Category Archives: Startup general interest

Give feedback with compassion

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This passage is from a 1958 letter Samuel Beckett wrote as feedback to Aiden Higgins, an aspiring Irish author living in South African (emphasis mine):

My reluctance to comment has become overpowering. I hate the thought of the damage I may do from such unwillingness and such incapacity. If I were less concerned with you I should simply say it is very good, I like it very much, but don’t see where to send it, and leave it at that. But I don’t want to do that with you. And at the same time I know I can’t go into it in a way profitable for you. This is not how writers help one another.

I love the burning compassion that comes through. Beckett clearly cares deeply for Higgins and is delivering the feedback because he wants to help. People on the receiving end of feedback coming from a place of caring are much more likely to listen and remember.

The other thing that stands out for me is the effort that Beckett puts in. That’s important because it reinforces the point that he cares, but the bigger takeaway is that giving good feedback takes a lot of work. Facts need to be remembered and it takes time to prepare properly. The McKinsey Feedback Model is a good guide.

Hat tip to Brainpickings.

The correlation between intellectual honesty and great companies

By | Startup general interest | One Comment

Intellectual honesty is tough, but a powerful enhancer of company performance and driver of personal growth. That’s the message of this post from Joanna Lord, and I couldn’t agree more.

Here’s how she puts it:

I think great companies appreciate intellectual honesty. I’ve seen this at Porch. The past few weeks I’ve pushed on some big things and asked some hard questions. I’ve actually blown up a few email threads…not because I want to. Or even because I had to. But because I believed an argument needed to be made for the greater good. Greater good can be the customer, the team or even the bottom line. There are lots of “greater goods” that demand that sort of risk.

Lesser companies punish people for those risks. They shut you down. They ignore your concern. They silence it with sentences like “we’ll get to that later” or “good point, but we’re just too far along to rethink that.” Great companies stop. They pause. Acknowledge the point made and give it at least a few minutes to breathe.

It doesn’t mean that the argument made wins out. In fact, I’d bet most times it doesn’t. But there is something really special about allowing it to breathe. This sort of respect for intellectual honesty breeds empowerment. It reminds everyone in the room that we all have voices and bring perspectives and experiences that are valuable. It kills bureaucracy and rewards gumption.

Startups have to make decisions based on imperfect information all the time. That means mistakes. Intellectual honesty is key to quick course correction when those mistakes happen. Heaven help the startup that says “we’re just too far along to rethink that”.

Similarly empowerment, rewarding gumption and avoiding bureaucracy are also things founders and CEOs should aspire to.

But intellectual honesty is tough too. It’s tough on individuals and teams who spend more time in uncertain and uncomfortable places (although that way lies personal growth) and it’s tough on startups who want to progress rapidly whilst hearing all voices.

As with so much in life the key is striking the right balance. Individuals should develop good judgement about when something is worth mentioning, worth fighting for, or should be kept on watch for a while. Companies should develop a culture that encourages speaking out, coaches individuals to help them develop judgement, requires that people get behind decisions that have been made, but have regular review points, and not allow intellectual honesty to be a cover for unconstructive criticism or snarking.

Founder CEOs vs professional CEOs – exit data

By | Startup general interest | 3 Comments

founderexitdata

At Forward Partners we want to back founders who will go all the way with their companies. That’s partly because we work closely with them and they become our friends, and partly because when a founder leaves a business it’s a horrible wrench from which it’s tough to recover, not least because the company has usually gone through an extended difficult period before the departure.

The above chart looks at what happens when the founder doesn’t go all the way. It’s the output of research done by US VCs which compared exits of companies with founder CEOs to exits of companies with professional CEOs. It’s a log chart, which makes it slightly difficult to read, but companies want their exit blob to be high and to the left – big valuation with little capital raised.

As you can see the red dots (founder CEO at exit) and blue dots (professional CEO at exit) are pretty evenly spread and surprisingly the main conclusion is that it doesn’t make much difference whether the founder remains as CEO at exit.

When you split IPOs and M&A then there is a difference. Founder CEOs do much better for IPOs and professional CEOs do slightly better for M&A. Because the biggest winners drive VC returns the authors conclude that founder CEOs are best. I prefer that conclusion from an emotional perspective, but looking at the data I think it’s a bit marginal.

 

Make your problems tangible

By | Startup general interest | 4 Comments

I re-read Eric Ries’s The Lean Startup this week largely because our partner companies do things a little differently to what I would describe as ‘classic lean startup’ and I wanted to get clearer on what the differences are and why. I don’t usually enjoy re-reading books, but this time I had lots of a-ha moments and it was a joy. It’s a very good book and deserving of it’s reputation.

