The “We” Problem

As we  welcome our 2016 startups this week, I get to do one of the scarier and more rewarding parts of my job at StartupYard, and that’s helping these companies define themselves, their products, and their customers.

When startups are getting ready to launch, they tend to be very focused on “what type of company” they want to be. That’s normal, and healthy. And it feeds into their ideas about what their “brand” should be, and how they should express that.

And here is where many startups stumble at the beginning. They don’t fully appreciate who their messaging is really for (clue: it isn’t for them), and what it’s really supposed to accomplish.

Where Brands Come From

The word “brand,” comes from the 19th century American practice of burning a rancher’s insignia in the hide of a cow, or other livestock, before moving the livestock to a marketplace. This was done to discourage theft from the ranch, or during the drive season. The word comes from the Norse brandr, which means “to burn.”

The practice of maker’s marks and watermarks goes back thousands of years, all the way to at least the invention of currency in ancient Sumer. In all cases, the practice originated from a need to protect against fraud. A maker, manufacturer, or publisher had to find ways of making sure that customers knew the difference between their products, and fakes.

As the industrial revolution peaked at the end of the 19th century, it became common for manufacturers to “brand” all their products, usually on the packaging, to distinguish them from forgers or look-alike products, which were increasingly common, and threatened profits. It was then that the concept of a “trademark,” and the exclusive right to use a specific brand were introduced into the legal system.

In essence then, brands proliferated as a means of consumer protection. And in fact, that has not fundamentally changed. Brands are still, at the core, about helping people to make safe, fair buying decisions, and protecting them from fraud and danger.

Brands Are About Trust

It wasn’t long of course, before entrepreneurs realized that consumers recognized quality products by brand. And so they began to focus on the way their brands looked, and felt, to customers.

Manufacturers also rightly recognized that a trusted brand could convince people to buy new things from the same manufacturer. If you trust a company to make your radio, you’ll probably trust them to make your television as well. Sprawling conglomerations like General Electric and Samsung were compiled, based largely on this new realization.

Brands have become synonymous with design, with philosophy and politics, and with class, race and economic status. Today, people make statements with their brand choices. This can lead startups to forget that the chief aim of having a brand is not just building recognition, or fitting into a particular culture. It is about maintaining a level of trust with customers, that will follow them from one product to the next, or one year to the next.

The “We” Problem

Today, of course, we’re all very well aware of the effect that brands have on our thinking and behavior. We’re probably too aware of it. We’re told now that everything is a brand, and that every person can be a brand. This can get us off-track when it comes to communicating clearly with customers.

I recently worked with a startup that wanted to launch a new product, under a completely new brand. They needed help putting together their messaging, and writing copy for their homepage and other marketing materials.

At this point, when a company has a good product, knows its customers well, and wants to dive into the business of growth, is often where they stumble on what I began calling the “‘we’ problem.”

Simply, most of the copy they had written, and most of the messaging they were focusing on, was about them. To them, they were expressing the qualities of their brand. They were smart, they were hard working, they were trustworthy, they were friendly. So why shouldn’t customers want to buy from them?

Well, because customers buy solutions to their own problems. They don’t buy the work of your team, or the relationship you have with the product. Those things can be a plus, but they’re secondary to a buying decision.

The central questions you have to answer are these: Does the product do what I need? Am I the target audience for this?

If the problem is that you're thirsty, then Coke has you covered in this classic poster.

If the problem is that you’re thirsty, then Coke has you covered in this classic poster.

People make their initial decisions based on that criteria, not on whether you communicate your attitude or your culture clearly.

Whenever I’m looking at copy for a homepage, I do a little experiment: I do a word search for the words “we,” and “us.” Then I compare that to words like “you,” and “our customers.” If you say “we” more than you say “you,” then you may have a messaging problem.

Startupyard.com, for example, contains 9 mentions of “we,” but 40 mentions of “you.” Also, several of the “we” mentions are directly followed by “you.” In addition, none of the “we” mentions are descriptive. They are active: “we’re looking for,” and “we try to.”

Most of the copy is concerned with either what kind of startup should join the accelerator, or what a startup will get by joining. These are the only two core criteria that matter in a decision to apply. “Does it do what I want?” And, “is it for me?”

Although it isn’t a rule that you can’t talk about yourself, you have to remain aware that to a prospect customer, how you see yourself is not that important. How you see them, how you value them, and what problems you will help them solve, are important.

Solve Problems, Make Emotional Use Cases

This is why we spend the first several weeks at StartupYard closely focused on one thing: the problem that the startup is solving for customers.

We work on positioning statements, which lead with who the customer is, and the problem being solved, and that is what initial conversations with mentors are all about. This helps the teams to stop talking about themselves, and start talking about their customers.

This also helps our startups to focus on emotional use cases. What frustrates customers? What aggravates them? What scares them? What brings them happiness? Saying “we have state of the art encryption,” is an unemotional argument.  But saying: “Our state of the art encryption will protect you against hackers,” is a powerful motivator.

Original-Apple-iPod

When Apple released the first edition of the iPod, it was famously “1000 songs in your pocket,” not “the next generation MP3 player, that can hold up to 4 GB.” This focus on the emotional use case: the feeling a customer gets from the promise of the product, is what makes Apple a powerhouse brand. It’s never about how smart they are, it’s about the experience you will get.

If you think your brand is about you, then you’re likely to focus on use cases that aren’t emotional for users, like efficiency, or price, or sophistication. In effect, you’re likely to make a feature argument, instead of a real value proposition.

It’s important to keep in mind what we talked about in the beginning. The primary purpose of a brand is to serve customers; to protect them from fraud and danger, by establishing a clear sign of quality. Only then can you leverage a brand to be something symbolic.

And that sign of quality can’t be forged. It has to be earned by solving customer’s problems- by offering them something they can clearly understand and want, and by delivering exactly what you’re offering.

The StartupYard Startup Reading List

If you follow us on Twitter, you probably know that StartupYard is constantly sharing great content with our followers. Internally, we also keep a “reading list” of  items we think our startups should read before, during, or after the program. This is the StartupYard Startup Reading List.

With a new acceleration round beginning next week, we thought we’d share the list we’ve compiled. It’s organized into Collections, Launch, Sales and Conversions, Retention, Growth, Marketing, and Free Stuff.

Under each item is a short extract from the link. If an extract wasn’t available, we added a short summary. Enjoy!

-The StartupYard Team

Collections:

http://startupstash.com/

40 categories of curated tools and tips for Startups. A must have.

http://marketingstack.io/

28 categories of curated Marketing advice and tips. A must have.

Launch

Quick and Dirty Guide to Launching your Startup in 2015

There are plenty of blogs out there that talk about paid advertising, social media, offline distribution, content marketing, SEO, SEM, e-mail marketing and so on. But I will be focusing on actionable items you can do to get your first 1,000 users in a weekend’s time and with less than $500 of investment.

16 Startup Metrics

We have the privilege of meeting with thousands of entrepreneurs every year, and in the course of those discussions are presented with all kinds of numbers, measures, and metrics that illustrate the promise and health of a particular company. Sometimes, however, the metrics may not be the best gauge of what’s actually happening in the business, or people may use different definitions of the same metric in a way that makes it hard to understand the health of the business.

The apps that help you bootstrap | Highfive

Wouldn’t it be nice to have a business idea today, and have that business up and running tomorrow? With today’s apps it’s totally doable.

Sales And Conversions

Complete SAAS Guide to Calculating and Optimizing Lifetime Value

Getting new customers is good. Keeping a customer and getting them to continue paying is better.

Conversion Optimization Psychology

Why are contrasting buttons effective? Why should you use 1st person CTA wording?Why (and when) are trust symbols effective?

Conversion Rate Optimization: Startup Growth Lessons

Some call it – *cough* – growth hacking. Others call it optimization. But what we’re all talking about, really, is crazy smart, innovative, results-driven, product-focused marketing that has an outsized impact on your company’s growth and bottom line.

Retention

Hooked Retention

How GrowthHackers(.com) Uses “The Hook Model” to Foster Incredibly High Member Retention

Why You Need Cohorts to Improve Your Retention

You need to dig deeper into your app using a method called cohort analysis. That’s how you’ll identify how well your users are being retained and the primary factors that will drive growth for your app. Here’s how the most experienced and analytical product people like Siqi go beyond your standard cohort analysis to do it.

Growth is Good, but Retention is Forever: 500 Startups VIDEO

A video from 500 Startups on Retention, and why it is eventually more important than growth.

Growth

The Ultimate GrowthHacking SourceBook

30,000 words of modern-day growth hacking strategies for the discerning SaaS growth hacker.

SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters

This article is a comprehensive and detailed look at the key metrics that are needed to understand and optimize a SaaS business. It is a completely updated rewrite of an older post.  

43 lessons growing from $0 to $1+ million in revenue, twice

I realized the other day that we’ve grown from $0 to $1 million with two separate products (HelloSign and HelloFax). This happened a long time ago, but I was recently reflecting on the lessons.

Growth Hacking:  VIDEO, Neil Patel

Pierre Lechelle: Growth Hacking Strategy

When thinking about Growth, most people think about CRO (Conversion Rate Optimization) on the ToFu (Top of the Funnel). They don’t really understand what is the power of Growth.

