Little bets and billion dollar ideas

March 22, 2011

**By Peter Sims Article

Don’t Bet Big. Little Bets Are The Ones That Turn Into Billion-Dollar Ideas

When I was in business school, one of the most common things I would hear people say was that they wanted to do something new—like start a company or take an unconventional career path—but that they needed “a great idea” first.  That always surprised me a bit, especially at an entrepreneurial hub like Stanford, since most successful entrepreneurs don’t begin with brilliant ideas—they discover them.

Ironically, this would include the biggest business idea to come out of Stanford in decades.  Google didn’t begin as a brilliant vision, but as a project to improve library searches, followed by a series of small discoveries that unlocked a revolutionary business model. Larry Page and Sergey Brin didn’t begin with an ingenious idea.  But they certainly discovered one.

Meanwhile, Pixar started as a hardware company that never found a market, and got into digitally animated movies by making a number of small bets on short films.  Twitter began as a side project within Odeo, a podcasting company that was going nowhere.  After asking employees for suggestions about what the company should do, Odeo founder Evan Williams gave Jack Dorsey, then an engineer, two weeks to develop a prototype for his short messaging idea.  People inside Odeo loved using it and Twitter was soon born.

The truth is, most entrepreneurs launch their companies without an brilliant idea and proceed to discover one, or if they do start with what they think is a superb idea, they quickly discover that it’s flawed and then rapidly adapt.”  – Article


Daring Prototypes and Ingenious Products

March 21, 2011

**By Carlye Adler   Article

How Kickstarter Became a Lab for Daring Prototypes and Ingenious Products

“The team had some manufacturing experience, but they had no idea how to bring a product to market. And money? They didn’t have that either, and it would cost $15,000 to produce a minimum run of 500 C-Loops. They considered pooling their savings (including Ben’s college money) and taking out a loan, but nobody relished that idea.

Then they found Kickstarter, a website where people post descriptions of their projects and anyone can chip in to help fund them. Ben had discovered the site after hearing about a couple of guys who wanted to manufacture a tripod mount for the iPhone 4. Ivan pledged $20—in effect preordering one of the gizmos. “I thought, that could be us,” Ivan says. Using Kickstarter was an appealingly offbeat approach, and there was no risk. Even if they couldn’t raise the full amount, they’d build a following and win some free publicity.

The C-Loop team started going through Kickstarter postings to see what traits made for a good project. They put together a video that described the device and conveyed their passion for it. Then they began thinking up rewards for various funding levels—for $5, contributors would get some stickers and their name on the new company’s website; for $35, they’d get a C-Loop in a microfiber pouch. And they set a fund-raising target of $15,000 in 42 days; if they didn’t hit that goal, none of the backers would be charged and no money would change hands. (This was a Kickstarter rule, designed to protect investors from sinking money into half-funded projects.) …

Two months later, the trio had manufactured and shipped 1,800 C-Loops. In addition to the presales they booked on Kickstarter, they have been selling the device through their own website; they say they’ve received calls from two dozen distributors around the world and are in early talks with some prominent camera retailers.”  – Article


$600bn or $1bn

March 20, 2011

**Posted by jeremyliew in startups, VC Article

… the rewards for success in a big market are much greater, so it makes sense to attack big markets. For the same reason,VCs are often very focused on market size. … While you might play in a big industry, it is the Total Addressable Market size (TAM) that is really important. TAM is really a pretty simple concept – it is what your revenue would be if you had 100% market share in your business. This is often radically different from what an analyst report estimates as market size as their view of the “market” can be quite different from what your product can address. Here is an excellent analysis from VigLink of their TAM:

Click to see a larger version

Viglink allows publishers to put commerce links into their content with a universal affiliate code, and then tracks sales that originate from those links and pays out the affiliate fee. As you can see above, they have done a really nice job of starting with an enormous “market size” ($600bn+ ecommerce market) and broken it down into what is addressable by them, the network payout piece of commissions coming from affiliate orginated ecommerce transactions, which is still a $1b+ opportunity.

