Week 11 — how to sell things that don’t exist

Godfather

Recap

Over the course of the last 2 and a half months we’ve gotten a shitload of stuff done to move business forward.

Right now you should feel we’re reaching a new breaking point: are we going to be able to hustle everything together to actually, really ‘make it work’?

At this point there’s a few things we need to move forward fast:

  • Somehow find enough money to build (a first version of) the product
  • Some definitely proof that we’re on to something that will convince friends, investors, grandmas and — most importantly — yourself, that you’re really on to something.
    • In this regard there’s really 1 ‘proof’ that stands out above anything else: people that are willing to hand over their hard-earned cash to you!

Take money

Today we’ll show you how to do exactly that: get money to build your product, by taking customers money before the product actually exists.

Let’s talk about pre-selling!

Stuff to learn

So what is pre-selling?

  • Pre-selling means selling something before the product actually exists. This in contrast to selling something that already exists.
  • Here’s some examples:
    • Pre-selling a housing block in before it’s build
    • Books, music and most campaigns on kickstarter
    • Tours – where you need a minimum number to cover costs

Why should EVERYONE pre-sell?

There are a couple of reasons to pre-sell. Some are obvious, and others are less so:

  • The obvious one: you solve your money problem. Just like any Kickstarter campaign pre-selling allows you to get money from customers, so you can fund your first batch of products.
    • This way you don’t have to convince investors. Your customers will essentially become your investors.
    • It’s also way better than putting in money yourself. Whenever this can be avoided you should. The main reason is that you are effectively then becoming an angel investor instead of an entrepreneur!
  • Fundamentally, pre-selling is also about reducing risk. You’ll validate your concept before you build the product.
  • Finally there’s a somewhat less obvious, but equally important concern: pre-selling will allow you to build a product people that are actually willing to pay.
    • The unfortunate reality is that most people don’t put their money where their mouth is. Your most vocal prospects — those that have a strong opinion about your product — might now necessarily be the people that will actually pay.
    • By charging money you’ll see who’s serious and who’s not. Now you can focus your effort on making something that the real customers want.

The way I see it there are 2 potential outcomes, and both are positive:

  • Positive outcome: people are willing to fund you, even though no product exists yet.
    • Pre-selling is better in this case, because you can be more confident early on, focus on the real customers, and get money to fund development
  • Negative outcome: people are NOT willing to fund you.
    • This is kind of a bummer, but it’s definitely better to know this now instead of later. Maybe revise your product or messaging, and give it another shot?
    • You’ve just saved yourself the work of developing a product that nobody cares about.

The pre-sell checklist

Below is a quick breakdown of what’s needed for a good pre-selling campaign. I won’t go into too much detail because circumstances might differ, but the overall flow is always the same.

Step 1: Figure out how much money you need

  • Pretty self-explanatory. How much money is needed to be able to actually deliver on your promise – to get a product in the hands of customers?
    • Don’t forget to also include stuff like shipping costs, if you’re doing a physical product
    • Do you need ALL of the money up-front? What if you need $30k to build the product: would it be okay to get $20k in pre-orders, and fund the last $10k another way, based on that proof?
  • Your target should be the lowest amount of cash that would still bring you success. Remember that you’re always free to accept more pre-orders after you’ve reached your goal.
  • Note that you can take this number from your financial analysis that you did last week (Week10)!

Step 2: Create an ‘offer they can’t refuse’

  • For this you need to:
    • Pitch your product
      • On Kickstarter video is pretty much essential these days, if are really needing validation as much as the money itself.
    • Benefits
      • Outline exactly what people will get, if they make a pre-order
    • The catch
      • Now you’ve outlined an awesome deal, so customers will automatically feel that there must be some kind of catch.
      • Be fair & honest here, and tell them the catch: the product isn’t ready yet, so they need to be a bit patient.
    • Guarantee
      • This whole thing is exactly like any other sales pitch. Especially in cases where people perceive a risk they really want to see some kind of guarantee.
  • Expert tip: go over to Kickstarter, and filter for the most successful campaigns. You’ll see exactly what they did to pre-sell their products.

Step 3:  Set up the infrastructure

  • In order to start taking money you need to set up some infrastructure
    • Either go with a platform like Kickstarter, or update your website to tell the story
    • Set up some way for people to transfer money to you. Really anything would work at this point, but make it as easy for yourself as possible to collect the money.
      • For instance: use a link to a Typeform form, which will accept creditcards. Problem solved!

Step 4: Hustle like there’s no tomorrow

  • Well, this should be clear by now, I’ve been talking about hustling since the start of this blog! Be vocal and use every means you can think of to get the money together.

Extra resources

Here’s some extra resources on pre-selling:

http://fourhourworkweek.com/2012/12/18/hacking-kickstarter-how-to-raise-100000-in-10-days-includes-successful-templates-e-mails-etc/

 

Stuff we did

Regular readers of my blog will have seen we always follow up the ‘theory’ with what we actually did on our startup. However, this week we are not ready to pre-sell our website builder product as there have been a few unexpected delays.

I won’t go into all the detail as to how this happened but I’ll say that’s a fact of startup life and, actually, I’m pretty happy to have made it this far keeping to the initial plan!

 

What’s up next

If you’ve been able to presell, you should be in the following position:

  • Concept is validated. This is a MASSIVE milestone that you should definitely celebrate. Well done!
  • There’s enough money in the bank to fund your product.

Really there’s only one thing you should do now. Next week we’ll teach you exactly how to build great products.

Week 10 — smashing out the numbers (finance & funding)

Recap – what we need to make it all work

Over the course of the last 10 weeks we’ve validated the core components of our business.

  • This journey has only been going 2.5 months, look what you’ve been able to accomplish in that short timeframe!
  • We have reduced the risks in our model by probably 80-90% => so the chances that it’s totally not going to work out are relatively slim.

We now need to make sure that all the components of our business make sense together. It’s time to add up the numbers, and see if we have a business worth doing.

  • What we’ll achieve this week:
    • We will answer this key question: “Can we grow predictably and big enough to build a great company?”
      • Is the market big enough?
      • Does it align with our personal vision?
      • How much money do we need to pull this off?
    • Also we’ll identify some key financial drivers
      • Guesstimate the 2 key values for any business: Customer Acquisition Cost (CAC) & Lifetime Value (LTV)
      • Our engine of growth
      • Key metrics to track

Stuff to learn

Some preliminary remarks — before we begin:

  • If you’re afraid of numbers: Get over it fast. Every entrepreneur needs to understand some basic accounting, and be in control of the finances.
    • I’ll not make it too complicated here though – some common sense is enough to ‘get it’. Stick with me and see how you like it.
  • Most of this process is pretty straight forward. It’s more about showing you the right mindset to approach finance than about doing a lot of work here.
    • This leaves plenty of time to work on driving traction in the meantime!

