Last week in Prague, the famous inventor, sci-fi author and speaker Ramez Naam gave a talk about one of our favorite topics: Exponential Innovation, under the auspices of DirectPeople. Ramez Naam is not only an award winning author, he is also a veteran of Microsoft, the holder of 19 separate patents, and the founder of Apex Nanotechnologies, which is the first company to create software tools for molecular design.
The partnership is fitting, as DirectPeople works with companies and startups to realize innovative new projects, building teams around new ideas and executing them for banks, energy companies, and telcos, as well as smaller firms. (Full disclosure: Petr Sidlo, CEO at DirectPeople, is our mentor, and Phillip Staehelin their Innovation Evangelist is our mentor and investor.)
The talk centered around an introduction to exponential thinking, much like those we have written before. What really stood out from the talk however, was Naam’s particular attention to the reasoning that so often fails to predict radical changes in the business and technology landscapes. As important as the exponential innovation framework is, we must put it in context with the logic that has failed to match it over and over again.
The talk was a long one, so I’ve chosen to focus on 3 key errors that perpetually lead industries as well as individuals to dramatically underestimate the effects of innovation over long periods. As Naam pointed out in his talk,
3 Ways we Fail at Predicting the Future:
First: Disruptive Innovation Comes “Bottom Up”
One of the key analogies Naam used was the broad history of world empires beginning around A.D. 1400-1500, with two key events: the European discovery of America by Columbus’s fleet, and the exploration of South Asia by Zheng He of China.
Though the two events bear remarkable similarity in their timing and boldness, there the similarities end. Columbus’s voyage was an accidental success. Attempting to circumnavigate the globe with too little food and resources, his fleet was saved by the accidental discovery of Cuba, a fraction of the total distance to his actual target, East Asia and India.
Zheng He, on the other hand, commanded the most technologically advanced navy in the world. His ships made Columbus’s tramp fleet of the Nina, Pinta, and Santa Maria look like bath toys in comparison. His expedition was well planned and financed, took much less risk, and made much more important near term discoveries for China in the form of large potential trading partners.
Yet, Columbus’s voyage set off an imperial age in Europe that lasted for nearly 5 centuries, and saw the colonization and Europeanization of most of the world. Zheng He’s 25 year exploration of South Asia and East Africa ended in the burning of his fleet, and the closing of China from the outside world for another 4 centuries.
Why these two vastly dissimilar outcomes? Moreover, why did the results of a well funded, professional, and government backed expedition (that of Zheng He), result in nothing of significance, when the poorly funded, badly planned expedition of Columbus ended in Spain’s domination of South America for hundreds of years, and Britain’s eventual domination of half the world?
Top Down V. Bottom Up:
There is one key differentiator: China’s exploration of the known world was a top-down affair, instigated by the emperor, and carried out on behalf of China’s leadership. It was essentially a government program/ Meanwhile, Columbus’s voyage was backed by Queen Isabella of Spain (after other monarchs turned it down), but she served as little more than a financier. The project was from the beginning a bottom-up effort by Columbus, and would have been doomed to failure and the death of the entire fleet, if not for America conveniently sitting between Europe and Asia. Columbus lucked into a discovery that eventually made him rich and famous. He took the key risk (with his life), and so he also owned his share of the rewards.
Again, Naam directs our attention to the effects that leadership structure had on the resulting discoveries. While Zheng He returned to China a hero, his discoveries and fleet were the property of the Emperor, who chose simply to dismantle them, rather than to take the risk of engaging with foreign trade and potentially coming into conflict with foreign powers. To China, the fleet represented a cost and risk that was evaluated based on the status quo. Since the voyage proved that China was the most powerful nation on Earth, the Chinese saw no more reason to engage with the outside world and risk their already safe position.
Stability Becomes a Liability
Columbus was in a weaker position from the beginning. So why did he win? Naam argues that it is because of the inherently competitive nature of European politics at the time. While China was unified under the Ming Dynasty for 3 centuries (from 1368-1644), Europe’s political landscape was inherently unstable, and composed of hundreds of individual state-like entities, with nobles fighting for position and consolidating control of their regions.
It was that instability which made it difficult for any one government to back Columbus, and it was the need for a competitive advantage that drove Isabella, who had only just united Spain under one ruler, to fund him. The price of not having state control of the expedition was that Columbus himself (along with the explorers and conquistadors who followed), personally profited from their efforts. A traditional of entrepreneurial exploration was established because Europe could not afford to publicly fund it.
Thus, Columbus’s voyages were highly disruptive to the established order because Europeans were desperate to gain competitive advantages over neighbors. Meanwhile China, the strongest nation in the world at the time, had no such need. In fact, quite the opposite, as opening itself to trade only served to destabilize China when it eventually did realize it could no longer afford to remain closed. It was finally Britain that forced the opening of China and established Hong Kong as its trading colony in the late 19th century.
One does not have to look too hard here to recognize the tech startup and the modern corporation. Stability for its own sake can turn to a liability over time, as hungry younger competitors adapt too quickly and are too numerous to be stopped.
Second: Exponential Innovation is Deceptive
Naam spent a lot of time covering the ways in which exponential innovations deceive people into seeing them as always just about to slow down. This is because the fundamental drivers of innovation are often mistaken as being the same as they were before the exponential growth curve took effect. He shared this graph, for example:
The graph shows a classic exponential curve in the electrical capacity of solar power from roughly 1998 to 2014, along with the World Energy Organization predictions of future growth. As is plain to see, every single prediction over 12 years shows static growth, but realigned from the new actual baseline in any given year. Every prediction is not only wrong, it’s wrong in exactly the same way.
Why would that continue to happen for 16+ years in a row? Surely someone at the WEO might notice it happening and try to figure out why?
Exponential Innovations are on a broad front:
Naam provides a partial answer in this blog post on the topic. He points out that predictions typically take a snapshot of the industry at the present moment, and extrapolate expected advances based on what appear to be limitations to growth that are non-surmountable without a step change in the technology or the underlying economy.
This works most of the time, because most of the time the specific conditions for exponential innovation aren’t met. Namely: that advances in different aspects of a technology produce feedback to affect growth in other areas. Innovation is happening on a “broad front.”
In this particular case, the reason the predictions are wrong is not because their underlying assumptions are inaccurate, but because they are about the wrong things.
For example, predictions of the slowed growth of solar energy may point to theoretical limitations in the materials being used to make solar panels. Indeed, solar panel efficiency is not growing as fast as it did in the past. Instead, as Naam points out in his post, the manufacturing methods are improving faster instead, which is compensating for the diminishing returns of material science advances.
This effect repeats itself over and over again. If it isn’t manufacturing, it’s software. If it isn’t software, it’s infrastructure changes. If it isn’t that, it’s changes in the consumer business model that accelerate growth. The growth in total wattage keeps going up exponentially because all these advances are driving each other forward at once.
Third: Exponential Innovation is Democratizing
On the last point about innovation around the economic models of new technologies, Ramez Naam took special care. He argues that exponentiality of innovation depends on the technology’s ability to be democratized over time.
In fact, in reference to solar power, he used Nuclear energy as a counter-example. Despite the enormous efficiency and effectiveness of modern nuclear power, it is failing to keep up with solar energy in the growth of its footprint. In fact it is declining. Predictions by Isaac Asimov and many others about a nuclear future in which atomic cores power watches and handheld computers, or even body implants, are now severely dated.
Why is that? Naam argues that it is because Nuclear power is difficult or impossible to democratize. Simply because of how it works, and its ability to be weaponized, atomic power must remain under the control of governments. This means that the core technologies involved with nuclear power have fewer chances to influence other areas of technology growth, and vice versa. Nuclear grows in a kind of parallel, where advances don’t greatly benefit other technology areas, and so other technologies don’t arise to create demand for new innovations.
Nuclear is not doomed because the technology doesn’t work, but rather because it can’t be enmeshed with other businesses and technologies. Like China’s great navy in 1400, nuclear is a state operation: it can’t be democratized because it is too dangerous.
If we go back to the previous example of Columbus and Zheng He, we see that a classical prediction would state that the Chinese technical superiority would allow them to predominate or to catch up quickly with the west. But what actually ended up happening was that the west innovated around the business model of exploration first, and the attractive monetary incentives led a revolution in technology that profited from the scalable finance model that colonization had created.
Consider the fate of nuclear vs. solar power in that context. Nuclear is far and away more complex technology. The only problem is that might not matter. The innovation that advances on a broad front and permeates society will win out.
By the time the British Empire came into direct conflict with China, it was the English who had developed the use of colonies as markets for their own goods, rather than a source of resources for the use of their own governments or ruling classes. Thus the English could afford conflict with China, because colonization was immediately profitable to those involved, rather than to established players only.
