that prove or disprove our value and growth hypotheses is what we should focus on. Once we do that, what are some common mistakes? (From PG’s 2005 essay)

  • Release Early. get a version 1 out fast, then improve it based on users’ reactions. By “release early” I don’t mean you should release something full of bugs, but that you should release something minimal.
  • Keep Pumping Out Features. I don’t mean, of course, that you should make your application ever more complex. By “feature” I mean one unit of hacking– one quantum of making users’ lives better. [Which should directly come from your hypotheses testing results]
  • Make Users Happy. There are two things you have to do to make people pause. The most important is to explain, as concisely as possible, what the hell your site is about. How often have you visited a site that seemed to assume you already knew what they did? The other thing I repeat is to give people everything you’ve got, right away. If you have something impressive, try to put it on the front page, because that’s the only one most visitors will see. Though indeed there’s a paradox here: the more you push the good stuff toward the front, the more likely visitors are to explore further.
  • Fear the Right Things. Most visible disasters are not so alarming as they seem. Disasters are normal in a startup: a founder quits, you discover a patent that covers what you’re doing, your servers keep crashing, you run into an insoluble technical problem, you have to change your name, a deal falls through– these are all par for the course. They won’t kill you unless you let them.And in any case, competitors are not the biggest threat. Way more startups hose themselves than get crushed by competitors. There are a lot of ways to do it, but the three main ones are internal disputes, inertia, and ignoring users. Each is, by itself, enough to kill you. But if I had to pick the worst, it would be ignoring users. If you want a recipe for a startup that’s going to die, here it is: a couple of founders who have some great idea they know everyone is going to love, and that’s what they’re going to build, no matter what.
  • Commitment Is a Self-Fulfilling Prophecy. I now have enough experience with startups to be able to say what the most important quality is in a startup founder, and it’s not what you might think. The most important quality in a startup founder is determination. Not intelligence– determination. [In fact, intelligence, like funding, can be counter-indicative of success.]Time after time VCs invest in startups founded by eminent professors. This may work in biotech, where a lot of startups simply commercialize existing research, but in software you want to invest in students, not professors. Microsoft, Yahoo, and Google were all founded by people who dropped out of school to do it. What students lack in experience they more than make up in dedication. You can lose quite a lot in the brains department and it won’t kill you. But lose even a little bit in the commitment department, and that will kill you very rapidly.
  • There Is Always Room. So for all practical purposes, there is no limit to the number of startups. Startups make wealth, which means they make things people want, and if there’s a limit on the number of things people want, we are nowhere near it. I still don’t even have a flying car.
  • Don’t Get Your Hopes Up. This is another one I’ve been repeating since long before Y Combinator. It was practically the corporate motto at Viaweb.Startup founders are naturally optimistic. They wouldn’t do it otherwise. But you should treat your optimism the way you’d treat the core of a nuclear reactor: as a source of power that’s also very dangerous. You have to build a shield around it, or it will fry you.The shielding of a reactor is not uniform; the reactor would be useless if it were. It’s pierced in a few places to let pipes in. An optimism shield has to be pierced too. I think the place to draw the line is between what you expect of yourself, and what you expect of other people. It’s ok to be optimistic about what you can do, but assume the worst about machines and other people.This is particularly necessary in a startup, because you tend to be pushing the limits of whatever you’re doing. So things don’t happen in the smooth, predictable way they do in the rest of the world. Things change suddenly, and usually for the worse.

    Shielding your optimism is nowhere more important than with deals. If your startup is doing a deal, just assume it’s not going to happen. The VCs who say they’re going to invest in you aren’t. The company that says they’re going to buy you isn’t. The big customer who wants to use your system in their whole company won’t. Then if things work out you can be pleasantly surprised.

    The reason I warn startups not to get their hopes up is not to save them from being disappointed when things fall through. It’s for a more practical reason: to prevent them from leaning their company against something that’s going to fall over, taking them with it.

  • Speed, not Money. The way I’ve described it, starting a startup sounds pretty stressful. It is. When I talk to the founders of the companies we’ve funded, they all say the same thing: I knew it would be hard, but I didn’t realize it would be this hard.So why do it? It would be worth enduring a lot of pain and stress to do something grand or heroic, but just to make money? Is making money really that important?No, not really. It seems ridiculous to me when people take business too seriously. I regard making money as a boring errand to be got out of the way as soon as possible. There is nothing grand or heroic about starting a startup per se.So no, there’s nothing particularly grand about making money. That’s not what makes startups worth the trouble. What’s important about startups is the speed. By compressing the dull but necessary task of making a living into the smallest possible time, you show respect for life, and there is something grand about that.

