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260 customers surveyed, but sloppy customer research

I blogged recently about the difference between quantity and quality when it comes to customer research. My friend Michal Bohanes recently made the same point with a picture in his excellent post mortem on his startup Dinnr (in which I was an angel investor).

batman

Michal was making the point that despite all this work he didn’t ask the questions that would have revealed customers didn’t care enough about his ‘deliver all the ingredients so you can home cook a meal’ service to actually buy. Instead he asked people whether they liked the idea and because people want to be nice and are bad at predicting what they will do in the future took away a bunch of ‘false-positive’ signals.

I know I keep going on about this, but it’s an easy and incredibly damaging mistake to make. Kudos to Michal for having the confidence to tell his story.

 

Avoiding burnout

“Dude. Go the gym!” is what one of my partners told one of our founders recently. He was stressed out closing a funding round and had dropped his usual routine, but the extra time didn’t help. In fact not going to the gym made things worse.

It’s easy for founders to get immersed in their businesses and not look after themselves. I was close to one company where that happened earlier this year and it was terrible. Bad for the founder and bad for the company. Bad enough that we are thinking about how we can add life coaching to the package of support we offer to our portfolio companies.

A couple of days ago Steve Blank wrote about his personal experiences with burn out. He was working hard and doing well, and the praise made him work harder still. And then he crashed. Here are his lessons learned:

  • No one will tell you to work fewer hours
  • You need to be responsible for your own health and happiness
  • Burnout sneaks up on you
  • Burnout is self-induced. You created it and own it.
  • Recovery takes an awareness of what happened and…
  • A plan to change the situation that got you there

Great advice. That said, I think you can find people to tell you when you are frazzled and should slow down a little. Husbands and wives can do that if you bring them into your startup journey. Mentors can also be a great help.

Making money from apps is HARD – some data

Screen Shot 2014-08-20 at 17.44.29

As you can see from the chart above only 3% of mobile app developers are making more than $100k per month/$1.2m per year. Assuming the same power law applies as monthly revenues scale further it’s a fair guess that only 3% of that 3%, i.e. 0.1%, are making $1m+ per month or $12m+ per year. That’s one in a thousand making enough to be interesting as a VC backed startup. Not great odds.

And it’s getting worse. The latest news is that app downloads are decreasing. The average Brit has downloaded 1.8 apps to their phone, down from 2.3 a year ago and 31% of smartphone owners have no third party apps on their phone at all (up from 20% last year).

The trends show that developers are still increasingly favouring apps over web technologies, but I’m thinking that might change soon. Maybe it will become easier to make money on the mobile web than from apps. It doesn’t seem like that’s a high bar.

The chart above came from Vision Mobile State of Nation Q3 2014 which you can download for free here (registration required).

 

 

Snaptrip case study – Solo founder hypothesis in action

My partner Dharmesh Raithatha wrote the post below on the Forward Partners blog earlier this week. I’m reproducing in full here because it’s a great explanation of our solo-founder hypothesis and how we work more generally.

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Are you a solo founder with an idea? We believe that we can help you create a successful e-commerce company better than anyone else. Here’s a case study of how we’ve helped Snaptrip.

HOW IT STARTED

Snaptrip started as an idea, an excel spreadsheet and a passionate founder called Matt. We met Matt for a casual coffee and the chat quickly turned into a follow up meeting and subsequent investment.

Matt was a second time entrepreneur who had a wealth of experience in the holiday lettings industry. His hypothesis was that consumers were moving towards last minute bookings and there was a gap in the market.

With no team and no technical expertise Matt was planning to find a team and build out some product before starting to raise some seed money. Our unique model allowed him to get started straight away.

USER RESEARCH

We help founders develop a deep understanding of the problem so that they don’t have to rely on gut alone.

We worked with Matt to design interview questionnaires and coached him on interviewing technique. More importantly, the team paired with Matt throughout this understanding phase to share the insight. Talking to customers doesn’t seem very difficult but learning how to intuitively ask open questions, deviate from a script and synthesise the information gathered takes practice.

Our neutrality also provides a nice counterweight to a founders confirmation bias.

THE PROCESS OF GOING OUT AND REALLY UNDERSTANDING THE USERS NEEDS AND PROBLEMS GAVE ME ABSOLUTE CONFIDENCE IN THE CONCEPT AND WAS INVALUABLE FOR THE SHAPING OF THE PRODUCT AND OFFERING. IF I MEET ANYBODY WHO IS STARTING A COMPANY NOW THAT IS NOT UNDERTAKING THE PROPER VALIDATION, I TELL THEM THEY’RE MAD, NO MATTER HOW GOOD THE IDEA IS! – MATT FOX

CONCIERGE MVP

The Concierge MVP means taking care of initial customers with the attention that a personal concierge would provide at a top hotel. It allows you to launch with a minimal product and provide an amazing service to your early customers while learning even more about their needs and wants.

