Archive for the ‘Entrepreneurship’ tag
I firmly believe that a person will have at most one truly great idea in a year. People who expose themselves to a wide range of information and experiences will probably be closer to 1 and people that don’t.. well, they’ll be closer to 0. But how much are these “great” ideas really worth?
I argue that ideas, even the best of them (assuming the greatness of an idea is actually measurable), are worth essentially nothing. Ideas may in fact lead to invention or innovation, but the idea in and of itself is simply a starting point. The value is in the execution that comes after that starting point. And the reality is that startups — whether a high-tech venture or a restaurant — fail because they fail to execute in one way or another. Furthermore, startups that are successful are very often, at best, tangentially related to the original t=0 idea. All this is not to say that there aren’t ideas that are better than others, but smart execution is easily an order of magnitude more important.
What is interesting is that empirical research shows that there is definitely an idea premium when startup founders allocate founder equity amongst themselves. In other words, the person with the idea often receives a bit more equity than the other founding team members. Moreover, that idea person is the CEO of the startup 56% of the time, but CTO only 12% of the time. One might quickly conclude from this that the market does value ideas. My hunch, however, is that because the idea person was, by definition, the first to start developing the idea and building the team, he has often put in the most sweat equity and the extra equity is not compensation for the idea itself.
So am I arguing then that that one great idea you have each year should just be quickly dismissed as having no value? No, absolutely not! The ideas that I have actually pursued are those that keep nagging me. But the thing to remember is that even if you vet the idea and it still has you excited, remember again though that it is the execution that will actually make your idea worth even $1. If execution is all that matters, the important question then is: what does the right team look like to execute on the idea and would you belong on that team?
I had heard of the search fund concept, but beyond the obvious challenges, was always curious about how one would get started and what exactly the process entails. Luckily, HBS posted videos from panels that took place at last year’s Search Fund Entrepreneurs Conference.
For those that aren’t familiar with what a search fund is. It’s essentially entrepreneurship through acquisition. The basic steps are:
1) Small “search” team of entrepreneurs rounds up a dozen investors who will front some cash (about $25k each give or take) to cover the cost of the search team finding a great business to acquire.
2) Once the search team finds such an investment (this can take a couple of years) the original investors can invest at a discount.
3) Assuming the deal closes, the search team then takes over the operations of the company and grows it.
4) PROFIT.. =)
If you have a couple of hours, these videos are definitely worth watching even if you have no desire to be involved in a search fund. I learned countless practical lessons on how to create and manage proprietary deal flow, negotiate, deal with accountants and lawyers, obtain debt financing, and even how to successfully lead and manage a growing organization.
Paul Buchheit, the creator of GMail, and a founder of FriendFeed (which I wrote about earlier) wrote an interesting post describing his philosophy on the development approach of innovative products (typically in startups). I found his thoughts to be very similar to those of my own. My favorite part is:
So what’s the right attitude? Humility. It doesn’t matter how smart and successful and qualified you are, you simply don’t know what you’re doing. The good news is that nobody else does either, though some are foolish enough to think that they do (and that’s why you can beat them).
What is the humble approach to product design? Pay attention. Notice which things are working and which aren’t. Experiment and iterate. Question your assumptions. Remember that you are wrong about a lot of things. Watch for the signals. Lose your technical and design snobbery. Whatever works, works.
What I tell people over and over is that one can be the most accomplished product designer/manager/engineer, but when developing a new product, you are really just making an educated guess about what will resonate with your user. Sometimes what makes so much sense on paper just doesn’t jive with users. In a sense, the design+requirements for the initial product is the hypothesis and the v1.0 of the product is the experiment that tests the hypothesis on users.
What separates the winners from the losers is the analysis of the results, which in the case of web-based products can be efficiently done by looking at specific engagement metrics. This does not just mean pouring through Google Analytics data. Instead, I’ve found it to mean combining the analytics data with database queries that measures key application engagement metrics.
The point is that the development of innovative products must be both rigorous and methodical. Use the standard scientific method. The unknown question is “What do my users want?”. Start with a hypothesis, experiment by testing your products with real users, analyze what worked and what didn’t, modify your hypothesis, test, …
Have you ever been browsing a merchant website and a popup appeared asking you for feedback? Or have you received an email following a purchase asking you to fill out a survey about your experience? I do almost weekly.
Having needed to collect feedback in the past, I understand both how hard it is to get people to fill out surveys and how valuable direct user feedback is to improving the user experience. Thus, I’m more likely to fill out a survey than most.