One of Eric’s pieces of advice is to ‘make your problems tangible’. At the time he is recommending companies use cohort analysis instead of aggregated customer analytics so they can see whether changes to the product are making any difference. His point is that the only way you can see differences is to compare the behaviour of customers recruited since with earlier cohorts. If the product changes aren’t making any difference then growth in engagement or some other customer metric won’t be what you hoped for and you will have a nagging feeling that something isn’t working as planned. The cohort analysis makes the problem tangible.

That’s great advice in and of itself but it extends to all other areas. If you have a nagging feeling that something isn’t right think hard about how to make the problem tangible. Once a problem is tangible it’s much easier to fix it. In the above example the feedback loop from customers back to development gets much quicker making it easier for the dev team to cycle through ideas until they find something that works.

Other activities that can make problems tangible include:

  • Observing customers
  • Interviewing customers
  • 1-2-1s between team members and management
  • Encouraging feedback and a transparent culture generally
  • Unit tests

The list could go on and on. The point is to find ways to shine light on problem areas.

 

UK second only to US amongst large countries for ‘Digital Evolution’

By | Startup general interest | No Comments

W150210_CHAKRAVORTI_COUNTRIESBUILDINGDIGITAL1

The chart is from a Fletcher School study of how different countries are succeeding in embracing the digital revolution. You can see that the UK is doing very well on the Y-axis, showing that we are very “digitally evolved” and that we are doing OK in terms of progress – neither falling back or accelerating.

It’s easier for smaller countries to substantially re-orient themselves, as Singapore in particular has done, so the real point of comparison here are the other large developed countries: the USA, Germany, France, Italy, Spain and Japan. Our position amongst that group is strong, particularly given we’re part way through a period of lower state investment generally, but the message to the new Cameron government should be that there’s no room for complacency.

The measure of digital evolution is derived from four broad drivers:

  • supply-side factors (including access, fulfillment, and transactions infrastructure);
  • demand-side factors(including consumer behaviors and trends, financial and Internet and social media savviness);
  • innovations (including the entrepreneurial, technological and funding ecosystems, presence and extent of disruptive forces and the presence of a start-up culture and mindset); and
  • institutions (including government effectiveness and its role in business, laws and regulations and promoting the digital ecosystem)

Together these are the necessary pre-conditions for a fertile startup community. If any one is missing life gets much tougher for entrepreneurs. Policy makers wanting to improve our digital economy and attract the best entrepreneurs from around the world to these shores should target the detail behind each of the four drivers.

There’s more detail in the full report here. Much more…

Lean startup methodology is brilliant but confusing

By | Forward Partners, Startup general interest, Uncategorized | 21 Comments

I just read two articles which beautifully illustrate the brilliance and challenges with the Lean Startup methodology.

First up was the story of Blue River Technology an agriculture robotics company whose first product is called LettuceBot. They were part of Steve Blanks Launchpad class at Stanford and followed lean principles to great effect. Their first idea was an autonomous lawn mower. In conversations with customers they discovered that was a bad idea, but also learned that farmers have a problem with weeding fields of carrots. Through more customer development they found that thinning lettuces is a bigger problem, and LettuceBot was born. They then sold their first LettuceBots off Powerpoint and had huge validation before they started building product. Brilliant.

Second up was Dan Kaplan’s critique of Peter Thiel’s critique of lean. I’m with Kaplan in thinking that Thiel is wrong in his critique of lean, but the interesting thing is that the problem stems from Thiel’s understanding, not from any fundamental issues with lean:

  • Misunderstanding 1: Lean is only good for making small changes to things that already exist
  • Misunderstanding 2: Customer development is nothing more than listening to what customers say they want
  • Misunderstanding 3: Identifying and testing hypotheses isn’t a planned process
  • Misunderstanding 4: MVPs are half baked products

Those are Thiel’s confusions as described by Kaplan. Then as a bonus Kaplan also points out that most people misunderstand the word pivot, mistakenly defining a pivot as when a company switches from one product or business idea to another (e.g. when Stuart Buttefield switched from the failed flash game Glitch to Slack) whereas Steve Blank defines a pivot as a smaller iteration of a business model or idea (e.g. a change of channel or customer segment).

To be fair Thiel’s critique of lean is bound up in a wider critique of incrementalism and a desire to see more step change thinking, but these points illustrate that lean methodologies are hard to understand and implement. It’s interesting to note that Steve Blank was in the classroom with Blue River Technology to help them with any misunderstandings and to stay disciplined. Most entrepreneurs don’t have direct access to Blank, and maybe that’s why they struggle. At one point Kaplan says:

if more entrepreneurs understood it [Lean] and applied it rigorously then fewer startups would fail

I agree with this. The high failure rate for startups is an unnecessary source of misery and loss. The opportunity now is to do something about it by helping entrepreneurs understand and apply lean. That means making it simpler and more practical.