Indeed, this innovation is what made the American revolution the opposite of a disaster for England. Because England had repurposed itself as the workshop of the world, the growth of American power and economic strength helped the British empire to finance itself through trade with America. Britain had innovated away from the old definition of an Empire through mercantilism and trade. The state did not have to directly fund exploration and colonization because it shared the profits with the colonies themselves.
The English democratized economics itself. That was the innovation. It was one China still struggles to match.
So too with solar energy: solar power can afford to compete directly with traditional sources because it brings the benefits of the new technology closer to those who will profit from it. Even when solar was not at cost-parity with traditional fossil fuels (which is no longer true), it was cost effective for those who adopted it, because they saw the benefits personally, and over the long term. The risk of adoption had an appropriate reward.
Unlike with nuclear power or coal, which require long-term up-front investments far from view of those who pay for them, solar is a source of energy consumers and businesses can own themselves. This means they’re increasingly likely to invest in it, and to see less risk in doing so. The technology is thus democratized, and suddenly it can be the basis for knew, previously unimagined products or businesses.
The innovation can be in the business model this makes possible: not always in the technologies that underwrite the growth. Exponential Innovation shifts streams and goes around obstacles, rather than charting a straight line in one area. Thus predictions from the WEO may accurately represent technological limitations, but still fail to predict growth because they are using an outdated economic model.
Is There a Better Way to Predict the Future?
On the one hand, if predicting the future were as easy as a new mental framework, then everyone would be doing it already. Yet on the other, we can avoid making the same wrong predictions over and over by paying attention to what causes an exponential growth cycle in a particular industry or technology.
One of the key takeaways for me from Ramez Naam’s talk was that exponential change occurs primarily where there are multiple axes of advance being explored at once. If one hits a wall, another can cause the technology’s adoption to grow any way. What is inherent in an exponential growth model is that growth never depends on one particular characteristic of a technology, but rather on the overwhelming incentives it creates. People want it to grow, and so it does. That was the fundamental insight of Moore’s Law decades ago. Limitations we recognize as crucial today can become meaningless tomorrow, because the incentive structure for innovation is self-feeding.
Singularity University uses a framework called the 6 “D”s (also used by Ramez Naam), namely: Digitized, Deceptive, Disruptive, Demonetized, Dematerialized, and Democratized. In broad strokes, they argue that an organization or industry becomes exponential when the following conditions occur:
- Advances are based on an already exponentially scaleable platform (ie: computing, or energy generation)
- Advances appear to be insignificant or even slow at first, although capabilities are doubling and redoubling on small scales.
- Advances begin to outperform existing solutions at sub-scale (eg: Solar vs. Coal)
- Cost falls as demand rises.
- Advances become commoditized and ubiquitous.
- The underlying technology becomes commonly achievable and can be applied anywhere.
Given these conditions, a technology may reach an exponential growth curve, and if we recognize a technology that begins to fall into this particular virtuous cycle, we must closely examine whether or not traditional predictive frameworks of the future remain useful.
Last month we announced that OptioAI, a member of StartupYard Batch 8 and StartupYard’s first Georgian startup, had joined TechStars Berlin. Techstars is the world’s largest accelerator network, with over 1000 invested companies, and $3.3bn raised over the past 12 years. OptioAI is through the first month of the program already, and will present at the Berlin DemoDay on April 19th.
OptioAI joined StartupYard with a plan to create a text-based finance management platform for millennials who weren’t seduced by traditional banking (which is to say, most of them). Today their core mission remains the same, and has evolved to become a text-based platform that “makes your money talk to you,” by connecting users with their financial data in a natural way, via voice and chat.
I checked in with Shota Giorgobiani, Co-Founder and CEO at Optio, to find out how the Techstars program is going. Here is what he had to say, this time via email.
Were you surprised to be selected for Techstars right after the StartupYard program?
The funny thing is, applying to TechStars started more as an experiment.
We’d heard how hard was to get to Techstars. Techstars does not officially publish information about the number of applications they get for every batch, but rumors say that only 1-2% of initial applicants get to Techstars and the number of applications per program can be near 1000.
Furthermore, Techstars generally accepts only 1 or 2 early stage company per batch, so it looked almost impossible right from the beginning. Our goal was to understand how the process works and prepare for the future when we would be “ready,” but as always, you never know when you are “ready” and what “readiness” means. So we ended up by being selected for Techstars Berlin, which actually is a great outcome of the “experiment!”
How does the application process work?
The first part of the selection is pretty much standard: you send your application, you are shortlisted and then have a Skype call. If you are in the final round, you are invited to selection day.
Some cities have 2 meetings with startups and some just one, but overall it’s the same as at StartupYard. The main difference is the final selection process: It’s not like a “traditional pitch” competition, or a series of one-to-ones, it’s more a face to face meeting with the whole selection committee.
We had 2 meetings, each for 15 minutes with 2 different groups. The idea of this meeting for Techstars team is to get to know the team. It’s a known fact (and it’s true not only for Techstars) that most of the time, especially early-stage startups are chosen because of the team, not because of the idea or product. And when I mention team, not only the credibility of the team is important (like how many years have you been in the industry), but also if the team can be managed and helped to make better decisions or not.
This was something we really improved on at StartupYard: how to listen and to show that you are taking questions seriously; how to engage with debate and not be defensive.
Also very important is to show what you have. No matter if it’s a working product with 1000+ users or mockups of your idea. You should be excited about what you are doing and you should naturally show this excitement. It’s even good to start your talk with the demo (and most of the time – you are asked to do so).
One last thing: 15 minutes is too short period to cover everything. You may be tempted to use up your time talking about your plans, but you should be able to cover most important topics in 2-3 minutes and move to the Q/A part, where you have a chance to show your competence, passion, vision and also show where Techstars can help you. So you should be prepared and be able to manage your time well.
For us, it was a little challenge, because we naturally tend to speak a lot about our company, and you should really train yourself to do it quickly. At the end of the day, it’s all about the match: a personal match between team and Techstars and clear view of how Techstars can help, if any of these is missing, I think you will not be accepted.
How did StartupYard prepare you for taking on this next step? What has been the biggest challenge at TechStars?
I can talk about that for hours, but to be short and clear: I think, based on our current stage, we had little chance to get to Techstars, if we had not been in StartupYard.
There are clear reasons for that: at StartupYard we learned to describe what we do and who we are quickly and clearly. This is a crucial thing, you should be able to explain in 2-3 mins why are you building the company, what are you building, how this team can achieve the goal and etc. And that’s very hard to do, it takes time and practice. Second is credibility: I think it’s very hard to get into the world’s top accelerator just by sending the application. Sure you can, but for us, at such an early stage and being from Georgia, it feels impossible.
Credibility and your network are so important, aren’t they?
Your network is your key to the world! You have to always be building it up and making it stronger.
For example, our story with Techstars actually started in Prague, in StartupYard, where we meet Techstars Berlin MD, Rob Johnson, and had the opportunity to talk with him and tell what we were doing. Rob was there because of StartupYard, so already you can see the network effect.
Rob suggested we try and apply for the upcoming program. When someone tells you that, listen to them! That’s a shortcut to being noticed among hundreds of applicants, because it comes from within their network. It comes with a degree of trust and confidence.
And believe me, if you are not already generating revenue and growing steadily and are still proving that your product makes sense, such a “shortcut” can be your only chance.
Overall, StartupYard gave us a lot of direct knowledge and experience and maybe even more importantly, wisdom, which helps us every day at Techstars.
For example, after one bloody month of mentorship in Prague, we had a very clear understanding of how the process looks and feels, how to prepare for meetings, what to expect from mentors, etc. Having that experience is invaluable when you get to Techstars and it helps you get the most out of the mentors there.
How has the move to Techstars affected your strategy going forward? What do you hope to get out of it?
The main challenges now are achieving strong product-market fit and finding a sustainable business model.
Have you made big changes in the product?
Yes, we just released an updated version and lots of changes are ahead.
We decided to focus on the simple, yet very valuable functionality of the product, so we narrowed down our long list of the feature set to something, we believe is valuable for our users on a daily basis. Still, we have to do lots of experiments and see how it goes, but we are now more solid in short-term vision and plan.
In short, we want to create a super simple tool/routine for our users, that can help them with daily money management. No long-term savings goals, no 5-year plans of repaying your mortgage – we are focusing on daily money management. Sounds simple, but as usual, the devil is in the details: if you can’t manage your daily spending, there’s no chance to solve your long-term problems., So for now, that’s our main focus and strategy.
This is going to be a post about what makes startups fail. But first of all, if you don’t regularly read CBinsights and receive their newsletters, then stop reading this post and go sign up. There’s a reason most newsletters don’t have 400,000 weekly readers.
If you do, then you may have seen a bit of content that CB insights has been updating consistently since 2014: The Top 20 Reasons Startups Fail. This is a list compiled from a sample of over 100 “Post-mortems,” written by founders and employees of high profile startups that failed.