Today, I got an email from BestBuy asking me for feedback on my in-store pickup experience. I clicked thru the link and was awarded with the following:
A whopping 40 questions each needing an overly granular 1-10 rating. When I saw this survey, I immediately lost motivation.
This brings me to my three rules for effective online surveying. I’m not a marketing veteran but I have conducted a few online surveys in my day. Also note that I’m not suggesting that these rules are going to boggle your mind. However, since most surveys I am presented with don’t adhere to these rules, I think they’re worth reiterating.
Keep it short – Seriously, this is so obvious but it shocks me how few surveys are truly concise. Some surveys are honest saying up front that it will take 15 minutes to complete. Others are less scrupulous and say it will take 5 when it really will take 15. Either way, keep the survey to 5 minutes or under and hope that your users can complete it in 2-3 minutes.
Start and end with the easy questions – If a user is stumped by your first question, they’ll abandon. An easy question will get them in a groove and help their brain recall more details about their experience. Conversely, by the end of the survey – particularly if the survey is longish – the user’s attention is waning. They’re nearing the end of the mental commitment they originally made to your survey.
Keep the answer choices simple and meaningful – Why do 1-10 when 1-5 will suffice? Mix up the answer choices as well. It will make taking the survey a little less monotonous and keep the user’s attention. Qualify the answer choices with text descriptions to make numerical ratings more comparable between users. e.g. “5 – I will definitely visit X.com next time I am shopping for a computer product. 1 – Even if X.com had the lowest price, I would buy elsewhere” . Keeping your survey short will make adding text descriptions not such a time consuming step.
On page 4, Jeff’s rules of leadership – and management – are listed:
- Hire very carefully — you’re creating an enduring culture.
- Be stubborn and flexible.
- Obsess about customers, not colleagues.
- Know when to throw away the org chart.
- Get good advice — and ignore it.
- Don’t chase the quick buck.
…and his rules for Amazon:
- Communication is terrible.
- Take leaps of faith.
- Be simpleminded.
- Add up lots of little advantages.
I’d encourage you to click the link above and read the details behind some of these bullets. His general rules on leadership you’ve probably heard before in one shape or form, but his rules for Amazon – particularly the “Communication is terrible” rule – I found to be thought-provoking.
Ask most people about Alibaba and you’ll likely be met with scratching heads. A lot of people have heard the name, but only a few folks seem to know that Alibaba is a Chinese company that offers a directory service for Chinese manufacturers and suppliers. I had watched some sort of documentary a few months back that played up the vastness of Alibaba’s directory and how through a couple clicks of your mouse, you too could can find a suitable Chinese supplier for just about any type of good you want to manufacture or sell.
Alibaba makes a lot of sense. I mean let’s face it. Doing business internationally is intimidating. Doing business in China is even more intimidating unless maybe if you’re Chinese and speak the language well. I certainly am not such a person so I know that connecting myself to the right Chinese supplier would be next to impossible without an agent to help me. From what I’ve been told, such agents can be quite expensive and because of biases (read: kickbacks), the agent may not even connect you with the optimal supplier for your needs.
Alibaba usurps the need for such an agent and provides someone like me direct access to the suppliers. It’s a simple concept that offers exciting opportunity for creating business relationships between foreign companies and China. Assuming Alibaba works as advertised, it’s no wonder that Yahoo! invested $1bn for a 40% chunk of the company. But, the question is, does it work? Is it really that easy for an average American businessman to locate and work with the right Chinese partner?
For one man’s experience, check out this post by Greg Runco. Greg designed a slipper and was looking for someone to manufacture it. He used Alibaba and describes his experience thus far with the supplier he chose. Greg also has several other interesting posts on his blog. I find his style sort of similar to mine and I enjoyed reading through his posts. Thanks for the introduction Greg!
Alexa is an Amazon company, that among other services, provides traffic details and rankings for web sites. Everyone references Alexa’s traffic rankings. I use it regularly to get a glimpse into how much traffic (and the traffic growth) of a particular startup. Likewise, many tech journalists/bloggers/pundits use Alexa rankings to analyze how much traffic one site is getting versus another and if the site is growing or decreasing in popularity. I’ve also read on many SEO discussion boards that prospective advertisers will look at your Alexa ranking to determine how much your ad space is worth. I’ve also spoken with investors who include an Alexa traffic check in their initial look at a startup. So, clearly, if you run a web-based company, that Alexa ranking is an important number. It will likely have a direct influence on your business.