I could probably tighten this up a lot further given some more time, but it’s definitely decreased in size from the 50 pages it started out as!

Links/Sources:

So 1st, definition of a startup: http://www.paulgraham.com/growth.html

Here are some notes from the book Lean Startup. Good stuff in here. http://sivers.org/book/LeanStartup

Value Hypotheses. http://thesquigglyline.com/2012/03/05/creating-and-testing-a-leanstartup-value-hypothesis-creating-and-testing-a-leanstartup-value-hypothesis/

Finally, some common mistakes. http://www.paulgraham.com/startuplessons.html

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Everything I Knew About Startups Is Wrong

Here’s a short list of the things I thought at one point which aren’t true.

  • Startups are about high technology. False. Startups are about making things that people want that scale. Yes, technology can help you scale, but it’s not required
  • Startups are all about hard work. False. Yes, startups require hard work, but there is also a luck element too (This is the main reason most of the other things I knew to be true weren’t)
  • You have to have a cool idea to make a lot of money in a startup. False. “Business Porn” has been sold to me since I was a teenager. The idea that cool businesses are also are very dramatic — great idea, super-cool founders, overcoming impossible odds, having something special about them that nobody else has. Hollywood and the book industry love this stuff, and it’s ruined millions of people’s ideas of what startups and business is all about. Most all of the time, it’s just work. Sure, it’s work you love, but lose the dramatics and focus on execution. Ideas are useless. It’s all execution.
  • Venture Capitalists accept plans over the net. False. Ask some VCs when the last time they took a bet on something they got over the net. Like never. If anything, they keep these web forms open as a way to figure out who to ignore. if you fill one out, they know that you have no idea how funding works, so they can permanently forget about you.
  • VCs actually know what the hell they are doing. False. Stats show that your company is no more likely to be alive after five years if you take VC money or not. Sure, if you take the money you might grow. You’ll have to grow or die. Most exercises in funding are social in nature. That means you know somebody. Some professor you know refers you to a fund, or you go to Y Combinator and make the rounds. VCs make money based on what all the other VCs are thinking and doing. Raising money is a cross between a beauty and popularity contest.
  • If your friends like the idea it’s pretty good. False. Your friends are your friends because they say nice things to you. This is true whether they’re hackers or not. What you need is customers, not friends. Get as close to the customers as you can. Live with them. Find out what they think.
  • Facebook, Twitter, and Apple can help you grow. True and False. Yes, if you win the lottery (or spend a huge hunk of time learning how to social engineer a great product), these services will let you gain a lot more traction than just being out there on the web. But apps are a sucker’s game: for every one guy posting how he made 100K there’s a thousand guys making nothing. Even if you succeed wildly, you lose. The owner of your walled garden is just going to incorporate your app into their base product.
  • Most startup founders will not tell you how they succeeded. Mixed Bag. The technology startup sector is tremendously more open than any other sector, so it’s false. Startup founders are usually more than willing to go on at length about how they did it. The crazy part is that most all of it is so unique to their particular idea, team, location, and time period. You’ll be lucky to listen to ten hours and pull 2 ideas out. Are there folks who will look at many startups and try to generalize for you? Sure! Several dozen folks. All with books, or podcasts, or seminars, or classes. There’s an entire industry out there based on you wanting to have a startup. It will bleed you dry and you’ll be no closer than when you started. Don’t be the fat guy reading Running World buying 300-dollar sneakers.
  • Most successful  startup founders know how they succeeded. I do not believe this to be a true statement. They know what worked at that particular time. They probably know why it worked. But once again, this is so contextual and people are so prone to overgeneralizing that the signal-to-noise ratio here is massively lower than it appears on the surface.
  • The best way to vet an idea is to ask other successful startup founders. Here’s where we take what we already know — there’s a lot of luck involved, advice is highly contextual, and don’t ask your friends — and add it together. The worst thing you can do with an idea is listen to others. Take the same hour you would ask and receive advice and go ask a potential customer. Find somebody who might want what you’re making. Do they like it? Would they give you money for it? If the answer is “yes”, then it doesn’t matter what all the successful founders in the world tell you. If the answer is “no”, then ask why and get real feedback from the people you’re trying to help. People can stand around the internet water cooler all day long and speculate on what might work or not. But you’re not getting anywhere. Developing a startup is about learning from the marketplace. What are you doing to learn from where it matters?

