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This Tweet from my friend Nicholas Lovell got me thinking about the changing dynamics of starting companies generally:
RT @LewieP: It is easier to make a game so more people make a game so it is harder to sell a game. <- this is something many miss.
— Nicholas Lovell (@nicholaslovell) April 9, 2014
Just as it is getting easier to make games so it is getting easier to start companies. Both the amount of money required and the depth of skills required have fallen precipitously, the first driven by open source software and cloud computing and the second by the improving quality of tools, services and advice available to entrepreneurs. (Note building a successful company is still very difficult, it is just the starting that is getting easier.)
As with games the result is that increasing numbers of companies are started each year.
As with games that makes it harder to stand out from the crowd.
The keys to standing out from the crowd are to have a great idea, to execute well and to generate momentum. Early adopters, investors, and the press are always looking for hot new companies that exhibit these characteristics and they have good systems to find them. However, because the number of startups is increasing the bandwidth available to look at each one is declining making it harder for companies to get anyone to take a second look if their execution and/or momentum falters.
Hence it is increasingly important to execute right first time.
(Side note: experimentation and failure are part of good execution in a modern startup so long as the experiments are thoughtful and learning driven.)
At a recent XOXO conference Ev Williams, founder of Twitter and Medium, gave his formula for a billion dollar business (as reported in Wired):
Here’s the formula if you want to build a billion-dollar internet company. Take a human desire, preferably one that has been around for a really long time…Identify that desire and use modern technology to take out steps
He gave Uber as his example. People have wanted to get from A to B since the beginning of time and Uber has just taken some steps out of the process.
The lesson here is that at the end of the day there is nothing new under the sun. We all still have the same basic needs and high potential consumer startups should be able to make a link between one of those needs and what they do. For my money Maslow’s Hierarchy of Needs is the best framework for understanding those needs. Whilst our basic human needs haven’t changed the extent to which they are sated is definitely evolving. That’s where Maslow’s Hierarchy is powerful. By listing our needs in the order in which we need them to be satisfied it makes it easier to see where the gaps are.
The dominant meme in this area is that our physiological and safety at the bottom of the hierarchy are largely taken care of, and that the opportunities now are in helping people with their needs for ‘love/belonging’, ‘self-esteem’ and, particularly ‘self-actualisation’. What’s interesting about Ev’s formula for a billion dollar business is that it shows how to look for opportunities anywhere in the hierarchy – there are opportunities in needs at the bottom of the pyramid if they can be satisfied with fewer steps. The more efficient delivery of health is one such area that a number of entrepreneurs are working on now.
This chart is taken from a presentation to DemoLabs by Helen Greiner, founder and CEO of CyPhy works and formerly of iRobot. It’s a capability timeline for drones.
At Forward Partners we invest in the ecommerce ecoystem and one of the sub-areas is innovative product companies building their brands online. I’m interested in the way drones and robots are changing the economics of manufacturing and enabling innovative product companies by enabling greater precision at lower prices, through mass customisation, and through cost effective small batch runs.
According to the timeline above it will be in 2017/18 when drones and robots are “evaluating and managing” that they are having the impact that I describe above. I think we will see the first innovative startups leveraging drones and robots to make amazing products before then. Indeed, I wrote about one example in the bike industry last year.
If content marketing is your game then Buffer just published some great data for you: The ideal length of everything online. Here’s the short version
They also say that blog posts should be 1,600 words/7 minutes, but they draw on data from Medium which has made great long form articles a feature of the site. I suspect that on blogs like this one shorter is better. That’s certainly the feedback I get. I aim for around 400 words (shorter today because no time….).
If you are interested in the ‘why’s’ and ‘wherefore’s’ then check the original post which quotes lots of supporting research.
Here’s a graphic to illustrate, including a few items that didn’t make my summary.
One of the hardest things for entrepreneurs can be knowing whether to pay more or less attention to the short or the long term. It’s easy to go wrong doing either. I’m thinking about this today following a discussion I had with a portfolio company yesterday and after reading this quote from Index Ventures partner Mike Volpi in his post about why Criteo succeeded (it was the team):
I always say startups shouldn’t think too long term, and just concentrate on the next milestone instead. A little like mountaineering, what you will see at 1,000 metres is very different to what you will see at 3,000 metres, 5,000 and so on. While you need to know the direction of travel, it’s only when you reach the next milestone that you will see how best to take the next step.
I think the key point in here is that so long as you “know the direction of travel” you should “just concentrate on the next milestone”. The question then is on which to focus at any given moment. At the highest level I would say that if you can talk convincingly to both these points then you probably have the balance about right. Not many startups can though.
If you struggle convincing investors about the size of your market opportunity I would spend more time on “the direction of travel” (and the destination) whilst if you find that people buy into your vision but conversations fall over after that then take a look at the strength of your short term plans.
If you’re still struggling then just make sure you reach your next milestone. Much better to do that and be vague about the long term than to fail to reach that milestone…