The method to the madness

Contrary to popular belief, there can be structure to the process of starting a company. This is one such structure.

Sometimes people say, "Wow - starting a company: that's so unstructured! That's so hard. You have to make it up as you go along. It's not like consulting, or any other job, where there is a clear route". In my opinion this is a mis-perception. A good starting point to rectifying this mis-perception is the structure provided by Steve Blank's book, The 4 Steps to Epiphany.

Starting a company is not any more or less structured than becoming a partner at top consulting firm, CEO of a consumer goods company or MD of a trading desk at an investment bank. Are the paths to any of these goals clear? Kellogg, and I'm sure other business schools also, provide some of the tools to get these. However, the trick is probably in sowing these up into a plan to get there - a structure. What do I need to know? What skills do I need? Where do I need to be?

If there is one lesson that one tends to learn over and over again in life and business school, it is that "failing to plan is planning to fail". Creating a plan ensures you've thought through a number of issues and at least mitigated some of the risks. It provides a route to get from A to B. In the realm of startups, a business plan is a kind of plan for starting a business. However, it usually describes the destination - point B - of what the business will look like, rather than actually describe how to get there.

How do you get to point B? It transpires that there are entrepreneurs who are systematically more successful than others. What is it that they know that others don't? What are they doing differently? From what I know of the start-up space, Steve Blank's The 4 Steps to Epiphany is the clearest codification of what successful entrepreneurs do right. It is dry book, written very much like a technical manual. However, it provides a real structure to starting a company.

At the simplest level, the structure that Blank provides is

• Customer discover: Develop hypotheses for the problem you are trying to solve and test them against real potential customers.
• Customer validation: Get a sales person, sell to initial customers, verify business model.
• Customer creation: Establish a repeatable process for creating demand for and selling the product.
• Company building: Attain mainstream customers, build functional departments.

My journey to date has centered around the first two phases of the process. I've gotten to know and understand some of the concepts from these parts of the process. For example, Blank repeatedly insists on the need to "get out of the building" and talk to potential customers. My posts from the early part of my 13 week Summer provide some insight as how the plans for my business changed as a result of this. Perhaps more subtle is his advice to "find customers for the product you're already building". If you listen too much to customers, you change your requirements so frequently that it becomes impossible to building a finished product.

Blank provides a sample, a great blog I should read more of and others have now even started rewriting the parts of the book so it's a little more digestible.

Week 13 of 13: Beyond Another 13 Weeks

As one set of 13 weeks finish, another starts.

As I come to the end of the Summer, I've been spending some time reflecting back. One of the great puzzles I've been thinking about this Summer is the question, what makes people do the things they do? I wonder why I've put myself through this painful process and what this means for my life.

The Summer experience has been tough, exhausting and pushed my mental and emotional limits. In large part, I put this down to the mental pressure it has placed on my self-perception. To get some grasp of the emotional zig-zagging I've gone through, you only need look at some of these choice thoughts that have zipped through my brain over the past weeks:

• "I'm certain I can sell this to someone"
• "Why won't people pick up the phone? Maybe I can't sell this?"
• "These interns are awesome!"
• "Why are these interns taking so long to complete this?"
• "If I were an R&D Director, I would love this"
• "He is an R&D Director, and I think he's saying he doesn't love it"
• "We're never going to get this done"
• "Hey! We got something done!"
• "This guy is perfect to join my team"
• "Why won't this guy join my team? Doesn't he realize he's perfect?"

In the same way that many of my classmates will now be reflecting back on their Summer internships and wondering if their experience lived up to what they'd hoped for, I too am now doing the same. My initial thought was that it was quite a painful experience. Surely I should be finding more joy in all this? Then I came across this:

As wonderful as flow is, the path to mastery - becoming ever better at something you care about - is not lined with daisies and spanned by a rainbow. If it were, more of us would make the trip. Mastery hurts. Sometimes - many times - it's not much fun. That is one lesson of the work of psychologist Anders Ericson [...] as he puts it, "Many characteristics once believed to reflect innate talent are actually the results of intense practice for a minimum of 10 years".

The paragraph is from Dan Pink's book, Drive. For a long time economists have argued that incentives are what drive people to do what they do. The increasing popularity of voluntarism, from Wikipedia to Net Impact, calls into doubt the simplicity of this explanation. Pink argues that people are most motivated when they have autonomy, a sense of attaining mastery and a sense of purpose.

As painful as the Summer has been, it has provided me with a lot of satisfaction. I feel I've made a lot of progress on my startup project. I have a product and a realistic plan for getting it to market. More importantly, I feel I've developed a clear sense of purpose. This is also a theme resonating in Kellogg's hallways: Dean Blount has blogged and written about the importance of finding meaning in one's work.

Just as my classmates will be affirming what place consulting, banking and other careers will play in their lives, I've decided what gives my life meaning is creating things - products and businesses - impactful things that did not exist before. My experiences in new media lead me to believe that this is the area where I can do this best.

