Last Friday, investors and mentors from Startupyard met with 16 candidates, chosen from the most promising of a total of 60 applicant teams for the upcoming accelerator round.

I was there, not to participate in the interviews or to vote on who would be included, but to see what sorts of teams I might be working with come April. The results were intriguing, and the following are a few of my takeaways from the process.

Many Teams Didn’t Have a “Pitch”

This is understandable, considering that in a few cases, the teams also didn’t have a real product or a market fit. That’s what we’re here for. Not having a finished pitch at certain stages of the process is fine, but it seemed that a few of the teams ought to have thought longer and paid a little more attention to selling their ideas. When there is, as we say “money in the room,” meaning that people are making real financial decisions about you and your team, and not only your ideas, teams should be prepared to sell whatever they have, even if it is just their own promising talents. In fact, there was interest in some teams based purely on their personal talents, and much less on their specific ideas.

Having a pitch of some kind also signals to the investors in the room that you have at least thought about the marketability of your ideas. A few of the teams had clearly rehearsed precise lines and questions they would use to pitch their ideas, and while our interviewers saw through these ploys, having a bit of a sales spiel is not insulting to an investor. To the contrary, comments on interviewees who attempted honest sales pitches were very positive: “at least he’s clearly thought about the market,” was one comment following such an interview.

Start Thinking About Your Market

This was a big one at the table on Friday. Some teams struggled to define who their customers might be. If you can’t imagine who might pay for your services, then it may be difficult to get an investor to agree to anything at all. An interview for an accelerator is not an investor meeting, but the accelerator is still investing some money, and good deal of time and energy, into your ideas. So having some ideas, at least, of potential markets for your products can help to convince the accelerator that you’ll be able to find a market- that you think in those terms when you need to.

You don’t have to have any customers to know something about who might buy your products (most of our applicants don’t have any current customers), but you do need to have any idea of where the value of your product is. In other cases, the products being described filled very crowded markets. If your product is already essentially a feature of a more successful product, that may be fine. However, you have to be able to reasonably justify why your product adds value that the competitor doesn’t. And you have to be prepared for the investors to ask questions about your more visible competition: why would someone end up using your product or service, if it is included in a competing platform? Is it cheaper, more streamlined, more appealing in some other way?

What Problem are You Solving?

There were two initial questions that Cedric Maloux, our CEO, asked every team, and the answers were probably the most telling about how far along each team was in thinking about their product or services as a real, viable business. “What problem does your product or service solve,” and “what are the extant alternatives?” The ideal answer was clearly that the product solves a serious, possibly costly problem, and that there are no current alternatives. More often the case was that the problem was one of convenience, of cost, or of lost efficiencies, and the alternative was either business as usual, or an alternative product with a different focus.

The most pressing problem that some teams had in answering this question was that they attempted to pose the problem as being related to their exact product, rather than a broader problem.

For example, we heard from founders who said something like this:

In some cases, the interviewers found themselves answering this question for the founder, when it should have been the other way around, finding uses for the backwards running watch that the founder had not proposed. These resulted in negative marks against those applicants- a founder that doesn’t think in terms of the market and in terms of solving problems may not be a desirable candidate for an accelerator.

It clearly wasn’t, for the interviewers, that the founder needed to know all use-cases of their product ideas, but they had to have some use cases for them. And “if you wanted to [do exactly what my product does]” is not a use-case. Products have to be adaptable to different purposes: they have to appeal to customers who themselves need different things.

The Team on Paper and the Team in Person are Two Vastly Different Things

There were a couple of teams that barely made it into the interviews, because on paper, their projects didn’t seem like ideas with a lot of potential. But when they got in front of us, they blew us all away with their energy, and their insights into how they would make their business ideas work. And the opposite was also true: we entered one interview virtually certain that the team would impress us, because the idea sounded great on paper. But the interview proved that while the idea seemed good on paper, the founder in question didn’t have the energy or the interest he needed to convince us to accept him. Cedric, who led the interviews, commented afterwards that it was a powerful example of how much depends upon founders themselves, and not just their ideas.