ADD: You might think that this post is terribly pessimistic. It’s not meant to be. In fact, I think the social nature of hanging out with other founders might drive out huge benefits for the new entrepreneur. I’d just be careful confusing implicit knowledge and social contacts with explicit knowledge and tactics. We focus on the explicit, the tangible, the teachable. I don’t think that’s where the good stuff is.

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The Copycats at HackerNews

I’ve been a regular on a site called HackerNews for a few years now. It’s supposed to be a place where technical folks can talk startups, but mostly it’s kind of evolved into a sharing place for stuff that interests hackers.

But damn, the place has grown. From just a few hundred members, the site regularly gets hundreds of thousands of people viewing per day.

Over all this time I’ve noticed one clear trend: the rise of the copycat. Whatever you do or say that might be popular, there are hundreds if not thousands of people ready to jump on the bandwagon.

About 18 months ago I got tired of having to create lists of books for people to share on HN. Lots of new folks wanted to know what the best thing to read was. So I thought: why not make a site where we list only the best hacking books and people can create and share lists of them? hn-books.com was born.

But it wasn’t alone. I spoke about my intentions online while I was building it. Within the next month there were a dozen book sites spawned by the members of HackerNews.

I’m not saying it was my original idea, simply that once it was mentioned there were a zillion deployments of the same idea.

At first this was really cool. When the community discussed the need to have some app to strip websites of all the annoying visual garbage on them, wham! A bunch of different really cool sites do that now. (Which I think is awesome.)

But it has a dark side. The problem here is that while ideas are cheap, having 100 people all trying the same idea puts an extra amount of time pressure on an entrepreneur that normally isn’t there. Everything that is mentioned is copied a hundred or a thousand times. It’s as if you, a non-painter, decided to paint a picture of a house. So you set up your easel and get out your paints in front of a nice-looking house and start to puzzle over how to start. Suddenly 500 other people all arrive — some of them who actually know how to paint — and set up all around you. Not only is it annoying, it’s also distracting. And it can lead to a kind of herd mentality where everything is attempted, but nothing is really tried. Next week all the same noob painters are all setting up around a nice-looking barn. Repeat and rinse.

It’s gotten so bad that mentions of a specific business strategy on HN have become counter-indicative of the prospects of your successfully trying it out. The more directly-instructive an article was, the more folks that were going to go out and follow the directions, especially if there’s no cost involved.

It took me a while to figure this out. I finally understood it by observing what was not being done: founders were not giving specific details of their business model execution at the level where others could actually use it. So you’d get a great blog article about how some guy made his startup, and how awesome it was, but somewhere in his actual business would be a few tricks he used that he’d never mention. After all, who wants a thousand people all using your tricks? You’d be crazy to publish that stuff.

It actually happened to me once. About three years ago I came across something very unique: a step-by-step guide on how to set up an internet business online that was written by somebody who was not trying to sell me something. I found it on some obscure user’s group online — I don’t even remember the search terms. At the time, I was willing to try anything. What could a month or two trying this hurt? So I tried it.

Did it work? Yes and no. I learned something very useful from this exercise. Whatever you do for a startup is going to take a long, long time. Take however long you are willing to work, then multiply it times three. It requires a lot of dedication and attention to detail that I (and most others) probably don’t have. As it turns out, getting good at painting is more about the attention, dedication, and mentoring you receive in your work, and not so much about the house you choose to paint. But good luck learning that the first time out. Most folks never learn it.

Most of us are great at thrashing around for a few months! Tell us an idea about an app that mines Facebook data and makes money and there will be a hundred guys tomorrow firing up their code editors. Sure, in a few months most will be gone, but expect to see everybody and his brother coming out with the same idea in a short amount of time.

I get a lot of SEO spam on the blog and in emails. Some of it is automated, but I actually get a lot of people following me because I’ve dealt with SEO in the past. For most all of these people, SEO is a shortcut to riches. Write some crap, make a landing page, then script up enough code so that you generate links back and start making conversions. Sure, Google might shut you down in a few months, but you’ll be thousands of dollars richer and will have used fake credentials anyway.

It’s the ultimate in ADHD money-making. Crap + Code + Conversions = money.