Most of our early seed companies have used the Concierge MVP to accelerate insight which have led to better business and product decisions.

Matt really embraced this and we put his phone number at the top of the site and really encouraged customers to phone or use livechat to get in touch. Snaptrip is a weekend and evening business so the demands on your personal life can be quite high.

The beauty is that you get  real transactions with a minimal product and customers who are ecstatic with the service provided.

MATT AT SNAPTRIP DID AN AMAZING JOB TRYING TO FIND US SOME LAST MINUTE ACCOMMODATION IN NORTH DEVON. THE ACCOMMODATION LOOKS STUNNING, A PERFECT LOCATION OVERLOOKING WOOLACOMBE BEACH, LOOKING FORWARD TO A RELAXING 5 DAYS IN MY FAVOURITE PLACE. THANK YOU SO MUCH MATT, I WILL DEFINITELY BE USING YOU AGAIN AND WILL RECOMMEND TO MY FRIENDS. – TRUSTPILOT REVIEW.

THE DYNAMIC BETWEEN FOUNDER AND TEAM

With our investment studio model we are covering new ground so how we best work with founders is something that we think about everyday.

For example, will the founders rely on us too much and will it impact follow on investment for the companies?

So far we haven’t found this to be an issue. In the early phases the founders soak up as much as they can from the experts in the room and as the business grows they need less and less of our support.

The timing often depends on previous experience, key hires and the growth of the business. But it has happened in every single instance.

In the early phases Snaptrip would often have the whole team working on the company. Whereas as hires come on board and the product develops our involvement has scaled down to more of a mentoring role and for tactical projects.

FINDING A COFOUNDER

Our solo founder hypothesis doesn’t mean we don’t believe that having a strong founding team increases the chances of success. We definitely do, we just think that for solo founders our model leads to better outcomes and opens up a larger talent pool.

Our talent team was able to source a list of potential candidates and Matt approached them directly for a chat. At this stage Matt had funding (albeit tranched), a solid understanding of the problem, a product and early transactions.

This gives massive credibility and opens up a much wider list of interested candidates.

Matt interviewed a number of candidates and the ones he liked we also interviewed to give him a sanity check.

Matt now has a awesome technical co-founder in Dan who has relevant industry experience from 8 years at HomeAway and post IPO left to run his own holiday lettings startup.

When Dan joined as co-founder the dynamic definitely changed for the better. Snaptrip felt more solid as a team of founders who both had sector expertise. It also meant that some members of our team could pull away from the day to day startup work and move to giving strategic advice while we focussed on the newer companies.

Snaptrip works better with 2 founders, with both Matt and Dan fighting for each other 24 hours a day.

PREPARING FOR FOLLOW ON FUNDING

Snaptrip is nearing the end of its 12 months and our investment team is helping Matt prepare his deck and introducing him to potential investors.

We believe that Snaptrip has a really great future ahead of it and we are really excited that we could help Matt get his idea off the ground.

Creativity in startups comes from people and process

At Forward Partners we have been thinking a lot recently about the qualities that we like to see in our people – our values if you like. One of those is to be “creative, adventurous and open-minded” and as we flesh out what that means we’ve been musing on how creativity works within our portfolio companies. We back great entrepreneurs with great ideas, so we’re not focused on the original eureka moment, but rather the way they find creative solutions to challenges as they arrive.

In western society we have this myth that creativity comes from lone geniuses, but in reality it’s hard being creative on your own. Some people are better than others, but most clever ideas these days come at the nexus of existing concepts and the genius is in bringing them together rather than dreaming up something out of nothing.

When creative solutions are required to solve day to day problems that arrive in startups (do I know what my customers want?, where can I find my first 50 customers?, why aren’t my leads converting?, what should my brand be? etc.) the best solutions come when the following elements are present:

  • A framework that helps us understand the problem
  • People who can bring insight from solving similar problems elsewhere
  • A process for teasing out solutions

And, of course some smart people.

 

Platforms for innovation

Chris Dixon crowdsourced this list of future platforms for innovation:

  • Virtual reality
  • Internet of things
  • Wearable computers
  • Cryptocurrencies / blockchain
  • Self-driving cars
  • Drones
  • Brain-computer interfaces
  • 3d printing
  • Augmented reality
  • Open data
  • Synthetic biology
  • Satellites
  • Injectibles
  • Nanotech

Platform may not be an appropriate descriptor for everything on the list, but it’s a good list none-the-less. At Forward Partners we are laser focused on early stage ecommerce for now, but that will run out and at some point we will change to a new area and it may well be one of these. Timing will, of course, be key. Being too early to a trend is as bad as being too late.