Gadget Startups Are Very Risky

A gadget based startup, or one that needs a physical product in order to realize their sales, are risky. We had a few pitches for physical products, and they were actually very good pitches, and excellent ideas. The problem is that the burden of proof that such a product will work and will be attractive to a market is much higher than for a purely software product. Not only do the founders need to know much more about their market, including the costs and challenges of manufacturing the product, but they also risk a much larger upfront investment in a technology that may not sell later on. This is in fact why gadget startups with physical products so often turn to preselling and crowdfunding, as has been the case for startups like Pebble, Tile, and Omni. Physical products are very attractive for preselling because the customers can be identified and locked-in long before the investment is actually made, guaranteeing at least a shot at profitability. Building and marketing a device from scratch, without an existing customer base, is therefore doubly unattractive for an accelerator.

Does your Product Have Global Potential? Does it scale?

Teams were sometimes not aware of what their competition was, especially when asked about the market outside of their home country. Accelerators in general, especially ones like Startupyard, focused on data and analytics, are looking for startups with global potential, so ideas that work in smaller markets that require a great deal of TLC (that’s Tender Loving Care), are not going to fare well in this kind of environment. The elements of a product that can make it a success in a local market can work against it in a larger one, presenting problems like language dependence, organic growth limits, and scalability of service and of sales. This doesn’t mean these products are bad, just that they may not be right for an accelerator. If a product would benefit more from slow local adoption with personalized sales and marketing, then it shouldn’t be in an accelerator at all, and some ideas are best grown city-to-city, gaining their greatest value from their local nature, rather than wider adoption and more aggressive growth.

Do Rapid Prototyping

We’ve written about this before, and it remains important. Teams often didn’t have a product to show us because they were working on the demanding problems that their backends presented. While that’s the right idea, some modest attempt at demonstrating the end-user functionalities involved would have gone miles towards convincing the board of Startupyard to take a second look at a few projects. Even non-functional mockups of the end product can make a product much more tangible and attractive than a description can. A picture is worth a thousand words, not because pictures are better, but because they inspire the imagination. They feel real, even when talking about an abstract idea just doesn’t.

Rapid prototyping can also help founders to define what exactly it is that their products do. A prototype virtually demands that a the designer at least start imagining use cases for the product. This is why rapid-prototyping can be so important: it is more than a demonstration- it is a piece of the process of envisioning your finished product, and the customer who will use it.

Give Specific Answers to Specific Questions

Nerves play a big part in these types of interviews, and the interviewers understand that. But at the same time, not every question is a test, and not every answer needs to be perfect. If an interviewer asks you a simple yes or no question “do you have any paying customer?” for example, you should start by answering yes or no. While for some people, the instinct is to get out ahead of the question, and to answer the concerns they think it raises, often times the interviewer is really interested in something else, and a straightforward answer, followed by a short explanation, is always the best way to go.

Be honest, and trust that the interviewer will seek the information he or she needs to make the appropriate judgements. If you answer a question like that one with “well, right now, we’re not worried about the monetization because we’re still growing the userbase, and we think that…,” the interviewer will not know the answer to the question, and will be frustrated at having to ask it again. And it’s likely the interviewer just wants to know the status of your product or service, not in using that information to judge your competence. The right answer might be “Yes, we have a few paying customers, but growth is slow because…” or “No, however we are still concentrating on growing our user base.”

One of the most pleasing moments during the interviews came when a very young founder answered a question about his company’s scalability by saying: “I’m just not sure about that.” There was a visible reaction from the table of interviewers, and you could see them thinking: “here is someone being honest about himself!”  You run the risk of outsmarting yourself, by trying to figure out what answers the interviewers want to hear: just answer the questions as they are asked.

Appearances Matter

Candidates don’t necessarily need to be in black and white.

Much study has been done of the links between attractiveness and trust. We don’t consider ourselves shallow judges of character, and the point of being a professional investor and a mentor for startups is having the ability to look beyond appearances and see potential where other people don’t. But all the same, the way you look sends important signals about how you work with other people, what you think about yourself, and how aware you are of these things.