Here’s the crux of the matter: there are people who actually invent an iFart and make hundreds of thousands of dollars in a month, there are people who sit down to paint and make something that sells right away, but odds are overwhelmingly that you aren’t that guy. Odds are you will generally develop as most other startups develop; over a long period of time as you assemble these various business execution ideas into something workable that supports some grand idea (what the grand idea is — not important. The less you focus on that the better.)

We’d all would like step-by-step instructions on how to make a million dollars in a month. But if somebody published it, guess what? Everybody would be doing it and it wouldn’t work. The system is rigged so that the easier it is to connect effort to money, and the more that know how to do it, the less likely it is for a newcomer to make it happen.

That’s not saying that short projects are a waste of time. I love short projects that stand on their own and compete for my attention. Do something for 2-4 weeks and then be done with it. Move on. But don’t expect to see any results for a few years, if ever. What I learn from these exercises is being able to repeat the entire span of startups: idea, execution, business model, marketing channel, and so on. If you ask me, anybody who wanted to teach startups would have people actually learning all of these things with “practice” ideas, over and over. As they gain competence through trial and error and repetition, they’ll develop a voice and style that will carry over to a working business.

So if you want to be a copycat, fine. Go for it. But pick your poison: pick one idea and stick with it for a year or two, or do the micro-startup idea thing I did for a while where you develop something new every couple of weeks. Whatever you do, don’t fall into the death zone. Don’t “fall in love” with an idea, screw around with it for 4-6 months, then give up. That’s the worst of both worlds: you’ve picked something and stayed with it long enough to get really emotionally attached, yet you haven’t given it the attention it needs to actually grow (or die). Then when you finally switch to something new, it comes as a failure.

And whatever you do, don’t follow along with some idea mentioned on a popular website like HackerNews — unless you like learning through pain. The only thing that’s going to happen is that you’re going to be reading about somebody else who tried the same thing and is now living the high life — without telling you exactly what they did that you missed out on. That’s not a learning experience, that’s self-torture.



tl;dr: because of both the mixed messages we send and the size of the HN audience, we’ve actually created something we didn’t mean to: an environment where lots of copying goes on, but not many are really working in a way that generates good learning about startups. Instead it’s much more of a copycat, cool-for-a-day, chase-the-herd atmosphere.

That hurts. Don’t do that.

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Being Rich Will Kill Your Startup

And again I say unto you, It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.” — Attributed to Jesus (Matthew 19:24)

I’m not a religious person at all, but I think I grok what Jesus is saying here. If you are in the frame of mind that most rich people are in, you’re going to have a hard time of it spiritually.

He might as well have been talking about startups, because the more you think like a rich person in a startup, the more likely you’re going to flame out.

Why?

Because a consumer’s mindset is fundamentally different from a creator’s mindset.

When I’m a consumer and I want something, I go out looking for information. During my quest, providers tell me a narrative of how using their product makes my problems go away. In general, those with a better narrative — and one supported by friends and people I respect — get my business. I “buy into” the narrative, placing myself in the role of protagonist.

Need an oil change for the car? Do some googling, find a few local shops and read their main page. Each page tells me how fast, careful, or courteous they are — they tell me a story of how if I showed up with my car, the experience would be great and by the time I left I’d be happy. Poking around on Facebook, friend Amit verifies this narrative for one of the shops. He went there, found the help friendly and the service quick. His story ends happily, just like I read on the website.

So I buy into this narrative and become a customer. I go, pay my money, get an oil change, and I leave happy. I bought the narrative and lived it. Life is good!

So what’s the problem?

If I’m a rich guy forming a startup, I’ll go about doing things exactly the same way. Need hosting? Google some, find some sites, read their material, pick a provider. While this model still might work for hosting, how about marketing? Need to sell something to doctors? Here’s a bunch of sites that will sell you an email list. Want more people to visit your page? Here’s a bunch of sites that guarantee traffic to your web page. Want to find out what doctors like? Here’s a site that will create survey forms. And so on.

As it turns out, no matter what you worry about when creating a startup, the marketplace will provide you those same narratives and recommendations. Whatever your worry, you can find stories of folks with the same worry who bought some service or product. Now they’re happy.

Just like with the oil change, except not.

You can’t write a check to solve all the worries a startup might have. But you can certainly write a lot of checks! Take a look at the thousands of startups each year that burn through piles of cash buying into narratives about how if they only purchase X, their problems will go away.