Part I: defining your vision & goals

  • How big do you want your business to be in order to consider it a success?
    • Are you looking for venture capital money => better find a company that can grow to $50m valuation
    • Or a lifestyle business => maybe $20k in yearly revenue is enough

Part II: how big is your market?

Obviously the size of the market you need is tied to your vision & goals. That’s why we’ll tackle it next.

Below I’ll outline 2 ways to estimate your market: top-down and bottom-up.

  • Top-down (a.k.a. the traditional way):
    • This is what you want to avoid: “We’re in the XYZ market. This is a $18b market (or whatever). If we serve only 0.1% of this market then we’re doing great!”
    • Why this is a bad idea: it’s the 0.1%. This is a total guess. Also, do you know of any company that’s having a 0.1% market share? Me neither.
      • On top of that: can you think of any investor who’d invest in a company that’s planning to have a 0.1% market share? Bad idea.
    • Bottom-down works the other way around: look for a market that you can define much stricter, and where you can be market leader straight away.
      • Your market is anything where you can see yourself having a 50-70% market share.
      • After you’ve identified your first small market, you’ll consider other markets or segments that you might move into next.
    • Below I’ll show how we did the market size calculations using both approaches.

Part III: what is driving your growth?

The next step is figuring out exactly what things are driving your growth. For this you need to know 3 things:

  • What is your ‘engine of growth’
  • How expensive is it to acquire a new customer (CAC)?
  • What is the value of this new customer to your business (LTV)?

Engine of growth — the core process that’s driving growth for your business

  • For starters: the engine determines what things to focus on to create more growth. There are actually 3 engines of growth: viral, paid & sticky.
  • Viral engine of growth
    • This relies on existing users to invite new users to start using your product as well. This creates a positive feedback loop or ‘snowball effect’.
    • This engine only makes sense if it’s a product that relies on network effects to work well (e.g. social media, email, Skype, Dropbox, etc.)
    • Your key metric is referrals. For a virus to grow each virus cell needs to infect more than 1other cell (on average) to keep growing. Likewise each user needs to bring in more than 1 other user to have a viral loop.
  • Paid engine of growth
    • This means you put aside a percentage of your revenue to spend on marketing & sales to acquire new customers. You pay for getting more customers.
      • 90% of all businesses work on this engine (Amazon, Coca Cola, airlines, really almost everyone)
      • Note: this model might sound a bit boring & ‘old’ but remember that it’s better to have something boring that works, instead of something fancy that doesn’t work!
    • The key metric is acquisition costs, and pushing it as low as possible.
  • Sticky engine of growth
    • This is a model used by subscription services (magazines, mobile phones, cable TV, SaaS businesses)
    • This model makes sense if customers use your product continuously, over a longer period of time.
    • The key metric here is retention. If you can retain people longer you’re increasing the value of the customer, thus giving you more leeway in what you can spend on acquiring a new user

CAC & LTV — the 2 magic numbers to calculate profitability

  • CAC = customer acquisition costs or the total cost to acquire a new user
    • CAC is often tied to a channel. Each channel has a different CAC
      • For instance: if you pay $1 per click (CPC) in Google Adwords, and your website converts at 3% you’d need 100 clicks to get 3 customers, or $33 per customer. You would say “CAC for AdWords is $33″
      • In week 9 (about Traction) we outlined how most businesses primarily rely on one channel at any given time.
    • You want CAC to be low. Lower = better
  • LTV = lifetime value, or the value (in $$$) you get from each customer
    • To be more precise: it’s the profit you expect to get on average from a new customer. So not revenue, but profits.
    • Example: A car dealer sells a $20,000 car that he bought the for $15,000, so the LTV is $5.000 (assuming he sells only 1 car per customer)
    • LTV for a software-as-a-service (SaaS) startup could be 12 months x $20/month = $240
  • For any business to turn a profit the LTV needs to be higher than CAC. Benefits should be bigger than costs. The bigger the gap, the bigger the profit margins.
    • Don’t forget to consider whenCAC and LTV occur: typically costs precede benefits.
    • This leads to cashflow problems: consider the above SaaS startup that gets a $240 LTV, and for instance a $80 CAC:
      • LTV is 3x higher than CAC. This would be a profitable business case.
      • However, CAC occur before the customer signs up. After that $20/month in value is earned back.
      • Therefore in the first 4 months cashflow are net negative, and only after that does it switch to positive.
      • So, in this example, if you acquire 1,000 customers in the first month it means there’s a gap of $80k to cover, even if the company would eventually be profitable L

It’s hard to pinpoint CAC & LTV exactly. That’s fine: for now you’re looking for a ballpark estimate of both so you can see if your business model makes sense.

Part IV: Costs

It’s time to map out our costs structure (it’s part of the lean canvas, we introduced in Week 1). Here’s a couple of questions to ask:

  • What are your fixed costs?
    • Fixed costs are not dependent on how many products you produce.
    • Examples: legal costs, software development, website design
  • What are your variable costs?
    • Those are costs per product or per user. Thus more users = more costs
    • Examples: hosting costs, production costs, acquisition costs (see above), customer support

That’s a great start. Below I can give you a few more rules of thumb, which might be helpful if you’re feeling ‘stuck’ at any point.

  • For most startups over 85% of costs are salaries. Don’t forget your own salary either!
  • Any company is wise to spend 50% of its budget on marketing & sales expenses (driving growth).
    • In other words: if you expect marketing to be a small cost: think again 🙂
  • Consider (again, rule of thumb!) that you need a margin of at least4x the production costs. This leaves room for marketing (see above), profits and overhead.

So, if you’re selling ice creams that you bought for $0.50 a piece, sell them for at least $2.01 or you’ll likely not make a profit!

Part V: does is all add up?

We’re finishing up now. The core question to ask yourself is: “Is this a worthwhile business?” 

  • Breakeven: How many customers do you need to cover your costs?
  • How many customers do you need to achieve your goal from Step 1?
  • How much money do you need to get a first product live?
    • In other words: how much money do you need to be able to show much more traction, and raise more money?

Often you’ll find that you need some money up-front to be able to develop a product. Here’s some thoughts on that:

  • Traction triumphs everything. Focus on the amount of money you’d need to show significantly more traction.
    • This means enough money to build a first version of the product, and start developing channels.
    • If you need more than $50k you’re probably thinking way too big

Stuff we did

Right, now I’m going to hit you with our exact numbers that we worked through to work out if our startup was likely to succeed or not!

Part I: defining vision & goals

  • For this I obviously discussed it with my cofounder (in case that’s not obvious!)
  • This is our vision:
    • Running startups is f*cking hard, and startups would be tremendously helped with having sites that make it easy to figure out growth
    • If we can help startups succeed in transitioning into growth modus we’re extremely valuable, and we help more startups companies succeed.
  • Our mission is: make more startups succeed. Because the world needs more good ideas to be turned into good businesses
    • We believe the problems with finding growth are pretty universal, but our primary focus is on SaaS startups because are doing that type of business ourselves. We want to talk the walk!
  • Our big, hairy goal is to make a startup with a 50m+ valuation, that’s market leader in the core startup growth tool: their website.