The list is ranked by the number of times a specific reason for failure is cited – each post-mortem contains some combination of these reasons:
StartupYard’s Top 3 Startups Fail, and How to Avoid Them
We won’t detract from this piece by hashing out every reason startups might fail. Instead, we’re going to focus on 3 of these reasons, and how to avoid letting them kill your startup before it starts.
Some of these reasons also explain why we choose not to work with some startups that apply to our program. If you’re thinking about applying to an accelerator or talking to early-stage investors, then these are important questions to ask about yourself and your business.
Oh boy. This is a big one. For me, this is the big one. The mistake that kills a startup dead like a beautiful rose in a dry vase. Ignoring your customers, refusing to think about them and to be driven by their needs, is the kiss of death.
It all starts so innocently: a humble coder working nights and weekends on a passion project. That’s the way a startup should start, but the nature of a startup is to grow – not just in size but in mentality.
Every startup investor and mentor has had this conversation:
Mentor: who are your customers.
Founder: Well we are our own customers.
Mentor: Yeah… but who is going to be your customer? What do they need?
Founder: They need our product.
Founder: Because it’s awesome. They’ll love it.
Mentor: Yeah but… why your product? What not a competitor?
Founder: Because we are newer/smarter/cheaper/better UX, etc.
Mentor: How do you know that’s what they’re looking for?
Founder: Because we are the customer.
Points to you if you can spot the tautology in this reasoning. I strongly agree that a problem you are passionate about solving has to be one that affects you. In that sense, you should be your first user, you just need to remember that the customer is somebody you can also learn from.
A good way of remembering that is this: you didn’t buy your product. You built it. Your customer will buy it. Even if you both have the same problem, you are not the same person.
Again, it’s essential to create something you would use yourself. It just isn’t enough. Great products involve a deep insight into the motivations of customers; even when that insight is a very simple one, or an instinctual one, it does not come about by chance, but by observation and curiosity about people.
Thinking About Your Customers:
In short, it comes down to having a process. Here is one you can try:
- Develop customer focused product/messaging frameworks (aka: Positioning)
- Make educated guesses about your customers in that framework (aka: Personas)
- Test these frameworks with real people and an early product or mockup.
- Redevelop your product and business strategy based on what you’ve learned
There’s not one way to do this, but there are plenty of ways to do it poorly. Not having a clear idea of what you know and don’t know about customers is a mistake that’s easy to avoid. Paul Graham put it this way in one seminal blog post:
“When designing for other people you have to be empirical. You can no longer guess what will work; you have to find users and measure their responses.” -Paul Graham
2. Lacking Passion
“You need passion,” we are so often told. Less often are we told what that means.
I think this is why some founders confuse “having passion,” with “being energetic,” or “assertive,” or “dominant.” These are not the same things.
Passion comes from within – it’s not a performance art; it guides what you say but also how you think, what you are willing to do, and what setbacks you are willing to accept. In short, it’s not about how you behave, but about who you really are.
Everyone has some passion. It’s the thing that keeps you up at night, and bothers you throughout the day. A little voice in your head telling you something needs to be done.
Understanding their own passion is pretty hard for some people. We’ve seen that a lot. We spend a lot of time with founders trying to find out what gets them really engaged and excited about their work. What gets you out of bed in the morning is what’s most important in your work.
One of the first thing we ask applicants to StartupYard is: “Why are you doing this?” The answer says a lot about your passion.
A lack of passion is easy to spot, if you know what to look for. Here’s an overview of the qualities that typically tell us a founder lacks the passion they need to move forward:
- Risk Avoidance: Founders who are unwilling to take risks, such as leaving a job, moving to a new place, or bringing on a co-founder.
- Waiting: The founder who bases their decisions on the actions of others; who waits rather than acts with intention. “I will leave my job if you give me funding.” “I will decide what to do based on what investors say.”
- Focused on Money/Valuation: Some founders who are overly focused on “getting the best deal,” do so because they value control and personal gain more than achieving their stated goals.
- Motivated by Opportunity: I sometimes say: “don’t pitch me an opportunity, pitch me a company.” A founder who talks about getting a piece of a huge market might not be doing what they do out of a love for the work.
- “Win At All Costs” Attitude: In my opinion, this happens when founders confuse passion for ambition. Ambition isn’t a bad thing, but it isn’t passion for what you do- it’s a passion for winning. Your passion for helping customers has to ultimately outweigh your personal ambitions, or else you won’t make decisions based on what’s right for them (and thus your business), but rather what fulfills your ambition.
Seeking your Passion: How do you know you’re doing things for the right reasons?
In my view, this is a simpler question than people often make it. We are taught from an early age that we should emulate those who are successful, but education systems often don’t help us to really understand why successful people are special to begin with: because they have a passion for what they do.
For all the tactics, tricks, and habits of the rich and famous, passion underlies everything. People succeed when they do what they are good at, enjoy it, and are willing to work harder at it than anyone else.
Just consider the following questions if you want to get in touch with your true passion:
- If I were rich, would I stop doing this?
- Are there better uses of my talent?
- Am I waiting to enjoy what I am doing?
- Am I doing this in order to be able to do something else?
If your answer to any of these is “yes,” then you ought to think hard about what you’re doing. You haven’t yet found your passion.
3. Missing Product-Market Fit (PMF)
“When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins. When a great team meets a great market, something special happens.” – Andy Rachleff, CEO, Wealthfront
Even if you’re doing something you really care about and you’re doing it for customers you understand really well, you can still fail to make the right product for the right market.
Andreessen-Horowitzs has a fascinating post on product market fit, in which they quote Andy Rachleff who developed the PMF framework, starting with what he calls a “Value Hypothesis:”
“A value hypothesis identifies the features you need to build, the audience that’s likely to care, and the business model required to entice a customer to buy your product. “
There are two sides to the PMF equation. Market, and Product. Missing PMF means failing to address a specific market with exactly the right product, at the right price.
Andreessen-Horowitz heavily emphasizes finding the right market first, which is another way of saying that you must identify the right problem to solve. If you pick the wrong market, you can end up building a product that people love, but won’t pay for.
This happens more than you’d suspect: plenty of popular products have never gained good PMF. Even mega-popular products like Twitter can teeter on the edge of failure, and take over a decade to achieve PMF (which Twitter seemed to do only in 2017, with their advertising business and focus on media and news).
Other orphans of bad PMF are products like Tumblr, Vine, Soundcloud, and BetaMax tapes. Each of these has either failed, or is now on life-support. The latter example of BetaMax is included in this extensive list from Business Insider. In fact, virtually all the products in this list failed because of lack of PMF. Not because the products were bad, but because the business model didn’t work: the market didn’t sustain them.
The Right Product
“First to market seldom matters. Rather, first to product/market fit is almost always the long-term winner.” – Andy Rachleff
So picking a problem you can solve, for a market that wants a solution critical. Still, you can manage this and still fail. The product that solves that problem also has to appeal to the customer enough for them to use it.
A great example of this also comes from BI’s list: The Apple Newton line, which lived from 1993 to 1997, and which Wired later called a “Prophetic Failure.” What most people don’t know about the Apple Newton line was that they very accurately predicted three distinct product categories, which would emerge in the following 15 years: the smartphone, the tablet computer, and the modern consumer laptop.
In many ways, looking at a Newton from 1995 feels like looking at a cyberpunk version of a modern device, made to look like a 90’s product.
The Newton failed in three categories that would go on to be the fastest growing market categories in history for computing, but still failed because the technology wasn’t ready. As the project lead Steve Capps said later: ““We were just way ahead of the technology. We barely got it functioning by ’93 when we started shipping it.”
The series failed at least partly because the market was not ready for such devices, but also because of its infamously bad character recognition feature. Even though later editions of the devices improved on the original, it was too late for Apple, which would spend the next 20 years rebuilding itself and slowly reintroducing all of these concepts in the form of the iPhone, iPad, and Macbook.
Testing the Value Hypothesis:
Like listening to your customers, PMF is all about trial and error. Make certain assumptions, test them with a minimum viable product, make more assumptions, and test them. The clearest milestones for PMF come from customer feedback about the Value Hypothesis.
You can begin to test this hypothesis right away, even with just an idea- with no product to show. It’s pretty simple: if you get confusion, lack of enthusiasm, or even hostility, either it’s the wrong product or the wrong market. Find out what the person you are talking to does want, and also look for others who do want the product you’re pitching. Chances are the answer is somewhere in the middle.
This is a bit like fishing. Either change the location or change the bait. It just takes time and consistency. Fish long enough, and you can get lucky.
For example, I was attending a tech conference a few months ago, when I got the chance to meet the former Senior Vice-President of a major electronics company. He mentioned that he helps early stage hardware companies find PMF, and I mentioned we had just such a company seeking PMF: Steel Mountain.