How segment models growth for two sided marketplaces

Frameworks help us organize and understand the world, and data helps us stay focused and monitor progress. So, it’s no surprise we use them both to help us project future growth and figure out how to hit our lofty goals.

Build a Growth Machine Like Andy Johns

Andy Johns has had the good sense to ride not one, but FOUR rocket ships. He has been a key member of the growth team at…

13 Growth Hacking Techniques You Can Apply Right Now

Growth hacking is the idea that an entrepreneur can take a clever non-traditional approach to increase the growth rate and adoption of his or her product by ‘hacking’ something together specifically for growth purposes. Most startups find themselves facing the same problem: they build a product that no one ends up using. Say you have…

Video: 10 Habits of High-Growth Startups by Sean Ellis – GrowthHackers

Sean’s talk at the DEMO Traction Conference.

The Ultimate List of B2B Growth Hacks

Marketing

How We Addressed our Main Content Marketing Pain by Outsourcing to Freelancers

Today I’d like to share with you one of the biggest marketing struggles we experienced at Ivalua, the previous company I worked for and where I handled Marketing for over 2 years: content creation – and how we overcame it leveraging freelance writers.

Why You Need to Create a Content Marketing Strategy
The most popular digital marketing mantra in recent years has been “Content is King”, and while the mantra itself may be a touch overused, it is by no means inaccurate. Now more than ever it’s incredibly important to create a content marketing strategy and make it your your own unique content marketing strategy if you hope to drive traffic and boost brand awareness from online channels.

Persuasive Writing Techniques
Design, SEO, and advertising can only get you so far. If you want to accelerate sales online, you need persuasive copy. According to Harvard Business professor Gerald Zaltman, 95% of our purchase decision occurs in the subconscious mind. Most marketers ignore how our brains work and fight against human psychology.

SEO Tools

153 succint reviews of SEO tools, by Brian Dean

Paddle: App Marketing Ebook

Paddle’s guide to app marketing explores the techniques developers can adopt to drive more downloads and grow their apps.

The science behind killer landing pages

A great list of the essential elements of a landing page, and why certain types of things work for conversion.

ViperChill’s Private Niche Project

A fascinating, if amoral, view of online marketing and networking building

What Startups Need to Know About Content Marketing

With content marketing, you can educate and engage potential clients while differentiating your company and positioning it as an industry leader.

The definitive guide to lead generation Facebook ads

In marketing, lead generation is the generation of consumer interest or inquiry into products or services of a business. For the purpose of this article, lead generation refers to the generation of consumer interest. A list of qualified leads is a priceless asset for your company. It’s cheap to build and works great for every kind of business, including “boring” B2B companies.

CopyWriting Tips

  • Which words do you choose?
  • How do you frame the offer?
  • How can you sell without appearing sleazy?

5 Smart Ways To Use Retargeting To Drive Leads In B2B Marketing

Creative ways to use retargeting ads to improve lead generation. Learn how B2B marketers target site visitors based on funnel stage, industry and email contact information.

How to Win Trust from Google and Rank Well

If your website isn’t trusted by Google, you’re basically consigned to the lowly, deep dark depths of search results pages ten and onwards.

A simple SEO guide in 2015 (Infographic)

Is SEO really a harder game to play as KunoCreative’s Dan Stasiewski put it in this excellent SEO guide infographic?

Investment

A map and List of Investors in Europe

TechStars created a map and list of 300+ investors who routinely invest in Seed, Series A or Series B rounds raised by European startups. All in all, it totals about €15 billion worth of funds.

Amy Guttman: Don’t write business plans: Advice for startups from one of silicon valley’s top seed investors

1. Don’t write business plans; instead build prototypes & test them with customers.

2. Don’t create five-year revenue projections; create 12-month expense projections.

3. Do create marketing plans, but focus on unit economics and metrics/analytics of:

a. what customers cost to acquire,

b. what products cost to build/deliver,

c. how much customers generate in revenue and when

4. Test and iterate on your assumptions — turn your business plan into a business metrics dashboard of KPIs, and continue to measure and improve every week.

5. Don’t run out of cash. Check your monthly burn rate, cash in the bank; figure out your remaining runway and try not to get below six months of cash.

The Guide to Finding an Angel Investment

This guide is indispensable for all wanna-be Business Angels and those entrepreneurs seeking Angel Investment! It contains best practices and practical tips culled from Busi- ness Angels around the world. It is a must-ready, easy-to-read, and great-read for all those private investors interested in playing a major role in the early-stage investment eco- system and those entrepreneurs interested in attracting Business Angel Investment.”

– Candace Johnson, President, EBAN (Europe)

Horror Story: How to Build a Unicorn From Scratch and Walk

A cautionary tale about keeping your priorities in order as a startup founder. Great read!

Social Media

15 New Social Media Templates to Save You Even More Time

Our best list of social media templates for scheduling, organizing, analyzing, and sharing better and faster than ever before.

80 Twitter Tools for Almost Everything

Twitter is chaos, but in the midst of this beautiful mess is a ton of data that if you can understand


What You Need to Know About Open Graph Meta Tags for Total Facebook and Twitter Mastery

Marketers create a lot of content. Yes, content is king, but a king is powerless without followers. So, what’s the first thing that comes to mind when you want to reach a broader audience with your awesome new post?


Facebook Data Study Insights

The Facebook pages that are doing wonderfully well with likes, shares, and comments on their posts have so much to teach about new tactics and worthwhile strategies. Our friends at BuzzSumo analyzed 500 million (!) of these Facebook posts, and we’ve learned some amazing takeaways that you can implement on your page today.

Free Stuff

The Design Freebies List
Free Stock photos

A collection of sites that offer with-attribution, or free to use images for your startup. Always check the terms on individual sites before using an image!

https://blog.bufferapp.com/free-image-sources-list

https://www.pexels.com/

Meta-Search for GNU Public and Free Stock Images

Can Central European Startups Compete?

The following was set to appear in a Czech business publication, but was, possibly to our credit, deemed a little too controversial. Thus we’re publishing it here, because we do stand by what we’ve said. 

2 years ago, StartupYard set out to answer a single, vital question. Can Central European, and especially Czech startups compete on the global market? After validating the concept of an internet accelerator for 2 years in the Czech Republic, mostly focusing on local startups, we set out in late 2013 to turn StartupYard into a platform for Czech and other Central European startups to go global. Here are the answers we’ve found so far:

Global Vs. International


To answer this question, first, it’s important to understand the distinction between a “global company” and an international one. Many Czech companies are, by necessity, international. Czech tech companies typically rely on clients and customers from abroad, often Germany, the UK, and the US, who can count on Czech agencies, developers, and manufacturers who are reliable, high quality, and above all, cost effective.

But being the cheap alternative to the local workforce for comparatively rich markets does not make Czech companies global in scale, nor in ambition. 

Instead, a global company is one that provides an innovative product or service, with the potential to disrupt the way all sorts of things are done, regardless of geography. A global company is one that has no borders, and that does not rely on its primary location as its main competitive advantage.

The Curse of Cheap

What we saw straight away as we turned StartupYard into an accelerator for global projects, was that the Czech tech ecosystem was addicted to “cheap.”

Today’s Czech software houses and digital agencies came of age when the costs of development, even for relatively simple products, were significantly higher abroad than they are today. Even now, these companies keep their international edge by keeping salaries low.

But this pattern of subservience to the bottom line has become a trap for the Czech ecosystem. By continually restricting itself to the low-cost alternative model, the ecosystem has encouraged some of the best and most ambitious innovators and engineers to flee to markets where investors have more appetite for risk. Czech startupers who are serious about global growth tell each other to leave the Czech Republic, and seek opportunity elsewhere.

Global is The Future

Czech entrepreneurs have been slow to enter the global market because of some obvious practical and structural barriers. Access to capital, and the ambition to match that access, has been limited by the size of the Czech market. It’s now easier for an American company to launch in Europe than for a European company to launch on the American market. That is owing not only to an imbalance in access to capital, but also to the historical fragmentation of the European market.

Language is another barrier , and the maturity of Czech business practices and the educational system have been another. Czechoslovakia’s long separation from world markets kept this country’s golden hands from important new ways of working for decades.

But today, these barriers are eroding. The Czechs are catching up, as the European economies integrate, and Czechs have several important advantages, not least a strong public education system, a smart and hardworking employment base, and a strong technical infrastructure. Today, as an example, the Czech Republic has faster average internet speeds than the UK and the US, ranked 9th internationally by Akamai Technologies.

No More Excuses

Wannabe Czech entrepreneurs are addicted to excuses, rather than to positive action. And we hear every excuse in the book.  “Investors here are too conservative, there’s no capital,” or “we have no Czech role models,” or “we’re not good at storytelling and marketing,” and “we’re just a small country after all… this isn’t Silicon Valley.”

Identifying problems isn’t solving them. And we could dispute every excuse there is.

Two StartupYard investors alone, Credo Ventures and Rockaway Capital, have 10s of millions of Euros to invest in Czech startups, and they are constantly on the lookout for new opportunities. In our mentor group alone, we have a dozen angels actively looking for smart investments, and willing to invest early on.

And we have dozens of entrepreneurial role models, like Roman Stanek, Tomas Cupr, Michal Illich, and many others who are actively seeking to support Czech startups. The problem, more often than not, is that the startups just don’t reach out, and aim too low to begin with, assuming they won’t be of interest to these figures.