Part II: how big is the market?

  • What’s the LTV of each customer? (I inserted this after doing Part III)
    • $2,400 value/year ($200 per month)
      • We’re assuming 12 months
      • We’re assuming that some users would be power users that pay more than the $179 first tier. It’s a bit of a guess, but that’s fine for now.

What’s our potential market size?

  • Top-down approach
    • Let’s use 125k startups per year (75k US, 50k non-US)
    • Assume 40% of them are potential buyers (right problem, right audience, etc.)
    • $2.400 value each
    • Thus we’d look at $120m potentially (= 125k x 40% x $2,400)
    • Doing $50m+ in sales in 5 year seems reasonable. This would put our valuation north of 50m at least.
  • Bottom-up approach
    • 15,000 SaaS startups
    • A market leader (us) can serve 70% of startups here: that’s 10,000 startups
    • This would mean $25m in yearly revenue (= 10,500 x $2400)
    • Being the market leader in SaaS websites we’d probably be in an excellent position to move into other related segments as well (e.g. enterprise & B2B startups).
    • Anyway a valuation over $50m seems very possible

NOTE: we’re not saying “we will probably be valued at $50M in 5 years.” Rather we’re showing that at least it is a possibility.

Part III: what is driving growth?

  • Engine of growth
    • We’re for sure in a ‘sticky’ engine of growth, since we sell our software as a subscription (SaaS)
    • Thus we can use different traction channels to acquire new users, but should focus on keeping churn low.
  • CAC — customer acquisition costs
    • Currently our landingpage is converting 10-12% of visitors to beta signups.
      • Those people are really interested in the concept. I assume at least 10% would buy us if we asked them to. Thus current conversion is 1% (10% x 10%) at least.
      • It’s very doable to optimise this further over time, leading to 2-3% conversion at least.
      • Current channel (paid ads) can be reduced to $2 cost per click (CPC).
      • Assuming $2 CPC and 2% conversion we’d need 50 clicks per new customer, thus $100 CAC.
    • CAC for paid ads is $100
      • Later on we can expect to ‘unlock’ new channels (word-of-mouth, SEO, freemium) that will be cheaper.
  • LTV — lifetime value of a customer
    • We’ll charge $179 per month.
      • Of this we have only minimal costs per user. Probably we’ll have around $150 gross margin
    • $150 per month would be enough to make back our CAC in the first month.
    • Assuming people stay with us for 12 months that would be $1,800 value per customer
      • Churn rate would be 8.3% (= 100 / 12). This is a key metric to measure. If we can reduce it to 5%, then LTV would be $3.000

Conclusion: LTV is at least at an order of magnitude bigger than CAC, and there would be a short lead time (time between when we spend CAC and get LTV back).

  • We wouldn’t expect cashflow problems, so fast growth is not a problem.

Part IV: costs

Costs structure:

  • Acquisition costs: $100
  • Hosting & server costs: pennies per user
  • Customer support: we’re a web app serving tech-savy people.
    • We don’t expect this to be a serious cost. 1 support rep can serve at least hundreds of customers
  • Fixed costs: software development & design

How much cash do we need to show much more traction?

  • We need to build an initial version of the application, so we can accept actual customers. Also we’d need money to acquire our first 100 customers
    • Software dev: $35-50k
    • Traction: $10-20k
    • Others: $5k
    • Total needed: $50-75k
  • Thus $50-75k would allow us to get 100 paying customers, become profitable, and positioning us to raise a bigger round of investment to improve on the product and drive more growth.

Part V: does it all add up?

  • Market is big enough to satisfy our ambitions
  • LTV is significantly bigger than CAC. I believe we can be very profitable here
    • I would be surprised if LTV wasn’t at least 10x CAC.
  • Initial cash needed to get started isn’t easy to get, but it’s definitely not a deal breaker.
    • I can clearly see the path to building a profitable company that wouldn’t further rely on outside money to ‘make it’

What’s next up next?

Right, it been a long blog – but an important one to show the exact numbers! From here, it’s time to make another milestone decision:

  • Proceed if you feel confident that the numbers add up, and you have a business worth doing that’s in line with your goals & ambitions.
  • The numbers don’t add up => rinse & repeat (part of) the 12 week process. Go back to the drawing board and improve your business model.
    • Note that this is the norm: almost nobody gets it right the first time. Going back 1 or 2 (or 5 times, in the case of my other startup!) is perfectly cool.

Next weeks there’s some few essential part coming up to finally turn this validated idea into a fully running business:

  • How to pre-sell — get paid before you spend money to build a product
  • How to build a great team & company
  • How to actually build awesome products, now that you’re having team & cash on hand!

Week 9 — Traction makes the world go round

Wow!

We’ve past the 2/3 point and we’re super happy that the startups we set this blog up for are making BIG progress! 9 weeks down, 3 to go!

Traction matters in all situations. It’s crucial to see what works for you, no matter where you are based!

Recap – it’s all about de-risking your model!

By now you should have realised that we’re quite big on ‘risk management’. A startup is all about bringing risks down quickly.

In week 4 we identified 3 sorts of risks:

  • Product risk — can we build the product?
  • Market risk — do people care?
  • Channels risk — can we reach our customers?

If you’ve been working along with us for these last 9 weeks, you’ll see that ‘channels’ is the riskiest thing right now:

  • Probably your biggest problem is getting enough eyeballs to your site / product / service
  • If you get both channels & market risks pinned down, I’m very confident that you’ll be able to make a solid product as well.

Stuff to learn

This week we’ll discuss traction. Before we dive into the nitty-gritty, let me cover the fundamentals:

  • What is traction?
    • Traction is momentum. It’s proof that your business is quickly moving in the right direction. It’s a sign that your company is taking off.
    • Traction equals growth, and is the lifeblood of a startupIf you have traction everything else will solve itself.

There are many different channels to drive traction, and it’s hard to predict which one will work best for you.

  • In order to determine this you’ll have to do some testing. We’ll show you exactly how below.
  • It’s likely that one channel is optimal, and far better than all others. Since most businesses get zero channels to work (and thus go bankrupt) you’re doing great if you get just one channel to work!
  • Your traction strategy should always ‘move the needle’ for your company
    • This means that your efforts should have a meaningful, measurable impact on your business.
    • Example: if you have 10 customers now, and a new channel helps you to get 10 more, that’s certainly meaningful – it does move the needle. However if you have 10,000 customers and a new channel gets you 10 more that doesn’t move the needle!
    • Different phases as a startup ask for different channels. Focus on finding something that works for this stage, but expect to hit a plateau at some point. Don’t worry about that: it’s a good problem to have.

IMPORTANT: you should expect to spend 50-60% of all your resources on traction related efforts.

Why such a big number, I hear you ask?