There has been much debate over how accurate Alexa’s rankings are. To understand how accurate (or inaccurate) Alexa’s data is, you need to understand how their system collects traffic data. It’s really quite simple. Alexa offers a toolbar for IE that offers up a Google search box, Alexa site info, popup blocking, and page highlighting among other features. More importantly, it records every single URL the browser visits and sends that information to Alexa. The important thing to understand here is that Alexa’s traffic data is based solely on the traffic of users who run IE and have the Alexa toolbar. For some more specifics about how and what Alexa calculates, go here.
Up until this point, you might be thinking…hmmm this Alexa sounds pretty reasonable! Rishi, why do you call it a “myth”?
Alexa states that they compute “traffic rankings by analyzing the Web usage of millions of Alexa Toolbar users.” Millions huh? Seriously, have you ever seen anyone that runs the Alexa toolbar. I sure haven’t. Google or Yahoo toolbar, sure. But never Alexa. My hunch is that it’s more like hundreds of thousands, not millions, of users. Possibly millions have downloaded it and had it installed at some point, but not all are currently running it. Check out this post from a couple years back on SEOChat. The author concludes that “that the Alexa sample size was 180,000.” Since Alexa does not post any demographic data, all of this is 100% speculation. However, the point is that the toolbar’s user base represents a very, very small percent of the Web-browsing population. And what kind of people do you think have the Alexa toolbar installed? I’m thinking it’s more Joe InternetProfessional and less Joe Teenager and even less Joe Noob. Evidence of this is that MySpace is currently ranked #5 and Google is #2. According to every other data point I’ve seen, MySpace pageviews far exceed Google. My guess is that your typical MySpace user is a lot less likely to be running the Alexa toolbar than the typical Google user. If efforts were taken to make this userbase statistically random (like a Gallup does) then the traffic data would be a lot more reliable. But as it stands today, one could not expect the pool to be random and thus the traffic data just isn’t that reliable.
Another huge problem with Alexa rankings is that it easy to manipulate. The traffic rank of ItsRishi.com is a patheticaly low 3,741,850. According to Alexa, my reach per million users for the past 3 months has been 0.1. That means that 1 in every 10 million Web users visit my site on a daily basis. Is that accurate? Who knows. Even Alexa states that traffic data beyond the top 100k is not statistically significant. Fair enough. As an experiment, I will be improving my traffic rank over the next few weeks. How? It’s simple. I installed the toolbar on my IE browser and from now on will use IE whenever I am working on ItsRishi.com. What this means is that I’ll probably end up with a few hits on average per day. If I don’t see enough of an improvement in a couple weeks, I’ll recruit some IP addresses – oops, I mean friends – to also install Alexa toolbar on IE and use it while visiting ItsRishi.com. My hope is to crack the top 100k. I’ve read many stories from webmasters who have done this very same practice with great success.
While I will be doing this for ItsRishi.com purely to satisfy my curiosity, you can bet that many companies are using such techniques to magnify their Alexa rank. The higher your rank – especially if your rank is rapidly climbing – the more people are interested in your company. That’s just a fact. Whenever I hear about a startup for the first time, I usually do a quick check of their Alexa rank to get an idea of their popularity. If the rank looks promising, I assume the site is hot and I take a deeper look. As I’ve explained, this assumption is faulty, but there really is no better (public) way of determining a site’s popularity. So while the Alexa number may not be accurate, it is a number. It’s not really much different than when Forrester publishes a report saying that an industry is X billion dollars. When you want a number, any number is better than no number. I guess the lesson here is to be careful of how much meaning you try to extract from the Alexa data.
If you’re trying to compare two companies in the same industry, the best suggestion is to find a metric that’s more pertinent to that industry. For example, an owner of a online retailer comments: “There is one competitor in particular that I watch..He is a member of Bizrate, so I can count the number of customers that take his survery each month, and compare it to the number that take our survey.” In his space, the number of Bizrate survey submissions is a much more accurate metric for him because its a nice apples-apples comparison since you can assume that at his store and his competitor’s store, the % of customers who complete the survey is about the same.
You can follow my Alexa progress here.
