Clay Christensen has been talking for years about how startups exist to help a customer get something done for the customer. I’m always amazed at how few founders seem to have got the message. Instead they continue to bang on about their product and its features. Repeat after me: NO ONE CARES!
What we do care about is getting something done. Understand what we’re trying to get done and why we’re not getting it done. Reflect that back to your potential customer and see what happens.
Charging by the User
Charging by the user is so old-school says Kyle Poyar. There are still cases where it does make sense but many more where it doesn’t. He offers a 6-point checklist for when it can still work: 1) Each user receives differentiated value, 2) Customer has strong need to standardise their company or department on your platform, 3) The product has network effects where each new user adds incremental value for all users, 4) Budget predictability and control is critical for your customer, 5) Customer wants east-to-understand pricing, 6) Usage metrics in your industry have become commoditised or are becoming table stakes. GOOD
Measuring Month-on-Month Growth
Archana Madhavan describes 3 common ways founders delude themselves and make themselves look stupid in front of investors. First, what is month-over-month growth? “The change in the value of a specific metric as a percentage of the previous month’s value.” The 3 common mistakes: 1) Small absolute numbers modelled as MoM growth, 2) Inconsistent growth modelled as MoM growth, 3) Linear growth modelled as MoM growth. WISE
De-Risking a Startup
Leo Polovets at Susa Ventures identifies 9 types of risk many startups face. He then identifies 3 steps for managing them: 1) Do an honest self-assessment of your company’s major risk areas, 2) List ways to move from high risk to low risk along each risk spectrum. If not sure what to do, ask investors, advisors, or other founders, 3) Create short-term and long-term risk mitigation plans for your company. SENSIBLE
Founder Ownership at Exit
Ever wondered what a founder’s typical equity share is at exit? Sammy Abdullah of Blossom Street Ventures analysed 79 tech IPOs to find out. Median: 11% founder vs 62% VCs. Smaller investors and employees account for the rest. Their parting advice? “Raising money is very dilutive, so preserve your equity by staying as cash efficient as possible and finding creative ways to grow.” TOO RIGHT
Elizabeth Yin is a partner at 500 Startups. She divides startups into 4 buckets. Her buckets are: 1) Super high tech companies (very few startups fit here) – team is most important, 2) High infrastructure companies – team is top again but revenue not expected out of the gate, 3) Free consumer apps – you need a strong story around hyper growth, engagement and retention, 4) Everything else (aka companies that can make money immediately) – very early monetisation expected. GOOD TO KNOW
Brad Feld’s Q316 VC Update
Veteran VC Brad Feld offers his thoughts on the state of VC capital. A key takeaway for me is that while early & late stage funding is holding-up, mid-stage is getting harder.
World Fintech Report 2017
Key findings from this inaugural Cap Gemini and Linked report: 1) 50.2% of the global population have used at least one fintech service. 2) Low levels of positive customer experience with non-traditional as well as traditional financial services – except for mobile with Gen Y and tech savvy segments. 3) All firms are failing to keep up with customer expectations. 4) Gen Y and tech savvy segments offer high revenue potential. 5) Traditional firms are struggling to innovate. UNSURPRISING
New Network Effects
Levy-Weiss and Currier are Partners at NFX Guild believe that ‘platform’ applications are where the (big) value is. They define four layers of application: 1) Hardware, 2) Platform, 3) Main, 4) Niche. There are many niche applications but each Main application is creates 10x the value. Likewise, ‘platform’ applications (Google, Facebook etc) create 10x the value of ‘main’ applications. They argue that network effects are the reason ‘platforms’ so valuable. Examples are app stores, social networks, search engines and messaging apps. Where are the opportunities? 1) On internet and mobile, 2) Laggard verticals (including financial services), 3) On emerging platforms such as AR/AR, AI, IoT, Blockchain 2.0, Robotics. EXCELLENT
Twitter have introduced a primitive form of chatbot (intelligent messaging) capability. Airbnb and Spotify are already up-and-running. Could help with customer service. MAKES SENSE
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