So, how many lightbulbs
does it take to change a startup?
Founder's Answer: "Just
one more. I'm not convinced yet that we need to change..."
In any case, on with the
Generally, I'm a big
believer in sticktoitedness when it comes to startups. Many entrepreneurs give
up too early on their idea. This could be driven by economics, impatience or a
simple lack of focus (jumping from one idea to the
said that, based on entrepreneurs I've talked to and what I've read, one of the
key "patterns" in lots of successful startups is that they were able to shift
their idea and strategy somewhere along the
way. Sometimes, these entrepreneurs are responding to a "lightbulb" type
moment that makes it blindingly obvious that the old strategy is likely not
going to work, but perhaps a small tweak would make it viable.
So, here are some of the
common lightbulbs that I think we should look out for as signs that it may be
time to revisit the strategy. Of course, some of these lightbulbs are brighter
(more obvious) than others.
Warning: I'm not
advocating that at the first sign of any of these you should drop everything and
pursue something different. Startup issues are generally much more nuanced than
that. That's what makes them interesting.
Signs That Your
Startup Might Need A Change
absence of co-founder enthusiasm: Lets say you've been at it for a few
months. You've even recruited a co-founder (or tried to and failed). If after
this time you just can't get your co-founder on board with the idea, something
might be wrong. If she doesn't wake up on at least some mornings all
fired up and ready to take on the world, it might be time to sit down and take a
hard look at what you're doing. If you have failed to recruit a co-founder in
the first place (despite pitching the idea to many, many people), that might
also be a sign. They could all be simple-minded and lacking the vision to see
the brilliance in your idea. Or, it could just be that the idea's going to be
really, really hard to sell. Even great ideas, at some point, are likely going
to need to be "sold" to people like co-founderes, employees, investors,
partners, customers, etc.)
2. "Just one more
feature and someone will buy...": This is a really interesting one
(and a common one too). Finding early customers is really, really hard. For
purposes of this discussion, we'll call "customers" those people that give you
money and that are not obligated in any way to do so (i.e. not friends and
family). A common delusion in entrepreneurial circles is to believe that by
fixing some aspect of the product, customers will all of a sudden start rushing
in. In most of these cases, if the market collectively is just not responding
to what you have to say (or sell), there's a chance that the base idea needs to
be revisited. Perhaps you haven't identified a sufficient point of pain yet.
Perhaps nobody cares. Rarely is it because of the lack of some specific
customer! That's not what the product was designed for...": You wake
up one morning to discover that one of your customers is being really stupid.
They're not using your product to its fullest potential -- or in a way that you
really designed it to be used. In fact, what makes it really stupid is
that they're paying way more money to you than they should because if all they
wanted to do was [X] then there are lots of others ways to get that done. A
week later, you find a similarly stupid customer doing something similarly
stupid things. Guess what: The customers may have identified a more relevant
market opportunity for you. It may be worthwhile seeing if there's a pattern to
this atypical customer usage and whether you could tweak the product or its
packaging and go after more of these types of customers.
4. The $1,00
product vs. $10,000 solution problem: Lets assume for a second that
customers are buying the product. Woo hoo! That's great. Now, the problem is
that shortly after they buy, they want some other things: implementation
support, training, migration assistance, etc. Basically, a whole set of
services that surround the product. In the enterprise software world, we call
this a "solution" (i.e. te product + services needed to make it useful). The
point here is that though your "idea" may be to setup a website and let
customers try/buy your software online, the actual business for your
market may not look that way. It's possible that nobody will buy the $1,000
product but lots of people would buy the $10,000 solution. If you find that
most of your customers are immediately asking for services (and seemingly
willing to pay for them), it might be a signal that you need to rethink what
your offering is. It's also possible that what you're trying to do is sell a
solution, when what customers want is a simple product that they can customize
5. The "We'll Make
It Up In Volume" Syndrome: There's the old cliche: "yeah, we're losing
money on each customer, but we'll make it up in volume!". This particular
strategy is not necessarily a bad thing. If there are a lot of "fixed costs"
involved in the business (like writing the software for example), then you are
likely to be losing money on the early customers, but hit profitability at some
point. That's not what I'm talking about here. What I'm talking about is when
the variable cost per customer far exceeds the money you make. This is
simple economics, but startups make this mistake all the time. If the actual
cost to deliver the value to the customer is too high (compared to what you can
charge), volume is not likely to fix your problem. Yes, you heard it here,
there are startup business ideas where the fundamental economics just
don't work and this doesn't become "obvious" until a bit later in the rpocess.
Do some simple math and figure out what it would take to make each customer
profitable. You don't have to get to this point on your first few customers,
but you better have an idea of how to get there at some point. If not, change
something. Change the offering. Change the price. Change the market. Charge
for services. Do something to make the economics viable.
That's all I have for now.
There are lots of other "signs" that I see that startups (including my own) need
to look out for that that warrants revisiting the product, the strategy or other
things. It's good to be determined and stick to your plan. But there's a fine
line between determination and stubbornness.
What are your thoughts?
What other things should entrepreneurs be looking out for that might signal that
some change is in order? Please leave your thoughts in the comments