There’s a new networking event for local folks in the tech entrepreneur community called Stirr. I’m usually not a big fan of going to such events, not because I don’t like talking with people (anyone that knows me knows that if there’s one thing I absolutely do like is to talk) but because loud, crowded environments such as these don’t usually promote much meaningful conversation. By the end of the night, I have a bunch of business cards and a voice that’s shot to hell. Some people probably think that a stack of business cards equals victory but for me the only thing tangible I get out of going to these types of events is meeting other entrepreneurs who share the same spark that I have. It’s inspiring to me and often serves as that extra glass of Kool-aid that I need to stay optimistic about entrepreneurship. Anyways…. one thing unique about Stirr is that they allow a few companies at each events 60 seconds to pitch their company and live demo their product(s) throughout the night. The companies that participated tonight were:
3Jam – Text message a group of friends at once. Definitely a nifty tool when you need to engage in a conversation with multiple contacts on your cell phone. The problem is that this is a feature, not a business. They can either charge users a nominal fee per use or add advertising to the messages. A lot of people text message so this should be good revenue right? Wrong. If this becomes popular, you can bet that carriers will implement this simple functionality on their own and add it to their own list of paid services. It’s unlikely that carriers, who are notoriously snobby, will agree to some sort of joint marketing/revenue partnership. Carriers also have the resources to better integrate such functionality into the phones themselves.
Accomplice – According to Accomplice, their product is “a simple, intuitive application that integrates an efficient personal organizational tool with the ability to quickly pull together a team. With Accomplice, busy professionals can be effective, save time, and execute on all of their personal and work activities using a single system.” Ummm.. Yeah. Your guess is mine. I did see a demo of their product from a distance and it seemed polished but from what I’ve seen, most people end up sticking with very simple – often crude- solutions to organizing their personal information rather than using fancy PIM’s. I’m not saying Accomplice is bad but if I can’t understand what it is and how it’ll simplify my life in 15 seconds, that’s a problem. But who knows, maybe my life just isn’t busy enough?
JumpCut – Edit videos online. I haven’t personally used their service yet but I was impressed by the demo they were showing. I don’t see these guys surviving as a standalone service. They will need to be able to integrate with other video services such as YouTube to directly access, modify and then save videos stored elsewhere. Otherwise, it’ll be too much of a pain in the ass to upload your video to JumpCut, modify it, download it back and then upload it to YouTube. And this is when the service is free. Presumably, JumpCut will want to earn some money so that will further deter users. Video sharing communities like YouTube will either build thier own tool (which of course will have much better adoption even if it’s not as good) or buy JumpCut. I could definitely see a big player like Y!, Google, MS, Fox Interactive buying these guys to bolster their respective video sharing offerings. Again, I have not actually used JumpCut so I don’t know how good it is.
LogSavvy – The dude who spoke about LogSavvy roused the most interest from the audience by talking about how relational DB’s do not allow applications to easily mine the data to discover relationships between …. eh, I sort of lost him in the middle. Their website is similarly vague. From what I can tell they have software/systems to analyze web server logs, db logs, and other logs to form custom reports and views. Being able to poke and prod your data to optimize your product for your customers is becoming ever-more essential to success especially as not only user data but also user behavior is logged. So, I could imagine the demand for this type of software is high. I guess we’ll have to wait for something more tangible to understand what they’re up to.
TheMintPages – Review site for female beauty products. As the host of Stirr reminded the audience, the female beauty product market is huge. Review sites for every day products don’t really exist so I could definitely see a niche site focused exclusively on the needs of this consumer catching on. Of course, this is basically a social content play so the key to success is all about not only reeling users into the site, but hooking them into creating content for the site – whether that means writing a product review or replying to other user’s comments. I personally did not like their site design though. It’s way too Web2.0 which gets the thumbs-up from the geeks but geeks (usually) don’t buy makeup.
I accepted an invitation to be on a “Young Entrepreneurial Careers” panel taking place during a week-long entrepreneurship summit organized by the Asian-Pacific Student Entrepreneurship Society at Stanford. The description of the presentation is:
What does it mean to be a young entrepreneur? Hear from panelists with recent entrepreneurial experience, people who still remember the trials and concerns that come with starting up a venture for the very first time. They will discuss some of the issues that young entrepreneurs face, such as making the first leap to entrepreneurship and balancing a “normal” job and life with the entrepreneurial venture. We will also hear from panelists who will discuss what embarking on an entrepreneurial career entails.
Many of the events on the schedule for Summit 2006, which takes place from April 10th to 15th, are open to the public, including a keynote speech – that I’m looking forward to – by Peter Thiel. For more information about Summit 2006, click here.