Comments (22)

By brantcooper, March 15, 2012 5:06 pm

Those who run in #LeanStartup circles know too well the problems encountered with language.  Eric Ries, Steve Blank and others are criticized for choosing terms and phrases — lean, customer development, MVP, fail fast, etc. — which unintentionally lure would be startup entrepreneurs into thinking about things Wrong and then doing them Wrong.  Lean means don’t take money, “don’t you really mean market development, not customer development,” minimum viable product should be minimum desirable product, one doesn’t really want to fail fast, that causes entrepreneurs to screw their investors or not persevere.

While the critics make cogent arguments, there’s an implicit assumption that different words would not be subject to similar critique from a different angle. It’s generally not helpful to remove phrases from their context and critique them standing on their own.  Doesn’t “viable” contain “desirable?”

I tell you all this, however, because I’m about to do the same thing.

Don’t Think Big

“Thinking Big” is used as panacea to the menace of “feature” startups, who are merely “copycat” companies that often embrace the leanstartup “formula” that forces them to have “small ideas” and seek to “flip,” thereby leaving their investors in the lurch.  Thing is, markets determine the size potential of the business and many startup entrepreneurs mistakenly believe “think big” means go for a big market.  Tragically, a small idea attracts a small market no matter how big the market is you go after.  Thinking big doesn’t change a small idea into a big market.

Do you see what I did right there?

Truthfully, people who exclaim “Think Big” mean go for big ideas.  But do you know why the “startup curve” leads with the TechCrunch bump?  Because the founders were “thinking big” regardless of the size of their idea.  Do you know why a few startups survive the bump? The sage Fred Wilson says:

It turns out, like most success stories, the answer [for success] was simplifying the service. Taking features out. Reducing the value proposition to a clear and simple use case. This was not done in a vacuum. This was done by releasing a less than perfect product to the market, finding a few customers who wanted a less than perfect product, and then listening carefully to those customers to get to the ideal product.

That’s right, they succeed by thinking small. Product-market fit happens first in sub-segments. Understanding the core value proposition for hyper-sub-segmented markets is where you’ll find strong market signals.  You can’t go big without winning small first.  It’s impossible.  The top of the funnel is not filled in as quickly as the bottom no matter how fast you pour the water.

Sean Ellis writes: “[S]tart by focusing the majority of your energy trying to create at least one must have use case.”

To understand a “use case” you must properly and even obsessively segment your market.

Think Disruptive

What critics of me-too startups (criticism that I think is unwarranted, btw) really mean is: Think Disruptive.  Don’t be sustaining innovation.  Change the world.  I’m all for that, though all startups have their place in the ecosystem.  (If we grow the bottom of the startup pyramid, we’ll get more disruption at the top.) When you have thousands of new startups, the fact that most founders focus on problems they experience shouldn’t be surprising. What would be surprising is if it were true that if they simply thought a little harder, they’d be able to come up with ideas that are truly disruptive.

Most truly disruptive innovations come out of scientific or engineering disciplines and though they’re not very visible to the startup community, tens of thousands of people are working on them.  If Universities had better lab to market programs (e.g., where they’re taught doing rather than merely writing business plans, or licensing technology to dinosaurs), we would see more disruptive activity.  Investors focusing on hugely promising technology is a good thing, too.

Disruption is often stumbled upon.  Experimentation is a good way to lead to lucrative stumbles.

Like other startup people who hear a lot of pitches, I do tire of hearing similar pitches and the mobile app equivalent of a bridge to nowhere. But hey, if any of them happen to succeed, it will likely be because they nailed the value prop for a market segment that eventually proved big enough.

Comments (4)

By brantcooper, May 9, 2011 5:46 pm

Whether there’s a tech bubble or not is an interesting discussion going on in the blogosphere. (Reading guide is below.)

I fall into the “boom before bubble” pack. Having lived through the 90s’ bubble, there’s no way we’re there yet.  That doesn’t mean there won’t be one, but my feeling is we’re skating a razor’s edge off one side of which looms another wave of  housing foreclosures and a doom & gloom Sequoia presentation. Investors herding like sheep around darling Silicon Valley startup memes is not in itself bubblicious, it’s SOP.  Sheep investing affects supply and demand conditions that result in higher valuations.  Good or bad, that doesn’t in itself represent a bubble.

The Internet bubble was about more that overvalued startups. Horowitz and Graham argue other dynamics way better than I can (see links below), but I think it’s important to point out that bubbles dramatically affect the entire economic climate. The bubble was “our” version of 70s inflation.  The bubble caused a huge migration of people to the SF Bay Area. Salaries went through the roof (not just for engineering talent.) So did cost of living.  In the 90s, the housing bubble was inseparable from the Internet bubble. The buying of lots of different goods became irrational.