He asked me what the company did, so I gave him the 90 second water-cooler pitch. Within a few moments he was nodding. When I got into some of the features, he was saying: “yes… yes.” When I finished, he exclaimed: “I can’t believe no one has done this! When can I buy one?”
This, I must repeat, was the former Senior VP of a major electronics company, whose products you probably own. Nobody had ever pitched him this particular idea in just the right way before. That is a powerful indication of PMF. You don’t have to convince the customer they need the product, because they know they need it.
Still I may lack some important information. Is this customer representative of a distinct market segment? Is the business model workable for the target market? Does the product work the way they want and expect?
You still have to explore all those details, but enthusiasm for the product’s core value proposition is a great milestone. It was then the Steel Mountain team’s job to continue testing the product with the same customer and others like him.
When I spoke with Janos about his company way back in early 2017, this is what I had to say:
“The past year has seen a boom in chatbots, which have become a buzzword in the tech industry, most particularly with retailers and big brands. StartupYard this year handled dozens of applications for chatbot startups, but despite the buzz, none of these seemed to us to have really discovered the inherent value of automating customer interaction on social media, and in customer care. Chatbots are not a new idea, after all, and much of the recent hype has come thanks to Facebook opening its platform for 3rd party developers, which has spurred renewed interest in new applications for chat.”
Today these words seem more true than before. Today, brands and marketers are facing the prospect of decreased access to their customers across social media channels, prompting them to rethink their social strategies, and put even more emphasis on chat and messaging.
Though we still get applications for chat-bot related startups (and we even took another in Batch 8: OptioAI, which has gone on to join TechStars), finding an immediate recognizable value for end-users remains a big challenge. So we’ve been very pleased with our choices so far, as both companies have been able to prove that the genre can be leveraged into compelling and useful products that people really value.
I sat down to catch up with Janos about his team’s experiences since leaving StartupYard nearly a year ago, and see what Chatler has accomplished in that time.
Here’s an overview of what I learned, and a look at how Chatler sees the near future for chat, and for itself:
Big Brands Love Chat (and Chatler)
Since finishing at StartupYard, Chatler has signed The Coca-Cola Company as a paying customer in 3 markets, Czechia, Hungary, and Serbia.
Chat via Facebook messenger is a growing category for major brands, who see chat volume increasing faster than any other channel. In addition, recent major changes in Facebook’s algorithm have left big brands scrambling to refocus on messenger as a prime channel for customer outreach. As Facebook decreases brand access to customers via the newsfeed, companies like Coca-Cola are looking to messenger as a bigger part of their future strategies.
That puts Chatler in the right place at just the right time to help big brands handle their social media presence, when content may become less important than personalization and two-way communication.
Many big brands currently use contact centers operating enterprise CRM software, so Chatler has responded by developing API integrations for software companies like vcc.live. The company provides contact center CRM software for major brands and contact centers in Germany, Poland, Hungary, and Romania. In turn, these larger software providers can offer their brand clients, and also their retail and finance clients, the option of adding Chatler’s AI layer into their current toolset for customer care communication.
That’s a win-win for Chatler, who can provide the core AI functionalities for large clients that already have enterprise solutions in place. With Chatler, enterprise CRM providers can focus on providing the full stack of services to clients. Chatler will be used in this context to monitor communications, and develop automated suggestions and responses that are shown to get the best responses from customers. Chatler can help contact centers use their collective expertise more effectively, and refine customer support techniques using AI.
Investors See the Potential
Chatler has now raised 330,000 Euros (100m Hungarian Forints), from seed investment program of Hiventures Venture Capital Fund Management Ltd.
The investment has helped Janos and his team to build and prepare the launch of their enterprise-ready API, and it has opened doors to high-profile events and demo days, such as those of KPMG, and MOL, Hungary’s largest energy company.
And of course, Chatler is hiring! They’re looking for everyone from developers to salespeople. If you’re in Budapest, or if you’d like to be, and you love what they’re doing, send them an email.
Corporates are Slow, but SME is Interesting Too
While the Chatler team has had to wait longer than they would have preferred to release their API for enterprise customers (which is one of our Startup Facts), the waiting has also reignited their interest in SMEs and social media influencers, who can get value out of Chatler right now.
The team has already recorded some traction by selling their solution to Startup Safari, a well attended city-wide event for tech people in Budapest and elsewhere. Safari will use Chatler to manage the high volume of messages they receive during the events. In some cases, Chatler will work in parallel with a chatbot to allow fully automatic responses to simple questions on schedule, location, and other details of individual events.
That’s why Chatler has created a browser plugin that allows individuals or companies to begin to create a knowledge base from their correspondence on Facebook. Over time, Chatler’s AI functions will begin to suggest answers to common and eventually even complex questions as well. The plugin is designed to enhance the normal chat experience via Facebook, not to redesign it or to fully automate it. Chatler calls this “Next Level Chat.”
We have tested the plugin, and it’s very simple to use. Give it a try!
Leading the Chat Conversation
Chat is a unique channel for customer communication. It isn’t email, it isn’t the phone; it’s something different.
That’s why Chatler has also been developing content for SMEs and big brands to learn about this form of communication in the business context. They have started an active blog, where companies can learn about engaging with their customers, Chatiquette, and turning your chat channel into a content marketing channel as well.
Want to learn more about Chatler? Message them!
The best way to interact with Chatler is through their own product. You can start a conversation with Chatler on Facebook Messenger by opening the app on your phone, selecting “People” at the bottom of the screen, and tapping “Scan Code.”
Welcome to the future.
StartupYard Batch 9 kicks off in a little over a month. Final selections are happening next week. Time flies! We can’t wait to see who will be joining us for Batch 9.
Every round, we like to share a visualization of the application process. While we haven’t made the final selection, we can share our initial data about the applicant pool. All data is anonymized, but you can get a nice sense of the trends we encounter with each round.
A full overview of the selected teams will be available at least a month after the start of the program (so no earlier than May).
As we did for Batch 6, and then again for Batch 7 and Batch 8 we find it very useful now to look back on the applications, and see what’s changed this time around. Where are people applying? What are startups working on? What are the hottest buzzwords? Previous experience has shown us that StartupYard applications can be revealing about the key trends to watch for in the next 6-18 months.
Here we’ll give you a visual trip through our applications for this round, with our analysis, and comparisons with previous years.
StartupYard Batch 9 : Who’s Applying?
StartupYard Batch 7 was the first time that StartupYard attempted two rounds of acceleration in one year. Batch 8 and 9 also come in close sequence, with applications closing on Batch 9 only 2 months after the end of Batch 8. The pattern in volume of applications has remained the same: we received almost exactly the same number as with Batch 8: 149 in total.
Below is a word cloud of the areas in which Startups identified their top skills and the markets they are working in. Note: we have eliminated the word “software,” due to its ubiquity in the application pool.
As we can see, Finance takes the top spot, along with Transportation, and Artificial Intelligence coming in second. We can hardly be surprised by this: between Bitcoin and Blockchain hype, Uber’s continued fascination for tech people, and the many emerging use cases for AI or IoT, these areas are naturally attracting fortune-seekers with new ideas.
In Batch 7 and 8, we noted that Marketing took the top spot in terms of which domains the startups were interested in. This was followed in the past by Data, and then Marketplace.
Going even further back, startups from Batches 5 and 6 were still focused on Platforms, Mobile, and Apps, with UX and UI being important skills to mention. Today, these terms barely appear. It seems platforms with good UX and UI are now seen as default requirements for new products.
Marketing is Dead: Long Live Marketing
Interesting to us is the fall from grace of Marketing, which led the board for years. It may well be a reaction to the broader cultural shift toward suspicion of Big Data and Advertising that have dominated the tech conversion in recent years. Facebook and Google have particularly been the subject of much concern over privacy, the spread of propaganda, and the wellbeing of users.
The rising focus on AI along with Blockchain seems likely to be part of a shift in general consumer sentiment against the mass collection of private data, with its inherent loss of privacy and control over our experience of online services. At the same time though, these terms are increasingly being used as instruments of marketing: companies now talk about using Blockchain and AI to do things for which these technologies may or may not be huge game changers.
While data is still the foundation of AI, it may be that startup founders see what they’re now doing as beyond the data mining business, which is already quite crowded. Big Data may have simply become a fact of life. On the other hand, new privacy regulations in Europe, and a cultural backlash against big data collection may be pushing entrepreneurs to avoid the need for massive data collection.
Finance and Distributed De-Uberization
Finally, Finance has made a big break from the crowd, likely because of rapid shifts in the way consumers are treating finance products. PSD2, European open banking regulations that force financial institutions to allow customers to share their financial data across multiple platforms, was meant to drive more innovation around consumer finance products.
We see increased interest not only in personal finance, but in insurance management (both B2B and B2C), payments, and consumer/corporate investing.