While nobody arrived for their skype interviews in their pajamas, my personal observation was that the more professional looking teams were taken more seriously. While this is as much a function, I think, of how those teams behaved and spoke, and were aware of the questions that needed to be answered, and how they needed to be approached, the psychology of appearance can be just as important for the interviewee as for the interviewer. Taking 10 minutes to think about what shirt you’re wearing, the expression on your face, and even the placement of your webcam and lighting fixtures (for an online interview), can give you confidence and perceived control over the interview, that will translate to answers coming more easily, and with fewer hiccups. An interviewer will remember how you looked when they spoke to you, and you want to look like someone that they could work with for 3 months.

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Cool is not The Future

A recent pair of articles on The Verge and FastCompany have me thinking about problems. They’re ostensibly about Google’s next step in the long process of marketing Glass to a wider consumer audience, bringing it from the fringes of the Explorer Program, to the “Geek Sheek,” status that Google has been aiming for, and often missing, since they released a promo video as far back as early 2012 (oddly the promo’s opening shot features a MacBook…). While there’s been much back and forth about privacy concerns and “Glassholism,” with restaurants around Google HQ banning the devices, and explorers reporting unexpectedly fierce reactions to the devices, the controversy is probably mostly good for Google. But these recent pieces had me really wondering about something we’ve talked a lot about here at Startupyard recently.

What Problem Does Google Glass Solve?

That may seem like a stupid question, but I think the answer is revealing of why, after decades of this same concept floating around in the tech world, one of the biggest tech companies in the world, with its endless resources and bottomless R&D budget, is having anything resembling problems marketing a device that can only be described as incredibly cool. Apple sold the iPhone literally before they were finished making it work. Their first presentation of the product was with a prototype that was not actually fully functional.

And it is cool right? A computer that you can wear on your eye? Imagine all the cool stuff you can do. A million ideas spring to mind instantly. Don’t they? There’s just one problem with that, that I see. Google Glass doesn’t solve any problems. What does it do that tells you: this thing is going to add something to your life, the way you do things, that will make your life better, easier, more fun, or more productive.

Ok, why is that important? Well, simply put, Google is positioning Glass as the “next step,” in a tech evolution that has taken us from typewriters to smartphones in 70 some-odd years. But what is often forgotten is that, every single step of the way, each major leap in that evolution has been based primarily on solving a problem (or a range of problems), without creating more problems than doing so was worth. This kind of approach is in the DNA of Google as a company, from the search algorithm, to Gmail, to their mapping efforts- all of their most successful ventures have been in problem solving. And it’s often in areas where they aren’t actively solving problems that they run into real trouble: Google+ springs to mind.

Innovation is Problem Solving

Let’s take that step by step. The modern tech industry has its predecessors in 3 slightly different fields. One is the computer, the second is the television, and the last is the typewriter. Essentially, the consumer computer industry was born in the 1970s when it was slowly realized that the processing power of a computer could be combined with the familiar input mechanism of typing, to allow for programming interfaces that were based on symbolic logic systems that people would be comfortable with almost right away. The television or CRT monitor was the ideal medium for displaying that information (replacing heat-activated printer rolls and punch-cards). The modern computer was slowly assembled out of components that people were familiar with: a typewriter, a TV, and a processor. As obviously as these concepts are to us today, they were not so 50 years ago.

Virtually every major advance in consumer computer technology has been based on the act of solving problems that existed with this initial paradigm. Magnetic tapes and punchcards were slow, so floppy disks and hard drives were developed. Keyboard based manipulation was sluggish, so joysticks and later mouses were introduced. DOS was intimidating to consumers, and the learning curve made a whole class of software products unattractive to potential customers, and so window-based operating systems were developed. MP3 players replaced CDs because of their carrying capacities. Later, the concepts already familiar to consumers from the computer and software industries were combined with the mobile phone to solve another major problem: people wanted to access the internet from anywhere; smartphones were born out of a problem that needed to be solved. They were cool, but cool just gets you in the door. It doesn’t make you essential.