  • Consider the following:
    • Common misconception: “If you have an awesome product everything else will solve itself.”
    • Actual fact: “If you have traction everything else will solve itself.”
  • It’s also important to realise: traction is not something you’ll check off this week. It’s a process that you’ll have to keep repeating. Doing this stuff will take (much) longer than one week.

The goal for now: find 1 distribution channel that works. Then exploit that channel as aggressively as possible.

  • “Once you’ve found a strong traction channel, spend like there’s no tomorrow”
  • Below we’ll break down the exact process to find your number 1 traction channel.

The traction process

In a nutshell, the process looks like this:

  1. Define a clear, measurable traction goal
  2. Brainstorm which channels can get you there
  3. Pick 2-3 channels that seem most likely to achieve your goal (focus!)
  4. Test them out, one-by-one
  5. If you find something that works: spend as much as you can, while you can

Step 1: Define a traction goal, for example: “is to get 5,000 email addresses of people interested in the beta launch

  • Here are the requirements for a good goal:
    • It’s clear
    • It’s measurable, including a timeframe
    • It’s the core metric for your business
      • This means that if you achieve this goal then everything else/ all other problems will be insignificant
    • Bonus (my personal favourite!) – it should push you out of your comfort zone.
      • You should feel excited and awesome about yourself when you imagine achieving the goal.
      • Aiming low seems safe, but actually it’s not. When you’re aiming high you’ll be more energised, motivated & creative.
      • A good yardstick: 50-70% of people who you tell about your goal should think you’re unreasonable.
      • Actually you yourself should also feel like you’re being unreasonable. That’s a good sign!

Step 2: Brainstorm

  • Consider all your options – in many cases there are many more options than you think.
  • Here’s a list to get you started, which I shamelessly copied from the book Traction by Gabriel Weinberg & Justin Mares, which is a create resource that I highly recommend!:
  • Viral marketing— encouraging existing users to refer other users
  • Public relations— getting featured in newspapers, blogs, etc.
  • Unconventional PR— publicity stunts & exceptional customer support
  • Search engine marketing— AdWords pay-per-click advertising
  • Social and display ads— ads on social media & niche sites
  • Offline ads— TV spots, radio, billboards, etc.
  • Search engine optimisation (SEO)— organically ranking for keywords in Google
  • Content marketing— blogs & content to drive traction
  • Email marketing— selling to people using a mailing list
  • Engineering as marketing— using engineering resources for marketing (widgets, micro-sites, free tools, etc.)
  • Targeting blogs— traction via niche blogs
  • Business development— strategic partnerships
  • Sales— pick up the phone, sell to prospects
  • Affiliate programs— giving others a share to drive leads
  • Existing platforms— piggybacking. Think FarmVille + Facebook
  • Trade shows
  • Offline events— sponsoring or running offline events
  • Speaking engagements— speaking gigs to reach your audience
  • Community building— growing a passionate community (e.g. Wikipedia)

Especially when you’re starting out, there will be smaller, specific ‘hustle channels’ that might also work. Just go over all options, and consider how each could work for you…

Step 3: Pick channels and focus

  • It’s far better to have 1 channel that’s working, instead of 10 that aren’t. Based on your brainstorm, boil the list down to the 2-3 channels that you deem most likely to achieve your goal.
  • I suggest using 2-3 channels, since you can test 2 or 3 in parallel without a significant loss in focus.

Step 4: Test the waters, one-by-one

In step 5 we’re going to spend like there’s no tomorrow. Obviously you only want to do that when you’re certain to get results. That’s why it’s essential to test your channels first!

  • For each channel you can design small experiments (remember week 8?!).
  • The main questions you’re looking to answer:
    • Acquisition costs: How much will it roughly cost to acquire a customer via this channel?
    • Scalability: How many customers can you acquire via this channel? When would you reach a ceiling to growth?
    • Are the customers in this channel the right ones for you?
  • Almost all channels can be tested for (must less than) $500 each
  • If your first channels don’t get you the results you’re looking for, it’s best to go back to step 2, and repeat the process.

Step 5: Spend without holding back

  • Spend 85-90% of your resources on expanding the channel that works. Spend 10-15% on finding something new (for when the current channel hits a plateau)
  • In this stage, converge all your efforts on 1 channel, and keep pushing till you either reach a point of saturation or costs rise too much.

 

Stuff we did

(a.k.a. channels that are likely to work early-stage for us)

1.) Goal

  • Our final goal is to get 200 customers to buy beta access pre-launch at $179 (= $35k total).
    • Because we want to use some sort of kickstarter-like campaign we would need to make those people buy over a ± 2 week timespan.
    • The only way to do this is to have 1 channel that’s reliable & ready for action at that moment: an email list with interested people.
  • Assuming a conversation rate of ± 5% we need roughly 5.000 email addresses to be on the safe side.
    • Note to self: we should test this 5% conversion beforehand, because this is a risky assumption!
  • Thus our goal for now is to get 5,000 email addressesof people interested in the beta launch. Goal set? Check!

2.) Brainstorm

  • We went over all of them, and identified 3 likely channels:
    • Paid ads (mainly social & display ads)
    • Publicity
    • Sales

3.) Focus

  • Paid ads seem like a viable channel.
    • We consider Facebook, LinkedIn, Twitter & BuySellAds
  • Publicity (Hacker News, Betalist, Producthunt, etc.) seems like a viable channel, but need a high converting landing page to be effective.
    • Those traffic sources can only be used once, so we better have a well-converting landing page first! (this is a technical point, these guys won’t have you more than once!)
  • Scraping + direct sales
    • We’ll use a script that ‘scrapes’ all startups from sites like Betalist, Y combinator, etc. This would give us access to thousands of leads
    • After that we’ll cold email those startups, and drive them into our funnel

4.) Test the 3 best channels

  • Paid ads
    • We started running Facebook ads. We allocate a budget of $200 to see if we can get acquisition costs below $2 per subscriber
  • Publicity can’t really be tested, but still we can reduce the risks:
    • Get a benchmark of how others performed – Google how other startups got on with the same sites
    • Get landing page conversion up (a.k.a. make it look awesome)
  • Scraping & direct sales
    • I went over sites like Betalist, and found that it would be super easy to compile a list of thousands of startups in our target customer niche. Getting qualified leads would be easy.
    • I manually scraped 50 companies, then mailed all of them. We’ll see what happens in a few days.
      • Also, I’ll send 3x reminders to people who don’t respond
    • com also worked as a viable intermediate test to see how people would respond. Here I got about 70% of people to respond, of which half are positive. 25% leave their email.

5.) Spend like there’s no tomorrow

  • As I said before: you can only spend like crazy if you have a high amount of certainty on the numbers from step 4. In our case, we’re still working on that!
    • Paid ads => costs per lead $8 (goal: $2) — seems doable to me
    • Publicity => landing page conversion 10-12% (goal: >20%) — seems doable
    • Sales => no results yet. I expect a 30% positive response.
  • The channels seem promising enough that optimisationcan get me to the point where the numbers add up. For this reason I focus on optimisation, and not on testing other channels just yet.
    • You know that you have to stop relying on optimisation if you fail to get fast improvements. In my case I can reasonable expect to increase performance 100% every 2 weeks, and a 4x improvement would make the numbers add up.