In addition, the sudden rise of the ICO, and thousands of emerging technologies based on the Blockchain, have inspired startups to become “finance” oriented companies. Tokenization of services and networks opens the opportunity for financial products to become involved in more areas of the economy than before.
Whereas in years past, we saw many applications interested in the “uberization” of many services, today startup founders are seeking to “blockchain” everything, from in-person payments to insurance contracts, to day-labor.
This cannot be too surprising, given that the sharing economy Uber has represented for many years has really failed to deliver the benefits it has long promised. Indeed, Uber itself has still failed to become a sustainable business, and has suffered a severe backlash from consumers – once the name on the lips of every founder, Uber is no longer in the conversation.
Whereas “uberization” leverages a common platform like a mobile app to create a marketplace, and extracts rent from the different participants, blockchain startups forgo the platform in favor of a protocol that can be remixed with other services, and which is not centrally controlled.
This is doubtless appealing to startup founders, because it distances them from the deeply unpopular practices and cultures of companies like Uber. Uber still takes a large share of every transaction on their platform, but it is increasingly clear that their centralized model does not deliver significant benefits to the market (which has been largely covered up by Uber’s massive subsidies for drivers and riders).
This is not even to mention that Uber itself is not a sustainable business after nearly a decade in operation. It lost nearly $4 billion in 2017, leading Forbes to label its business model “fundamentally broken,” something many critics had been pointing out for years already.
Startup founders are realizing that services like Uber are certainly attractive to consumers, but they are also asking: “why do you need Uber the company to have Uber the marketplace?” Most of what Uber can deliver to customers and drivers can be done more fairly, more reliably, and more cheaply using a distributed service model.
Where are Startups Applying From?
Let’s start with a view on where applications came from for Batch 8, and compare that with Batch 9. Here they are in sequence:
I’ve changed the color scheme here slightly to emphasize the volume of applications from 2nd tier countries. As you can see, Czechia is still the leader, but it leads with only a third the number of applications as even last year. Batch 8 had about 45 applications from Czech companies, Batch 7 had even more. This year, there were only 16 Czech companies in the pool.
At the same time, 0ur geographic footprint widened considerably. This year, we attracted applicants from 44 countries: more than ever before. Batch 8 saw only around 32 countries. New countries included Sri Lanka, Gibraltar, Taiwan, and Lebanon- with one application each.
Which countries saw an uptick in applications? Surprisingly the biggest jump was from the UK, where 13 companies applied. That’s more than any previous year. Perhaps Brexit nerves or political tensions are pushing UK entrepreneurs to seek growth in Europe before it’s too late.
Anecdotally, we noticed that a significant portion of co-founders in UK based teams were in fact southern Europeans or other ethnicities. Are startup founders looking to abandon the UK and return to mainland Europe before the Brexit hammer drops?
Applications from Ukraine and India also rose this year. Ukraine’s jump was expected because Ukrainians have recently been granted the ability to visit Europe without need of a visa in advance of travel. This is good news for startups, as it decreases a huge barrier to Ukrainian companies seeking to do ongoing business in the EU. It may also be a matter of concern for Ukrainian startups, many of whom have personally confirmed to me during visits that more young people are leaving for the west than in the past.
Full Employment Has Huge Impact
We had believed in the past that the number of applications from Vysegrad countries would continue to increase at a faster pace. This has not happened over the past two cycles. Instead Slovakia, Hungary and Poland contributed fewer applications in total than came from Ukraine alone.
There may be a key to explaining this in the employment statistics across the region. Slovakia’s rate of unemployment dropped like a rock in 2017, from almost 9% to less than 6% today. Anything under 5 is considered “full employment,” meaning that jobs are available and workers in demand across the income spectrum.
In fact, most of the Vysegrad group are suffering from a lack of workers for the first time since the fall of communism. Poland, Hungary, and Czechia are all below 5%, whereas the European average is about 8%. Wage inflation has increased accordingly, rising in Czechia to nearly the 2007 pre-crisis level of 6% per year.
Meanwhile, unemployment remains higher in Eastern Europe, with Ukraine close to 10%.
For the first time in many people’s lives in Vysegrad countries, governments are taking measures to improve workplace participation among young people, encouraging them to join the workforce earlier.
Because unemployment is very low, wage inflation and working conditions are improving quickly, possibly encouraging more young people to seek jobs in existing companies, rather than starting their own businesses. Increased career security may also give employed people less motivation to leave a comfortable salaried lifestyle and found a startup.
As living standards rise, the risks of starting a business are more obvious: loss of opportunity and income can be more acute when incomes are rising, as people tend to fear losing what they already have. In times of high unemployment, some will take more risks, having less to lose.
In Which Domains are Startups Working?
One of the key items every year is the breakdown of “domains,” or areas of tech innovation where the startups are working. This is often somewhat different from the market focus, as startups seek to apply new technologies to old problems, or bring existing technologies into new markets for the first time.
The core domains we focus on represent more than half of all applications. Of these domains, Machine Learning remains the strong leader it was last year.
However, IoT and Blockchain have strongly edge out Analytics and Security, which have been dominant in previous rounds.
It’s important to note that the domains startups identify themselves as belonging to may be a function of fashion as much as the reality behind the words. Whereas in previous years, we would get many applicants who called themselves “security companies,” today those same companies might emphasize AI, or IoT as their domains, with security being downplayed.
In the previous round for example, Steel Mountain, which makes a security device that employs machine learning to hacker-proof connected homes and devices on Wifi, called itself a Security Company. Today, it might rather call itself a Machine Learning company, which does security, or an IoT device company that uses Machine Learning.
Often the product can be the same, but the emphasis in the application may change to fit the new trends. The security topic has somewhat cooled for startups, as blockchain has taken over many of the same applications, and as security companies become more common.
As always, the largest single group of applicants represents none of our areas of focus. Some of these companies do in fact work in IoT, Blockchain, or AI, but they choose for whatever reason to emphasize their domains differently.
This has a lot to do again with how founders see themselves and their future in the industry they’ve targeted.
We sometimes ask applicants: “Do you want to be a technology company or an ‘X’ company?” X being insurance, music, entertainment, finance, or 101 other possible domains. The distinction at an early stage is not always completely clear, especially because founders are not always from technical backgrounds, and don’t always see themselves as primarily tech companies.
One conversation we had with an applicant working on Machine Learning revealed that he was focused on one particular industry, and would not be interested in shifting focus. Of course that’s a valid choice, but it’s also something you can’t always tell from the way an application is written. Sometimes applicants begin with one idea, and end up working on something entirely different, aside from the core technology involved.
What It All Means
This data set is too small to draw a definitive picture of the startup landscape in 2018. However, as we have been consistently monitoring trends in our application pool for the past 3 years, we can outline some clear trends.
The state of employment has had a clear impact on the volume and sources of applications. We also believe that the state of the economy has affected the types of companies applying to StartupYard. The ubiquitous “me-too” startups and the local clones of American products and services of 5 years ago are all but gone today. Perhaps many of these ideas have already been successfully executed in Europe, but the state of the economy has also changed the landscape considerably.
In 5 years, networks around high-tech startups have matured, and the communities around Central Europe have gained new heroes in the process (including many of our alumni). The first generation of online entrepreneurs, and successful online businesses, are now engaging very actively with the younger generation of startups, as we have observed within our own mentor community. Banks, Telcos, Insurance companies, Manufacturers, and Tech giants feel the increasing need to engage with early stage companies, and younger tech entrepreneurs now have a menu of options for growing a business with corporate partners, early stage investors, and active Business Angels.
It is a good time for startups.
At that time, the Feedpresso project was an android app with a small clutch of dedicated users, that helped a person organize and consume the news of the day. It was sort of like Flipboard, but it learned from your reading habits over time to provide a better mix of content you would hopefully find interesting.
Building a content product is a huge challenge, and Feedpresso was no exception. While they rolled out new features, brought feeds online and to iOS, they were bedeviled by the age-old problem of their business model. People who liked the free app didn’t want to pay for it.
So this year, Tadas sat down and wrote an update to shareholders. There would be a significant break in the pattern. Feedpresso would now focus on a very specific kind of customer: the kind that values news enough to pay for the tools to get it. All plans would be paid only.
Feedpresso will reset its strategy, focusing on people in the tech business, who are looking for high performance news aggregation.
I spoke with Tadas last week about the transition, and about his new goals for Feedpresso in 2018. As you’ll see in Tadas’s telling, this transition hasn’t been easy. But today his guiding metrics are not what they were a year ago:
Lloyd: Tell us a bit about your product pivot towards curation and the tech industry.
Tadas: After spending almost a year learning from our failures, we’ve learned (or at least I hope so) that we need to connect with our customers and really dig into their needs, and that’s not possible if we don’t have a very specific person in mind.