If small countries can’t make big waves in the international tech economy, then someone should inform Estonia, which has given the world Skype, and Transferwise, and is little more than a tenth the size of the Czech Republic. Estonia has turned its tiny size to an advantage by being globally minded for over 25 years. Czechs have no legitimate excuses for not doing the same.

I’m from “Silicon Valley,” which is not a real place in the sense that many Czech entrepreneurs imagine. I was born and raised just south of San Francisco, and I can tell you there is nothing special in the water there; no magical advantage that startups gain when they land at San Francisco Airport. Nor are most of the people there particularly entrepreneurial by nature.

People used to take buses to LA to “become movie stars.” Now it seems they think they can take a flight to San Francisco to become tech billionaires. But it just doesn’t work that way.

San Francisco arose from a gold rush which never really ended, but has constantly changed its focus for nearly two centuries, from gold, to silicon, to smartphones, and now to ideas.

Silicon Valley is a state of mind. It is just full of people who have strong views about the future, and refuse to see limits to their ambitions. Going there won’t change who you are. You can set your personal goals higher, no matter where you live.

Storytelling

The global marketplace has its own demands, and presents new challenges to Czech startups. Chief among them, is the importance of soft skills that Czechs have not yet emphasized sufficiently. The Czech Republic severely lags Germany, Estonia, and all of Scandinavia in English proficiency, and the vital (for a startup) skills of storytelling and brand building are de-emphasized in a business culture that is all about the bottom line, or about technical innovation over customer focus.

Telling stories, the act of constructing a convincing narrative for success that a customer, an investor, an employee, or a partner can engage with and which can inform and inspire people about your company and your products, is a precious and vital skill among startups.  

If Czech entrepreneurs face these challenges head on, they will find that they can win investments, gain customers, and attract talent anywhere in the world. Silicon Valley may be where a lot of startups live, but it isn’t where they all come from, and it isn’t where they will ultimately win customers, and make money.

The Czech Republic has produced generations of ingenious builders, who already have the skills to create some of the world’s best tech products. It must now produce a new generation of ambitious, thoughtful communicators in order to sell those products to a wider audience. Czech startups have to stop doing what comes naturally: they have to stop focusing on being builders for hire, and start focusing on building their own future, with their own customers, and their own stories.

Signs of Success

The Czechs, it seems, are in a constant state of crisis of confidence. But one wonders why that is. The Czech Republic is the only country in Europe that has developed a viable competitor to the global search giant, Google, in Seznam.cz, and it hosts two of the world’s leading computer security companies, Avast and AVG. AVG became the first Czech company to IPO on the Nasdaq just 3 years ago.

Today, the Czech Republic is a net technology exporter, and its name is associated internationally with quality workmanship, efficiency, and creativity.

As barriers to the global market come down everywhere, and as consumers and businesses all over the EU and the world become more used to innovative and disruptive global startups, nothing stands in the way of Czech startups, and their global ambitions.

Today, Czech technology products touch the lives of millions of people, all over the world, in ways visible and invisible. From StartupYard alone, companies like BrandEmbassy, TeskaLabs, and BudgetBakers, to name a few, serve hundreds of thousands of people daily, and are growing fast.

A future in which a local resident of Sao Paolo, of London, of Bangkok, of Delhi, or of San Francisco, can make a Czech technology product a part of their daily lives and routines has already arrived, and there remains no excuse for Czech startups not to compete for the attention of customers and businesses everywhere.

Central Europe Accelerator

The 4 Ways Applications to StartupYard Fail, and How to Avoid Them

With just 9 days left for Startups to apply to StartupYard 2016, we’re going to share a little secret with you.

One of the questions we often get from would-be applicants is: “what do you focus on in the application? What is going to make me stand out?” The answer is of course: “the team, and the problem you’re solving for customers.” That encompasses most of what we care about when looking at written applications to StartupYard.

Aside from that, we’re looking for your sense of awareness. Who are your real competitors? Where could you be in a few years time? What is the grand design?

And here comes the secret: virtually *any* idea with a technology component and a global market could pass the first 3 rounds of our 7 round application process. That’s not to say that getting into StartupYard is easy. We ultimately accept fewer than 3% of applicants to the program. But the vast majority of applicants never get past the first 3 rounds.

Failing at the Easy Stuff

The fact is that if you’re asking us what you need to do to get to an interview with StartupYard’s selection committee, you’re well on your way to getting the interview anyway. We look for people who don’t wait in line patiently. We look for people who ping us via email and come to meet us in person, and treat this process the way we hope they treat everything: as a challenge that can be hacked and optimized, and overcome through hard work and critical thinking.

As part of the pre-screening process for StartupYard 2016, we have already begun reviewing submitted applications. As always, this process is a scary one. We have to make big decisions based on a small amount of data. And that only gets worse when applicants don’t bring their A game to the application process.

Most startups who apply fail at the easiest part of the process. The application takes, conservatively, 2 hours to fill in. But we know that if a person can’t muster the energy to project ambition, focus, and passion through such a broad set of questions, then they aren’t likely to be the kind of founder we are looking for in the first place.

Still, we know that some people just never shine on paper. There have been plenty of applications that have left us very unsure in the past, only to turn out to be from startups who, once the lights were on and the Skype camera rolling, blew us away with their energy and focus.

The sad truth is that there are undoubtedly those who never make it that far, but who probably deserve to be heard.

4 Ways Applicants Fail Before they Start

There are a handful of common failure points for written applications. Here are the ones that will get yours trashed the fastest:

  1. The Grocery list application

Many founders are engineers, and engineers think in peculiar ways. These applicants treat the application like a dumping ground for data, instead of a medium for communication.

So in response to, say, a question about traction, we’ll get a list of data points with no sense of what they are connected to: “50% growth in user acquisition via social media in first 3 months,”

That’s nice, I’m sure, but it doesn’t tell us much.  How much did they spend? What was the original number? A narrative response is helpful for reminding yourself that you’re not talking to somebody who knows anything about you, your product, or its history.

Treat the application as you would an email to an investor. That’s pretty much what it is. Introduce the concept, talk us through the basics, and establish an argument and a narrative as you answer the questions, as to why we should accept your team. If it’s a list of numbers, they may make sense to you, but they won’t mean anything to us.

2. N/A

If we asked the question, assume it means something. Assume it’s important to us, if not to you. But many applicants leave questions blank, or answer “N/A.”

None of our questions are inapplicable. If we ask whether your team has worked together, and you haven’t, then that doesn’t mean the question doesn’t have an answer longer than “no.” How about: “We haven’t worked together, but we know each other because we had mutual friends in X industry, or at Y club or community event.” Tell a story about how you know each other. It isn’t hard.

One of the worst questions not to answer is about traction. We simply don’t take companies that have no traction. That’s because “traction,” is really about more than revenue, users, or sales. It’s about the company as a whole, changing and growing from one month to the next.

Tell us what you’re doing, even if you’re not adding users or making any sales yet. Every company has traction of some kind: “talked to 50 target customers,” or “developed prototypes,” or “raised 5,000 Euros from friends.” That’s all traction. “6 Months ago I had an idea, 3 months ago I found a co-founder, and now we have a business plan and are working on a prototype.” Great. Each of those things move a company forward, and are a kind of traction we want to hear about.

3. The Non-Answer Answer

One of the biggest red flags for us on an application is an inability to connect with the questions being asked.

And I would say the most common question to get a “non answer answer” is the question: “What problem are you solving?” Out of 10 applications, I would estimate that about 3 answer this question in a remotely straightforward manner.

This is of course not a problem with just startups. It’s human nature to answer questions according to what one thinks the questioner really wants to know. Often startups spend a lot of energy justifying their idea by talking about the market, because they think that’s more interesting to us.

But this tendency can cause people to avoid answering the question that is being asked, which is about what problem customers actually have, that you will solve. Many applications jump into a sales pitch which states every benefit their product offers, without addressing the basic problem it is solving.

What problem are you solving? “Well, we allow customers to something something 5 times faster and 3 times cheaper than something something, and we do it using the latest something, which is 30% more efficient and better for the environment than something something.”

Fantastic, but what is the problem? Is the problem that the competition isn’t fast enough? Not cheap enough? Not good enough for the environment? The problem you’re solving says everything about what kind of company you are, and who you want to sell your product to. Is it for people looking for something cheaper? People looking for something more powerful? People looking to save the environment?

A litany of benefits is not a coherent argument in favor of your product. Nor is the size of the market. Those benefits have to be worth it, to someone, to pay for. If not, no matter how big the market is, you won’t be a part of it.

Consider the Consumer

Just consider yourself and your own behavior as a consumer. Do you use Uber, or DropBox, or Google? I’ll assume you use at least one of those services.

Now, some reading this may not remember the first time they used Google, because it’s been a part of the internet since they can remember. But I do remember my first time using it, in the 11th grade. It was just after 9/11, 2001, and I was looking at Yahoo news articles, trying to find information about the terrorist attacks.

“What happened to that 3rd plane they were talking about on the news?” I asked a friend on AIM (this was before the days of Skype). “I can’t find anything on Yahoo.” All my searches were returning bad results. It’s hard to remember now that a search engine couldn’t always be counted on to read your mind.  “Google it.” “Huh?” “Google it, with Google, it’s the best way to search stuff like that.”