Awesome resources I’ve used

I’ll finish up this week with a few incredible resources to learn more about the whole traction thing:

  • Traction by Weinberg & Mares => think of it as this note, but 100x more extensive. I owe a lot of this information to them.
  • Quant-based Marketing by Noah Kagan => roughly the same thing. Just Google ‘quant based marketing’.

What’s up next?

  • First of all: traction isn’t something you fix in a week!
    • It’s something that will take you more like 3-4 weeks to see strong results.
    • You can, however, expect to make it to step 4 (testing the channels) this week! So you’ll definitely see initial results.
  • In the last 3 weeks of this blog, we’ll show you 3 essential components to kickstart your company into the second gear:
    • Finances — how to see if the numbers add up, and you’ve got a business worth doing.
    • Pre-selling — the ultimate proof, and a way to get enough money to fund product development.
    • Team building — how to deal with co-founders and build a great startup team.

 Catch you next week!

Week 8 — the shortcut to being ultra-focused: experiments

Welcome back everyone! Please keep signing up by clicking ‘Follow’ at the bottom right of this page.

This week, is a very practical guide to running experiments to help you quickly find out what works best. I’ll be giving a mix of science and IT as this week’s lesson!

Recap – remember that risk roadmap?

On an abstract level the goal of a startup founder is to quickly de-risk the entire business model that you documented in Week 1.

  • In other words: the business model is a set of assumptions or ‘best guesses’. You can reduce the business model risks by validating your assumptions.
  • Not all assumptions are equally important. Some are bigger / riskier than others. By tackling the biggest risks first, you reduce your overall risk as much as possible, as quickly as possible.
  • Risk reduction should also be your measure of progress at this stage.
    • Each week ask yourself: “How much did I reduce risks — how many of my core assumptions have I validated this week?”
    • At this stage, risk reduction is a more important metric than sales or revenue growth.

At any given time there are 100 things you could do, but only 1 or 2 that really move you towards your goal.

  • To remind you of the goal: to systematically bring down risks in your startup so you or others can invest more resources confidently

This week we’ll show you how to systematically de-risk your business concept. This allows you to stay laser-focused, and achieve results much faster!

Stuff to learn

If we take a very elevated view, the process looks like this:

  1. Ask yourself the key question: “What is the biggest and riskiest assumption right now?”
    • Your thoughts on this are documented in the risk roadmap (Week 4)
  1. Create an experiment to test your assumption, and either validate or reject your assumption.
  2. Assuming you were right you’ve now just proven your assumption, and thus brought the overall risk in the startup down.
  3. Rinse & repeat. What is the 2nd biggest risk?

First things first: what is your biggest risk?

The first thing to do is go back to your Week 4 risk roadmap, which outlines what risks to tackle next.

  • You might find that quite a lot of the risks you saw 4 weeks ago are now being solved (that’s called ‘progress’ ladies & gentlemen!)
  • Maybe some new risks popped up along the way
  • Maybe some risks can be rephrased to be more specific & clear

Probably you will have found during the solution interviews that the ‘product risks’ are now much lower. Also market risks should be a lot smaller as compared to 4 weeks ago.

Design your experiments

Each experiment is composed of 4 components:

  • Assumption / hypothesis — simply states the assumption you’re making
  • Expected outcome — what you think is true
  • Experiment — how you’re going to find out if you’re right or wrong
  • Actual outcome — what you found after the experiment

Example

  • Assumption — “Doing Facebook ads is a good channel to reach our audience cost-effectively”
  • Expected outcome — “With our ads we pay less than $1 per click, and those visitors convert at 10% into leaving their email”
  • Experiment — “Run $20 in Facebook ads, and see what the cost-per-click is. Measure how many people convert on your landing page.”
  • Actual outcome — “CPC (cost-per-click) is $3. Conversion is ± 10%”

All experiments follow roughly the same cycle to get to completion:

  • Planning => Build => Measure => Learn
    • Planning — design the experiment
    • Build — set up the experiment
    • Measure — gather the results
    • Learn — draw conclusions and move on

Tips on experiment design

  • Each experiment has only 1 goal: to validate 1 specific risk.
    • By acknowledging that each experiment has to tackle only one risk you make it easier on yourself. This comes in handy for the next tip:
  • Be super creative.
    • You don’t have to proof that your whole business is gonna work. You only have to test whether your 1 assumption is true or false.
      • Take the Facebook ads experiment for instance: you don’t need a website at all. You only care about the Facebook ad click-through rate, right? So why bother about making a landing page?!
    • I’m a lazy bastard, and so should you be: I advise you spend at least 20% of your time to brainstorm ways to be more creative & save yourself some work.
  • Writing experiments is hard!
    • Ideally, set aside the best part of your day (probably early morning) to work on strategy, experiments & priorities.
    • Putting in time here will pay off handsomely because you’ll be more focused, and waste less time and money on less important things.

 Stuff we did

 Here I’ll introduce 2 tools to help you experiment and help you read your customers’ minds!

Split testing: increase website conversion 2x in 2 weeks (Tool 1)

While we’re on experimenting anyway, this might be the perfect moment to introduce you to the concept of split testing.

Some basics:

  • What is split testing? => it means that you make 2 variants of your website and split the traffic between those 2 variants. Then you compare which one performs better (i.e. more signups).
  • Split testing is also called A/B testing. It’s the same thing.
  • It’s possible to split the testing even further A/B/C/D/E but for here we will focus just on A/B testing.
  • The concept of split testing can be applied in many ways. Some examples:
    • Test landing page A vs. landing page B
    • Test 6 different Facebook ads, each with a different picture – see which picture gets most clicks.
    • Run ads with different core value propositions and see which one gets the best response. Then use that value proposition throughout.
    • Make variations in your website headline, or the call-to-action.
  • The best tool to do split testing on your website is Optimizely.com. It does a great job in showing you how to actually create those tests.
  • It’s super basic, but I’m not going to show you the ‘how to’, for the sake of the length of this post!

Below is a picture of the results of my first test. There are a few things you should notice:

  • I tested the copy of the headline. The 3 variations that I used where:
  • Baseline (control group): “The only website builder for startups
  • Variant A: “The website builder for growth hackers
  • Variant B: “The website builder for SaaS startups
  • When I took this picture we only had 38 total views, which means 13 for each variant, which is not a lot at all!
  • However, we could already conclude with statistical significance. That at least variant A would outperform the baseline.
  • If ‘chance to beat baseline is 90%+ you can conclude that it does better than the baseline. If it’s lower than 10% you can conclude that baseline is better.
    • This is called a p-value of 0.10 if you want to go all geeky.
  • In the end we found that both variants A & B actually led to ± 50% increase in performance of the whole landing page. Notice that this is due to changing only 1 word in the headline!
  • Related to this: you should always start with testing the headline, then sub headlines & section headers, etc. etc.
    • You should expect that 1 out of 3 experiments turn out clearly positive.
    • This means you shouldn’t get disappointed if your first results are negative.
    • Expect most experiments to take 25 visitors per variation to draw conclusions.
    • If you do A vs B you need 50 visitors but if you were to do A/B/C/D/E testing you’d need 250 visitors. Therefore it’s simpler and better to focus on A/B
  • I recommend you take 15 minutes each day to review the experiment, and create a new one. After 2 weeks you’ll have 10 experiments, with 3-4 positive results which should be enough to at least double or triple your website conversion. Nice!

