In today’s guest post on Tech Cocktail I talk about being accountable.
In today’s guest post on Tech Cocktail I talk about the importance of taking advantage of unexpected situations and opportunities when they arise…usually without warning or a chance to be prepared. My story is about the time I met Senator Paul Simon in a coat check line…
Today I had a guest post on Tech Cocktail about managing your mental game. See: http://tech.co/100-of-the-time-its-90-mental-2013-01
Guest post today from December 5, 2012 on Tech Cocktail. See: http://tech.co/startups-how-much-funding-should-i-ask-for-2012-12
Much of the work that I have done involves transferring technologies out of academia or federal laboratories. The framework for academic spinoffs is that typically there are technical co-founder(s) who are the subject matter experts in the technology. But investors have declared the days of “professors as CEOs” to be over. So often there is a business person who is also at the table at the founding of the company to handle the business matters and to provide a steady hand as the company takes off. I’ve been that business person at least six times. Through those experiences I’ve come to learn that the way career scientists think are very different from the way entrepreneurs think even when they share the objective of wanting their startup to succeed. Call these differences in perspective, or cultural issues, if you will, between the motivations of academics and entrepreneurs.
Academics make their reputations based on what they know. They don’t “profit” from this knowledge until they publish it and can explain to others how to reproduce their work. Only then is their professional reputation enhanced and their research validated. Publication success is often a key factor in deciding whether an academic wins research grants or is offered tenure. For many academics, the recognition they gain by advancing knowledge in their field is sufficient motivation. But they will not see a meaningful financial reward for their work unless it is commercialized, usually by founding a successful business.
The pursuit of money by business people if often repugnant to dyed-in-the-wool academics, Continue reading
You know Chutes and Ladders–the board game (Snakes and Ladders to those of you from the British Commonwealth). It’s popular among the younger set since the game is simple and requires no skill. In fact luck is a major component of success with the game. The goal is to be the first to move through the 100 spaces of the board. If you land on a ladder, you get to go up the ladder and advance a number of spaces equal to the length of the ladder. If you land on a chute, you slide down a number of spaces. Careful observers will note that landing on a ladder and advancing is the result of performing some virtuous task like baking cookies. And going backward down a chute is the punishment for a vice like breaking a window.
It seems to me that the parable of this game is a metaphor for what it’s like creating a startup. And in particular the “two steps forward, one step backward” sensation is very much like raising venture capital. Continue reading
We’re a few weeks into the Lean Launchpad Class, NSF Innovation Corps edition, and one phrase comes up over and over again by the instructors: Get Out of the Building. This simple phrase directs the teams to go figure out what their customers need and want, and suggests it can’t be done by researching on the internet or talking to second hand sources. It reminds me of the old phrase, “You can’t learn to swim at the library.”
One of the privileges of being in the class is being able to watch the twenty other teams figure out who their customers are and what their value proposition is. This is part of the customer discovery process. Even though I feel as though I figured out much of this in the school of hard knocks through many startups, the class puts structure around the process which is very useful.Still, we’re finding for our team, which is working on an innovative biosensor technology, the process is not easy. It is filled with frustrations and the need to backtrack after going down blind alleys. The great value of the program, though, is that we’re doing this work without spending any money. If we can find the right opportunity space, it will be fully validated by the time we go looking for money. Not only will our chances for raising money be much higher, we will have saved a lot of burn in the process. Add me the growing list of people who are becoming disciples of this methodology.
Just a week ago I was mentoring a student who is part of the University of Illinois’ Illinois Launch program. It was clear that although he had an idea for a business, he had not done anything to test the concept among the many stakeholders that would need to buy into his vision for his company to become a success. I think in the past I would have questioned his assumptions and challenged him on why he thought the world needed his products. Instead I found myself saying to him, “You need to get out of the building” and go talk to your prospective customers. Will they want what you have to offer? Will they pay for it? How are they getting the service today? How will they justify paying for it? I didn’t have to challenge him on anything, but he was very motivated to look where my finger was pointing, and he emailed me the next day thanking me for the great advice and encouragement.
In just a few short weeks a decade of experience in customer discovery has been reduced to one simple phrase. If you are in the process of launching a new company (or even just a new product), you need to go talk to your customers by getting out of the building.
You can’t sell it if you can’t make it.