Picasso worked to make things simple

Picasso bull

Apple apparently shows this picture to employees at the secretive Apple University. It’s a great illustration of working to make something simple. The first panel is a bull with horns, hoofs and texture, the last is an abstraction, but sill a bull. That’s what Apple is about and what a lot of good design is about.

 

A brief and not-so-kind history of web advertising

You could chart the history of web advertising like this (quotes from Adrian Saunders/beaconreader.com):

  1. Display ads from Yahoo and AOL: “Incredible returns! Trackable analytics on reader behavior! Just like the print ads you know and love, only cheaper and with better metrics!”
  2. Google Adwords, Demand Media: “Publish what you want, when you want, and make a living through Google Adwords! Build a business outside of the stranglehold of portals! Show readers ads that they’ll actually want to click! Keep optimizing the hell out of your stuff and you’ll turn this into a business any day now!
  3. Facebook and Twitter: “Forget everything but social, where people read and consume content based on other people’s recommendations! Build up social capital, focus on “sharing” and watch your amazing work go viral! You’ll receive more traffic than you’ll ever need to make the business work!”
  4. Mobile: “Everything before was a falsehood, the reality is that everyone is on their phones now. Mobile is where advertising is really going to take off…”

And now the new hotness is content marketing and it’s close cousin native advertising, ref A16Z’s investment in Buzzfeed).

The analysis above is a bit unkind in that entrepreneurs have built businesses on the back of display ads, Google Adwords, social and mobile, and critically it ignores search advertising. However, there’s more than a grain of truth in it. Nobody is enamoured with display ads anymore, everyone understands that unless you have massive traffic you only make pennies from Google Adwords, and mobile has already taken a big chunk out of desktop social (albeit that much of it is mobile social).

Ultimately the important question is: is web advertising moving forward?

For me the answer to that is a clear ‘yes’. Search marketing is the most efficient way of connecting people with things they want the world has ever seen, social is developing into a great way to connect people with things they might want to buy but don’t know exist, and now content marketing allows brands to build authentic and high value relationships with potential customers. Moreover, from a startup perspective you can make these channels work at the small scale you need in the early days of your business.

That said, there is a constant feel of “emperor’s new clothes” about the web advertising world and it’s important to look beyond the hype.

Tablet share flat on gov.uk driving license site

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I post this chart showing breakdown of access by device for the UK government’s ‘book your driving test’ site for two reasons:

  1. We have data showing that tablet share is flat since the beginning of the year and that all the growth is going to mobile. The ‘tablets are yesterday’s story’ meme has been growing recently, and it’s great to see some hard data. There are of course variations by sector, but driving tests are pretty mainstream (although I imagine they skew young) so this should be representative.
  2. This is a great example of innovation from the folk at gov.uk. The fact that they are sharing data like this is great and the implementation is high quality. The chart on the site is interactive with options to set the date range, but I couldn’t see how to embed it, so this is just a screen grab.

App store discovery a little less broken?

It’s a common refrain that the process by which apps are found or discovered is broken. Discovery and hence download volumes are driven more than anything by ‘app store placement’ and by being ‘featured’, both of which seem to be more down to the whim of Apple and Google than the merit of the app. What we need is an equivalent of Google’s Page Rank, but for apps. That way good apps would float to the top and discovery would be more meritocratic. That would be better for startups who often have great products but lack the resources or the networks to curry favour with Google and Apple.

The current discovery process isn’t completely broken, in that Apple and Google do take the quality of the app and it’s popularity into consideration, but it isn’t right. Consider these stories. Two similar stage startups that we are close to have recently been playing the App Store game with Apple. They both networked hard to get close to the right people at Apple, developed features that Apple suggested they should and then held back release of those features in the hope of getting promoted. One got promoted in a big way (Stylect) and the other got only a low placement in an App Store category with little traffic. Neither knew until the day of the promotion. That can’t be the best way to do things.

However, Apple and Google are both heavily invested in the status quo. Their app stores earn them a lot of money and are a protective moat for their mobile phone businesses. So I’m not expecting things to change quickly. Thus I was surprised to read this morning that app store competition is increasing. Tomasz Tunguz has found that app store volatility has increased substantially over the last twelve months which indicates that new entrants are doing better and that discovery is getting less broken.

That’s a little bit of good news for startups in an area where they don’t usually get much. I like to think that one day we will have an open system on mobile, but until we do life will be harder for young companies than it needs to be and we will get less investment and innovation in mobile than we could.