A real example!

The picture below shows exactly how my headline experiment performed – click on it to super size!

Use heatmaps for smoking hot insights  (Tool 2)

You’re now all firmly in geeky ‘growth hacker’ areas. A/B testing is cool, but there’s another tool that’s even simpler to use, and equally awesome: heatmaps.

  • I recommend you use Inspectlet. You should have created a free account with them a few weeks back anyway.
  • Inspectlet allows you to do 2 things:
    • Heatmaps: see how people click & behave on the page
    • Visitor recordings: see exactly how individual users scroll around your site. It’s like you’re looking over their shoulder when they check the site!
  • What you should do now:
  1. Go to the dashboard and select ‘visitor recordings’. Then watch 5 recorded sessions. I promise you’ll be blown away! 
  2. Check out your heatmaps and see if you can draw some conclusions.

Below I pasted 1 heatmap for our page that’s really interesting

  • This is the ‘scroll’ heatmap. It shows how far people scroll on your page
  • About 60% of our visitors make it to ± 2/3rd of the page, but then something weird happens: all of a sudden 35% of visitors leave the site.
    • This means that more than half of the people that scrolled this far down now decide to abandon the page. Weird, right?
  • Now it’s up to us to draw conclusions: see if we can improve the content and solve this ‘gap’.

What’s up next week?

  • After you’ve seen all this you’re probably eager to start A/B testing like crazy right? That’s a good thing, but you need a steady flow of traffic to your website to make this work.
  • In the next few weeks we’ll cover the most tricky part of all for most startups: how to get your channels right so you can reach your audience and sell efficiently.
  • After that we’ll wrap up this course (we’re already 70% through!) with how to build a team, and how to do startup finances. Exciting!

Week 7 – solution interviews

Welcome back everyone and thanks for your feedback on the new format. Please signup up by clicking follow at the bottom right of this page.

This week, we finally get to talk about the one thing that every entrepreneur loves to talk about — our product solution!

First though let’s look back that our first six weeks.

Recap – our focus so far

Weeks 1-6 have been focused on the most important assumption: do our customers have a problem worth solving?

  • First we did 1-on-1 research (problem interviews), and then scaled up to verify with more people using a MVP landing page.
  • Last week’s results with our landing page reaffirmed for us that there is a real problem that’s worth solving.

We haven’t focused too much on the solution yet, because the solution depends on the problem:

  • You can’t make a good solution without first fully understanding the problem.
  • Also, product development is expensive, so better to test first if people care!

IMPORTANT: it’s highly possible to not immediately find a strong problem. Without having a problem worth solving it is — as the phase suggests — it’s not worth it to invest your time in building a solution. Rather you should dig deeper to find other, bigger problems.

This means that you’ll have to do a few steps over again. However, I have some encouragement for you:

  • Just for reference: when I started out as an entrepreneur it took us 5 attempts to find a problem worth solving. It’s no shame to not find a good problem on your first attempt!

Stuff to Learn

So we’ve validated our customer segment & problem. It’s now time to design and test a solution that solves this problem. We’ll touch on 3 segments in the Lean Canvas (see Week 1):

  • Value proposition — the benefits a customer gets
  • Solution / product — how the product works (features)
  • Revenue model — how we charge for our solution

Lean Canvass

Again we’re going to use the ‘fake it first’ approach: we’re not going to actually build the product yet, but rather just pretend like it’s already there, and see how people react.

We basically take the demo that we created in week 5 and approach customers to reduce the key risks right now:

  • Does the proposed product solve their problems?
  • What features do they need?
    • What features can we leave out?
  • What price can we charge?

We’ll use 2 ways to get feedback: qualitative & quantitative

The most important way to gather feedback is face-to-face solution interviews. Those are interviews similar to the problem interviews, but focused on discussing the product, and answering the three questions above.

  • Before you start: prepare the script
    • I would advise to keep it very basic: just write down the questions that you need to answer.
    • Outline of an interview:
      • 2 min — get to know them if you didn’t yet (verify that they’re indeed the right target audience)
      • 10 min — show demo and discuss product
      • 3 min — discuss pricing
  • Tips on doing solution interviews
    • They should be talking 90% of the time. You should be writing.
    • It’s important that you have a full picture of the lead so you can put their feedback in perspective. The most important things here are:
      • Do they really belong to your target audience?
      • Do they care deeply about the problem?
    • When discussing pricing, never askfor a price. Tell them instead.
      • BAD: “What would you be willing to pay for this product?”
      • GOOD: “It costs X. What do you think? Do you want to be on the shortlist?”
    • Also, always anchor the price.
      • Anchoring means that you give people some cues on how to compare the price.
      • For instance in the case of my new startup, Leansites:
        • No anchor: price is compared to website builders who charge $5-15/month. Leansites costs $179/month. => that’s expensive…
        • Anchor: “Leansites costs $179. That’s about equal to 3-4 developer hours. If you spend more than 3-4 hours per month on your website you should consider Leansites.” => sounds reasonable…

Who to interview?

  • People you spoke during problem interviews
  • People who left their email on your landing page
  • Anyone who engaged with your outreach (retweeted, liked, commented etc).
  • People you spoke during problem interview
  • People who left their email on your landing page
  • Anyone who engaged with your outreach (retweeted, liked, commented etc).

Bonus: typeform surveys

Often you’ll have more leads to reach now than you can realistically speak to 1-on-1. Here (online) surveys come in handy…

  • Surveys allow you to supplement (not substitute!) your 1-on-1 interviews with more quantitative data.
    • Surveys are also a great way to find good leads: ask them to fill out a survey and then decide which people are most interesting to speak with face-to-face.
  • A solution-focused questionnaire has 3 parts (same like the interviews!)
    • Confirm that they’re in your target audience
    • Ask them what they think about the solution
    • Pitch them the price and hear their response
  • There are many free tools to build surveys online. We use Typeform.

Just F*cking Do It!

“Get out of the building. Talk to customers” — Lean Startup motto

  • Your goal for this week should be to have 10 solution interviews (1-on-1).
  • You’ll know when you’re done if you have a clear definition of the customer, a clear idea of what features need to go in your initial product, and a rough idea of what price to charge.

A helpful resource:

What’s next?