Most of the companies that I have worked with over the past 10 years have had a heavy dose of engineering content in their products. The companies made physical stuff (i.e., not software) and the reproducibilty and scalability of the production processes were of paramount concern. Time and again investors would ask, “Is your process scalable?” Time and again we would look at scalability and feel good about how to achieve it, and make strong pronouncements to our stakeholders. While scalability is VERY important, we missed the larger issue that was more important at the time.
The bigger issue is that the manufacturing process needs to come under control first. Unless you have a process that is in control (yields consistent output) at a small scale, it is not scalable. I’ve seen in many companies an inability to control the process–even at the prototype stage. In the semiconductor world, people are known for making wafers full of products (sometimes as many as 10,000 chips can be on a wafer). Instead of knowing that each die is good, instead they have to ferret out the good ones from the bad ones. And if you’ll permit me to get crass for a moment, engineers are known for finding the KGD (known good die) among thousands of bad ones, and showcasing the good ones as if to say that the product works. Clearly a KGD proves the concept is feasible (proof of concept) but it does not prove that you will have a successful business.
If there’s a way to affirmatively discern a good one from a bad one, one can probably live with this–for a while. When Intel started legend has it that their yield was on the order of 2%. But imagine if you were a machine shop, and your goal was to manufacture products by finishing them to a certain tolerance. Imagine if, prior to performing the finishing operation, you had no idea if it would work. Forget about scaling it, in this example the process is not under control.Having a random assortment of dice on a wafer representing every possible combination of unstable variables does not a product make.
Now extend this issue to the need to grow sales. Companies rightly want to be selling and shipping product. But unless you can make things under control in small batches first, you’re going to be in a world of hurt. If your process is stable and you understand it, then you have a chance to scale it successfully.
If manufacturing is part of your operation, I cannot stress enough the importance of focusing on this issue that directly hits your bottom line. Otherwise no one will buy your products (that’s obvious), but you also won’t have a chance to sell your business or license your process either.
Please comment if you have something to add for surely I’ve not done the subject justice.
This is the first of my Nine Guiding Principles.
About 10 years ago Tom Churchwell, a VC in the Chicago area, said to me, “I’ve never seen a technology company fail because of the technology.” I’ve come to really understand this statement since I’ve now seen first hand, time and again, technology startups that manage to get their technology to work correctly yet still flame out.
What happens is that the founders, who are often technologists, are focused on making sure they can get the technology to work, but the businesses fail because they didn’t take the time to really understand the needs and motivations of their target customer audience. I won’t call this a “build it and they will come” phenomenon because I think that’s insulting (even though it happens). Rather I’ve learned first hand that its hard, make that REALLY hard, to understand how customers will respond to new technology…especially if the team doesn’t have anyone with domain expertise from the customer industry. The list of products that get to market, but which aren’t positioned properly, priced correctly, promoted through the right channels or provided with the correct customer support are legion.
This is such an ever present problem, that a whole new way of thinking about startups is emerging. I am excited and proud that a company I am starting was just accepted into the new National Science Foundation I-Corps (Innovation Corps) program. The program is based on the Lean Launchpad curriculum created at Stanford by Steve Blank and others. I haven’t read Steve’ book yet, The Four Steps to the Epiphany, but as I understand it, the central thrust of the lean startup methodology is about getting out of the office and learning from your customers what they need. Then you develop a framework for getting customer feedback and cycles of learning so that you can adjust as needed (i.e., pivoting) until you find a business model that works. I heard Eric Ries speak the other night in Chicago about his new book, The Lean Startup, which is already a bestseller and it hasn’t come out yet. I was blown away at how he has articulately put structure and process around many of the things that I’ve learned through 12 startups. In just about every one, the real pain we experienced was failing to understand our customer’s buying criteria. And we weren’t ignorant of this. Its just damn hard. And it makes or breaks your company. That’s why this is my first guiding principle.
The point is that I realized (but unfortunately didn’t write a book) what Steve Blank, Eric Ries and many others are now espousing and that its all about the markets. Technology companies rarely fail because they were unable to get the technology to perform as advertised. But they often fail because no one wanted to buy their product at the price point offered through the channels they chose. I predict that a renaissance is about to occur, somewhat catalyzed by Eric’s book which everyone will be talking about soon, that the art of doing a startup is about understanding your customer.
Even though I’ve learned these lessons in the school of hard knocks, I’m expecting to learn a ton when I go to Stanford in a few weeks to attend Steve’s class. I’ll blog about the experience. Please subscribe to this blog (there’s a box in the right column) if you’re interested in getting automatic updates.