Traction is everything

The theme for this week's lecture was about growth and getting traction. This week we also had a quest speaker Xiaochen. She is a Co-founder & the Chief Marketing Officer at Guide to Iceland. Xiaochen told the story of their company and at the end of her presentation we had a Q&A related to growth and HR issues. Afterwards we discussed the topic growth in more detail.

Growth is the engine of startup. If growth stops so will the startup. (Source)

Growth is the engine behind every startup and it should never be underestimated. This was made clear on the very first lecture with this course. On the first lecture I asked what is the most common mistake when starting a startup, and the answer was: the lack of traction. It is very common for founders the get too caught up in product development and focus too little on getting traction. If you fail to focus on getting traction while doing product development you will most likely end up with a product the customer won't even want. You have to always think about the customer and if you lose focus you will not succeed. This point brings us to a great tip from the Traction book:

"The biggest mistake startup make when trying to get traction is failing to pursue traction parallel with product development. Traction and product development are of equal importance and should each get about half of your attention. This is what we call the golden rule :

Spend 50% of your time on product 

and 50 % on traction"

-Traction book 

  

So how to get traction then? Well there are many ways. The Traction book  lists a total of 19 different solutions for this issue. These options range from viral marketing to PR stunt events. It is vital to get at lease one of these channels to work. Peter Thiel (co-founder of PayPal) has stated:

"If you can get even a single distribution channel to work, you have a great business.  

    

If you try several but don't nail one, you're finished. So it's worth thinking really hard about finding the best distribution channel"

It is also important to note that traction is not a function of money, although in some cases having money helps. But the point is that to get traction you don't need money and this is what many founders get wrong. Many think that getting money from investor for marketing purposes will magically solve everything. This is not the case. To be able to get funding you have to show traction and growth. Having statistics that your startup is growing is the best proof to show your concept works and this is what many investors are looking for in a startup. So never ever forget to focus on getting traction when starting a startup!

Here's all for now, until next time!

QuizUp visit & Competition - Yay or nay?

On our fifth lecture we discussed competition and we also payed a visit to a startup company located in Reykjavik called QuizUp. In this post I'll go over what I learned from the visit and I'll also discuss the competition. Is it a good thing or not? I'll start with the QuizUp visit.

On 2014 QuizUp had more than 20 million users. (Source)

 

QuizUp is a mobile trivia game from an Icelandic company Plain Vanilla Games which has gotten very popular. We had a few presentations at their office about the programming aspect of their app. It was a very interesting visit. The presentations themselves were very technical with a focus on programming techniques. To be honest I did not understand most of the technical stuff but I would still say the visit was very much worthwhile since I learned a lot just by talking with the founders and hearing their story. It also helped that they had beer and pizza as well.

What I found interesting was the fact that the company was still unsure about their business plan. That was actually pretty comforting since our own startup team is also currently unsure about how to monetize our idea. It's good to know that this is a problem which others face also. I just find it peculiar that QuizUp has a very popular app with millions of users but currently no means to make money from the it. Adding adds would be a simple solution but that is a route they would not like to take.

Before we went to visit QuizUp we also had a lecture about competition. If you ask yourself is competition a good thing I think most of people would answer yes. This makes sense since for us consumers competition is good. It forces companies to keep innovating and improving their product and also helps to keep the price down. 

However, if you are sitting on the other end of the table as startup founder competition is a very bad thing. Competition is something founders want to avoid since it will distract founders from their focus on the customer and the product. Competition also diminishes profits. Striving to be first in the market by offering unique product is something much more interesting for a founder. Being the first in the market with a unique product will offer a monopoly state with very little competition as was discussed in my previous post. 

Monopolies are only bad if we're dealing with a static world because in that case they can create artificial scarcity. This was very much the case with resource based businesses such as energy and oil for example. However, with a dynamic world monopolies are a good thing. Creative monopolies will actually improve the society and make life better for everyone. These are the companies that are so good at what they do that no other firms can offer a close substitute. Creative monopolies create so much more value compared to the substitutes that customers are willing to pay extra. These companies also increase the abundance of choices a customer has by adding entirely new categories from which to choose from. These kinds of companies are for example Google, Apple and Facebook, just to name a few. These companies have successfully created something that is completely new or ten times better than the competition. 

