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November 2011
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2011-11-16 »

Stuff I said at Kansas City StartupWeekend that sounded smart

I rarely get the chance to try out words of wisdom on real people before I present them to you here. So when I post something, it might turn out to be a dud, or pure gold, and I never know which. Not this time! This time you get pure, unadulterated, gold-coloured brilliance.

1. People miss the point of the "minimum viable product" (MVP... no, the other MVP) for startups. It does not mean, "release the first version with less features and then add more features later." No, we want a minimum viable product. The absolutely smallest set of features needed in order to get useful market information. How many features is that? Usually... zero. An MVP can be just a slide presentation, a sales pitch, a web site, a Google ad, or a customer conversation. The best MVPs let you objectively measure customer response fast and then tweak. One quick way to start is to make a web site that claims to offer the product you'd eventually want to build, and then gives a signup form, and then (oops!) crashes when people try to buy it (or sign up). Then make some web ads to send people there based on certain keywords. No, not a page that says "Coming Soon!" and asks for an email address. You want a real, live, signup page for what looks like a real, live product. You can add the "it works" feature later. In the meantime, since your MVP is so cheap and fast to build, you can try lots of different ones, add and remove advertised features, and see how that changes user responses. Once you have some input like that, you can make something slightly less minimal. Doing an MVP this way requires incredible self-control. Most people fail.

2. Speaking of terminology, "pivot" is misused too. People seem to think pivot is a happy-sounding word for "give up and do something different." But it's not. It has a very specific meaning based on very specific imagery. If you're running down the street, you have momentum. If you then plant one foot hard in the ground in front of you and turn, you can actually redirect that momentum in a new direction. That is what we mean by "pivot." When you give up and start over, you lose your position and all your momentum. But when you pivot, you keep all the stuff that's working, and you keep going from where you were before, but in a new direction. You have the same team, the same money, the same corporation, the same already-built features, and (hopefully) the same users as you did before. You use what you've already have in order to head somewhere new. Most importantly, the energy lost during a pivot is proportional to the angle of your pivot. If you only rotate by a little, you only waste a bit of your momentum. If you turn around 180 degrees, then your progress so far is actually an impediment - like when you've gone way into debt working on one idea, then start to pursue a totally different one. Pivoting is the art of choosing small rotations that let you maintain most of your speed and take advantage of your current position, while still admitting you've been running in the wrong direction.

3. No startup ever actually does what they thought they would do on day 1. Everybody pivots. "Except [company x]," said one person, "They're doing exactly what they planned." "Are they profitable?" I asked. "No." "Oh, then they just haven't pivoted yet."

4. The definition of a market niche. This is one of the most important lessons I learned from reading "Crossing the Chasm." It has a somewhat complicated definition of a niche, but since then I've had a lot of luck just taking the gist, roughly: If you can name a conference attended by a particular group of people, that group is a market niche. If there isn't such a conference, it's almost certainly not a niche. For example, let's say you were making a web site to help people find a lawyer. "People looking for lawyers" is a market segment, right? Wrong. There's no "I'm looking for a lawyer" conference. Lawyers are probably a market segment (although arguably, not all types of lawyers go to the same conferences). But everybody needs a lawyer eventually, and that's not a niche, that's everybody. "Startups who need lawyers" (lots of startups need lawyers and go to the same conferences, eg. StartupWeekend) are a market segment, as are building contractors and organized crime lords. Maybe you can help them find lawyers.

5. Your competition is whatever customers would do if you didn't exist. Let's say you're making software for producing cool graphs of statistical data. There's already really powerful software that does this, but nobody in your market segment uses it for some reason; maybe it's too hard to use or too expensive. That software is your competitor, right? Wrong! That software is irrelevant. Your customers don't want it, so even if it's competing with you, it's already lost. Your customers are probably using either Microsoft Excel's horrible chart features, or giving up and just not making charts at all. So your competitors are Microsoft and apathy, respectively. Apathy is probably going to be the tougher one. To find your list of competitors, just ask yourself what options your customers think they're choosing between. Ignore everything else.

Bonus: When presenting at a StartupWeekend-type conference... remember that the judges see a lot of businesses, and they're expecting you to have a business plan (or at least an idea of your target market and where you'll get revenue from). However, like I said in #3 above, no startup ever actually does what they originally set out to do. The judges all know that too. So your business plan is kind of a farce, and they know it, but if you don't have one, you look unprepared. So I suggest this: have a "grand scheme" and an "ideal first customer." Present them both, and where revenue comes from in both cases. Admit outright that your grand scheme will probably turn out to be wrong, and your real first customer might not be exactly like your ideal one. Basically, prove that you care about business, but you know you have to be flexible, and you're not scared of it. For a team two days into a new startup, that's all anyone can hope for.

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