You will see more on this subject from Forward Partners over the coming weeks.

Five practical tips for happiness

By | Startup general interest | 2 Comments
  1. Buy experiences instead of things – a US study found that 54% of people reported greater happiness from an experiential purchase vs 37% from a material purchase
  2. Help others instead of yourself – a study of 600 Canadian and Ugandan students found that people spending on others reported more happiness than people spending on themselves
  3. Buy many small pleasures rather than a few big ones – overall happiness is more strongly associated with the frequency of feeling happy than the intensity (Diener, Sandvik, & Pavot, 1991)
  4. Pay now and consume later – anticipation is a source of happiness (whilst consuming now and paying later is like a sugar rush…)
  5. Read product reviews – knowing what made other people happy and why improves purchase decisions

These points are taken from a 2011 paper in the Journal of Human Psychology, which has a controversial subtitle “If money doesn’t make you happy you probably aren’t spending it right”. As well as the above tips they make the point that whilst money may not buy you love, most of the things that contribute to happiness are available for purchase:

Wealthy people don’t just have better toys; they have better nutrition and better medical care, more free time and more meaningful labor—more of just about every ingredient in the recipe for a happy life

Despite that, wealthy people don’t report themselves as being any happier than the less wealthy. The authors believe that’s because people are bad at predicting what will make them happy and spend money on the wrong things. The explanation for this poor forecasting is that most people don’t know the basic scientific facts about happiness.

That sounds like a solvable problem.

Interesting stuff.

Posit: A startup’s first goal shouldn’t be to search for a repeatable business model

By | Forward Partners, Startup general interest | 3 Comments

Steve Blank gave us this now famous definition of a startup:

A startup is a temporary organization designed to search for a repeatable and scalable business model

At Forward Partners we are in full agreement with this definition (although we spell organisation with an s…) but have found that it is a bit confusing for startups in their first weeks and months.

I’m writing this post today having just read a Venturebeat post by Blank, which talks to one of the points of confusion. He titled it ‘Build, measure, learn’ doesn’t mean throwing things against the wall to see if they stick.

If you read the post above or Blank’s books (The Startup Owner’s Manual or The Four Steps to the Epiphany) he does write about what entrepreneurs should do at the very beginning of their startups. He advises to start by generating hypotheses using Ostevald’s Business Model Canvas and then build the minimum amount of product necessary to test the most important assumptions.

We have gone a step further.

Like Blank we advise entrepreneurs to be explicit about their assumptions and their hypotheses and we use the Business Model Canvas as a tool (part of our idea stage due diligence is to thoroughly analyse the Business Model Canvas in a workshop format), but then we insert a new stage.

We think the best next step is to find a point of emotional connection with customers.

The beauty of this step is that it’s simple to understand and easily actionable via a good customer development process. Lean aficionados will know that ‘Customer development’ is a Steve Blank concept, so credit where credit is due. What we’re doing differently is making it more prominent and defining the objective as finding that point of emotional connection.

The reason for the difference is that we are laser focused on early stage ecommerce companies and that’s where our thinking is targeted and where emotional resonance and the authentic relationships that follow are key to building a great brand and a large, sustainable business. Blank is writing for all sectors and across more stages, and his advice is necessarily more general.

Once a point of emotional connection is found then it’s time to jump onto the build-measure-learn loop and begin the search for a repeatable and scalable business model (i.e. we re-join Blank).

How great VCs add value

By | Forward Partners, Startup general interest, Uncategorized | No Comments

Vinod Khosla and others have said that 70% of VCs add negative value. I wouldn’t want to be one of those (although I probably was at one point…). How then, should VCs add value?

This is from Founder’s Notebook:

  1. provide concrete help with hiring, fundraising, and intros;
  2. encourage you to figure things out without pressuring you to expand prematurely;
  3. share what’s working from their other startups;
  4. ask great questions that you wouldn’t otherwise have thought about; and
  5. focus on real metrics rather than buzz among other VCs and the media.

We try to do all five of these at Forward Partners, whilst avoiding mistakes like these. Numbers 1 and 3 are where we are strongest.

Re 1.: Our startup team are often the first team members for our idea stage companies (albeit part-time), and then after a month or two of working faster because of our support they typically start recruiting their own full time team members. Matt Buckland, our Head of Talent, plays a key role in helping them do that.

And re 3.: Because we are tightly focused on early stage ecommerce we have a lot of relevant learnings to share with our partners. So much so that we are writing them down. So far we’ve captured them ad hoc on our blog but going forward we will start to publish them under a framework we are calling The Path Forward. More of that soon…

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