That’s where you lot come in…

… you come up with the science.

“I’ve got the brains.
You’ve got the looks.
Let’s make lots of money”
— Pet Shop Boys

Most of the people who contact me with an idea for a new technology business do not have the skills needed to actually make their product.

In fact, typically that’s why they are contacting me – they presumably think I will want to build it, or else introduce them to one of my technical friends who can.

They don’t seem to realise that their idea by itself is just like the hover board in this Ali G sketch:

On the other side of the equation, there are a lot of developers and designers out there who think that the only piece of the puzzle they are missing is an idea worth executing, as if you just need to build it and they will come (and as if the majority of ideas worth executing are obviously worth executing in advance).

Most of the successful ventures that I’m involved with who have technical co-founders are soon desperate for good quality sales and business development people to help them grow – e.g. Vend has a great opportunity for the right person now, for those of you based in Auckland.

This is silly. The farmer and the cowman should be friends.

Imagine a matchmaking service – where people with a business idea could connect with developers looking for something worth building, and where technical founders could connect with those who are not afraid of talking to people and selling and doing deals.

Imagine … if only I could find somebody to build it ;-)

Questions about your venture

I get contacted by a lot of people who want to talk about their great idea for a new business. Nearly all of them want to meet for a coffee or chat.

I’m time poor and don’t drink coffee – there are unfortunately not enough hours in the day for me to talk in person with everybody.

So, as a substitute for caffeine I normally start with these eight questions:

  1. What is the product?
    A brief description is fine, in fact if you can’t describe it succinctly that’s a warning sign straight away.
  2. How do you know it’s something that people want?
    The only answer I’m really interested in is “because more and more of them are already paying for it”, so expand on that :-)
  3. Who is on the team?
    Again, a brief bio/background is fine.
  4. How do you make money?
    What are the unit economics?
  5. How will you overcome your obscurity?
    What is your sales process? How repeatable is it? What does it cost you to get a new customer? Are there network effects? What about the idea will be remarkable?
  6. What is the competition and how do you compare?
    If you don’t think there is any competition for what you’re doing, think harder!
  7. What are you doing that’s hard?
    What will others find difficult to copy/replicate if you’re successful?
  8. What do you need?
    How much investment are you looking for, and at what valuation? Or, if you don’t need/want investment, what specific help can others provide? What are your constraints?

Questions like these are a good way to test the viability of a venture. I’ve found that asking for this information ahead of a talking in person is a useful filter – it’s surprising how often I don’t get a response.

For some #3 and #8 are the difficult questions. If all you have is an idea, and haven’t given any thought to who you will need to work with and how much it will all cost, then you’re probably getting well ahead of yourself in talking to potential investors. Until you understand your constraints you don’t really know what you need.

For others #4 and #5 are the toughest, because their idea doesn’t have an obvious business model. It’s important to make the distinction between a venture, which has some potential to make money, and a hobby, which is just for fun.

The best thing you can do to stand out from the crowd is to point me at a product that I can use and, even better, that you are already selling. It doesn’t have to be polished or even finished, as long as you have planned for the work required to turn it into something that is ready to be used in anger.

Remember, nothing impresses potential investors like scrappy execution. Most people don’t get that far.

Last, but not least, please don’t just ask me to refer you to the other better known investors I am fortunate to know. They are also easily contactable, are just as likely to reply to an unsolicited email and will probably ask the same questions as me anyway. If I don’t know you at all I’m unlikely to make an introduction. If I do make an introduction the first question they will ask me is: “are you investing?”

After all of that, if you’re still interested, then your venture must be awesome and I look forward to hearing from you!

Pesky Details

ANZ Business Banking Manager Fred Ohlsson, announcing the launch of another business plan competition (emphasis mine):

“Nearly all the business ideas we see are great, however sometimes people haven’t always thought through and covered off all the details like how they will get paid or researching if there is a genuine market for their product or service.”

Pesky details!

By the way, I recommend the competition to every start-up founder who values their time at zero – if you’re selected as one of the regional winners your prize is $1000 cash, $1000 of services from “website and social media experts” and $1000 of legal advice (how many 6 minute units is that I wonder?)

I suppose this sort of reality TV approach is how we choose pop stars these days, so why not start-ups too!

Source: Stuff

Jobs at Fishpond

When a start-up business is growing quickly and everything is humming there is no better place to be. Which is one of the reasons why I’m excited to be involved with Fishpond – I’m an investor and also work with them as an advisor.