We took a look at our audience and ourselves and we realised that a clear audience that we can understand and communicate with is Technology Business professionals. These are people who know the worth of quality content, and are willing to pay to get more out of it.
People that are busy and are in a need of constant updates as the competitive landscape is constantly changing – new best practices, new MAs, and new technologies.
It’s not just about news either.
Another important aspect of the new Feedpresso is that it is a curation tool that helps our customers build their base of knowledge. Organizing and contextualizing timeless content that is important to you is something that’s surprisingly difficult to do with existing solutions.
The way content is presented to us, it has become difficult to give it our full attention, much less to remember it and review it given new information. Whatever is on your feed today is gone tomorrow (or in 5 minutes).
I think that many people feel overwhelmed in today’s culture of newsfeeds and tweets, and unable to really remind themselves of the things they find most important. So we are aiming to help customers contextualize what they read, and build up a record of their knowledge to better understand what they know, and how they know it.
You can see the need for this being met already in other ways, for instance by newsletter curators like Azeem Azhar, who work hard to create a context for modern events that readers can refer to into the future. My feeling is that everyone ought to be able to do that for themselves.
We need to bring back deep reading and reflection.
We’ve even started doing a Technology Business Review newsletter for our customers which turned out to be a success (it has a 70% open rate!). I think this is more evidence that people need more tools to contextualize the content they are consuming and keep track of it.
Lloyd: What’s led you to the decision to shift your focus onto power users?
Tadas: I’ve been made to realize, how true the advice by Paul Graham is: “Build something 100 people love, not something 1 million people kind of like.”
It doesn’t matter if you have a thousand customers if they do not care about your product. It is even worse when they all are so different that you can’t even talk to them, because there is nothing you can ask or say that would be relevant to all of them. Even more, the responses you do get are so diverse that the direction to go next is totally unclear. You end up trying to just get more users, any way you can.
Now I see that this is mostly what happens with freemium news products. They just become a machine for catching eyeballs, just like the content they are helping to spread. They don’t end up helping anyone. They just become another layer in a chain of distractors.
I think that serving the need to get more eyeballs on news feeds has really negatively impacted the people at the end of that process. We see more stuff, of lower quality, and it does have a measurable effect.
We are told that people won’t pay for news, which means news isn’t the product anymore, the readers are the product. I think that’s just not good enough.
I am not alone I think.
Last year while we were at StartupYard, Facebook was still denying that this problem existed. Today they are being much more open about it, and admitting that they’ve made some big mistakes. People are really negatively affected by the toxic environment of falsehood and anger on display now.
That is not saying it’s all terrible. Also in 2017, newspaper subscriptions grew faster than any year in modern history. People want to pay for news again. People want quality, and advertising is supporting quality less and less, so paid news is coming back. This can be a moment where people decide it’s worth it to get the right tools to read the news.
So that’s the environment we are in, and we’re targeting a very selective set of customers, who I think understand this problem well, and want it solved.
We’re pretty much back at square one as a business, and we’ve started rebuilding our audience around this new understanding of the problem we solve. Our advantage this time is that we know what the problem is, and we have the tools in place to build on, and try to solve it.
Lloyd: Are you close to a sustainable business model? How much more work do you need?
Tadas: That’s a good question. I have my eyes set on 1000 paying customers this year. That would make this a sustainable business. 1000 could be a lot, or it could be not very much, depending on how well we execute the next phase.
We have just a core handful of users who made the switch with us to a paid product. We’re learning from them every day.
Our customers have a lot of options to choose from, and even if the alternatives are inferior, it becomes really difficult to stand out in the crowd. This is why I believe a shift to focusing on a core set of customers who know the value of the product well is the only way forward.
Lloyd: What are your next steps for the product?
Tadas: The next step in the product is to fix myself – I still think that there is so much space for improvement in the way we communicate with our customers. Before that is improved, we can’t have a clear direction in the product.
And here I don’t mean clear regarding what new features to add. I think that there is still a gap in the understanding of what fundamental problems our customers have. This news environment is evolving every day, and I don’t think anyone has the answers yet as to how to fix it. But we think we have the right approach, and we have to explore it with our customers.
Lloyd: How can people support the new Feedpresso?
The Killer Talk: TL;DR: A Long Complicated Post
Creating a killer talk is complicated. Therefore this post is complicated, and because I want to go into detail on some of the points, I’m going to start with a quick TL;DR summary table. If you’re like me, and enjoy a nice wall of text, skip down and start reading!
- Practice is everything
- Gifted speakers give bad talks too
- Bad speakers can become great presenters
- Understanding Story Structure
- Clear structure makes things memorable and easier to understand
- Stories are present in all forms of expression, like architecture
- Proper story structure helps us to manage attention and not be boring
- Picking the Story
- 3 Key factors
- What the audience expects
- What the audience wants
- What the audience needs
- 3 Key factors
- Complicating the Story
- Subvert the 3 key factors and introduce conflicting ideas
- Bring your story to an unexpected solution
- If it’s not arguable, it’s not interesting
- Telling a True Story
- Make yourself or someone else the hero of your story
- Create an interest villain too
- Have your hero’s story be a framing device for your views on the topic
- Pro Tips: Establishing Authority
- Always frame your talk in the context of your expertise and experience
- Embrace your limitations as your advantage (unique perspective)
- Make your authority clear by your words, not by declaration
People ask me sometimes how I prepare for the talks I frequently give at tech conferences and universities around Central Europe.
They say preparation is everything, and I agree. At StartupYard, we’ve been able to turn seemingly hopeless public speakers into real stars. It just takes dedication and time.
The truth is though, certain people are just good at public speaking. I have always been one of them, and that has made me slightly lazy when it comes to preparation. However, as expectations have risen over time, I’ve taken my speech prep more seriously.
This, by the way, is another common problem. Those who *are* naturally gifted public speakers tend to under-prepare. We’ve all had the experience of listening to a great speaker give a mediocre presentation for that reason.
The opportunity to change minds through public speaking is in many ways more powerful than in almost any other medium. It is an art our species has practiced for longer than any other. Standing in front of other people, and challenging and influencing their sense of truth, of justice, and of reason, is as good as it gets in the marketplace of ideas.
Public speaking is the Cadillac of communication.
So then, as a reformed lazy person, how do I prepare for public remarks? How can you learn from my experience?
Understanding Story Structure
“My mother always said: whatever you do in life, don’t be boring.” – Christopher Hitchens
The greatest sin in public speaking is to bore or confuse your audience.
To be truly interesting is to be memorable. And memorability requires some structure- something the memory can attach itself to. The structure of a talk, just like that of a building or a piece of music, or a book, gives the listener/viewer/reader the shape of the idea, and helps them to remember it.
We call this structure “story.”
Think of it like architecture: the visible elements of a building help us to understand how that building works. Where are the entrances? What is the building for? These clues help you understand what is an office building, rather than a hospital, or what is a grocery store versus a warehouse.
An architect tells a story with the design of a building. In this analogy, we can see that it is possible to fail at speaking the same way you can fail at architecture. There are entire genres of architectural criticism that focus on this problem (and that particular blog is a hilarious example).
Is your talk a maze, or is the layout clear? Do people recognize the entrances and exits? Does it appear to be what it actually is? Does it make sense in the context of its time and space? Is it balanced?
Story structure is about answering these questions.
Note that not all of them have to be answered in the same way! Sometimes you want a maze. Sometimes you want the exits to be hard to find (like in a casino), and sometimes you want a building to stick out, and not fit in. But just like in architecture, we cannot simply ignore structure if we want to be different and memorable in the way we speak in public. We have to master story first.
Picking the Story
My strategy for creating a story for a talk is to understand 3 basic things very clearly. Again, this approach could be applied to any creative medium, even things like music (in fact, studying music theory and composition is where I learned this approach).
The three elements I start with are: what the audience expects to hear, what the audience wants to hear, and what the audience needs to hear.
So let’s take a practical example like Blockchain – the latest hot topic everyone wants to tell everyone else about. If I were to give a talk, I would follow these steps:
- Think about what the audience expects you to say. Blockchain is the future? It’s a revolution? It’s safe? It’s better than alternatives?
Pro Tip: Try to find something (which you also believe), that the audience doesn’t expect you to say. Blockchain will solve world hunger? Blockchain will cause a worldwide crisis?
- Think about what the audience wants to hear. That blockchain is working out the way they hoped? That decisions made in the past were good? That the future is bright? Maybe the audience wants you to be negative about it as well. This is specific to the context of the talk, and who will hear it.
Pro Tip: Acknowledge what the audience wants to hear, but don’t say it. “I know what you’re probably expecting to hear from me, but I’ll have to disappoint you.”
- Think about what the audience needs to hear. What are the inconvenient truths about blockchain? What are the things people are ignoring? How are most people wrong about it? What is hard to grasp for this specific group?
