I’m seeing lots of startups these days. Startups at events, pitches in emails, even pitches over SMS at 00:15 on Friday night (yeah – not recommended).

There are good ones in there, always, but I’d like to air a personal opinion. Almost always the ideas are small. Even if there’s the ambition level to create a great product for the global masses, what I would really like to see are big ideas. Are you really making a difference?

It’s like we’ve moved from digitization to widgetization. There are wonderful platforms out there that you can easily build products on – phone apps, web apps, mashups – but that doesn’t mean that everything should be just an extension of a platform. You’re trading off flexibility and reach of the idea to speed and reach of users, which definitely feels like a fair balance. But in addition to shoehorning ideas into smaller molds, widgetization also drives a long-term risk. If you build on an existing stack of platforms and create something very useful for that platform, the next update of that platform may well kill off your idea. Updates to Twitter, Facebook and iOS for example kill startups every time. If you are so awesome, why wouldn’t the platform provider just build that functionality into the platform? Of course you can aim for being that functionality, but aiming at a specific exit from the start is easier said than done.

Think outside the platform. Don’t be a widget. What are the really big things you’d want to do? How do you want to change the world? How do you want to affect people’s lives? I think I’ll start asking those questions more.

This post was originally posted on Marketing Sense. Go there to stay on top of my marketing-related posts.

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I just had a quick read through of the Startup Genome report. The ambition level and aims of the team are commendable. But I was disappointed by the substance. I would like to make it clear that I respect the endeavour immensely and would certainly like to see a more robust reporting of the findings. Maybe concentrating on just a couple of the points the list as their 14 key findings would make it even more valuable. I also respect getting Steve Blank to launch it with this article.

As a disclaimer, having written my Master’s dissertation on the topic of using evolutionary analogies in the social sciences, I hope you’ll understand I’ll take a pretty critical view to anything claiming to map the genome of anything above the level of biology.

First of all, you have to remember this is survey report. Surveys are inherently flawed in selection bias, and this issue should always be addressed in any report claiming findings based on a survey. Based on the description on their blog, it is impossible to say how large this bias has potentially been. To put this simplistically, if you survey startups about success, are you sure you are including the failed ones in the first place? Maybe they tackled this. Here is a long post on analysis methodology. But the most important disclaimer would be the data gathering description.

The high-level points are good reminders of some of the things that are important.  I’ll go through their 14 key points here.

1. Founders that learn are more successful: Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.

Startups that follow success stories and learn from them are likelier to succeed. Sounds pretty good, if a bit obvious. Also, without exact methodology, the numbers mean very little. Also notice that the survey includes both very very early stage startups, and companies that have been developing their product and their company for a long time. In the longer run, it is likelier that you read and follow more of what happens in your field, and it also likelier that you are getting funding, since you have survived (yes, notice the tautology).

2. Startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.

This is certainly pretty open to interpretation. What is a pivot, anyway? At what point? If you change your idea twice during the first week, did you use up your pivots? Another way of saying this is: If you can’t adapt, you fail. If you lack focus, you fail.

3. Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.

It would very interesting to see how this changes over time and over economic conditions. No, I won’t mention the b-word.

4. Investors who provide hands-on help have little or no effect on the company’s operational performance. But the right mentors significantly influence a company’s performance and ability to raise money. (However, this does not mean that investors don’t have a significant effect on valuations and M&A)

This sounds interesting. But this needs to be opened much more, since hands-on help is not a hard-and-fast data point, and can vary from individual to individual greatly. Another explanation for this is that there is just too much noise in interpreting this that it looks exactly the same.

5. Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.

Not surprised, but given the concerns about the methodology and terminology, the numbers are pretty meaningless.

6. Business-heavy founding teams are 6.2x more likely to successfully scale with sales driven startups than with product centric startups.

Not surprised.

7. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.

Not surprised. Another way of saying the above points is that you should do what you are good at. The learnings about core competence are nothing new.

8. Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.

Great! Sounds like most of the opinions of traditional VCs and incubators about ideal teams.

9. Most successful founders are driven by impact rather than experience or money.

That they want to make something big happen? Awesome, I agree.

10. Founders overestimate the value of IP before product market fit by 255%.

Ok. How do they know what the actual value of IP is, against which the 255% is calculated? I would definitely need more data, or will continue to take this with a massive chunk of salt. Also notice that even if this was exactly true, it would still be enough in the ballpark for an estimate to be pretty good. It is not off by an order of magnitude.

11. Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.

A resounding yes! Notice though they say “validate”. Do you know exactly when you validate your market, or is that something you will realize after the validation happens, and has itself been validated, and has maybe survived an invalidation… you get the point. It is a moving target. But yeah, things tend to take longer than you expect them to.