And so I, like a few billion other people, typed in www.google.com, and 14 years later, I do more or less the same thing every day.

Consumers react to problems, and only then do they search for features. My problem, on that day in 2001, was that I didn’t have information I wanted, and I didn’t have an easy way to get it. Google solved that problem.

With every product you use, there is an initial reason you started using it. Even if it was a direct competitor for something you were already using, it did something the competition did not do, and you needed. I switched from Yahoo 14 years ago because it wasn’t allowing me to do one thing I wanted. Yahoo had many features that Google didn’t, in those days. But Google could do what I needed, and Yahoo couldn’t.

We are looking for that one thing that you offer, that makes you Google in 2001- the thing that makes someone who uses your product say: “oh, use this, it’s the best for that particular problem.”

Your problem doesn’t have to be a new one either. Google’s wasn’t solving a problem people didn’t know about. Neither is Uber, or DropBox, or many other hyper growth startups. It was just that the competitors weren’t doing a good enough job. There was room for a new solution.

4. Misidentifying the Competition

XKCD's Take on "new products."

XKCD’s Take on engineers and “new products.”

And this leads to the our last great failing. Ignoring or misidentifying the real competition.

I say, the “real competition,” because defining your competition as a startup is a very tricky business. Broadly, your competition should be whatever your target user currently does to solve the problem that your product is built to solve. That’s true as far as it goes.

But where many startups get into trouble is by picking companies that “look like” their own, and calling that the competition. That’s not wrong, per se, but it isn’t very insightful or helpful. It leads to a lot of applications where the competition listed is a handful of companies most people have never heard of, including us.

Think about that:  if your competitors aren’t expanding globally, is that a good argument that there is a strong market for your products?

And by picking competitors that are very similar to yourself, you undermine your ability to define yourself in a broader market. You are not really competing for the small number of users that these smaller direct competitors already have, after all. You ultimately want people who have never used any product in your category to start using yours.

If you’re a car company, you want to sell people their first car. You don’t want to spend your time convincing people to give up somebody else’s car, which is perfectly fine for them, and switch to yours. The arguments in favor of owning a car vs. not owning one are easier to win than an argument over which of 2 very similar cars a person should own, particular when they already own one of them.

When I’m working with startups on product positioning, I often use the example of Uber. Who are Uber’s competitors? The answer is more complex than you think. If Uber thought its competitors were other taxi companies, or other ride-hailing apps, then this would affect its behavior in specific ways. It would try to do just what taxi companies do, only somehow better. Or it would try to do what other ride-hailing apps do, only faster and cheaper. It would be competing for people it knows are in that market.

But Uber’s success has been tied to the fact that it doesn’t hold itself to these lowly ambitions. It wants to compete for much bigger markets- to replace a whole range of consumer behaviors. Uber wants to be an alternative to owning a car, to renting a car, to hailing a taxi or to taking a bus. It want’s to be an alternative to drivers for working for a taxi company, or even having a summer job. It wants to be an alternative to ordering take-out food, or picking your mom up at the airport. It wants to replace many common behaviors at once- not just one or two.

Would Uber say their main competitors are taxi companies? Or is their main competition found in modern car culture itself? Which market is ultimately the more promising one?

So expand your horizons, and pick competitors according to the customers you want; not the customers that you know are already in the market. It is perfectly fine to aim high. We don’t laugh at companies who name big competitors. Big competitors have many vulnerabilities, and the bigger they get, the harder it is for them to keep growing and changing.

Give us Your Big Vision

The real shame is how often we talk to a startup in person, and find out how much better they are than they look on paper. “I didn’t want to tell you the big vision yet, because it’s in the future.” We hear that surprisingly frequently. But why? Tell us your big vision; share your wild ambitions. That’s why we’re in this business!

Your big vision demonstrates your passion and the scope of your thinking, and you shouldn’t be afraid that it will make you seem ridiculous. To some, it will. But there is no highly successful startup that wasn’t laughed out of at least a few rooms before they struck gold. If people don’t buy your big vision, then keep working on it. If you work hard enough on it, it will eventually be realistic, and maybe even achievable.

8 Reasons Not to Join an Accelerator

Yes, yes. We’re always trying to convince people that accelerators are generally a good idea. And they are, for a lot of you out there. But not for all of you.

Here are 8 reasons not to join an accelerator. If any of these speak to you, consider very carefully whether going to one won’t be a frustrating waste of your time and energy.

1. You Need the Money

Time and again, we meet with startups who only have questions about the money and terms we offer to startups. If you’re joining an accelerator for the money it provides, think twice.

First of all, it isn’t a lot of money, really. 30,000 Euros might seem like a lot  -older accelerators like Y-C give up to $120,000- and more in follow on financing. But if your idea is really workable as a business, you can find that money somewhere else. And when you do, it’s likely you wouldn’t have to give up a sizable stake in your company for it.

The money-for-equity equation doesn’t make sense by itself, but the accelerator model makes sense when you look at the results. StartupYard companies are at least 3 times more likely to survive their first year than companies who don’t join an accelerator, and our vested interest is in every one of our companies becoming a success, and fetching a high priced exit. The funding we provide couldn’t accomplish this. It would be a poor investment. But the connections, guidance, and support we provide can make the difference between a company falling off the map in a year or two, or getting seriously funded, and having a shot at real success.

2. An Accelerator Means Instant Growth and Recognition

Sorry, it won’t work that way. DropBox, Twitch, Stripe, AirBnB, Softlayer, and SendGrid (all companies that went through accelerators), did not become successes just because they were in accelerators. Quite the opposite: these companies made Y-Combinator and TechStars famous.

No, they became successes because they had dedicated founders who made the right decisions and just as importantly, worked hard. We can’t make you work hard, but we can help you make the right decisions, and forge important connections. That’s it. It’s hardly rocket science (though some of our alums are rocket scientists).

Every startup, to some degree, has to be in the right place at the right time. An accelerator can help you be in that right place, and help you determine whether it is the right time. We can be a firewall against your worst impulses, but we cannot do any of it for you. If you expect that an accelerator will make you famous and win you funding, don’t be so sure. You’ll be the one doing the work.

3. You’re a Solo Act

You’re a lone wolf, who plays by her own rules. You don’t need a co-founder, because that person would just get in your way. The glory will be yours alone.

That’s all fine, except we’re not interested. A single founder can become a bottleneck for new ideas and input. He or she can also become a blocker for needed action. A single person with too much control over a startup will find it easier and more tempting to resist doubts, and to avoid stopping to reconsider strategy. Beyond that, a single founder usually just can’t handle all the demands of attending an accelerator and running a company at the same time.

Anybody who has ever watched a police drama knows the dynamic. A partner is somebody who can play good cop to your bad cop, and can back you up when you’re in trouble. They’re someone who can tell you you’re crazy, or can confirm that you’re really onto something. Nobody wants to approach a lone wolf, so get a partner you can trust.

4. Your Ideas Are Perfect

You don’t tolerate criticism. Why should you? You’ve been successful all your life, and this situation is no different. You will just make your company work, no matter what, doing what you had it in mind to do.

My advice is, go for it. If it’s a perfect idea, then it really will all work out without you having to question it. But if you’re coming to an accelerator thinking that even the basic idea behind your company can’t change, then don’t come. Stay home.

kpTtT

Accelerators are for failure as much as they are for success. Better to fail early on, and in a controlled way, than to build an empire on sand. We will push you to falsify all your notions of what will work, and what won’t. Most startups discover basic, critical flaws in their concepts while attending our program, which is exactly when they should discover them.

5. You’re a Tourist

Like a weekend wine-taster in Napa (or maybe Moravia), you’re just dipping your toes in the water to see what this whole startup thing is about. You’re not about to buy a winery and start mashing your own grapes, unless somebody can convince you it’s a good idea.

We don’t have the energy or the heart to sell your own startup to you. If you’re not sure it’s something you want to dedicate your life to working on for at least several years, then don’t join an accelerator. You’ll save everyone, yourself included, a lot of grief.

On the same token, don’t join an accelerator expecting to pick and choose what you’ll get out of it. “I just need the mentors, I don’t need the workshops.” I can’t say how many times I’ve heard words to this effect. And yet, these are usually the founders who need our input the most. But if a founder isn’t open minded and open hearted, there isn’t much we can do to change that.

6. You’re Not a Startup

That sounds a bit silly, but it’s a real thing. Part of the problem is something we’ve discussed a lot, which is that tech companies today seem to think they have to be “startups.”

Startups are companies that need to scale quickly in order to survive. They are companies that are innovating a new technology or business idea or process that hasn’t been tried before in just that way.

But every year, we get applications from game companies, digital agencies, and e-commerce providers who want to tap into the “startup mojo,” and experience hyper growth without having a hyper-growth product.

The line between a traditional business and a startup can be unclear at times- sometimes their products do essentially the same things, but in radically different ways. Make sure your path forward involves rapid growth, and global reach, and that it isn’t, in the parlance of Y-Combinator, a “lifestyle business,” set up to make a small profit over many years of steady business.

7. You’re Looking to Cash Out

Your results may differ.