I’d urge other entrepreneurs to conduct similarly realistic analysis when they present market size estimates.”  – Article


Changing Hearts, Minds, and Actions

March 16, 2011

**A book review by Bob Morris  Article

Enchantment: The Art of Changing Hearts, Minds, and Actions
Guy Kawasaki

“The title of each of Chapters 2-12 begins with a “How to” and then in the text Kawasaki explains how to achieve likeability (Chapter 2), trustworthiness (3), prepare (4), launch (5), overcome resistance (6), make enchantment endure (7), use push technology (8), use pull technology (9), enchant your employees (10), enchant your boss (11), and resist [unethical and/or inappropriate] enchantment (12). Once again, Kawasaki – the pragmatic idealist and empirical visionary with an abundance of street smarts — is determined to explain what works, what doesn’t, and why.

As he explains, enchantment can occur anywhere and “causes a voluntary change of hearts and minds and therefore actions. It is more than manipulating people to help you get your way. Enchantment transforms situations and relationships. It converts hostility into civility. It reshapes civility into affinity. It changes skeptics and cynics into believers.” ….”  - Article


A Zeppelin transit company on Monday

March 16, 2011

**By Seth Godin Article

Are You Afraid of Good Ideas?

Are you one of those people? One of the people with too many good ideas? The folks who have notebooks filled with notions, or daydreams filled with the future? … Paul is one of those people. And he carries the ideas around like a bag of rocks, insulation against criticism, protection from blame. “Hey, can’t you see I’ve got this big notebook full of ideas? Of course you can’t hold me responsible for accomplishing anything, I’ve been too busy thinking up the next thing…. If only those jerks on the Group W bench would listen to me, everything would be fine.” …

Some of us hesitate when we should be starting instead. We hold back, promise to do more research, wait for a better moment, seek out a kinder audience. This habit is incredibly common. It eats up our genius and destroys our ability to make the contribution we’re quite capable of making. Call it hypogo–trapped into not enough starting.

Surprisingly, the flip side is also true. Some people deal with the fear and hide out by doing something else. They overstart, constantly dreaming up the next big thing, bigger than big. They might start a zeppelin transit company on Monday, and then drop it for a Stirling engine patent application on Wednesday, and perhaps, if that doesn’t take off in just a day or two, aim for a business focused on home delivery of notary services by the end of the week. …” – Article


Users thank you by paying you

March 12, 2011

**By Ryan Kim Article

“Marco Arment, the former CTO of the Tumblr blog platform, is best known these days for his time-shifting reading app Instapaper. But he could start a side-job as a financial advisor to start-ups. His motto: Get the money from your customers, not investors.

Arment’s more traditional take is built largely on the idea that if he puts out a good product, there’s no shame in asking customers to pay for it. And the more they pay, the less he needs to rely on outside investors. Arment said many developers are of the mindset that they need to amass a huge number of eyeballs through free services. But they don’t focus enough on building a solid product that can command loyalty and payment from consumers, and instead try to gain profitability through advertising and turning to outside venture capital. …

Arment launched Instapaper as a free website in January 2008 and became profitable later that fall when he first began selling a paid iPhone app alongside a free version. He’s been profitable ever since. … Though Arment maintains a free iPhone app, he said the focus of the company has been on the paid versions which are updated first …

Let Users Thank You by Paying You

That’s what’s allowed Arment to really focus on the paid segment. In fact, he still questions the value of the free version at times because it can leave a more negative impression for users with its limited set of features.”  Article


The first 1%

March 12, 2011

**By Jeffrey Phillips     Article

“Here’s my checklist to determine if your idea has merit:

  1. Does it solve a problem that is relevant and important to a customer?
  2. Does it cut costs, remove a significant barrier or create a significantly different capability?
  3. Will the idea be easy to adopt for the target customer, with low switching costs?
  4. Is the offer and benefit easy to understand, and easy to communicate?
  5. Is your idea protectable or defensible?  Is there any intellectual property?
  6. Do you have concepts beyond product innovation?  Can you extend your idea to service innovation, business model innovation or customer experience?
  7. Can you offer your idea at a price point where you make money?
  8. Can you scale your concept quickly?

For any idea, in any industry or market, if an idea can pass all of these questions, it has a strong chance of success, but only if you can take the next steps to develop the idea, test it in the marketplace and then launch it.” – Article


The pivot

March 11, 2011

**by Caroline O’Connor and Perry Klebahn Article

Silicon Valley culture is built around great pivots — a sudden shift in strategy that turns a mediocre idea into a billion-dollar company.