12. Startups that haven’t raised money over-estimate their market size by 100x and often misinterpret their market as new.

I would love to know how many of these unfunded startups are teams who have actually worked on the company for over 3 months full time.

13. Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves.

This is a golden nugget of wisdom and should certainly be opened more. Please, please research this more.

14. B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the rules of business. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.

Yeah. But we tend to not do a hard division of businesses anymore anyway. Business-to-user or self-service B2B are flavours of companies between the hard borders of B2B and B2C.

Additionally, I am not a big fan of their “Marmer stages” (pretty gutsy naming them after the main author, well done there), as descriptive as they are. Here is the justification:

“We attempt to provide that evidence for the existence of the Marmer Stages int wo ways:1) The Marmer Stages correlate with traditional indicators of progress. 2) Startups that don’t move through the stages consistently, show less progress.”

How does that prove the existence of something new if it correlates with traditional progress indicators (which themselves are validated by #2)? This sounds like repackaging more than discovery.

There is more in the report, and like I said, the things they bring up are good reminders. There just isn’t that much news in it.

This post was originally posted on Marketing Sense. Go there to stay on top of my marketing-related posts.

We learn from UX and design experts that products must be user-centric. Thereby, we go out and do extensive qualitative research with the potential users. We interview them, ask them questions about their needs, even spend time with them observing their actual behaviour in everyday contexts. This is all very good, but it is not nearly enough.

You might think that if you know who your user is and what their needs and behaviour with your product is, you can align your marketing to address these needs, and Bob’s your uncle. It would be wonderfully simple if this was the case. Even if you have done careful qualitative user research and meticulous surveys to make sure you are doing the right thing for your exactly defined target audience, you are not in fact done.

The environment in which users interact with your product may change so much that they behave differently depending on the time of the day, the other engagements they have going on at the same time, or the person they are interacting with. We like to think of other people – and by extension, ourselves* – as having unchanging, fixed personalities. At the same time, we acknowledge rash decisions, heated tempers, stress. We buckle under persuasion, and we claim the mind is willing but the flesh is weak. We may behave and react very differently to the same stimuli in the morning and in the afternoon. Think about yourself. You like to think you have a pretty standard way of dealing with, say, your email inbox, but do you behave differently with emails that are in the queue in the morning, when compared to those that drop one by one during the afternoon hours? It is very difficult to accurately capture and represent such time- and context-dependent changes in behaviour. Add to this changing personality the changing external world, and you have quite a few variables to handle. (more…)

Iteration is an indispensable term and principle in software development and increasingly other project management. While the concept may be clear, a definition of terms should be useful. Here is how I think about it. An iteration is a version of a product or a project that best meets the currently known (prioritized) requirements within the currently available resources. To iterate, therefore, is to develop the product or project in such a manner that you end up with consecutive versions of it, each meeting the known needs within the know requirements within the current resources.

The Scrum project management method illuminates the idea of an iteration well. Scrum is also strong with the idea of a shippable product at the end of each iteration (or Sprint, in Scrum-talk). For software development, this makes a lot of sense. You want to have a functioning unit of a product that is aimed at meeting a need ready for testing at the end of each of development cycle. That way, you can incorporate the results of testing in future development cycles (to simplify). The point is to get a small piece 100% done, instead of getting larger wholes 80% done within a cycle. 80% done is half-baked.

The crucial takeaway for marketing is the idea of a shippable product. However you set up your marketing, you will want to have the current parts functioning 100%. You don’t have to have 100% of your marketing ready and running at any point really. You likely never will. Software versions don’t really end – you have version 2, not version 2 out of 10. Likewise, product marketing will never be ready. You will construct your marketing from various components – AdWords, a newsletter list, a Facebook campaign, a video contest – and what ever your palette at any given time is, you will want that palette to function well enough to yield results. You should be interested in the results on two levels.

First, obviously, are the results that tell you if you are making money. Is the channel working? Are you paying less for a lead than the lead is worth?

On another level, you should be interested in the results on a higher level. Your product marketing will give you valuable feedback on what is working and what is not. You will be able to test not only different copy or different landing pages, but different positionings and even different business models. A/B testing is crucial in this, but if you can, don’t start off by testing designs. Start off by testing offers, differentiations and even business models. Consider, for example, can you launch both a freemium and a paid model with a low entry fee at the same time? How long would you need to test your marketing to get strong signals on customer value in the different models?  Or to put the same inquiry in a larger context: What is your burn to feedback?

The next posts will address the human reasons on why iteration is necessary and what kind of tools could you have in your iterative marketing toolbox and in what order.

This post was originally posted on Marketing Sense at http://marketingsense.posterous.com. Go there to stay on top of my marketing-related posts.