Pro tip: Avoid saying things the audience doesn’t need to hear or already knows. Blockchain is a popular subject? Yes. Only say this if it has a rhetorical purpose: “Of course blockchain is a popular topic but… (insert something the audience needs to know).”
Complicating the Story
“Learn the rules as an artisan, so you can break them as an artist.” – Attributed to Pablo Picasso
So we’ve seen in essence, that a great talk is one that doesn’t say what people expect, that contradicts what people want to hear, and which says what people need to hear.
The art of public speaking is the way in which you complicate this process.
Complicating the story means introducing information or ideas that are in conflict with each other. One narrative appears to emerge, but is then challenged by a new narrative. A good public talk examines a story from more than one perspective, and shows how these narratives intersect and diverge.
So then an uncomplicated story begins with the three elements above, but stops there. It tells a narrative in conflict with previous narratives. A really complex and interesting story goes further, and challenges its own ideas in the same way, to arrive at still different conclusions. Often we do this by making the story about our personal journey of discovery: how we started by seeing things one way, and ended up seeing them another way entirely.
You will understand this concept quite instinctively, even if you have never noticed it before. Think of a classic story like The Lord of the Rings, or Casa Blanca. We are at first presented with two opposing ideas: a battle between the good guys, and the bad guys. But inevitably, the interesting part of these stories is what the good guys do that is bad, and what the bad guys do that is good.
You can’t have Frodo without Smigel. Casablanca’s Rick Blaine would never do anything interesting without his antagonist and rival Louis Renaultm to provoke him to action.
Remember: If it’s not arguable, it’s not interesting. Nothing worth your audience’s time is obvious. If everyone agrees with you all the time, then you’re probably not going deep enough. If you agree with yourself all the time, you’re probably not talking about anything that matters.
I know a talk has been a success when people come up to me afterwards to challenge my ideas. “Haven’t you considered this?” “I don’t agree with your conclusion about that.” These are positive outcomes for a public talk: that it inspires more people to think and talk about what you’ve said.
If nobody wants to give you their view, it may be because you haven’t really challenged them.If it's not arguable, it's not interesting. @lloydwaldo on Creating a Killer Talk Click To Tweet
Telling a True Story
You may recognize the patterns i’ve talked about as similar to that of a classic TED talk, and with good reason. TED is masterful at helping presenters to illuminate a topic from a very specific point of view, and build a story around it.
Ted talks are most often shaped around the “Hero’s Journey,” narrative device. This is a common storytelling practice in which a character (often the speaker themselves), goes through a series of experiences which change their view of the world, and leave them better off than when they started.
A story that can seem flat and uninteresting if told without this device, can come alive for the audience when the hero is included. Take, for example, this classic talk from Will Wright, creator of SimCity, on Spore, birth of a game, from 2007.
On the surface, this could be a very dry discussion of game design in the 21st century. But because Wright makes himself the hero of his own story, we are taken on a journey from his early experiences with game design, through his personal discoveries about science and the theories of the universe, and arrive at the present day, understanding much more about why Wright has created this new game.
This strategy also works when you are not the subject of the story. We routinely see this in political speeches, for example: stories of average working people whose experiences are used to explain a political position or a decision. Investors often use this device to talk about the companies they invest in.
Pro Tips: Establishing Authority
Any time you’re being asked to speak as an authority on a given topic, it’s your job to help your audience understand not only what you think about that topic, but also how you came to have that position in the first place.
A poor way of establishing your authority is simply to state that you are an authority. “I am an expert in this topic,” is the lazy presenter’s mode of persuasion. Better is to list your accomplishments, and even better still, is to actively demonstrate your knowledge and experience in what you say.
A speaker’s authority is as important as what they say. This does not mean that one must be the highest authority on a topic in order to be persuasive, but it does mean that the speaker must frame their arguments in context with their authority to make those arguments.
For example, if I’m being asked to give a talk on Blockchain, I cannot give a persuasive presentation based on my knowledge of the technology. I just don’t know enough about it. There are others who should be listened to on that.
I don’t have to avoid talking about blockchain though. Instead, I would need to pick a point at which my authority intersects with the topic, and examine it from that perspective. Speaking outside my area of authority diminishes my arguments, but sticking to what I do know can bring up important points about the topic that another type of expert might miss.Everyone is an expert if you look deep enough. @lloydwaldo on Creating a Killer Talk Click To Tweet
Can a marketing expert and an experienced startup investor tell you something meaningful about the blockchain? Absolutely. However, it should be something only a person with those qualifications would know or be able to argue effectively. I could talk about how the technology is marketed, for example, or what the technology’s implications are for marketing in general. I could talk about how the technology interacts with my discipline and my areas of experience.
Inside your area of authority, there will always be perspectives that can be valuable to others. So don’t ask “who am I to address this topic?” but rather “what does my expertise and experience tell me that others need to hear?”
Shareholder updates can be hard, particularly if you have bad news.
There are basically three ways founders tend to approach this: they can pretend everything is fine (a lie by omission), they can rationalize their past decisions and find a way to shift the blame off of themselves (aka: “our timing just wasn’t right”), or finally they can own the situation and focus on the future.
So it always makes us feel good when we see an update of the third kind, like the one we got recently from Jakub Havej, Founder and CEO at StartupYard Batch 5 Alum ClaimAir. With his permission, we are sharing the bulk of his end-of-2017 shareholder letter.
As you can tell, ClaimAir had a tough year. Things didn’t go the way Jakub hoped, but on the other hand, his team and the business both matured remarkably in that time, and today they are on a stable footing, looking to grow again.
It takes a lot of courage to admit when things aren’t working, and Jakub showed that courage to his shareholders. The feedback he got was incredibly positive, and his letter is something any young startup can learn from.By the way: You can help ClaimAir by using them to get compensation for flight delays, lost baggage, and other flight issues.
At the bottom, we’ll talk about what makes this letter special. Now, here it is:
Last time I wrote you, ClaimAir was in the middle of fundraising. And it seemed very good, around €100k was hard-committed at that time.
And you know what?
It didn’t end up working out. It turned out that one of the interested investors faced credibility issues. The other one revoked his commitment without stating any reason.
And then, hard times began.
The company was running out of money. I continued with the fundraising, but after a while I realized that it needed time… time we didn’t have. I felt I couldn’t control the fundraising process. I was just sending out emails and was eagerly waiting for any replies that often never came.
I felt desperate.
“ClaimAir seems very interesting. Please keep us posted about the progress, so we may consider the investment in several months.” – the most common response.
Fortunately, it didn’t last long until I changed my mindset.
Instead of only pursuing investment for the sake of faster growth, I primarily started focusing on the profitability of the company. My inner engine has become fueled by motivation to make ClaimAir independent of external financing.
It was a pure instinct of survival, supported by opinions of people like Jason Fried, founder and CEO of Basecamp. It shortly happened that I liked that approach.
“If a restaurant served more food than everybody else but lost money on every diner, would it be successful? No. But on the Internet, for some reason, if you have more users than everyone else, you’re successful. No, you’re not.” – Jason Fried
Businesses must generate profit
A growth of acquired cases, our most important metric until that moment, had become irrelevant overnight. I didn’t care about new cases, because they didn’t bring immediate revenue. It wasn’t the case with more than a thousand existing claims, whose total sum of requested compensation exceeded €700k.
As a result, my team refocused on the management of legal cases, those that were handled by our legal partners. We needed the enforcement to be done much faster and we needed our lawyers to understand that.
We started playing a tougher game with airlines.
Just in a matter of few months, our activities have started bearing fruits. In summer, our monthly net revenue was averaging to €6,500. Three months later, we’ve doubled that!
Keep costs under control
We’ve been increasing revenue while cutting costs significantly.
“When running a startup, costs are the only thing you can effectively control” – Cedric Maloux
Reducing costs was necessary. Even though it was hard for me to dismiss some people, it was inevitable. Being always transparent about the company made this much easier.
This step also forced us to optimize our activities even more, avoiding the reductions of having a devastating impact on our daily operations. This approach needs to be sustainable.
Finally, by the end of November, we made it.
For the first time in our short history, we ended a month with a positive cash flow. We generated €3,300 net profit, which completed our short-term mission.
It’s not easy to enter this market
I remember my discussions with investors. Many of them claimed that it’s easy to copy our business and enter the market. Well, it’s not true at all.
Not only do you have to find smart team members, develop an automated platform, put all operational processes in place, but you must be also successful with enforcement of the rights of air passengers. To achieve this, you must establish a network of legal partners all around the world. Last but not least, it’s a matter of fact that lawyers won’t take you seriously and won’t accept favorable conditions until you’re big enough and deliver a tangible volume.
Our industry is so specific and you need to combine a lot of aspects to get the ball rolling. As long as we’re motivated and innovative, I’m not afraid of newcomers.