Groupon began not as a local coupon business, but as a platform for collective action. Pay Pal started back in 1999 as a way to “beam” money between mobile phones, Palm Pilots, and pagers. Twitter was born from a stalled podcasting startup.

At the Stanford d.school, the ability to pivot is essential to the process we teach in our Launchpad course, an introduction to entrepreneurship in which each student launches a real company, taking it from an idea to revenue in 10 weeks. Even in that extremely short timeframe, abrupt turns are inevitable. The ground rules for fluidly shifting course — or, when needed, radically altering direction — apply equally well to start-ups outside the classroom, as well as to innovative ventures within established companies.

Here are our five rules for executing a successful pivot:”  – Article


Become a Fast Discoverer

March 10, 2011

**by Jeffrey Phillips Article

Forget About Being a Fast Follower

“…the cost of experimenting has fallen dramatically, yet few firms use rapid, low cost experimentation effectively, and lays the blame for that fact at the feet of our educational system, which cranks out MBAs who demand deep quantitative analysis. …  At one time it was expensive for P&G to film how consumers used Tide in their laundry. Now, they can simply ask moms and dads to send in video clips of their laundry practices. The consumers can, and will, do the work for the company. Here’s a low cost experiment. Send 50 consumers a video camera and a new product. Ask them in exchange for the use of the new product to record their use and experiences with the new product. Ethnography for free! …

Experimentation is very intertwined with innovation. Both require a hypothesis – if we do X, then we will get benefit Y. Both require a lot of work for uncertain outcomes. Both require rigor and careful planning. And both are consistently avoided by turning to “experts” who provide an answer, which takes less time and exposes the executive to less risk. After all, if the idea fails and the expert supported it, it can’t be the executive’s fault!

Good innovators are good experimenters. The converse is also true. Firms that don’t innovate don’t experiment. They wait for others to create a market and exercise a “fast follower” mentality. Which would be a fine strategy, except that the vast majority of firms fashion themselves as fast followers, and few really are. Why not reposition your firm as a “fast discoverer” using rapid, low cost experimentation. Then, you won’t have to pay experts, you will be the expert.” – Article


A can’t miss business

March 10, 2011

**by: John JantschArticle

5 Elements of a Can’t Miss Business

And, while you may indeed possess the next big idea, it’s likely more important that you understand a thing or two about the dynamics of bringing any idea to a market.

Below are 5 attributes that business owner should consider and embrace as they plan to start or pivot their business in the direction of can’t miss success.

1) The owner is the customer

Understanding the characteristics, desires and behaviors of a narrowly defined target market is very hard work, but essential to your success. Every marketing book or expert will tell you this, but few can give you the magic tablet that allows you to go deeply in the psyche of your prospect.

You can acquire some measure of knowledge from various research techniques, but nothing beats living, breathing, and feeling the same things your prospects do. Some of the surest successes in history have come from founders who created a product or service to meet a personal need and discovered a business by virtue of doing so.

2) The market understands the offering

Some entrepreneurs dream of locking themselves in a padded room for a year or so and emerging with the world’s greatest innovation. Sounds romantic I know, but if your innovation simply solves an incredible problem people don’t yet know they have, you may wind up burning through the money before they get it.

Better to innovate around a proven market, borrow genius from an unrelated industry, or discover an unmet need in a mature market crying for a solution.

3) The market already spends money here …

- Article


Investors treat entrepreneurs like toys

March 9, 2011

**By Mick HagenArticle

Entrepreneurs put everything on the line, but we’re just poker chips to some of our investors

“The Investor
I don’t appreciate the way some investors talk about the startups in their portfolio. I’ll sometimes hear, “Yea, i’m in on that deal.” The words themselves aren’t that bad… but it’s the way they say it. They convey an attitude of not really caring. It’s just a “deal.” It’s like they’re playing a game of monopoly or doing some fantasy baseball trade or playing a game of poker and us entrepreneurs are just the Skittles they’re playing with.

I get it. It’s often their job to invest in a bunch of companies. I understand. Spray and pray. Yadda yadda yadda. But it’s no excuse for not caring.