From their warehouse in Auckland, Fishpond run Australasia’s biggest online store, shipping books, movies, games, music and (just added) toys to customers around New Zealand and Australia and around the world (it’s a great place for ex-pat Kiwis to source their Outrageous Fortune fix from overseas, for example).

They are currently looking to add some more smart PHP developers to their team. There are both junior and senior positions available.

I think this is a great opportunity – a chance to work on a busy and popular website, which still has lots of room for improvement, and some complex back-end warehouse systems, and be part of a team that has a big influence on the success of the company.

If this sounds like you (or somebody you know) I’d encourage you to check out the job descriptions and apply.

I’ll look forward to working with you…

Because

Farewell Ferrit

How do you feel about the demise of Ferrit?

In the days immediately following the announcement there was a lot written about this, and a number of reasons suggested for where they went wrong.

The tone of many of these posts and tweets, as Dylan pointed out, seemed to delight in their failure, which is unfortunate.

To be fair many of the people commenting had previously pointed out faults in both the site itself and the approach those running it had taken in trying to build an audience.  So, I suppose, when the plug was pulled perhaps that was a vindication of sorts?

One thing that got very little coverage was the size of the challenge.

What they were attempting to do is extremely difficult.  There are not many examples of this sort of venture turning out successfully, here or anywhere.  If they had pulled it off it would have been remarkable.

So, why do you think they failed?

Here are some popular reasons to choose from:

And, of course, some that are even more fundamental:

So, here’s an interesting question:

Let’s say they had instead done all of these things right – i.e. spent nothing, launched quietly and iterated quickly based on customer feedback, relied entirely on word of mouth and focussed relentlessly on usability, carefully crafted an authentic and likeable reputation … all the time thinking small, just like a good start-up, plus somehow finding a way to provide some sort of value to customers without screwing their suppliers and leaving enough for themselves in the middle.

Would that have been enough?

Would they have then been successful?

Maybe not.

Build it and they won’t necessarily come, no matter how good you think it is and how much you try and tell them about it.

Looking at a high profile failure, and thinking that you just need to do to the opposite to be successful can be quite misleading.

If you will, let me try and make the same point from the complete opposite direction…

Trade Me, for example

I meet a lot of people who see Trade Me as a role model for their own ventures.

I struggle with this a little, for a number of reasons.

Firstly, the success that Trade Me has achieved was not nearly as premeditated as people assume.

As Paul Graham says in his essay about wealth:

“There is a large random factor in the success of any company. So the guys you end up reading about in the papers are the ones who are very smart, totally dedicated, and win the lottery.”

That’s true.

The “win the lottery” part of that equation is not widely acknowledged.

Very few column inches are dedicated to all of the other companies started around the same time as Trade Me by people who were just as smart and dedicated, but who didn’t have things fall their way.

Secondly, evidence would suggest that few people were able to imagine, let alone predict, the success that was ahead.

During 2000 and 2001, Trade Me was not yet at break-even and was quickly running out of cash.  A lot of time was spent chasing potential investors.  Nobody was interested.

Thank goodness – or things could have worked out quite differently.

Necessity is the mother of invention: we didn’t spend much on advertising because we never had much to spend, we were a small team because there was no other option, and we were pretty much forced to start charging success fees (a model which ultimately proved to be massively lucrative), probably sooner than we would have otherwise chosen to, just to stay alive.

Looking back, and knowing the outcome, it’s easy to identify those things that sign-posted what was to come.  This is what Nassim Nicholas Taleb calls “retrospective determinism” in The Black Swan.

But at the time, looking forward, the phenomenal growth which was literally just around the corner was actually far from obvious.

Which surely begs the question: how good is our collective judgement, when we look at early-stage ventures today and try todetermine whether they will be successful or not?

This is especially interesting given that many of those who cashed out when Trade Me was sold, myself included, are now involved in funding early-stage businesses, and trying to pick new winners (is there any evidence that we’re better at it than anybody else?)

Last, but definitely not least, the the environment has changed.

It’s not 1999 any more, Dr. Ropata.  Nor 2008 for that matter.

The things we did right back then are not necessarily the things you’d need to do today, even in exactly the same situation.

Trade Me was, and is, an exception.

Yes, we made the most of the opportunity, but let’s not discount the impact of being in the right place at the right time and a not insignificant dollop of luck.

The next Trade Me (almost by definition) will be an exception too, but probably won’t look anything like Trade Me did or does.

Looking at a high profile success and thinking that you just need to do the same to be successful can be quite misleading.