We’re still raising funds
It’s interesting to realize that “profit first” approach, which is much closer to my personal attitude, almost naturally attracted both our existing and new investors. Thanks to our results, we were able to raise money for a cash-flow cushion at a very fair valuation from new and existing investors in the past few months.
For a few upcoming months, I’m going to insist on generating profit together with securing a slight organic growth. We’re going to take on only as much work as is comfortable for the team.
As it has been planned for quite a long time, we’re going to prioritize the baggage segment. It’s still our unique value and the acquisition is much cheaper due to the missing direct competition.
Last but not least, we’re going to improve the product for travelers. B2whatever… we’ll design the service that works for the person on the other end. I’ll share more details in my next update.
In November, we’ve been awarded a “Scaleup of the month” by EBAN (European Business Angel Network) – read more.
I was interviewed by Roklen24. I spoke about startups, aviation trends, and our recent product updates – read more.
CEO – ClaimAir
What We love About this Shareholder Update:
A great shareholder update hits a lot of bases. Here are the ones this letter covers very well:
- It tells a human story, covering past, present and future.
- It admits problems, and offers solutions.
- It acknowledges and answers shareholder concerns.
- It asks for help.
- It argues in favor of the business and the team.
- It provides solid data.
Really, in the world of speculative businesses, we see only one viable way of dealing with the inevitable challenges you face. That is to be frank and honest, first with yourself, and second with the people who put their trust in you. What is most important about this note is that it is part of a consistent pattern of behavior. If you make a habit of telling the truth, your life ends up significantly easier to manage. In the short term, a lie or even an omission might be convenient, but in the end, it will create more pain than it is meant to avoid.
So if you’re a founder who is facing similar challenges (and you probably will at some point), do yourself a favor, and take a page from Jakub’s experiences.
Silly startup mistakes are a dime a dozen. We’re not fans of “startup playbooks,” at StartupYard. Checking off a list of stuff you have to do doesn’t make the difference between a fast growing company and one that is dead on arrival.
That being said, there are plenty of stupid startup mistakes that are easy to avoid. So easy, in fact, that will take you just 5 minutes to fix some of them. Here are 6 of those silly startup mistakes, plus why they’re silly, and how to fix them (in no particular order):
6 Startup Mistakes (And How to Fix Them)
1. Update Crunchbase, Angellist, Facebook, LinkedIn
You know what I and every other startup investor will do when we hear the name of an interesting startup? The same thing you would do: Google it. What shows up in a google search is very important for your first impression – the thing most people will see before anything else.
Here’s a typical experience: A colleague from another accelerator asks me if I have heard of Company X. I Google it, and first thing I see is a search suggestion to change the name to something similar that has more results. Bad sign so far. Hopefully your website is at least in the first page of results. I take a brief look at the website, then go back to the search.
Next, I skim down the list of sites looking for one of the above listed profiles, and check to see how old it is, any recent changes, and any important info. This is where many, many startups go wrong. The info is old, it’s outdated, the profile is inactive, or it’s just not there.
This is not a dealbreaker for me or most people, but imagine you’re in a list of 200 companies I’m looking at. I can find decent information on 100 of them. I only need to pick 50 to contact. What am I going to do with the company that has no relevant data available? Probably I’m going to put it aside. Plenty of fish in the sea.
Keeping these data sources up to date takes a few minutes every few months at most. So you might as well do it. Remember: only one contact can change your company’s future. So don’t make it harder for me.
2. Fix Your Open Graph Meta Tags
Here is a detailed look at how Open Graph meta tags work. The short version of the story is that 3rd parties, like social media and search platforms, use metadata, supplied by your website or encoded in content you share, to display information about the site or the content on the 3rd party platform.
Think of metadata as an album cover that goes along with whatever you post on social media, or in every link of yours that is shared by someone else. What happens if there are no open graph tags on your site and content? Anything shared about you comes along with a handy blank image and no description. Very professional.
How do you fix it? This isn’t a step-by-step guide, but we have a startup for that! start by checking your site at Testomato.com. It takes 30 seconds, and they’ll tell you if your site is in serious need of help when it comes to metadata (and many other problems).
Pro-Tip: SEO Plugins like Yoast for WordPress help you easily create and validate meta tags for content and pages. Which brings us to our next item:
3. Install Free or Premium SEO Software on your Site
We use WordPress at StartupYard, and believe it or not, I strongly recommend that our startups do the same, or at least choose an easy-to-use website builder with plenty of plugins available.
It’s for reasons like this: free software like Yoast SEO, which can dramatically improve your website’s visibility in Google search, and also helps you make sure your content and pages are tagged properly, in the right format, optimized for the right keywords, and well written and formatted as well. Their pro-version does even more, like setup redirects for you.
With the right setup in place, it takes an extra two minutes on a blog post or a new landing page to make sure everything is working properly, and that your customers can actually find in the future. Thanks to Yoast, StartupYard now ranks highly for a number of key search terms that we know startups are using.
4. Make Yourself Easy to Reach
My God, is this a bigger problem than you can imagine. As a scout for tech talent and startups, I’ve spent ridiculous amounts of time playing detective to try and figure out how to contact startup founders without landing in their spam folders, being ignored, or reaching the wrong person.
Keep this important information in mind: You are a startup founder. Not a rockstar. Don’t make it difficult for people to figure out how to talk to you. You might even *gasp* share your phone number as well. I like to know I can at least call someone if absolutely necessary.
Here are a handful of things I wish no startup would ever do on their website until it becomes absolutely necessary.
- Contact forms instead of email addresses – If there’s a better way of showing people that you aren’t accessible, I don’t know what it is. I hate filling these forms, and in my experience, 9/10 times there isn’t a reply anyway.
- Info@ email addresses – Don’t do this. Just don’t do this. Who gets an email sent to info@? As far as I know, it goes right to your spam folder, or to an intern, or a customer service rep. Info@ for a company of under 10 people is just putting out a sign saying: “we don’t want to hear from you.” Put the founders’ email addresses on the site. Let investors (and customers) contact any of them. A pre-revenue company cannot afford to screen emails.
- Auto-responders – I hate this. Again, if you’re a company of 3 people, you don’t need an autoresponder. Just reply to emails. Reply to all emails that are specifically addressed to you, even if your answer is just “not interested, thank you.” Just because your mail client has it as a feature doesn’t mean you should use it.
But what about all the spam, you say? What about when I *am* a rockstar, and my email is swamped with customer questions? There’s an app for that: it’s called email forwarding. Create a new email address that is to be shared only for professional reasons, and forward all emails sent to your public address to a special folder in your new inbox. Check it regularly, and create rules for individual senders who are still using your old address, to route them to your inbox. Done.
5. Print and Carry Business Cards
Hello, yes it’s 2018 and I’m telling you to get business cards. Yes, people can just send you an email, and you can add them on LinkedIn, and, and, and.
The thing is that some innovations are so good, so intrinsically elegant, that they don’t go away even when there are “better” alternatives available for less. To me, carrying a good business card is like wearing a tasteful watch, or having a firm handshake. It’s proforma, but it’s the good kind of proforma.
Just consider some of the reasons why a business card works centuries after its invention:
- It creates credibility. A person who spent money on business cards is taking things seriously. It also makes you seem like a prepared and professional person.
- It gives me a way of remembering your name while I’m talking to you. Believe me, that helps a lot of people. Also, it helps me understand your job and business without having to ask.
- It helps you stand out. Don’t get *too* gimmicky with your cards, but a bit of creativity shows you care.
- It makes it easy for a person to share your contact details with somebody else. That’s what networking is for. A business card makes it easy: “hey I thought of you when I met this person.”
- It makes it easy to start a conversation. Shy people sometimes come up to me saying “Can I have your business card?” This happens often after I’ve just spoken in public, or met a bunch of people at once. Those who don’t want to monopolize your time can take your card, and you can then start a conversation with them if you wish.
It takes 5 minutes to order good-looking business cards online. No excuses.
6. Fix your Email Footers
Kind of like business cards, this is a proforma thing that is really important, particularly because of modern technology.
Having clearly formatted footers in your email makes it super easy for someone to track down your contact details by searching their inbox. Even better, modern smartphones can use this data to provide contact info on incoming calls, and even help people find your phone number without digging through their emails.
It’s also a bit of much needed context when you’re sending messages or replying to large group messages. The worst thing that happens in those situations is that somebody without their name in the email address itself replies without a name in the footer either. You annoy me, whoever you are.
As a bonus, you can use your footers as guerilla marketing as well. Anytime someone forwards an email or you reply to a group, you can include a link to your product with a tagline. That’s nice, isn’t it?
Do You Have More Startup Mistakes That Take 5 Minutes to Fix?
Tweet it to us at @startupyard, and we might add it to this list!
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Get started applying to StartupYard Batch 9. Applications close January 31st, 2018.