The Entrepreneur
We put our entire life and livelihood at risk for the startup. We have no alternative. No portfolio to lean on. It must work. All day every day, we are consumed in building value in the enterprise. We forgo great jobs, great schools, and great opportunities to be building a startup — a startup that will most likely fail. But we continue. … I’ve had my share of battle wounds. I’ve gone through tens of thousands of dollars in debt. I’ve slept on couches and bunked up with friends. I’ve begged family members for loans… as humiliating as that is. I’ve gone through a nasty foreclosure. Yes, you heard that right: I’ve lost a home. Do you know how hard and embarrassing that is? My credit is a complete disaster and will take years to recover. This hasn’t been easy. Yet to so many investors, we’re just a “deal.” Just a drop in the bucket. …

The Exception
Not all investors are like that. Many investors are former entrepreneurs and they still remember what it’s like. They know what we’re going through. They understand how wet the pillow gets at night when times get tough. They understand what it’s like to come home and tell your loved one, “honey… i don’t know how we’re gonna pay rent this month.” They remember. Many investors aren’t former entrepreneurs. But you’ll know what kind of investor they are by how they talk about their startups and founders. You’ll know by how they express concern and empathy for them, their family, their situation. If they are truly founder-friendly, they’ll care. You’ll hear it and you’ll feel it.”  – Article


A dream? A nightmare?

March 4, 2011

**by Tim Berry on February 28, 2011 Article

Entrepreneurship Is …

“Is it a practice, or …

…  a way of life? Ask the serial entrepreneur, or the lifestyle entrepreneur. Ask a business owner whose business is working. Ask me or my wife – it’s been our way of life since 1983.

a dream? A few years ago Time Magazine wrote about a poll asking Americans what they dreamed about. “Starting my own business” came in second to taking a long trip, with 25% of the respondents. I used to dream about it, before I did it.

a nightmare? Go ask somebody who lost a job, house, or spouse over a failed business. Ask somebody who started a business, came to hate it, and couldn’t get out.  It was a nightmare for us when it turned dark and threatening, during the bad periods and hard times.

a false hope? Ask one of those people who spends forever writing business plans that never happen. Maybe this relates to my post here last week, if you can’t get funding, it’s you, not them.

an escape? Ask somebody in a relationship with an entrepreneur who lives for the business and nothing else.”

- Article



Not quite real, not quite fake

March 3, 2011

$99 iPad rival NoteSlate: Not quite real, not quite fake

There is no working prototype. No video. No proof that it exists. Yet NoteSlate — a digital drawing pad, or at least the idea of one — is burning a hole in the blogosphere. A few weeks ago, descriptions and mockups appeared online at NoteSlate.com. Since then, hundreds of technology news and gossip sites around the globe have written about it in at least half a dozen languages, heralding the imminent arrival of a $99 e-ink digital tablet that mimics the simplicity of old-fashioned pen and paper.

NoteSlate’s homepage opens with a question, handwritten in sloppy capital letters on a graphical rendering of the tablet: “Hello? Do you like this picture?” The answer, it seems, is a resounding “yes.”

CNNMoney tracked down the man behind the project: Martin Hasek, 28, a Czech product and furniture designer. He declined to name specific investors and suppliers for the project. Asked why he launched NoteSlate.com without a prototype or a product video to share, he e-mailed, “We launched NoteSlate for just one reason. We were not sure if NoteSlate could be successful on the market, because of its absolute different concept from the other tablets out there. What we got now is what we really needed to move forward and to make this tablet really real and changing the world.”

NoteSlate is best described as buzzware: a tech concept masquerading as a full-fledged idea because it needs consumer enthusiasm to support its development. Thanks to the marvels of the Internet, it’s easy to foist an unfinished idea on the world, creating a crowd-sourced trial balloon that, if it succeeds, might attract capital and talent.” – Article


When your product or service sucks

February 28, 2011

“I believe that marketing is what you do when your product or service sucks … in truth not one of our top performing companies had a marketing budget in their initial business plan. … in my talk at Harvard Business School, I said “Early in a startup, product decisions should be hunch driven. Later on, product decisions should be data driven”. I’ve seen that line tweeted a thousand times since then. Clearly people like that rule. Here’s another.

Early in a startup you need to acquire your customers for free. Later on, you can spend on customer acquisition.