I wouldn’t compare running a startup to gambling, but there is one parallel that is inescapable. When you go to a casino, the best practice is to give yourself a limit, and expect to lose all the money you’ve committed to gambling. If that’s an amount of money you’d be comfortable simply setting on fire and walking away, then it’s ok to play a little blackjack. Otherwise, don’t play.

So it has to be with running a startup. If you’re not comfortable with existential risks to your business, then you should probably be in a different field. And if you’re drawn to running a startup because you know that some startups get large payouts in the form of acquisitions, then it’s unlikely that you also have enough affinity for the idea behind your startup, to stick with it even when things look bad. And they will, at some point, look bad.

8. You Want to Be Famous

Let us not dwell on this. Just, no.

We Want to See Traction, not Fake Traction

Last week, we made the final stop on our 6 city, 5 country FastLane tour, meeting over 50 startups from The Czech Republic, Poland, Bulgaria, Romania, and Kosovo. In Warsaw, we FastLaned two more startups, giving them the chance to get ahead of hundreds of other applicants. In total, we FastLaned twenty companies.

Highlights from Poland

We had been hearing about the active Polish startup scene for forever, but Reaktor, run by Borys Musielak, was our first real chance of seeing it up close. Over 150 people packed into a house that is strongly reminiscent of an American college fraternity for their monthly OpenReaktor event, where 4 startups pitched to us, and 2 were FastLaned.

What do I have to have to get into StartupYard?

We heard this question a lot from Polish startups in particular, but it’s something many startups or entrepreneurs ask us when we’re on the road. Do I need a prototype? Do I need users? Revenue?

But this is really approaching the question the wrong way around. We don’t establish a minimum cutoff for the progress or stage of the startups we take, because every startups has a different path to take. We look at startups as potential partners. In our partnerships, it’s important that the accelerator can provide value. If we can’t, then there’s no reason for a startup to join us, or to let other startups know that we can help them too.

It so happens that we can most often help companies that are just about to or have already launched a beta product of some kind, and who have a few users or customers to boot. But we have also gone as far as to take a company with only an idea of what they want to do, as well as companies who already have a steady stream of paying customers.

Team and Traction

A really interesting female entrepreneur from India pitched us in Warsaw. She had approached us about pitching, but warned us that she had no product, no team, and no code. Just an idea, and a will to make it happen. She also had set up an MVP without any coding. And despite her having none of these things, she was so convincing, that we decided to FastLane her anyway.

So she asked me: “Thanks for that, but really, at what stage can this be something you’ll consider?” I answered that she had a month to show us how she can execute on her idea.

“But I can’t get a product done in a month!” she said. Well, of course not. And we wouldn’t expect that. But what we would expect to see, if we were to consider her for the accelerator, is some form of traction. People usually confuse traction for user growth and revenue. That’s not the whole picture for us.

Traction means evolution and progress. Where are you today, and where were you a month ago? If you’re the type of person who gets stuck, and doesn’t move forward because something is blocking them, then you probably won’t do well at an accelerator. You have to be willing to move where you can; to flow in the direction of what is possible, and deal with what isn’t yet possible as soon as possible.

How can a non-coder make progress on a technology project in a month? Well, she has to move in the direction of what’s possible. She can spend that time finding and convincing team members to join the project. At the same time, she can begin working on recruiting users for the day when she will have a beta product available. As I often tell startups: you do not need a final product in order to start delivering value to someone today.

If she can convince a team to join her on her quest, and she can convince future users that there is a great product on the horizon, and that they should be the first to use it, then she can earn a place at StartupYard on the strength of her personality alone. When we say it’s all about the founders, we mean it.

We wouldn’t exclude a team that didn’t have a line of code to show us, if the founder could go from an idea, to a team and a list of users in a month.

Professional Startups

networking

A flip side to this equation is probably the worst breed of startup out there: the Professional Startup.

These startups look great on paper. They can talk about their ideas, and they have a sexy concept, probably good UI, and a slick website. Maybe they have a few clients.

But there’s one tiny problem. They’ve been at that stage for years, and they’ve attended every incubator, accelerator, and startup challenge that would take them in that time. In our scouting for startups in the Central European region, we can spot these startups most of the time by their website’s emphasis on these “credentials.” One website had a timeline of programs and contests the startup had done, going back over 3 years.

The company had no feedback from actual customers. That should not inspire confidence.

This is most often what you’d call “fake traction.” It’s easier to talk to other startup people about your startup idea, than it is to talk to customers and sell your product. It’s sexier and more ego-boosting to talk to investors than to woo users and write content for your website. And I think many of these startups have the idea that the goal in startup life is to get scooped up by some magical acquisition before ever having to deal with the dirty business of doing actual business.

Or worse, they’ve been hoping all this time that the accelerators and incubators were going to do the work for them. No thanks.

But here’s a little secret: acquisitions of companies that don’t have any customers is rare. It happens, but it’s not a realistic goal for any startup. And anyway, if you’re acquired before you even get any customers, there’s not much chance that you’ll be acquired for very much- certainly it will be for less than if you get your hands dirty, and actually prove that you have some product market fit.

So what would we rather take? A 3 year old company with a sexy idea, a crack team, a nice website, and no customers to show for it? Or a woman who has never run a company before, but can pitch like crazy, and convince a couple of guys to help her get it off the ground in a month for no pay? We’ll take the newbie, thanks. That’s somebody we can really help.

StartupYard’s Viktor Fischer on Quitting Your Job, and Overcoming Fear

Hi Viktor. You’ve had a really interesting career, co-founding Innovatrics a decade ago, and most recently becoming a junior partner with McKinsey and Company. Can you tell us your personal story as an entrepreneur?

Hi Lloyd – sure, thanks for having me.

When we founded Innovatrics in 2004, I had no clue how to build a business. We created a software development kit around a fingerprint algorithm, put it online and waited to see who would buy it. When after 2 weeks no-one replied, we started to think about who might be the customer, what were their needs, what was the right product, what was the right pricing, and how we would sell it.

Early on we copied competition (copying is good), and negotiated licensing deals with major biometrics players such as Bioscrypt and CrossMatch – to survive. Over the next several years we found our niche: high-speed AFIS (Automated Fingerprint Identification Systems), defined the target customer segment. We fine-tuned the pricing and focused on the most efficient marketing & sales channels. Last year Innovatrics won Deloitte Top 50 in 2014 for its 344% revenue growth and last week was designated IT firm of the year in Slovakia. I am congratulating the team for those fantastic achievements.

After 5 years at Innovatrics, I decided to pursue an international MBA to grow my network and then entered McKinsey. Surprisingly, although McKinsey works for corporates, it follows a very entrepreneurial way of working. Projects (called “engagements”) are delivered by small teams (2 to 3 people full-time supported by experts and senior leaders), who work by quick iterations with the end product in mind (similar to “scrum methodology”). There is flat hierarchy and even junior members are encouraged to disagree with the most senior partners.

Aside from consulting, you are also an active angel investor. How do you pick your investments?

I only have 3 criteria: First, would I be a user of that product, and would I be excited to use it? This is my way of validating the value proposition.

Second, I need to know the management team, and have them be introduced by a person I trust.

Third, I need to have the knowledge I can use to help the startup. In broader terms, anything commercial, and in narrower terms, anything related to defining value proposition, validating product/market fit, modeling financial plan, raising funds, orchestrating B2B sales, or expanding internationally.

DSC03524

Fischer chats with fellow StartupYard mentor Ondrej Bartos at a StartupYard event

Have you ever broken one of those rules? If so, what was the result?

Yes, sometimes an edge in 1 or 2 criteria can balance-out the 3rd criteria. For example, recently I invested in MPower Financing via Angel.co. MPower provides loans to US university students coming from ethnic minorities.

Although I would not be a user of such a product, I like the mission of the company: I believe funding should not be a barrier to education. And I know the founders really really well (both CEO and CTO are my MBA classmates).

You recently left McKinsey to open your own club/bar, and focus on startups. What motivated the move? What will your club be like?

:Laughs: how much time do you have? I can talk for hours about this.

I think we do our best job when we do something we love (call it passion). There is one way that really worked for me to find that out: Think that tomorrow is the last day of your life. Really. Then imagine:  If that was the case, what would you truly like to do today?

My answers were: A) go for a drink to a nice place with friends, and B) help startups grow. So I left the corporate job and bought an old but legendary nightclub called Meloun. The idea is to create an ultra-lounge like we all miss here in Prague. An exclusive place with great drinks and great music for a fantastic night out. It will be kind of a secret place so I cannot say more about it at this stage – sorry!

To help the startups, I am becoming more engaged with the teams, helping where necessary depending on the stage of the company, and more engaged with the local entrepreneurship community (including Startupyard).

Can you tell us the story of your favorite investment, and, if you have one, your biggest investment mistake or failure?

I don’t have a favorite investment – all my startups, those I invest in or simply advise are like children – no one is preferred.

Failure? Probably those I decided to pass on (yes, I’m thinking Gjirafa), or those where I miss the team’s engagement. There is nothing more demotivating than a non-motivated team. There are two mindsets with which a company is created: either to be a lifestyle business, or to build a company changing the world. There is nothing wrong with either of those. But it needs to be clear from the beginning to the team, the investors and the advisors.

You are an active StartupYard mentor, and you hosted a workshop with us this year. What motivates you to work with startups in your free time?

