Marcus Cake

I found a great blog for startups - onstartups.com . It contains some interesting perspectives from an experienced entrepreneur. I have extracted the key points from two of his articles below and then provided brief comments of how I have applied similar principles to my current startup. I encourage you to read his original articles and subscribe to the RSS feed.

Why your software isn’t selling?, onstartups.com , 13th June 2006

Extract below:

1. Lack of visibility: Nobody knows who you are.
2. Lack of leads: Not enough people you can convert to customers.
3. Value Unclear: Prospects can’t figure out what it is you actually do for them.
4. Value Clear, But Not Compelling: Prospects know what you do, but couldn’t care less.
5. Trials Too Difficult: You’ve made it too hard for prospects to try your product – and few will buy without trying.
6. Competing On Price: Startups need to differentiate, but on something other than price. You’re trying to compete on price.
7. No Credibility: Prospects have no reason to believe you will be around in 6 months.
8. Too Hard To Buy: You’ve somehow managed to convince a prospect to buy, but the buying process itself is too difficult.
9. Client Risk Greater Than Zero: Your customers are having to absorb some level of risk (e.g.: You don’t have a money-back guarantee, you have long-term contracts, etc.).

Click here to read the article in full.

Customers may not purchase for any of the above reasons. Each point above must be addressed individually, quantitatively and qualitatively. Passionate entrepreneurs see the world in their way which reminds me of the following quote:

The reasonable man adapts himself to the world; the unreasonable man persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man. George Bernard Shaw

It is critical that customers can see the same world as the entrepreneur. The unreasonable man may change the world, but the marketing cost to cause the change will probably render the business unviable. The change the entrepreneur sees in the market place should be inevitable. That change should occur over the next few years. The business should grow into the market as it emerges. There are ways to mitigate risks.

In my startup, I will implement a low cost base and pursue break-even as soon as possible. I will also make sure I have enough money in the bank to ensure I can survive for two years without a cash injection. I will choose investors that can see the (potential) change and have an interest in what the business is trying to achieve. This will allow give the business the flexibility to adapt and grow into a market that increasingly sees the world in the same way.

“Startup founders: You don’t need a world class management team”, onstartups.com , 1st June 2006

Extract below:

As entrepreneurs, I think too many of us are focused on recruiting the best management team possible for our startups. This is seen as the path to fame and fortune. This concept is reaffirmed by investors that continually remind us that one of the most important things in a startup is a “world-class management team” (the other is a large and growing market).

I disagree with this. I don’t think you need a management team at all. You need an execution team.

Recruiting a management team assumes that you have things to manage. I don’t know about your startup, but in mine, there’s not a lot to manage yet.

You get the idea. Basically, in the early stages of your startup, everyone should be focused on execution (including you). You need movers and shakers and roll up their sleeves and get things done kinds of people. Code has to be written, sales have to be closed and customers have to be supported. In the early stages of a startup, the ability to sit back and strategize is a luxury that has to be earned. Don’t get me wrong, you want smart people that are thinkers and analyzers. But, it is even more important that they are passionate workaholics that just cannot be satisfied unless they’re doing “real work”. These are not mutually exclusive. The best startups have a team that can both strategize and execute – with an emphasis on the latter during the early stages.

“I’ve seen too many startups with “world-class management teams” that couldn’t actually build a product, close a deal or solve a customer problem to save their lives. Everyone was too busy figuring out the best sales strategy, the most effective market positioning and the optimal architecture for their product. But, at the end of the day (or the quarter, or the year), they had nothing to show for their efforts. “

“If you are bootstrapped and running a “capital efficient” company, don’t get lured by the temptation to bring on the world-class team too early. You can’t afford it. And, if you’re venture-backed and have a bunch of money sitting in the bank, use the capital wisely to actually build something useful, solve a customer problem and sell it so that you don’t have to keep going back to the well. “

Click here to read the article in full.

The primary costs for .NET businesses are people costs. Hardware is very cheap and available on monthly leases. As these businesses grow, a Virtual Private Server may simply be “dragged and dropped” onto more powerful hardware.This provides immediate scalability without downtime that historically occured when moving to new hardware. Open source software provides millions of dollars of intellectual property. The software can be utilised, revenue earned and the business may make a contribution to the open source community when it is able. People may work from home. There is a growing group of people that prefer to be freelancers and divide their time between multiple companies or projects.

In the early stages, I can’t afford to pay my “management team” their market salaries, and their is no need for the full complement of people - there simply isn’t that much for them to do. Their talents and energies will be available. An array of collaboration technologies allow them to contribute despite geographic differences and competing responsilbilities. As the business earns revenue, the individuals that “strategize” may be bought on full-time. The “execution team” which includes customer support will be contractors and often in multiple geographies. The use of open source technology and “freelancers” allows the business to have a “world class management team” that meaningfully contributes, an “Execution team” and a cost structure that reflects the growth stage of the business.