As I look forward, another thirteen weeks await. Next week is pre-term for Kellogg's second years, followed by 11 weeks of Fall quarter, with a week of thanksgiving nestled within. Though I will have a full course load for this duration, with lots of other distractions to boot, I have definite ambitions for progressing the business over the next thirteen weeks. I look forward to more emotional zig-zagging... well, sort of.

Week 12 of 13: Launch

We're open for business.

"It requires a special touch," begins the interviewee. "Each situation requires mastered skills that allow for the proper unraveling of each client's potential". I wondered whether we were still talking about sales. We launched our website this past week, www.prescouter.com. For a web/email business, this is significant. We're effectively ready to operate. With the focus shifting to revenue development, I've been interviewing for a sales person to work on bringing in customers. The folks I've been interviewing for the sales role certainly have had interesting things to say.

"But you don't really want to charge everyone the same amount, do you?" continues another interviewee. "You want a model where for a customer like Ford, you could sell for four times the price. You need a pricing standard." Yet another interviewee challenged my route to market, "Why restrict yourself to medical device companies? Hit everyone who has R&D departments! And what's your upsell strategy?". While I have a lot of experience interviewing people for technical software development roles, this was the first time I was interviewing outside that remit. Given that I am learning a lot from each interviewee, I clearly have no idea of what I'm doing.

The process of interviewing for a sales person has been turning into free consulting on the marketing and sales side of the business. For example, one interviewee suggested using a webinar to show people what the technology did. "Showing up at trade shows reaffirms your presence," said another. This was tactical information beyond anything taught at school. There were even some ideas that were more within my budget and means. "On the website, if we could get people to submit the keywords they'd use for the reports, that would be a real live lead". Wow, that is a good idea! Another suggestion was to create a group on LinkedIn for the type of people I'm looking for as clients.

Armed with just some advice from the internet, I had posted my job ad for a sales person not only on the university's career board, but also on Craig's List. People flocked to the ad on Craig's List - people from all walks of life. The problem I have with many of the candidates is one of trust. Given that I'll have a full course load next quarter, I'm not going to be able to provide a lot of supervision. I really need someone who can get a grasp of the product and take their own initiative. It's time I sought some advice from people who know a little more about this.

While interning at a venture capital firm last Summer, I learned of a model that some firms use to evaluate business. The model measures businesses on three axises: market risk, execution risk and team risk. Later stage companies have more of these risks mitigated, while earlier stage companies still face many risks on some or all axises. Getting customers will reduce the market risk of my business and prove that there is a market for what we're doing. Execution risk relates to the product. We've now launched a product. In doing so, we've reduced the execution risk. For me, this is the achievement of the Summer.

Excelerate Labs Demo Day

Chicago's House of Blues hosted Excelerate Labs' inaugural demo day.

On August 31st, the ten startups that journeyed through Excelerate Labs' 2010 summer incubation program presented their businesses at a 'demo day' event at Chicago's House of Blues. Excelerate Labs is a summer incubation program for pre-seed stage companies. It is modeled after TechStars and similar programs. I was fortunate enough to stumble upon a ticket for the event. As it turned out, the day's presentations were as much a lesson in how to present a startup as a lesson in crafting a startup.

The day started with priceline.com founder Jeff Hoffman giving a keynote. Hoffman recalled training with a world champion boxer (Lewis?), and counting for him the number of reps. Not believe Hoffman's count, the boxer dramatically started again from scratch. "The difference between 300 reps and 299 reps is the difference between world champions and everyone else," declared the boxer. It was stark reminder of the depth of passion needed to succeed.

There must have been over 150 investors in the audience, including stars such as Brad Feld. Each business's presentation was polished. In general terms, they each first started with a testimony from a stakeholder, before showing through statistics, media, customer testimonials or other evidence that there was a real problem. Where they could, the startups showed what traction they had already attained. In some cases, this was significant. None of the businesses showed financials projections, which made me chuckle - I guess the community has moved past fiction.

In many ways, I could not help but feel that most (if not all) of the startups were already quite successful. The role of Excellerate seems to have been to put a magnifying glass on them, attracting substantial attention, drawing resources (such as mentors), luring investors and boosting valuations.

What did I like about the startups themselves? GiveForward's viral marketing model reminded me a lot of justgiving.com's viral success. I liked Tap Me's core idea: an API that allows gamers to include sponsored in-game items; product placement for games. I liked how customer-centric PVPower's Solar-Bear seemed to be. EduLender's route to market - through financial aid offices - seemed compelling. What did I not like? One or two of the businesses are clearly closer less proven. It will be interesting to see what the next steps for these will be.

The day also included a keynote from famed wine tv webcaster Gary Vaynerchuk, who was hilarious. I might be losing something in translation here, but his main point seemed to be about "giving a f**k" about customers. He declared "caring" to be the new frontier for competition. I agree. In a world of information overload, businesses have to figure out how to help the customer beyond just providing them with what everyone else is providing.