My sole motivator is to help startups avoiding mistakes I made. Whether it is in their value proposition, defining a target customer, pricing structure, international expansion, or even personal work-life-balance and facilitating discussions between shareholders. I have scars on my back in all these areas. I want to help people avoid getting a divorce, arguing with business partners or putting thousands of work hours into a feature that is not needed.

Do you believe that successful Czech entrepreneurs like yourself are giving enough back to the startup ecosystem in terms of attention, mentoring, and investment?

First of all, I am Slovak. Just kidding, I miss Czechoslovakia and I believe the countries together could again reach the 10th place in industrial production they had in 1938 – although in different industries :laughs:.

It will not happen however without the government’s support. When founding Innovatrics, we received around 150 thousand Euro from the French government to get us up and running. Although there is a risk to receiving government funds (often startups use that funding to delay product introduction to the market), there is an improvement in Government funding: the Czech government spends ~2% on GPD on R&D and Slovak government spends ~1% on R&D versus the US ~3%.

I know I am not answering your question, but I don’t know yet whether local entrepreneurs are helping enough. I know some of them invest through [prominent venture firms] Credo and Rockaway, or directly, and they mentor via Startupyard. But I don’t have a benchmark. It would be great to compare for example the amount of Czech angel and VC funding to overall angel and VC investments in the UK, and US, but I don’t think there’s a clear benchmark.

What is a piece of advice you find yourself giving over and over again to startups? What is the hardest piece of advice for startups to really listen to?

Overcome fear. Often I see startup entrepreneurs doing what is easy: sitting behind a computer developing the next feature set.

Call a prospective buyer or an expert to get early feedback. Find an expert via LinkedIn. Send the deck or a link to the demo and set-up a call. There are plenty of people out there who would help you. Doing it you have nothing to lose. Not doing it, you lose the opportunity to score your first customer or a future team member.

Sometimes it feels  the hardest part for startups is to listen. Whether the founders are really able to listen, hear, reflect and incorporate the advice is what I am looking for during interviews.

Your career has been split between The Czech Republic, Slovakia, France, and recently Switzerland. How do you view the development of startup culture and investments in these different regions in recent years?

I cannot compare yet. But what I really like about the investment culture in other countries is the humility with which the investors and advisors help the entrepreneur. An entrepreneur is the shit, and our only mission is to help her succeed while increasing her self-confidence. Not the other way around (ie beat her idea and her self-confidence to death).

Are there things that bigger economies like France could learn from the startup and investing cultures in Slovakia or the Czech Republic?

I like how some of the local VCs really help the entrepreneurs think about the business during the investment process. They help to define and validate the value proposition, set up pricing, create financial model, key KPIs and develop a first 100-day plan. This process is beneficial to both parties and if I were the entrepreneur, I would embrace it fully.

Andrej Kiska recently told me in an interview that Czech (or Central European) investors are not as conservative as their reputations suggest. Do you agree with him?

I agree that the mindset is changing. That’s good. From my experience however, even as recently as the Webexpo couple of weeks ago, I noticed some investors using traction as their investment criteria (quote “For us to invest, you need to have customers. At least one.”) I think people should be the first criteria of choice and overseas that is understood.

What about StartupYard makes you keep coming back? How do you hope to have an impact on us as and our program?

This comes to my 2nd passion: helping startups grow. StartupYard is the largest local accelerator. Still however, some people do not know it. David Semerad from STRV mentioned during his talk at Webexpo that “YCombinator is like StartupYard but million times bigger”. I would like to help StartupYard bridge that gap, by making connections to  the international market stronger and by voraciously helping startups export. If we’re Czech only, we will not be successful and our startups will not be successful.

Why You Need a Sales Oriented Co-Founder

We already talk a lot about what Andrew Chen calls the product death cycle. The viral chart was created by David J. Bland, but the concept is familiar to many a startup mentor and investor alike. We see it all the time, and no matter how much we try to inoculate our startups against it, its pull is about as powerful as the dark side of the force. It looks like this:

product_death_cycle

Simply put, people like doing what they know. And engineers are good at solving engineering problems. The narrative for many successful startups also appeals to builders and tinkerers. Ultimately, we like to think of all the greatest startups and tech companies as successful because of their innovations, not because of timing or clever business decisions.

And it’s true that the most successful startups listen carefully to what their customers want. Slack has been a recent test case of a company that is totally focused on delivering exactly what its customers need, and innovating as fast as possible to provide it.

But that only works at the beginning. Early adopters know what they want, and can push you to create a product that is a killer app for them. Later, when more passive adopters are looking for the next obvious solution, your product isn’t necessarily going to be made for them as well. Great startups realize this, and begin the work of convincing a new market to use their products.

In the worst case scenario –and this is one we’ve seen personally more than once– a startup doesn’t even listen to the customers at all. When the product fails to sell or to increase its traction on the market, the founders just innovate new features anyway, hoping that the next feature set will magically do what none have done before, ignoring the fact that their market focus hasn’t really changed at all.

This is all to say, that the very best startups don’t just listen to what their customers want. The very best startups find out what their customers will pay for, and then provide it.

Customer Acquisition-Built In

Troy Henikoff, Director of TechStars Chicago, often says, loosely quoted: “If you hire a salesman to go out and sell something, and he can’t, you fire him. But if a founder goes out and tries to sell, and can’t, you change the product. It’s fundamentally different when the founders have customer acquisition built into their DNA.”

At StartupYard, we have continually had it reinforced to us, just how important this is. After taking on teams because we absolutely loved their vision, their products, and the team themselves, only to see them fail because they simply weren’t willing to be sales-oriented, we’ve learned to be wary of even those companies we are very attracted to initially. No product sells itself, and ultimately, we can’t be in this business for the love of products alone.

A team that is applying to StartupYard asked to meet with me this week. Aside from the fact that I love to see a team so keen, I could tell right away that this was a team that understood customer acquisition. They ostensibly wanted to meet with me to find out more about our program, but it became immediately clear that they were trying to figure out how to get into the program; what they needed to do to be sure they would be accepted.

I don’t mind that in the least bit. Of course, our job is to make sure the team isn’t just saying what we want to hear, but that is the job of any accelerator. The startup’s job is to say what we want to hear, *and* to have it be actually true. So I told them what they could do between now and the evaluation period, which is to prove that they can get customers.

They may not be able to sell anything right now, but traction with customers can come in a lot of ways. Will people sign up for a waiting list? Will they meet to discuss their needs? Will they consult on your product ahead of the launch? Will they recommend colleagues to do the same? There’s a good reason that “talk to 50 potential customers” is such oft-cited advice for startups. You can’t help but learn something by doing it.

And if the startup comes back and says: “well, we talked to 50 customers, but only a few said that this is something they would pay for,” then I would wait and see how they had reacted to that news. Did they find out what the customers were willing to pay for?

Having a Customer Acquisition Focused Co-Founder

Every startup is going to find one or two channels that work best for customer acquisition. The problem is that they will likely not be the first couple of channels the startup tries. An initial strategy may work, at first, for a while, but eventually, the startup is going to have to pivot to something else in order to grow.

Or even worse, a startup may have initial traction because it has a really great product. Then when that traction starts to flatten out, the startup thinks that the problem is that the product isn’t great anymore. In truth, that initial burst has just taken them as far as it can, and it’s time to try something new.

We often get the startups that don’t have a customer acquisition focus, but who did get lucky with some early traction, because the product is really fantastic.

I think back on one startup we worked with. They had a freemium SaaS product that was very popular in app stores, and they had had to do very little marketing to grow into the hundreds of thousands of downloads, and tens of thousands of active users. That’s fantastic. That’s part of why we took that team. And their product is really great. Truly.

But when that growth stalled, this was a team that had never even considered putting together a simple email marketing campaign. They hadn’t been concerned at all with customer acquisition or retention; they couldn’t even tell us their retention numbers. When growth slowed down, they started working on the product again- but lightning doesn’t always strike twice. The app’s initial popularity doesn’t ensure it can continue to grow beyond a certain number of users.

And what we often see is a founding team where nobody is responsible when that happens. This means that everyone on the team can take responsibility for their successes (and they do), but none have to take responsibility for the failures when the product stops selling.

There is little we can do to help startups like this one find religion in the form of focus on customer acquisition. It may not be in their DNA. But if you’re an entrepreneur who is just starting to get the idea that your awesome product may not be quite enough to take the world by storm, take heed: build your founding team, your company’s DNA, with customer acquisition as a focus.

If given the choice between two companies, one of which is comprised of engineers who have hired a sales or marketing manager, and the other with a sales oriented co-founder, we would nearly always choose the latter.

Engineers build. And they make So partner with a sales focused co-founder who will live and die by the numbers (users, engagement, sales, churn) that an engineer doesn’t want to focus on, and has the power in your organization to force changes when those numbers aren’t good. You can’t outsource something that needs to be central to your mission. You need customer acquisition at your core, and you need a sales oriented co-founder.

Are Startup Accelerators Useful?

This is an abstract of the talk I gave during the last WebExpo Prague on how startup accelerators can be useful for entrepreneurs.

I have an idea!

This is how it always starts. You’re alone at the terrace of a cafe gazing into the void, thinking. You’re having a conversation with some friends or acquaintances. You’re reading an article about a current state of affairs and suddenly, out of nowhere, it hits you. Hard. You’ve just had the-best-idea-in-the-world. Ever.

