Please entrepreneurs start building startups not products!

07/01/2018

I had another chat with some entrepreneurs on Monday this week.

Interesting technology product for the agtech industry. I’m particularly interested in agtech and biotechnology start-ups. They seem more common than ever. Its still amazes me how many entrepreneurs build products without validating or more importantly – they build products not startups.

I wrote a short post to refer budding entrepreneurs to who are still getting their first customers.

Don’t build anything

I would recommend putting all development, planning and product build on hold until you have clearly identified the problem your startup is solving. I know this is super basic, but often start-ups can’t pin-point the exact problem and measure the pain in a monetary method. Even amongst some more experienced entrepreneurs.

I won’t harp on about the importance of validation. All lean entrepreneurs and lean CTO are familiar and content and methods can be found all over the internet (try here, here and here). But I would recommend one tip that writers often leave out - use a qualitative structure. Most university provide interview guides for free to post-graduate students – use one! If you're stuck contact us and we will work with you to create one. This will ensure that you don’t lead the conversation and the results of your validation have validity. My second tip to avoid having a customer provide you positive, sugar coated “I wouldn’t use that” use this tip. Normally when I start a validation interview I make it clear I don’t want warm fuzzes, I’m investing my time into solving a problem based on the information they give me. I want to know the problem exists, it hurts them and they would hand me money today to make the problem vanish.

I’m lucky enough to have a qualitative researcher on my team Abbe Hyde. Her professional approach derived from academic research work ensures our startup has high quality data work with.

Is there away to skip validation? YES! (what really?!!)

Prior to working with Abbe I did had a hack I would use - see I was always a lean entrepreneur. When I grew up Eric Ries (theleanstartup.com) and Ash Maurya http://ashmaurya.com/ didn’t exist yet (well they were not too well known in entrepreneurship). How did I validate back then? My first two startups both failed horribly, financially hugely wasteful and end product was disappointing. This lead me to the process I still use today – simple: Sell before you buy! I would go straight out to customer and say “I have X, would you pay $$$ for it?”. If they said yes, “sorry I’m out of stock, if you pay me now I can get you one shortly.” Bam – that was validation for me. If you critique this method you will find a few holes that Lean startup covers.

Build a startup – not a product

This is the scariest thing I far too often hear - an entrepreneur has built a product without building a startup. This is still a super common one, and often extremely difficult to help the startup. My generic advice is to rapidly build the startup while leaving the product to one side. I have a process that will take 3 days, but It will drag up painful truths about the startup and even a truly honest entrepreneur will discard some of the painful truths. What do I mean?

You have probably heard this before – a smart team can build the product. Often investors don’t question whether the product can be build – it simply requires perseverance and smarts. What the will question is a strongly though out business model. Have you built a startup? Have you looked at all the external factors and internal factor to ensure your business is not a hobby?

A common one being that the financial model under the current product won't work or can't scale. A competitor that has not been properly identified can be a pain, or a missed opportunity to build on their existing technology.

More entrepreneurs at this point suffer badly, are unwilling to stop building a product that won’t generate revenue and instead “add-on” features and additional elements to the product. With SuchCrowd we realised too late on that funding to scale our platform would not happen in the New Zealand ecosystem, so we stretched our development into two, developing a nifty enterprise package that would seed the platform and provide ongoing revenue to support the public platform. This required twice the validation, 3 x the produce build and lots and lots more validation conversations. Lucky our awesome team was ready for it and the B2B customers had a strong, measurable pain-point. If we had correctly built the startup we would have identified the short fall in capital and pivoted earlier to ensure we could scale our startup.

Another startup I advised found out that their customer that loved their product would not pay for it, they didn’t have the money. Rather than pivot into a smaller customer base with revenue they tried to facilitate their platform between 3 user groups. That’s a tough one! Abandon the code and go where the problem and money is.

Methodically go through your assumptions

Here is a good tip for experienced entrepreneurs. When you doing early canvasing (which of course we all do every startup weekend!) you are eliminating assumption as fast as possible. What I recommend is don’t stop this process with the lean canvas, as you proceed through the financial model, sales pipeline and into product development - identify all your assumption! Keep this going as you build your business model up, assumptions around required funding, rounds – staffing and leadership structure as well as advisers and board structure.

Even profitable start-ups can employ this later throughout their startup. I’ve recently done a little contract work helping a startup tidy their business model, more for their second raise. I was surprise they could use the model at all with all the unknown variables that existed in the business model. Once the assumptions were removed we had an awesome feed forward tool to improve the sales pipeline and eventually the bottom line.

Recap:Please entrepreneurs!

  1. Quality validation! Follow a framework to ensure validity
  2. Make sure you build a startup – not just a product
  3. Kill assumptions and extend your assumption past the canvas and business model to the financial model and into critical parts of the startup.
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