There’s a fundamental problem here. Startups are about creating narratives, not consuming them. That is, the mindset of the browsing rich consumer is exactly the opposite of the creative startup. You should be more like the genius painter of a large mural: very carefully using resources you’ve hand-selected, in a very controlled fashion, tending the product every day, watching to see how it slowly progresses, seeking an end state where the eventual emotional impact on the viewer is the greatest.

Genius painters don’t spend all their time at the art shop reading art magazines gushing over the latest paints and brushes. They see, understand, and use other people’s products, but the focus is on creation, not consumption. Consumption is for chumps.

Good founders take little pieces of inexpensive (or free) resources and cobble them together experimentally, slowly discovering a narrative where somebody else finds value. They try to make something people want. Consumers read other people’s narratives, get out the checkbook, and buy big, beautiful honking solutions to life, the universe, and everything. Then they’re confused and let down that things didn’t work out for them.

When I’m a consumer, I buy into a narrative that I know exactly where it will end: with my being happy. In exchange for my money, I know for certain my problem will be solved. When I’m a creator, I’m the one creating a narrative for somebody else. I have no idea how the narrative is going to go until it actually starts working — making somebody else happy. There’s much uncertainty and doubt. There is no happy narrative you can buy into when forming a startup. Pay attention to this when reading books and hanging out places that cater to startups. There’s a lot of money to be made selling you, the future founder, on narratives that sound good but aren’t going to end happily.

Be the painter, not the rich guy.

ADD: This article is about “thinking like a rich consumer” not being rich. I apologize for the hyperbole in the headline, but I thought it was pretty clear that the problem here is in your attitude in how you appropriate services and products, not how much money you have.

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Welcome to the Ice Cream Factory

Ben and Jerry's Ice Cream Cone

When I worked for Pitney Bowes in Connecticut, one weekend the family took a trip to nearby Vermont. No trip to Vermont is complete without visiting Ben and Jerry’s — the world-famous place where they make all the yummy ice-cream.

We saw the strangest thing.

You could walk right in on the workers. I kind of expected an overview of the way ice-cream was made, perhaps a free cone (which, in all honesty, was one of the big reasons we visited), but a big part of the plant had glass walls. We could walk right up and watch everything they were doing in there. There were no secrets at all!

I didn’t understand how they could do this. Didn’t they have trade secrets? Things they had learned over the years to make their ice cream the best? If people could just walk around and watch everything they did, how could they run a business? Hell, how could they concentrate enough to run a business? Having all these clowns hanging around everyday would drive me bonkers.

A couple of years later I was working for the Federal Reserve. Great gig in downtown Washington, D.C. Right on the national mall. We could sit in the lunch room and watch buses pull up and thousands of tourists get off and start taking pictures. I would be checking in at my hotel and suddenly 300 Koreans would walk in the door — all with that “Wow! Take a look at that!” look on their faces. Whatever I was doing, wherever I was, there would be tourists.

At work the tours weren’t too bad — after all, it was only every now and then, and it wasn’t as bad as the Ben and Jerry’s deal. It was actually kind of flattering. But still, I didn’t see how anybody could run a business with tourists underfoot all of the time. I could deal with seeing these folks from time-to-time, but hell if I could put up with them in my office where I was programming.

Many years later in the startup world, I look around and it’s not unusual for people to share everything they are doing. Popular blogs show how ideas were found, markets discovered. There are even lots of guys who publish weekly sales and profit numbers. Ideas are cheap, they say, information has to be free! The more eyeballs the better.

I’m still struggling with this — something about this seems a bit too facile — but I’m getting better. One of the things I’ve learned is nobody much cares about anything you are doing anyway. No matter how level-headed you are, you always consistently overestimate the degree to which anybody actually gives a hoot about your startup idea.

In a world of apathy, the best you can hope for is to write an interesting blog article. Then, if you’re lucky, some smart people may drop by and offer you some advice that you really need. This is a key element of the startup experience — serendipity. It can’t be planned and it can’t be forced. It’s what makes a Silicon Valley work — lots of politely-interested strangers providing bits of advice and informally seeing what combinations they can make to the community in general. Because people don’t care personally about what you are doing, but they do feel part of a larger community that likes to help folks. This is the thing that is so hard to replicate about SV. You can dump a ton of money and build a hundred incubators, but you’re nowhere near having an environment where you can walk a block to Starbucks, ask the first ten people in line what they think of your app, and end up with half-a-dozen great pieces of advice. The culture just isn’t there. It has to grow.