This is going to make you rich and famous! How come nobody before you had thought about this? The more you think about it, the more excited you become and the more in awe you are of your own awesomeness. Congratulations. You’ve just joined the horde of entrepreneurs who have had that moment of grace… but what should you do first?

Forget about it.

You know the statistics: more than 80% of new companies fail in the first 12 months. Some might even argue that up to 95% of startups fail in the first 2 years. In other words, you have almost no chance of success.

Therefore, when that genius idea hits you, the first thing you need to do is to kill it. Convince yourself it is a bad idea. Yes this is hard. Obviously you’re a smart person, so it’s not like you expected to come up with a bad idea. Try harder.

If you really can’t convince yourself that your idea is a bad idea, then talk to your friends and beg them to convince you it is a bad idea. Don’t be defensive; on the contrary, listen to all their objections meticulously.

If you can’t convince yourself it’s a bad idea; if your friends can’t convince you it’s a bad idea; if your grandmother can’t convince you it’s a bad idea, then and only then, act on it. Obviously you don’t want to spend the next 5 to 10 years of your life pursuing a bad idea. That would be a total waste of your time and talent.

Positioning, Positioning, Positioning.

Now that the world is waiting to see your idea become reality, you are going to have to convince a few people (co-founders, first hires, investors), by explaining to them the why’s and who’s and how’s of your venture. You need to be able at any moment, under any circumstances, sober or drunk, to position your raison d’etre. The best way to do that is to spend some time working and polishing your product positioning statement. Make sure it flows and can only generate Wow’s in your audience’s mouth.

Should I apply for a startup accelerator?

At some stage, you’re going to have to ask yourself this question. Accelerators have now been around for 10 years and it’s very likely you will find one in a large metro area not far from where you are. Is it worth it? Should you apply to one of them, a few of them, all of them? I get asked this question often, and so far my answer has always been the same:

Should I maximise my chances of success?

Remember the statistics: you are more likely going to fail than succeed. Therefore instead of wondering if you should apply for an accelerator, try to figure out a strategy on how to beat the odds of going under. One of the ways is indeed to go through an acceleration program like the one we run here at StartupYard. So far 60% of the companies we have accelerated in 5 years are still running. Compare this with the previous statistic on failure.

So put that arrogant, know-it-all attitude away for a moment and think about what you would need to make your startup a success. As it turns out, your chances of success are much higher is you are accepted to an accelerator.

Nothing replaces experience.

Participating in an accelerator is not like attending a school. You won’t be treated like a kid- quite the opposite. By joining a mentor-driven accelerator like StartupYard, you will, in a very short time, meet with an impressive number of other entrepreneurs, corporate people, and professionals who not only are going to be excited about what you are doing (this is why they are mentoring you), but will also help you a lot by digging into their own experience. You can learn a lot by yourself, but you can apply more focused knowledge by relying on the experience other people have. For that an accelerator is extremely useful.

Nothing replaces personal contacts

Whether you will be looking for clients, partners, or investors, you are more likely going to succeed in meeting them if you are referred by someone else. Here again, an accelerator, armed with its network of partners and mentors, will help you meet the right person in the right organisation in less time than it takes to send a cold email. For that an accelerator is unbeatable.

We’re not called an accelerator for no reason

Ask any alumnus of a world-class accelerator, and they will tell you how invaluable the new contacts and knowledge they have gained in such a limited time are. 3 months is very short, but during these 3 months, you will be more exposed to the market than you could be when going it alone. This will help you to either fail faster, because if you are going to fail you better fail fast, or reach new KPIs faster. For that, an accelerator is where you should be.

Money is irrelevant.

Some startups I meet with are in the market for accelerators, comparing them based on the amount of funding they offer. This is probably the biggest mistake a startup can make when deciding on an accelerator, because the value of such a program is not in the amount of money they will give you. In fact, some of the best accelerators offer less cash than the less famous ones.

The value is in the network, the management team, and the calibre of the mentors, but certainly not in the tens of thousands of euros you will receive. Anyway, if your project and team are right, and the accelerator is doing its job, you’ll get the funding you need after the program. If you are only looking for cash for a few months, then an accelerator is not useful.

Married until the end.

In exchange for your participation in the program, you will most probably be asked to give up a small percentage (usually up to 10%) of your company. This is actually a good thing! Don’t view this as a loss. Making the accelerator a minority shareholder means that they now have a vested interest in your success. That’s not negligible.

In turn, this vested interest means they will probably do whatever is in their power to help you after the program is over. Down the line, they might be able to unblock a situation when you are stuck on a business deal, for example, and it’s in their best interest to do so. The success of early stage startups can depend on the influence of its investors. For that an accelerator is extremely useful even after the end of the program.

Don’t live in regrets.

“We would not be where we are now if it was not for StartupYard”. This is the typical feedback we hear from our most successful startups, and this could also be you. But don’t fool yourself. It is actually pretty hard to be accepted in an accelerator. Less than 3% of companies who apply are selected and, at a time when everybody wants to hear about your traction, being accepted to an accelerator is a clear sign of traction.

I meet tons of smart, seemingly ambitious entrepreneurs, with great ideas. Sometimes I invite them to apply to StartupYard. I even encourage them to join any accelerator, because I know what it can do for them and their young company. But when I hear “well, I’m just not sure right now,” I back off. I can’t sell a startup on its own chances of success. The drive to succeed, and the willingness to take a risk is a necessary part of your success as a startup. We can’t give you that, and we won’t try.

But I can tell you this: I’ve run successful (and unsuccessful), startups for 20 years, and I did it in a time when accelerators weren’t a thing. I would have killed for a chance to join one back then, so my advice to all those young Cedrics out there is this: go for it. As a founder, you will have a lot to lose (sleep, reputation, money, hair) but your startup has everything to gain.

7 Things the Government Could Do For the Startup Ecosystem

We talk to mentors, investors, entrepreneurs, and startup founders on a daily basis at StartupYard. Just last week, we hosted an in-depth discussion with Ales Teska, of TeskaLabs, who recently moved his company to London, about the Czech startup ecosystem, and how it compares (or doesn’t) with its London counterpart.

We’ve also hosted several interviews recently with StartupYard mentors and investors such as Andrej Kiska and Ondrej Krajicek, that focused among other things, on the impact that government policies can have on the startup ecosystem.

We often trumpet the benefits of doing business in the Czech Republic, and those benefits are very real. A low cost of living, low cost of doing business environment with a high number of skilled IT workers and engineers makes the Czech Republic competitive in the world of startups.

But good enough, for us, just isn’t good enough. Here are a few ways we think we (and other startup ecosystems) could do better through smarter government.

Starting Off Equal


Here we’re going to take the long view, and look at Europe as a whole. While, as Andrej Kiska pointed out in his interview with me in July, incorporation may be relatively easy in the Czech Republic, from his perspective as a partner at Credo Ventures, that doesn’t mean that the current regime is encouraging people to start new companies.

Incorporation may be easy if dealing with corporate structures is your day job. But entrepreneurs are engineers, artists, artisans, and inventors. They are not lawyers or accountants, and most aren’t even sure of which kind of lawyers and accountants they might need to hire to get the job done.

Incorporation in the Czech Republic still takes time, paperwork, signatures, notaries, bank accounts, identification, and in-person visits to various offices and departments. Contrast that with founding a company in the UK, where the process is fully electronic and fully supported by Gov.uk, or even better, founding a company in Estonia, a world leader in digital entrepreneurship innovation, where it takes literally minutes to have a company off the ground.

An entrepreneur in Estonia is already off and running for virtually no cost, while one in the Czech Republic is waiting for a criminal background check, registering a trade license, paying for notaries and articles of association, waiting in line at the bank and many other details, and spending about 30 days (minimum) and over 1,000 Euros for the privilege of doing all that.

In startupland, the costs of failure determine our appetite for risk. We should be taking more risks, more often, and we should be minimizing the costs of failure.

A Europe-wide, single framework for starting a business should be created to allow companies in any European country to start businesses in a single legal environment, in as short a time as possible. The system should be flexible enough to allow different companies to operate under the laws of their respective countries, but simple enough to allow anyone to start a business anywhere, whether or not they are a citizen, or even a long term resident of that state.

Estonia has proven with its digital residency program, that a paperless bureaucracy can better adapt to the needs of the modern digital economy. We need such programs Europe-wide.

Investor Incentives

Startup ecosystems depend upon and thrive on the investments of angels and VCs who are aware of the risks. We have talked here often about the risk aversion of Czech investors, who are reputed for their conservativeness. While that may only be partly true, it is no secret that the Czech Republic does have a smaller volume of such investments than neighboring countries like Germany, or France, even accounting for their larger populations.

We need to encourage investment in riskier ventures like startups, by offering a combination of tax incentives and government backed investment matching programs for startups and their investors to take advantage of.

This year, StartupYard has taken advantage of FiWare, an EC grant program which has allowed us to tie our recommendations for the allocations of grants to the success of individual startups raising money after our program. Through this program, we were part of the fund that helped raise 337K Euros for TeskaLabs, the fastest raised pre-seed funding round in Czech history. Our ability to help TeskaLabs meet their immediate needs, grow their sales pipeline, and become a more attractive opportunity for private investors.