Here's all for now. Next post will focus on growth. Until next time!

 

How to build great products?

On our fourth lecture we discussed how to create great products and how to develop business plan.  We also compared product business to service business.

When building a product it is vital to have the customer constantly in mind. Why would he or she use your product? What is the benefit of using your product? How does the product feel to use? What are the potential fears that a customer will face when switching to your product? Are there substitute products? How does your product differ from the substitutes? You should have an answer for all these before going any further with your idea.

Other important point that was raised on the lecture was a point about copying the ideas of others. Copying is something you want to avoid since it will get you nowhere. If everything you do is copy, you don't differ from the competition at all and you are always lagging behind in innovation. You have to bring something new to the table or make your product ten times better than the competitors. You also receive a great benefit from creating unique products since you will acquire a monopoly state for your company once you launch. You will be the only company in the market with such a product and you don't have to deal with competition. Of course if your idea turns out to be very successful other companies will also want a slice of the pie so the monopoly status of your company may not last long. An example of this would be the first iPhone. It was radically different from previous mobile phones and quickly gained a huge share of the market. Many competitors have since done similar products but iPhone still remains hugely successful.

The iPhone example illustrates also an other important point: It's vital to enter the market as soon as you have a functioning product. That way you will get to enjoy the benefits of being first in the market longer that you would if you would strive to create a perfect product before launch. The truth is that there is never going to be a perfect time for launch. The product you are developing will never be perfect so it's better to just launch as soon as you possibly can and reap the benefits from it.

We also discussed the differences between product and service based start-ups. The key difference is that the product approach will require large initial investments since you need a lot of equipment and such to create your product. However, if the product turns out to be successful you will make a lot more money than with a successful service business. The thing about service business is that  you don't require that much initial capital. Generally speaking it is very easy to start a service business compared to starting a product based business. You can pretty much just start offering services for money but the thing is that it is much harder to scale up a service business.  With product approach you can just manufacture more products to sell but with services it is very different. The figure 1 below illustrates the differences between a product start-up and a service start-up.

Figure 1. The differences between product and a service start-ups. (Source )

Here's all for now. Until next time!

Before the start

On the third lecture Bala held we learned about the things that you need to be aware of before starting a startup. We also discussed idea creation and we also watched the documentary Something Ventured – the art of venture investing. In this post I will discuss some of the key points which need to be considered before starting a startup based on the lecture and the documentary we watched.

Before starting a startup one must be aware of the counter intuitive nature of startups. With startups you cant' to rely on your intuition, that will lead you astray.  ONLY rely on intuition when it comes to people like finding a co-founder or hiring people. Paul Graham described the nature of startups on his lecture about idea creation with an example about skiing. Skiing is something which is very counter intuitive the first time you try it. Your instincts tell you to lean back if you want to slow down but this only increases your speed. That is why there are a lot of skiing instructors and very few running instructors. Startups are the same way as skiing, you can't rely on your instincts.

There are no requirements for starting a startup, you don't have to be an expert or a business major. You DO need to have product development intuition and empathy in order to make a startup work. There are also no easy shortcuts with startups. The slogan "Fake it till you make it" does not work with startups at all. It's worth noting that startups also consume vasts amounts of time. As a startup founder be prepared to have the startup to consume your life. Startups are always a gamble you will never know with certainty if a startup will be successful or not. The documentary we watched really drove this point home. It takes guts to do a startup or to fund one. In the documentary we saw many success stories. At the beginning of these stories there was never certainty about the idea being worthwhile.

Before the starting your adventure you should have a mentor who has also done a startup. Mentors which have not started their own startup aren't a great help. You really need someone who has walked the path. Starting a startup isn't something one can learn from reading a book. The best way to learn to do a startup is by starting one yourself.

Idea creation was the second topic we discussed.

How to come up with ideas? Here are few key points about idea creation:

• Do not start by thinking "how do I come up with fresh ideas"
• Good startup ideas sound really bad at the start
• Top-down vs Bottom-up is a good way to think about it

A good idea is to keep a notebook with you everywhere you go and every time you get an idea write it down immediately. In real world we run into many different situations which trigger new ideas. Later you can build on these ideas to see if there is actual potential behind the idea. 

Here's all for now. Next post after next lecture!