And sorry, I still don’t think people share as much as they make out to be sharing, at least publicly. Yes, every day I will see dozens of articles titled something like “How I got 100 thousand subscribers in one week!” These articles will tell me all sorts of generalities about getting celebrity endorsements and such. But most of the time I leave the blog just as ignorant as when I arrived. The critical details are always missing. Big ideas are always worthless, but a very small number of tiny ideas are priceless — and perishable. You’ll very rarely ever see these tiny ideas being published. If so, it’s always a mistake.

For instance, if you knew that famous reporter X was a big photography fan and loved to chat and write about pictures, and then you pitched a story about your business which had a photography angle, would you be blabbing about it on your blog? Or would you file that piece of information away until the next time you needed a story? The reason why we keep reading all of these overnight success stories without actually learning anything is that the authors skate over the tiny details that make the entire thing work. Most of the time the readers don’t know enough to realize what the authors are doing to them — painting some broad attractive picture of amazing fame and fortune while ignoring the key tiny little tidbits that went into making it happen. So you get the general feeling that you’re seeing something, but there’s nothing really there. In a lot of ways it’s like a magic trick: look over here while I do something over there. Interestingly, these tiny tidbits are exactly the kind of thing that you might share with somebody over coffee — but you’d be an idiot to publish them.

Even Ben and Jerry’s probably was this way, I was just too ignorant at the time to notice. After all, making ice cream isn’t much of a secret — no more than “How to speed up your website” or “Unknown magic of C#” — all that stuff, while appearing to be important is just mundane technical details. The real secret is business relationships, marketing plans, how to approach new distributors, strategic plans, all the little detail work that goes into making and popularizing a company logo such as the one shown above. This is the good stuff, and no matter how intently you stare at them making ice cream, you’re not going to see it.

So lately when I’m doing something like setting up a landing page for my new e-book on being a ScrumMaster, I go ahead and blab about it even though — gasp! — i’m actually still working on the page. Here I am making the ice cream. Here you are staring through the glass. Who knows? Maybe somebody will take a look and offhandedly suggest a great improvement to what I’m doing. Maybe you’ll see something that will help you dramatically improve what you’re doing. We’ll never know unless we try.

So welcome to the ice cream factory! Just don’t peak under the office door over there.

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Make something people hate

“Make something people want” is the first rule Paul Graham and other leaders of the startup community will tell you.

But they’re wrong. Or rather, what they say is incomplete.

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The Great HackerNews Book-a-thon

A few days ago I wrote a post pulling in books from HackerNews that hackers had recommended to each other.

Well, it hit the front page (thanks guys!) so I thought folks might be interested in seeing some real-world stats on how articles like this perform.

Stats



Hits Uniques
14,525 13,341


Entrance Sources



Source Hits
news.ycombinator.com 8482
direct 3429
jacquesmattheij.com 418
delicious.com 413
popurls.com 339
twitter.com 303
jimmyr.com 223


Revenue



Source Amount
Adsense $3.60
Amazon Affiliate Link $56.29
Total: $59.89


Analysis

Yesterday there was some concern that I was just posting a huge amount of links in order to make a quick buck. Well, for those of you looking to make a quick buck like this, it’s not much of a plan. In return for spending an entire day typing in links, you get 60 bucks.

You’d make easier money working at the local McDonald’s.

Also, for those of you looking to start a blog or startup, pay heed: tens of thousands of visitors, visitors who are interested in your product, visitors wanting to buy — and you make maybe a buck for every 300 folks. And these are serious customers — average time on site was over 5 minutes. In the real world you’re lucky to get a minute.

This is reality.

Now for the good news.

Actually a buck per 300 folks isn’t bad. It’s a pretty good number. If this were a startup, the question here is whether or not you can drive enough folks to the website to pay for expenses.

Now just for a hobby — something to kick around — domain registration is maybe 20 bucks and server hosting another 30 bucks a month. (Prices can vary wildly here, but hosting a site is anywhere from free to around 50 bucks a month). How much traffic is reasonable to expect for a hobby? Assuming I do something interesting with the site one more time in the next year and the HN’ers like it, it looks like revenue could be 120 bucks. (stocks or gold futures, always so hard to decide) Subtracting out the domain registration, it probably makes sense, as a hobby, to move the list over to its own domain. Maybe add in sorting. Lots of folks wanted to be able to sort and filter — just too many books in there.