When Steve Jobs introduced the Macintosh in 1984, it was the cool factor that got him the most press, but it took years for the concept to catch on. It was so cool and new, that people had a hard time understanding what problems the concept actually solved. It was too advanced for its own time, lacking the power and memory, as well as the screen real-estate, to do all the cool things one could imagine doing with it.  As iconic as it is, the Macintosh in its original form was a massive flop, and it lead to Jobs’ unceremonious firing not long after. And in some senses, the Macintosh concept was never fully vindicated. Even today, there are no products in the market quite like it, unless you consider the modern notebook computer to be its spiritual successor, in which case, it was only about 15 years ahead of its time.

Can An Idea Be Too Far Ahead of its Time?

“Ok Glass, Intimidate.”

The problems that the Macintosh solved were ultimately, and for many years, not solved in ways that made the sacrifices made in its design worth making. And many of those sacrifices are familiar when we talk about Glass. The screen was too small, making it unattractive to business and gaming clients (spreadsheets and typing then being a huge reason to own a computer, along with gaming), and the processor was underpowered for the applications it was running, making it slow. It was small but heavy, and depended on a large power source and clunky peripherals, meaning that even though it seemed like something you could take with you (I remember our first Macintosh had a carrying sleeve), it was hell to actually transport.

Glass occupies a similar dark spot. It is clunky and obtrusive, and It only seems to be mobile, but its battery and processing power don’t support the potential it offers. The focus on cosmetic changes from Google belie these issue, and what it actually offers are things that people are much more comfortable doing in other ways. You can’t read on it or watch a film, you can’t talk to someone with it and have them see you, you can’t use it to send emails (it’s difficult to input complex text), and you can’t comfortably view a map on it unless it’s of a very small area. The potentially revolutionary advantages for a product like Glass are still years from bearing any fruit: a voice activated AI that can use what you’re viewing to help you in your daily life is still years away from being practical, and the advantages of actually having it perched on your forehead seem dubious even if it did work. All the things you can do with it are cool, but none of them solve a problem. And as more than one user has found out, the presence of Glass makes people uncomfortable in a way that smartphones and even bluetooth headsets never did. Having Glass on your face creates more problems than it can solve.

Cool is not Innovation

Stainless steel finish? Not Innovation.

Innovation: assembly line production brings the automobile to the consumer for the first time.

Why does this matter to us at Startupyard? Or to any startup? Simply, it illustrates a common problem. Google got very far down the road in creating a product that has yet to justify its own existence. A big company can afford to take a chance like that, but can you? Cool is not innovation, or at least, it is not innovation that works in the tech business. A lot of successful products are very cool; in fact, being cool is an important part of being successful, but being cool cannot make your product a success. What will make your product successful is the urgency it creates in the consumer to buy. If you don’t have that, you don’t have a product as much as a curiosity. And that urgency has to be based on the merits of the product you’ve created, and not on how it looks, or how cool it is- but what problems it actually solves. That’s it, it’s that simple.

Could you leverage the technology in Google Glass to create a killer app that *does* solve a problem that makes Glass worth wearing? Because recent 3rd party promo videos are mostly full of activities that most people either shouldn’t do (read emails while you ride a bike?) or wouldn’t want to (view advertisements in a store? Take notes in a meeting?). Granted, Google has just now opened development to 3rd parties, so thousands of people are about to have the opportunity to prove me wrong. That’s the approach you should have to your products: what would make a device like that worth having?

This isn’t actually a screed against Google either. They are bringing their game to a new level, and offering developers like you a new set of problems to sink your teeth into. They are betting big that they are building a world that you will want to work in. And while we’re not focusing on Glass development at SY, the same rules apply to any idea for a startup. The same basic questions have to be asked.

Convince Me I have One Problem, and Fix that Problem for Me

As our applications filter in during this final week, we’re looking for a number of things. Of course we want to see innovative, cool product ideas, but we are mostly looking for founder teams that are focused on solving problems. What does your product do, that makes the life of a customer easier, more profitable, more productive, safer, or more fun?

