In 2015, after getting heavily involved in the local Startup community here in Brisbane, I’ve had a number of old friends and former colleagues approach me, seeking advice about how they can launch their own Startups. I’ve learnt a lot over the past year (and continue to do so) but perhaps the biggest lesson about building a startup is that it takes a lot of work and often, a lot of sacrifice and risk.
That being said, I’m often amazed at how easy it is to blow people’s minds with basic knowledge about startups. This is stuff that is quite simple in theory but never taught in school or university. Just by hanging out at a place like River City Labs, reading books and attending talks, you can learn so much that often goes unsaid outside the startup community. All it takes is one Startup Weekend and you’ll be primed and ready to start your own venture.
Without further ado, here are my top 5 terms to learn before starting a startup.
1. Business Validation
Have you ever heard the story of the wantreprenuer? This is the guy or girl who registers their company, writes a business plan and builds their product before ever discussing their idea with someone else. You wanna know the biggest determinate of your business success? It’s that people actually want the product or service that your business provides. It doesn’t matter how detailed your business plan is or how flash your website is. If nobody wants what you’re selling you haven’t got a business – full stop. Spend one weekend at a Startup Weekend and you’ll hear one word more often than any other – validation. This should be your goal before building your product, seeking investment or registering your business. A well validated business idea means that you have strong proof that people (1) are interested in your product or service and (2) value it enough to pay MONEY for it. If you can achieve this then it’s time to develop an MVP and build-measure-learn.
2. Build-Measure-Learn (aka the Lean Startup Methodology)
If you haven’t already, I suggest you pick up a copy of the book, The Lean Startup by Eric Reis. The Lean Startup methodology has become the prominent method for developing a startup these days and the book will give you a good basis for learning how to save time and risk by keeping your product cycle as lean as possible.
Even if you have strong proof that people are interested in your idea, now is NOT the time to throw all your life savings into building a complete product. Your goal starting out should always be to ‘keep it lean’. This means starting with what is called a Minimum Viable Product (MVP) . As the name suggests, your MVP is the most basic form of your product. You should spend as little time as possible building this first version. Even though, the grand vision for your product might be a complete solution for all your customers problems, don’t think that far ahead just yet. Use your findings from the business validation stage to decide on only a few features to start with and then build-measure-learn.
Now that you have an MVP, it’s time to measure its effectiveness in the market, gain feedback and iterate (ie. build-measure-learn) . The idea of this process is to learn as much as possible about how your customers enjoy and use each version before deciding on how to build the next. These learnings will form the basis of your decision to either persevere with your initial idea or pivot. The shorter this loop, the more chances you’ll have to find product-market-fit.
3. Product-Market Fit
Instagram co-founder Kevin Systrom said one of the key reasons his product was successful was his close attention to user feedback. Before Instagram became a hit photo-sharing app, Systrom was working on a check-in service called Burbn.
“We thought about what we could do to iterate more quickly,” Systrom said of Burbn’s pivot. “People loved posting pictures on Burbn” — so that’s where they took the venture, jettisoning other planned features.
Laurie Segall, CNN Money 2011
The Instagram story is a brilliant example of a startup that pivoted to find product-market-fit. Throughout the development of Burbn, Systrom focused on testing his assumptions rather than persisting with his initial plan. From learning through customers on Burbn, he was able to find product-market fit with Instagram and it, of course became the huge success we know today.
For the entrepreneur starting out on a new venture, the day you achieve product-market fit is day that you now have an actual business. Product-market fit means that you’ve finally matched a product or service with a market of customers who are willing to buy. This is now the catalyst for you to grow your business. It’s like the first ember in your camp fire. Without it your marketing and business development will fall on deaf ears.
4. Business Model Canvas
Given this ‘new’ way of building a business, formally written business plans are virtually obsolete. It’s great to have a plan but you must accept that the plan could change at any moment. That being said, a business plan still has it’s merits in making you think about the various aspects of building a business.
My recommendation is to forgo the business plan (in the traditional sense) and work on a Business Model Canvas.
The Business Model Canvas is something to print out large, post on your wall and stick post it notes on in each box. The benefit of this approach is that it forces you to think about the different areas of your business and helps you identify areas where your strategy might be lacking.
Built into the business model canvas is the idea of pivoting, except this time, it’s about finding a sustainable business model.
5. Manual Concierge
Another phrase which is tossed around a bit at Startup Weekends is the idea of the Manual Concierge. This is the idea that you should aim to test your business assumption manually before designing the actual product or service.
Take for instance, your business idea is a collaborative-consumption startup that enables surfers to rent out their surf boards. Before building an MVP, you should talk to surfers who want to rent their surfboards and people who want to hire a surfboard. If you can create a transaction between those two groups manually (ie call them up), then you’re on your way to building an actual business.
The Manual Concierge can be seen as another method to validate your business idea before building an MVP, especially if your business is a pure tech startup. If you are an engineer, however, you may find it easier just to test your idea online with a simple app. Therefore, the Manual Concierge is mostly optional and just another idea I wanted to mention for those thinking of starting a startup.
Of course, there is much to learn when it comes to building startups but if you understand all 5 of the above terms, I think you’ll be in the right frame of mind to get started. Entrepreneurship is unlike any other career. In essence, there are no rules and you can only learn how to be successful by actually doing it. That being said, please don’t throw your life savings into an untested business idea. One thing that I know for sure is that you must learn as you go.
Until next time,
Christopher R Dodd