And there’s the final point.  Frankly, as long as the voices saying we are in a bubble remain as strong as those who say we aren’t, it’s hard to say we are.  There’s was very little dissent in the 90s or perhaps more accurately, that dissent was easily drown out by the ignorance of the mainstream media. But that isn’t the case today, either.

The Best Way To Avoid a Bubble

Think globally, act locally.  Successful startup ecosystems in Boston, New York, Boulder and a few other cities eases pressure on Silicon Valley prices for EVERYTHING, including startup valuations.  Yes there are advantages to investing in startups in large ecosystem like Silicon Valley, including access to partnerships, vast amount of resources and M&A opportunities, but there are pitfalls, too.  Strong entrepreneurship exists outside Silicon Valley, as many of the past “big wins” show.  Local non-SV ecosystems frequently have strong, yet  underemployed resources, lower engineering costs, employees less likely to jump ship, and local environments arguably more attractive that Silicon Valley.

But where’s the money? San Diego’s Avalon Ventures is the only VC with an active fund. Tech Coast Angels, who laughingly claim “lean startup” as a tag, is infamous among entrepreneurs for their six month plan for not investing, rather for any risk-taking activity.  Local support organizations like CONNECT server clean tech and life sciences well, but their vanity metrics fail to reveal their inability to attract and help Internet and software entrepreneurs.  There are about a dozen San Diego angels on Angel List, most of whom have no San Diego investments.

I have heard similar stories from other startup cities, even the bigger cities that seem to be thriving.  There are several problems:

• Many local investors are “old school,” believing they sit in the catbird’s seat and can wait for for entrepreneurs to knock on their doors.  (Not going to happen.)
• Many local investors follow the lead of Silicon Valley investors, rather than striking out on their own.  (Angel List helps solve this, plus lower $ amounts should increase risk tolerance.)
• Investors don’t know how to connect to local entrepreneurs. (Entrepreneur groups are thriving and investors need not fear being swarmed.)
• Many entrepreneurs don’t know how to connect to local investors. (Entrepreneur groups help with this, too.)
• Some entrepreneurs either ask for money based on ideas or are not building “real” startups. (Why do you think I evangelize the Lean Startup framework?)

The crazy result is local startups going up to Silicon Valley to find funding and then experiencing a tremendous amount of trouble to move there AND local investors investing in Silicon Valley companies.  This circumstance not only represents a failure to support San Diego’s economy, but also serves to increase the pressure on the Silicon Valley bubble, er boom.

Please let me know your thoughts on the bubble and local investments in comments.

_____________________________

Here’s a short guide on bubble opinions:

Yes, there’s a bubble

Steve Blank (post)

Paul Kedrosky (post)

Mike Maples (TechCrunch)

No, there’s no bubble.  (Yet.)

Henry Blodget (slides)

Paul Graham (article)

Ben Horowitz (post)

Howard Lindzon (post)

Comments (13)

By brantcooper, January 13, 2010 2:32 pm

Based on input from Steve Blank and others, I updated the Customer Development image I created a few weeks ago.  Steve suggested I attempt to structure the image so that it was business model-independent.  So it is, but with a web-based model serving as an example.  Image has explanatory tool tips, as suggested by Valto in comments.

Click to Enlarge and see tooltips

Comments (1)

By brantcooper, February 12, 2009 12:09 pm

I just got off a webinar about lead gen in today’s economic environment.   I was pleased to see several process-oriented and metrics driven marketing recommendations, including:

• need to be revenue focused, rather than # of leads focused;
• marketing taking greater responsibility for pipeline management;
• measuring, testing, refining every step of way through pipeline;
• identified information and activity overload problem;

A few key points still missing, IMHO.

First, in today’s environment, business needs to be profits-focused, not just revenue-focused.  This is a critical distinction.   An expensive advertising campaign may add more leads to your pipeline, some of whom eventually buy.  You’ve increased revenue, but hurt the short-term bottom line.   (Arguably there may be longer-term benefits from raising “awareness” through advertising.)

Second, this may just be a language thing, but I’m guessing not.   Marketing and sales professionals continue to talk about the “sales process,” e.g., the necessity to create activities and produce collateral that “nurture” customers through the sales cycle.   Despite the fact that this webinar correctly identified information overload as a problem, the end recommendations still pushed for “getting all the information the sales team needs into their hands.”  Step back!  This is classic reactive marketing and emblematic of VP of Sales (& Marketing) driven marketing.

Key question to ask:  what is the buyer’s process.

Third, “who is the prospect” was asked at the end of the webinar, when it should have been slide 1.   Even if your company was able to handle multiple segments before the economy tanked, you need to reassess to determine what are your profitable segments now. See point 1.

Comments welcome.