… For the consumer/free part of the web, there are some obvious things you will want to do: ….” – Article

 


Three critical legal lessons for startups

February 20, 2011

“The dizzying pace of a startup company frequently leads to legal mistakes that could shake a budding company to its core. Entrepreneurs, take note: Here are a few things to keep in mind.

Startup or emerging growth companies have to act decisively, efficiently and quickly. But the frenetic pace and other challenges these companies face often lead to serious legal mistakes. All too often, these companies fail to distinguish and understand the differences between an agreement that is legally enforceable and one that is not; keep inadequate documentation of the legal rights and responsibilities among joint venture partners; and fail to identify and protect the company’s trade secrets.

What makes an agreement enforceable? … There are three basic types of written agreements, depending on the language of the agreement:  agreements to agree, letters of intent, and a fully defined, binding agreement. …

Document your joint venture agreements … If you go ahead and form a relationship without any further documentation, you’re asking for trouble. … the dismissed party finds itself with oral understandings about rights to use technology or to receive equity or payment, but no documentation. …

Protect your trade secrets … Employees should sign an employment agreement mandating that company secrets be used only for company business. The same language protecting trade secrets should also be included in joint venture agreements with other companies and third parties. Next, the company needs to take steps to internally identify its trade secrets.”

- Article

An entrepreneur should recognize the differences b


You May Kill Your Co-Founder

February 20, 2011

1. Money Burns Like Kindling

Whether you’re bootstrapping your startup or actually get seed money or VC capital, I guarantee the money will disappear quicker than you planned. A VC in Silicon Valley wants you to meet in his office…tomorrow. Bam: $2,000 for travel expenses. Another mobile carrier said they’d consider hosting your app, if you make 20 hours’ worth of programming changes. Bam. Another $1,000 gone, with no guarantee of revenue as a result. Things break. Conferences come up. Money dwindles. …

3. You May Kill Your Co-Founder

You and your best bud came up with a fantastic idea for a startup…only now he’s dragging his feet at getting coding done, or disagrees with you on every point. How are you supposed to grow a business if you can’t even agree on a logo? Starting a business with a friend can be stressful and put a strain on a relationship. Do you have to choose between getting rich or having a friend?

…”

- Article


Difficult Is good

February 18, 2011

“Entrepreneurs come in all shapes and sizes. There is no single formula for determining what type of entrepeneur will succeed. But one of my favorite stories about entrepreneurs comes from Don Valentine, the founder of Sequoia, which is one of the best venture capital firms in the business.

When one of the younger partners in the firm started, Don took him aside and drew a four square quadrant. Along one axis, he put “easy to get along with” on one end and “hard to get along with” on the other end. One the other axis, he put “normal” on one end and “brilliant” on the other end. He then said, “sometimes we make money with brilliant people who are easy to get along with, most often we make money with brilliant people who are hard to get along with, but we rarely make money with normal people who are easy to get along with.”

That has been my experience as well. Getting along with difficult entrepreneurs is one of the secrets to success in the venture capital business. It is also true that finding management teams that can get along with difficult entrepreneurs is critical to succeeding in venture investing.” – Article


A Quirky Way of Innovating

February 12, 2011

“Quirky’s mission is to crowd-source innovation and product design. They create consumer products by first setting up a competition for solicited but fairly rudimentary product ideas. People evaluate these and some are selected to obtain further refinement. Individuals suggest different features, designs and then even the product name and marketing slogans. Then, if enough people look like they actually want to buy the product, Quirky manufactures and sells it. All along the way, people earn “influence points.” It is not just coming up with the initial idea that wins you points — offering other idea components and playing an active role in voting for different suggestions also contribute — and depending on how many points you have, you may be entitled to a share of the earnings.

Now this is one of those ideas that can sound good in theory but be hard to pull off. For starters, enough people have to believe in what Quirky can do to actually contribute. The good news here is that Quirky appear to have got passed that initial concern and have launched real and interesting products.” – Article


I wonder why, not I’m a failure

February 12, 2011

Does success as an entrepreneur requires different strengths than success as an employee?

