Tag Archives: startups

Don’t Implement Ideas, Solve Problems

Taking inspiration from Paul Graham’s Ideas for Startups essay, Martin Zwilling offers some further thoughts—to wit, don’t start with an idea, start with a problem.

Potential startup founders are always looking for ideas to implement, when they should be looking for problems to solve. Customers pay for solutions, and there is no market for ideas. I’m often approached by people with a “million dollar idea,” but I haven’t seen anyone pay for one of these yet.

Entrepreneurs Not Learning From Mistakes

Entrepreneurial failure is an integral part of eventual success and an important opportunity for learning, or so goes the conventional wisdom (hence in some part the quote—commonly attributed to Lisa Amos—that entrepreneurs average 3.8 failures before success).

Ignoring the anecdotal success-after-failure stories that stick in peoples’ minds, a team at Harvard Business School decided to quantitatively study entrepreneurial failure and success rates and discovered that, contrary to popular belief, entrepreneurs don’t seem to learn from failures, and success is the only experience that made a difference to performance.

First-time entrepreneurs who received venture capital funding had a 22 percent chance of success. Success was defined as going public or filing to go public; […] results were similar when using other measures, like acquisition or merger.

Already-successful entrepreneurs were far more likely to succeed again: their success rate for later venture-backed companies was 34 percent. But entrepreneurs whose companies had been liquidated or gone bankrupt had almost the same follow-on success rate as the first-timers: 23 percent.

In Defence of Branding

By comparing and contrasting the “two worlds” of direct marketing and brand marketing, Andrew Chen discusses why metrics-driven marketing shouldn’t usurp that of ‘branding’.

The nature of internet marketing makes it easy to have a highly accountable, metrics-driven view – but companies that are highly metrics driven easily overlook hard-to-measure issues like brand and user experience. The reason is that when all product decision-making is run through metrics-driven reports, soft things like “Brand” show up as costs, but never as benefits.

This leads to systematic erosion in many “soft” but important factors, like customer experience, brand value, and “love.” And ultimately you need all of these things to create a massive, enduring consumer brand – it’s not enough to optimize funnels.

Frugality and Entrepreneurship

Inc. Magazine has a (possibly too lengthy) profile, complete with the expected insights, of Paul Graham—author of Hackers and Painters, co-founder of Y Combinator, and all-round entrepreneurship guru.

Cheap meals are, in a strange way, part of Y Combinator’s formula for start-up success. Graham wants founders to spend as little money as possible. Live cheaply enough, he believes, and you can become cash-flow positive without going on a lot of sales calls or spending too much time talking to investors. Graham calls this “ramen profitability” and says it allows companies to say no to bad investment terms and forces them to think about long-term viability. […] “That culture of frugality and discipline is really important for the Y Combinator mindset,” says Sam Altman, founder of Loopt, a graduate of Y Combinator’s first class. “The start-ups that do well are the ones that are working all the time.”

[…] Despite having spent five years painting, Graham long ago put away his brushes. None of his work is on display in his home in Palo Alto, and he’s none too eager to talk about matters of technique or style. But one thing painting taught him was the value of living frugally. “It taught me how to do cheap in a cool way,” Graham says. Artists, Graham discovered, don’t pretend to be rich; they live in sparsely decorated lofts and wear cool vintage clothes. “A start-up is that philosophy applied to business.”

17 Startup Mistakes

John Osher is the epitome of the “serial entrepreneur”. After selling his toy company – CAP Toys – to Hasbro in 1997 for more than $120 million this is what he did:

“I decided I’d make a list of everything I’d done wrong and [had] seen other entrepreneurs do wrong, I wanted to make a company that didn’t make any of these mistakes. I wanted to see if I could come up with the perfect company.”

He then produced 17 Mistakes Start-Ups Make and personally used the list to create another company he later sold to Procter and Gamble for $475 million.