The Czech Republic, along with individual municipalities and regional authorities, should replicate that success by funding grant programs that go directly to startups, by supporting existing venture capital deals, and make them even more enticing to investors.

The prevailing system forces startups to seek grants alongside private investments. But as Ondrej Krajicek detailed in his interview with me recently, this is the wrong way around:

“It happens to us from time to time as well that companies approach us with projects that don’t really need our involvement, but need a corporate partner for government funding. I don’t accept these sorts of arrangements as a rule.

We have projects at Y Soft that also seek public funding – I find myself in an awkward situation thinking: how can we differentiate as a real project with these projects designed to get funding? We are a real project, not one designed to meet the specifications of a grant, so we ironically have less of a chance of getting the funding for that. And that isn’t the way it is supposed to work.” – Ondrej Krajicek, Y Soft Ventures

The government should not be in the business of deciding which startups deserve investment capital. That produces companies that get investments because they’re good at convincing the government to give it to them, not convincing customers to buy from them or real investors to invest in them. Instead, the government should support qualified investors by giving them incentives to invest, including matching funds on all their startup investments.

To push new investors and high net worth people to invest in technology, startups should be classed as a special investment category, and investors should be allowed to deduct their investments in startups from capital gains taxes.

Social and Employment Incentives

As Ales Teska noted in his talk with us at StartupYard FastLane last week, a startup founder can expect to spend most of his or her time during the company’s initial growth phase, in hiring new employees. The Czech Republic is not lacking in talent, but startups have few competitive advantages against big employers who can offer not only competitive salaries, but also benefits.

The government should incentivize startup hiring by making it easier and less costly to leave the corporate environment, and join a startup. It can do this by subsidizing the costs of health and social insurance for startups hiring their first employees, within the first few years of operation.

This would allow startups to cut the costs of hiring, and pass the savings on to their employees, and it would discourage small companies from only hiring “sole trader” contractors who subsidize their own social and health insurance, and have little to no job security. Today, a large number of small companies abuse the Zivnostenski List (Sole Trader) system, because the costs of hiring employees directly are prohibitively high.

Welcoming Immigrants

The Czech population has remained virtually steady for over 50 years, while the population has continued to age. As is true in many developed European countries, the Czech birth rate dropped below replacement rate (the rate at which the population has enough children to replace themselves, about 2.1 births per couple), in 1980, with the average lifetime birth rate reaching a low of 1.13 in 1999, and rising slowly to 1.53 last year.

At current birth rates, without an increase in immigration, the Czech population could fall by as much as 30% in the next 30 years.  Up to 100,000 fresh immigrants might be needed every year to keep the population steady at the current level, and avoid a demographic and fiscal crisis. Meanwhile, Czech government policy has been lax at best about confronting future challenges.

Shamefully, The Czech Republic waited until only last year to amend its citizenship laws to recognize Czech-born foreigners who had lived their whole lives in the Czech Republic as deserving of automatic citizenship. Before that, 2nd and even 3rd generation Ukrainian, Polish, and Vietnamese residents were not necessarily eligible for citizenship in the only country they had ever known.

In addition, today, a foreigner’s time spent as a full-time student in the Czech Republic counts at only half the normal rate when it comes to qualifying for permanent residence. At the same time, foreigners who study in the Czech language attend university for free.

This means that the Czech Republic is financing foreign students to get university degrees, and then discouraging them from staying and contributing to the Czech economy by becoming permanent residents. This is not only unfair, it is idiotic. Foreign students are exactly the people we need in our workforce.

The government should abolish immigration laws which limit the eligibility of foreign students to obtain permanent residency and work permits after receiving university degrees in the Czech Republic.

Currently, fully half of medical school graduates in the Czech Republic emigrate every year. Figures aren’t available for IT workers, but the numbers certainly high.

Accelerators in the US, not a country where immigration is easy, manage to get visas for their visiting teams within about 2 weeks. StartupYard averages 2 months. In addition, companies incorporated by foreigners face a never ending string of pointless administrative challenges.

We need sensible but aggressive programs for attracting and retaining talent.

The government should also create special entrepreneurial visa categories for startups that are capitalized, and which choose to base their operations in the Czech Republic.

Hiring foreign workers should be getting easier as the population ages. Not harder. With the Czech Republic’s low unemployment, more skilled workers are needed to meet the needs of the digital economy.

Education and Language

Speaking of education, here is a point where the Czech Republic remains fairly competitive. There are a large number of high-skilled and medium-skilled IT workers, engineers, and programmers leaving Czech educational institutions and seeking jobs here and abroad.

While English fluency is stronger among IT workers than the general population, it remains significantly weaker than in the same population in Germany. As a whole, this country rates a score of 57.42 on the EF English Proficiency Index, ranking 19th of 63 countries ranked. That is better than Spain, South Korea, Italy, Slovakia, and even France, but we still lag behind Germany (at no. 10), Estonia (no. 8), Poland (no. 6), and all the Scandinavian countries (which occupy all the top 5 positions).

English proficiency is a key determiner of economic competitiveness. The Economist calculates that a second language (other than English) contributes to as much as a 4% rise in lifetime earnings for individuals from Britain. Though no comprehensive studies exist, some evidence suggests that English fluency for non-native speakers can increase individual earning potential by more than 30% on average. In the IT field, that number is bound to be even higher.

The Czech system should take cues from the most successful European education systems when it comes to English. Ample evidence shows that early childhood education in languages is vastly superior to education in teenage and early adult years. Denmark, the highest rated country on the EF index, begins compulsory English education at the age of 6. In addition, children’s programming from Britain and America is not dubbed, as it is in the Czech Republic.

In addition, there is little overlap in the Czech higher education system between engineering and hard sciences, and soft sciences like economics, business, psychology, and communications. American entrepreneurs benefit from a liberal education system, in which graduates are required to gain a rounded education to complement their specializations.

In California, for example, engineering students are explicitly exempt from the state cap on enrollment length in state universities, meaning that engineering students may seek complementary degrees in any subject offered. There is no need even to apply for enrollment in these programs as an engineering or computer science student. As a result, a majority of undergraduates in California now attend university for 5 years, and most now gain two undergraduate degrees.

Czech undergraduates should be encouraged to seek multidisciplinary degrees that bridge engineering, computer sciences, soft sciences and the arts. Entrepreneurs need to be well rounded in all these areas in order to compete internationally.

Legal Incentives

I touched earlier on the costs of starting a business in the Czech Republic. These costs should be zeroed out, and incorporation should be liberalized to allow anyone to start, and shut down a startup quickly and easily.

As Ondrej Krajicek noted on our blog earlier this summer: “[In the Czech Republic] failure equals punishment. When you fail and your project goes bankrupt, the state punishes you and the society punishes you. Instead of appreciating that you tried and failed, you are the one who’s bankrupt. Moreover, you cannot even establish new business for some time, not to mention the social stigma.”

Czech banks still practice the blacklisting of corporate officers who shut down companies and cancel corporate accounts, making it more difficult (and expensive) to found new companies. This practice should end, and the government should encourage banks to work more openly with small businesses and startups.

In addition, the Czech Republic should stringently avoid such anti-investment policies as Spain’s recent proposed tax reforms, which punish investors and startups that expand abroad by making them pay capital gains taxes on their market value, even when that position is not liquid.

Business and Political Culture

As Red Herring wrote last month about the Czech ecosystem, and the role of the government in supporting it, there is little practical support coming from the current government. There was not much anyone could say on the Zeman government’s behalf. Contrasted with Slovakia, and President Andrej Kiska’s bullish view of startups and innovation, the Czech government seems positively old-fashioned.

The Czech finance minister, Andrej Babis, recently attended the Czech Invest trip to Silicon Valley with startup alum Vit Horky of Brand Embassy, and our own Philip Staehelin, Exec in Residence at StartupYard in 2015.

This was a bit of an about-face for Babis, who famously called startups and small business development “ cliches and bullshit,” (in Czech: “klišé a kecy”), in an interview last year. He called for Czechs to focus on traditional, established businesses.

This rank of old Czech businessmen see startups as full of hobbyists and tinkerers who are long on ideas and short on real business solutions. That might have been true in 1992, but meanwhile, the Czech Republic has spawned Seznam, a one-time startup that now competes head-to-head with Google for the Czech search market. And we need not even mention Avast, AVG, SocialBakers, Apiary, or a dozen others. They were all startups once.

This is disappointingly myopic, but not atypical for a Czech politician, who sees the contribution of startups as secondary to those of large industries like heavy manufacturing, mining, energy production, or even tourism. But it’s wrongheaded too.

The startups ecosystem breeds innovative new solutions that can transform whole industries. Startups work best on the bleeding edge of innovation, and can afford to take risks and make predictions that large businesses can’t. A healthy national economy requires a healthy, competitive startup ecosystem.

Would Babis welcome a DropBox, a SoftLayer, or a SendGrid in the Czech Republic? He would have to accept that these billion dollar companies started out as “cliches and bullshit,” as all startups inevitably do.

The Czech Republic needs wise leaders who lean into the future, rather than dismissing the work of startups and innovators in this way. Politicians who are not captives to traditional business interests will see the potential for Czech startups to achieve success on the world stage. We need the government to take the startup ecosystem seriously, as its counterparts have done in Berlin, London, and Washington, and wake up to the 21st century economy.