As a startup? Mabye. Maybe not. I posted a question where I asked if people would be interested in such an app, and it got around 20 votes. A couple of people said they thought it was a great idea.

But it’s easy to support something in word only, and it’s also easy to wave your arms around wildly and believe that you have the next huge startup idea. What do I have here that is invaluable? Numbers. Hard numbers on how traffic would translate into sales. That’s probably the coolest thing about the entire post (aside from the total awesomeness of the books, of course)

So I’ll set up a small site with the same list. Perhaps I’ll take a risk and spend some more time adding some functionality. Perhaps not. But each little step I’ll be looking at numbers like this to decide what makes sense and what doesn’t. Things run on numbers.

At some point, yes, your hobby can become a business. But a cool idea, even a cool idea with 15,000 people who are visiting, isn’t enough. A real startup is a lot more than that.

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Secret Hacker Bookshelf



I received an email two weeks ago from a guy in the Philippines. He wanted to learn how to program and didn’t know where to start. Last week I was talking to a family member — he wanted to get into computers but didn’t know where to start. This week, 2 people came up to me and asked me questions about which books to read to learn startups and marketing.

It’s a common pattern. On the forum I visit, HackerNews, every few weeks somebody asks the same question — what are the best programming books? What are the best startup books? What are the best books on marketing? There are a lot of people asking, and the same questions are asked quite frequently. A quick search on Google lists dozens of questions about programming.

So. What do hackers recommend to each other?

Frankly, it gets old having to post comments recommending the same books over and over again. I know others feel the same way. But still, I’d like to help. So I decided to take all day today and find the best books from hacker discussions and list them here. Next time somebody asks me, I can just point them to this page. Who knows, if enough folks like the list, maybe I can keep it updated and expand on it.

Caveat Emptor: reading a good book on something fuzzy, like marketing or starting a business, is like having a beer with somebody at a bar. There’s lots of great ideas and great experiences to be learned. It’s also important to note that it’s you, not the authors, who is responsible for your life. Don’t fixate on any one book or author and go off hell bent for leather on what the author said. Instead, sample broadly, compare notes, learn both sides of the argument, then figure out how to use this new information to do things you want to do.

Having said that, this is a pretty incredible list and a pretty cool bunch of recommenders. If you have time, you should follow the conversations around some of these books. Many of the people commenting and many of the people writing these books have made millions or billions of dollars and would like to help you succeed too. And they’re not the traditional get-rich-quick, business porn, or self-help books that clutter up the marketplace. Lots of value here.

These books are listed by how hackers rate them, the vote count — books appearing higher on the list were voted by hackers as better than those lower. The programming section has several sub-sections that I haven’t broken out yet, but you can easily spot where one section ends and another begins.

As for some meta advice, if I were interested in buying one of these books, I’d probably read the pro and con reviews on Amazon, taking careful note of the con reviews (many times the pro reviews are fake). I’ve had pretty good luck using this technique, especially when I get there from a recommendation from a friend. And now you just gained a thousand hacker friends :)

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The Biggest Obstacle

I’ve spent the last ten years working on creating my own startup. I’ve read dozens of books, hung out with other people who wanted a startup online, joined clubs and associations, met with “experts” , etc. More to the point, I’ve actually built 5 startup ideas and tried them out.

I’m finally reaching the point where I’m starting to get traction — I’m not Ramen-profitable, but some things are starting to “click” and I’m making enough money each month to cover server and domain expenses plus beer money. That’s not Bill Gates-rich, but it sure beats a stick in the eye.

Now that I’m beginning to get traction, I’m also beginning to feel like I may never make it.

Why? Because there’s a huge obstacle that I am not sure I can overcome on my own.

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Spit-balling the Startup Racket

Yesterday I wrote an article about how the startup culture and business can reach a point of diminishing returns — about how in many businesses gatekeepers adopt policies best suited to them and not the market, about how people honestly trying to help may not know their own selection bias, and about how there is a subtle motivator in the startup world to be “about” startups, without actually doing anything.

Today I thought I would quantify that a bit, using you guys as guinea pigs.

The goal? To find how how much money there could be in simply talking about startups, ie, what is one of the things in the industry causing dysfunction.

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