Yes. As an employee, it’s really not safe to fail. There’s immediate judgment — one bad performance during a meeting can affect your review. Employees learn to hedge their bets, be careful about their output, and worry about what people think. That won’t work as an entrepreneur. Entrepreneurs have to look at the results of their efforts as a scientist would, with a focus on learning in order to improve results. Let’s say I offer a class and no one signs up. My mindset has to be, ‘That’s interesting — I wonder why,’ and not, ‘I’m a failure.’ …

What must an entrepreneur have in addition to a marketable product or service?

The ability to sell yourself and your idea even if you hate sales. Often this means changing your idea of what a salesperson is. In corporate America, you think sales and imagine the salesperson on your team — the extrovert with the classic sales personality. But find another model — maybe you’re an introverted software engineer. There are people like you who effectively sell their ideas. Recognize that you’re not trying to force yourself on anyone. If you love your product, you’re just talking to people about how it can help them.” - Article


Brilliant improvisers

February 11, 2011

“Sarasvathy concluded that master entrepreneurs rely on what she calls effectual reasoning. Brilliant improvisers, the entrepreneurs don’t start out with concrete goals. Instead, they constantly assess how to use their personal strengths and whatever resources they have at hand to develop goals on the fly, while creatively reacting to contingencies.

By contrast, corporate executives—those in the study group were also enormously successful in their chosen field—use causal reasoning. They set a goal and diligently seek the best ways to achieve it. …

Not surprisingly, angels and seasoned VCs think much more like expert entrepreneurs than do novice investors.” – Article


Inspired, and then …

February 10, 2011

“This is an  inspired thought – do you follow a “should” or your “have to’s” more than your inspired thoughts?” - Source


Judgments can last for 22 years

February 8, 2011

“Say you’ve made 2011 the year you’re going to start a business. It doesn’t matter if you’re going to make art, donuts, metal parts or software – you still need to create a business form. You may have heard of LLC, S Corp, Sole Proprietorship or Partnerships. You may also be in a rush to get started running your company. Hold on a moment, read this, and save yourself some problems in the future. …

If you were to start a business {without incorporating} and have a problem, creditors can secure judgments against you and your assets personally. You have to worry about asset protection. Those judgments can last for 22 years. Don’t think you can just avoid the problem if you make a mistake.”

I recently heard the story of a partnership where one of the partners told the others he had paid taxes on behalf of the business, when he actually pocketed the money. Other partners had debts to pay personally as well as issues with government agencies like the IRS for 7 years afterwards. This isn’t something to take lightly.” - Article

 


Professor Luftig on Risk

February 4, 2011

“From an article previously highlight in Management Briefs:

“I have concluded that being an entrepreneur is an irrational state of being. If human beings were purely rational, evaluative, value maximizing individuals …, they would not start companies. If they sat down and did the expected value calculation by laying out the probability-weighted outcomes of being an entrepreneur as compared to taking a safe job, it would not pencil out. Yet, entrepreneurship is not simply a rational journey. It is one that is defined by passion and personal satisfaction that transcends purely financial analysis.

I understand the points raised by the author, but I believe that this may be an outmoded way of thinking about entrepreneurship particularly as related to risk.” – Read all of Professor Luftig’s comments


It’s how you behave when you strike out

January 31, 2011

Failing well

Failure sucks. … I’m not sure I’ve read much about “how” to fail, since failure is so depressing and negative. But I’m here to tell you that there is a good way to fail and that there are steps for positively managing the aftermath. I’ve seen it done well, I’ve seen it done poorly and I’ve done it myself, so I certainly have some well-formed views on the topic.” – Article

in the VC business, if you hit .300, you are doing well. if you hit .400, you are going to the hall of fame. but it is how you behave when you strike out that defines your reputation.” Comment left on above article. – Source


Chicken entrepreneurship

January 28, 2011

“”Chicken entrepreneurship,” as Michael Masterson puts it in his book Seven Years to Seven Figures, is becoming an increasingly popular, and feasible, way to start your business. “I think there are thousands and thousands of potential chicken entrepreneurs out there in the world, dreaming of quitting their jobs and starting their own businesses, but afraid to do so,” he wrote in a recent article.  Running a part-time business comes with its own set of challenges, so you need to be prepared for the road ahead before launching. Whether you’re just looking to generate some extra cash on the side, or you plan to transition your part-time business into your full-time gig, here are a few tips on how to create a successful part-time business strategy.” – Article


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