  • After the solution interviews you’ll have a clear understanding of the following parts of the lean canvas:
    • Problem
    • Customer
    • Value prop
    • Solution
    • Revenue model
  • This means that there’s one important block that’s still relatively underdeveloped: Channels.
  • During the next 3 weeks we’ll help you figure out the right channels to create traction for your business and, in the process, flatten out the other wrinkles of your business model (messaging, product features, etc.).

Stuff We Did

We had two main activities this week.

We had in-depth conversations with 8 customers so far. Here are the notes of one Skype call (solution interview).

We updated the lean canvas. Here’s a few of the key insights we had over the last 6 weeks:

  • Focus on SaaS (software-as-a-service) startups only.
    • Using the keyword ‘SaaS startup’ vs. ‘startup’ converted 40% better.
  • It’s unclear that we’re not a landing page builder, so we need to work on that fast!
  • Top-quality design is an important selling point
  • Our software architecture is coming together nicely (I”ll save you the details)
  • Freemium makes a lot of sense => free for landing pages, $179 for full solution
    • If customers hit the right point in time, then $179 is not a concern at all. If they’re not there yet, it seems outrageously expensive.

Week 6 — early channels, or ‘hustle part II’

Welcome back!

You’ll see I’ve tweaked the format again after feedback that the blog and notes need to be more easily readable. The blog is now split into four parts:

Stuff to Learn

Stuff We Did

Recap & Next Steps

This Week’sTo Do List

Our office at Hubd

Our office at Hubud

 Stuff to Learn

This week was all about …

More hustling in our chosen channels to get a 100 qualified leads so we could achieve three things:

  • Get as much data from our Landing Page as possible to keep reducing our market risks
  • Keep testing our channels and we know they don’t appear magically
  • To find a way to move from our hustle approach to a stable, repeatable predictable way to get more people into our funnel – e.g. “if we spend X, we’ll get a new customer

Never lose sight of the importance of a very clear goal. As Seneca said: “If you don’t know what port you’re sailing to, any wind is favourable”!

For us, it was all about driving traffic to our landing page to get those 100 leads.

Brainstorm everything you can think of to achieve that goal

It’s important here to not prematurely decide that stuff wouldn’t work. Try to consider all options.

Here’s a list to get you started:

  1. Personal network
  2. Leads from problem interviews
  3. Direct outreach to people on Twitter, Facebook or LinkedIn
  4. Do customers gather somewhere online? Can you find a list of those people => figure out their email addresses or Facebook contacts => reach out to them?
  5. Can you join their Facebook groups?
  6. Can you join their LinkedIn groups?
  7. Forums?
  8. Business development & partnerships

Tip: look for small, equal-sized partners. Big guys are unlikely to partner with you, and you don’t need that many leads anyway.

  1. Some influencer that could spread the word for you (if you bribed her)?
  2. Public Relations
  3. Paid ads (e.g. Facebook)
  4. Meetups

Always ask for referrals. Often once you find 1 person, they can act as an entry point to reach a whole new network.

Prioritise & focus: what’s most likely to yield results?

Start by looking for the ‘quick wins’ that are most likely to get you to the desired goal. Here’s a couple of things that would not fit with this:

  • Partnerships or blogging are unlikely to get us 100 website visitors this week, so I don’t focus on that.
  • Posting in Facebook groups will never be a scalable channel to reach 1000’s of people, but it might get me 50 clicks this week. That’s 50% of my goal!

Get to work: strengthen my hustle muscle 

Here the ‘Just do it’ motto really applies: take your brainstormed list, start doing, and start crossing stuff off the list. It’s not hard, but you got to take action NOW.

Make sure to immediately reach out to whoever shows any sign of interest (e.g. likes your post on Facebook, responds). Now is the perfect time to ask for referrals, more feedback, an email, etc. etc. etc.

A few random thoughts as I type:

  • Getting on a 1-on-1 call with potential customers at this stage is still super valuable. As soon as you have a Facebook conversation / someone’s email / some sort of interest => try set up a Skype call to learn more. 
  • All this work doesn’t take forever (we do it on the side whilst still running another business). The key thing is to ignore your inner perfectionist, set aside any limiting ‘gut feeling’ and just put it out there. It’s really no rocket science, and posting in 10 Facebook groups shouldn’t take more than 10 minutes.
  • Scroll further down to see the exact emails & Facebook messages I use

And some useful resources to read:

  • The book Traction: A Startup Guide to Getting Customers
  • Sumo Jerky — see a true hustler in action!

Stuff We Did

Below is a list of all the stuff we came up with during a brainstorm of how to get those first 100 qualified leads – remember this week’s goal! 

Although we are focused on the near leads, when we did our brainstorm we also thought of the channels we think we will need to use in the future. It’s never a bad thing to be thinking of the end game, even at this early stage.

First though, here’s the exact messages I use for Slack/Facebook

First message
1-on-1:  Hi *name*, can we discuss *website* for a second? I can probably get you more sales & growth 🙂
Groups:  Any of y’all running SaaS startups that want more sales & explode product growth? => we’re building leansites.co 🙂

Email message

Hi,
I’m testing out a new venture. Figured you’d like it:
We want to help SaaS startups get more sales & explode their product growth.
We’re building a platform that allows you to create a jaw-dropping website quickly, and get all growth-hacker tools build in so you can see what’s working immediately and hack your path to sustained & fast growth. I’m talking KISSmetrics, Optimizely A/B testing, etc.
Check leansites.co for more.
We’re looking for some early guys to build an awesome product for. You down for that?

Cheers,

Pieter

P.S. know any other SaaS startups that might be interested? This is for people who build awesome products, but need more $$$ flowing in. Please forward to them.

Short-term tactics – suitable for pre-launch

  • Content marketing — Create a 12 week course for other startups
  • Capture email subscribers with own channel
  • Adwords / PPC ads
    • retargeting afterwards
    • Facebook ads
    • Likes: Techcrunch, Wired, Appsumo, etc.
  • Hustle in Facebook groups
  • All startup hubs have their own Facebook groups. We can easily get into many of them.
    • Despreneurs
    • Startups in Bali
  • Slack communities
  • #startups
  • #nomads
  • Elance & oDesk outreach to people who want to get a site online
  • Scraping + direct sales to accelerator startups
  • Helps in getting into such accelerators as well
  • Helps build partnerships with those accelerators
  • Could also be VC firms, incubators, etc.

Mid-term tactics – requires a (freemium) product

  • Freemium product
  • Retargeting
    • Upselling freemium users into premium (even if it doesn’t exist yet)
    • Retarget content readers >> subscribers >> freemium users
  • Referral / incentives program
    • Test to see if there is viral potential
  • SEO via freemium sites — requires probably 5.000+ sites to start working
  • Content marketing
    • Auto-responders series (different packaging)

Long-term tactics — requires a ‘best of breed’ product & serious traction

  • Launchrock partnership
  • Appsumo / dealsites promotions
  • Accelerators & incubators partnerships
  • Word-of-mouth

Recap & what’s next

Remember the lean canvas from Week 1? After this week’s work we’ll have achieved roughly the following:

  • Validated & verified a customer segment and their core problem(s).
  • Validated & verified our value proposition
  • Validated & verified early channels

This leaves the following areas still open:

  • Solution — what exactly do we need to build to solve the problem?
  • Revenue model — what can we charge, and how do we charge?