Problematize Your World

Credit: Flickr: ralphbijker

If I’m the customer you’re aiming to win, I will buy if you can convince me of one thing: your product will do one of those above things. Because no matter how cool it is, I don’t buy anything I don’t think I need. So look around you right now. What is inefficient about your life and daily activities? What sucks the most to do? What is hardest to get done, or to get other people to do? Could you leverage data in a simple, clean and straightforward way to solve it? That is the kernel of a great idea: turning an annoyance, an inefficiency, or a lack of something into a problem that needs solving.

And when it comes to a business plan, yours has to depend on the bulk of your customers being like me, and not like the rich idiots (or super geeks) that buy things just because they’re cool.

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We’re very happy to announce that Deloitte has joined StartupYard as a new partner to offer our 2014 teams individual management consulting and finance, tax and legal advisory through a wide range of their services. The expertise of a global leader with an individual confidential advisor approach.

The Following is a Guest Post from Stefan Surina and Jiri Sauer at Deloitte.

Over the past two years my colleagues and I have spent a reasonable amount of time meeting and mentoring startup companies. The support of young entrepreneurs is, after all, the main purpose of the Business Clinic run by Deloitte in the Czech Republic. Team composition, ideas, business models and passion levels vary project to project. There are though, a few common mistakes (in corporate jargon “development opportunities”) most “startuppers” should pay closer attention to. We would like to share few ideas with you on how to avoid them.

Know Your Customer

Photocredit: Fotoffigrafie, Flickr

You would be surprised how many times we do not get an answer to such a simple question. You may happen to have unique technical solutions or a brilliant business idea. However, did you do market research? Do you believe there are customers willing to pay for your product or service? How do you plan to approach them and are you able to do it? What about the competitors- how are they perceived in the market and how good are they are at what they are doing? Any startup company needs to have a solid business plan and know what it hopes to achieve; otherwise it is inevitably doomed to fail.

Do It Yourself

“Either gain momentum or fail quickly.”

Photo Credit: Dan Zen, Flickr

There are lots of companies willing to do all the heavy lifting for you. You may purchase specialized market research, all sorts of professional services, a full squad of sales representatives, etc. Trust me, no one will ever take better care of your company and your project than you do. You are the best advocate and the best spokesperson for your idea, your project, and your firm. The passion and determination you radiate for your business partners and customers will make the difference you’re looking for. Stop hesitating, start doing whatever it takes to get your company up and running. The great advantage of the DYI approach remains in saving you loads of money. Plus you get hands-on experience with the market you’re trying to reach.  A Chinese proverb says “The best time to plant a tree was 20 years ago. The second best time is now.” It is natural to consider all your options, and you do not want to take the wrong decision. On the other hand, you’ll never know who’s working on the same idea and could be entering your market the very next day. Do not be afraid to start as soon as you have your idea semi-polished. Either gain momentum or fail quickly. You do not want to end up flogging a dead horse, do you?

Keep It Simple

“If you cannot describe in few words what you are doing are you sure you are doing it right?”

Photo Credit: Hey Paul Studios

International companies put complex decision making processes in place, changes take months, even years. Each company had to grow to such stage over time. It is the usual toll for success. Right after this status is reached the company gets challenged by its competition and new market entrants. Do you still remember Nokia being the world’s biggest cell phone producer? Keep all your processes as straight as possible, do not inflate your organizational structure, do not get carried away by possible opportunities rather than the current challenges, do not spend unreasonable amounts of time and money on worldwide patent protection when you even do not know if there is anything worth protecting, do not fantasize about IPO when you have just opened the shop, etc. If you cannot describe in few words what you are doing are you sure you are doing it right?

Avoid Tunnel Vision

Photo Credit: Michael Caven, Flickr

If you want to make a business in today’s environment, you need to focus on all its aspects. We have seen many companies completely neglect any sort of financial planning. We’ve met with teams having no clue what legal regulations need to be followed. We’ve amazed that some startups were already considering the exit strategy even though they have not sold any sort of product or service yet. Do not get obsessed with one thing and one thing only. Take into account all options and requirements. Nonetheless, do not forget to do it now, do it yourself and keep at it.

In case you are interested in more business insights and more information about Business Clinic, and what Deloitte and TechSquare can do for you please reach us through the comments below, or by email.

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