This week’s to-do list

  • Post in #humblebrags channel in hashtagstartups.com
  • 1-on-1 outreach to people on hashtagstartups.com
    • Can quickly test 2-3 different outreach angles with 20 people each
  • Put website link in Slack name
  • Find other Slack communities to join, then do the same thing.
  • Posting in all Facebook groups
    • Despreneurs
    • Startups in Bali
    • Startups in London
    • Hubudians
  • Find new groups, and post in them as well
  • Scrape 60 SaaS startups, and reach out to them via email
    • Test 3 different email headlines
    • Test email vs. Facebook vs. Twitter
    • Look in #channels for quick ways to find those startups
  • Send website link to Chris, so he can introduce me to more people
  • Once we get subscribers, email them back and ask for referrals
  • Look into Facebook ads
    • How to target entrepreneurs effectively?
      • See if Noah has written about it
    • Look into Twitter ads
      • Lead generation card + video message?
    • Try Elance & oDesk applications to ‘create website’ request
    • Create social accounts, so people can follow us
      • Facebook page
      • Twitter account
    • Ask Benoit about ‘startup studio’ guy
    • Ask people for advice on how to reach more people
    • Reach out to 10 ‘growth hackers’ to see if that’s a viable channel
      • Search Twitter, Facebook & LinkedIn. Reach out directly.
      • Bigger guys
        • Tradecrafted
        • com people (followers & influencers)
      • Bonus: if someone thinks it’s really interesting, we might be able to get him involved…
    • Update all people that I’ve already spoken with during problem interviews
      • Ask them to spread the concepts, and ask for referrals
    • Follow up with Katariina

A final word – follow us!

Follow us (see bottom right corner) if you’d like to receive this by email each week.

Cheers

Pieter

Week 5 – building your product, NOT!

I’m really enjoying this new adventure of sharing all our start-up thinking and it seems you guys are too as I’m starting to get a few cool questions. The most frequent one is: “what is the startup you are working on?” and I’ll come to that shortly.

First though, here’s a reminder of what the mission of See Through Startup is:

To tell other startups exactly what we do when we create a new startup in close to real time

We do this is by writing everything down in Evernote – so please, please click through here to read about How to NOT build your product.   

And, as promised, here’s a sneak preview of our product, Leansites.

Cheers,

Pieter

Week 4 – risk roadmap

Go straight to this week’s note

I often get asked why I love working on start-ups so much and I always say it’s all about the opportunity to just help a lot of people and make life a bit easier!  That opportunity also gives founders like me to participate in success, if we are willing to take risks.

Start-ups are risky because they are based on a set on assumptions, because everything is just totally new. By their very nature, entrepreneurs find comfort more easily in risky situations that folks that work in established businesses.

For instance, I might be comfortable in doing something where there is a 20% chance of failure. This is because the start-up approach is to work with all the risks, and tackling the biggest ones first.

Conversely, my friends in bigger companies tend to be ‘risk averse’ and trim back on the riskiness of a new product before even starting, which immediately dilutes the potential opportunity and is often more costly than market testing because of the man hours spent doing chunky risk assessments.

As entrepreneurs, we look at three areas of business model risk:

  1. you can’t build it (product risk),
  2. it doesn’t meet a need (market risk)
  3. you can’t access customers (channel).

In our case, our work in speaking to customers (start-ups) helps us reduce both our market and channel risk. Being able to reach our customers has proved to be an easy task – it helps that there are many of them at our co-working space, here in Ubud! The challenge is now convert this work into 100 paying customers.

Our main risk is still our market risk and that’s where all our effort is going using a landing page and running A/B tests of assumptions and doing more interviews. I’ve set out our three risk roadmaps in this week’s note.

Feedback:

I’m really keen to get comments on the blog format. So far there are have been two main points – (a) that the raw notes are great but (b) they’re a bit unwieldy use, save etc.

Please keep you comments coming using the Comments option or you can email me pieter@vicancy.com

Happy New Year

Pieter

Day 8 – skyping with target customers

In a hurry? Go straight to my new note here.

First off, the format of raw notes seems to be working, with over 100 of you (± 70%) clicking through, so I’ll keep this brief and the notes detailed.

Secondly, I’m working on inviting sign ups here, as many folks are keen to get notified when a new blog is posted. We’re also moving to a new home for the blog, one where it’s much easier for you to comment.

So what’s been happening this week? It’s all been about finding the right customers to talk to and then getting on Skype with them to really test out whether the problem we identified on Day 1 is real or not.

A couple of early lessons:

Be bold in sharing what you are doing

I made sure I told loads of people here at Hubud what I was doing and this directly led to an excellent customer interview. I heard about them from an investor that read (in a board report!) about the problems his start-up was having with its website.

This is a good example of what I like to call hustling! Going wide for good interview leads is an effort worth making. I’ll post my idea any place that I think might create some shortcuts. I could write a full post on how I like those creative shortcuts.

Don’t assume you’ll speak to the right person first off

Part of finding the perfect customer is also about speaking to the right person. In one case I spoke to a developer but he was pretty new to the team and didn’t have the history of the problems they’d had with the website.

So, we found the actual influencer and he made a massive braindump with juicy info. Just what I was looking for.

Click here for this week’s note and please keep your feedback coming

Cheers,

Pieter

This post was first published on Medium on 18 December 2014

Day 1 — start-up plan

Hurry? Click here!

Hi, I’m Pieter Moorman and I’m based here in Bali running a small team within a start-up that I co-founded in 2013, called Vicancy. We’ve been experimenting with remote working and I’m really enjoying the open, sharing experience that we get as members of Hubud.

At Start-up Weekend Bali last month, I started working on a new business idea. Initial responses suggest it’s a viable business so Artem & I decided to test it out.

We’ve noticed that there are many other people at a similar stage of testing an idea, so I thought it would be cool to open up our thinking and process for everyone to see, ask questions and learn from. I’m hoping we’ll learn plenty along the way too.

This will be a different type of blog post, one where the objective is to teach the lean start-up approach in a real-time kind of way. The emphasis will be on giving full transparency of our thinking and working notes in its raw form, for example how we use the lean canvas. You’ll read exactly what we read.

We’ll create the rest of the story as we go and as we learn. Like any start-up, the main thing is to get started, so with that, please take a look at our Day 1 Start-Up Plan and post your comments!

Link to the notes: Day 1 Start-Up Plan

Catch you in a week or so!

Cheers,

Pieter Moorman (pieter@vicancy.com)

This post was first published on Medium on 9 December 2014