Lessons Learned in 2010

To recap the story so far: I have been an entrepreneur for the last 8+ years — self-funded the first two years and bootstrapped the last 6+ years. Throughout that time, I’ve been searching for a better way to build *successful* products. I’ve tried building in stealth, release-early-release-often, open sourcing, less is more, more is more…

I came across Customer Development/Lean Startup late last year and have been applying it to my products. I was particularly attracted to the engineering focus on marketing and the strong emphasis on building customer feedback loops throughout the product development cycle.

Fast forwarding to the present: I just sold my 8+-year-old company and am in the process of starting up a new one. I didn’t make this decision lightly and attribute it in large part to my learning over the last year:

The Fallacy of Metrics

There is a lot of emphasis on metrics in a Lean Startup, but when you first launch, you have very little to no traffic. You can’t rely on techniques like split testing or metrics alone to lead the way. First, you wouldn’t be able to afford to wait for statistically significant results, but more importantly, metrics only tell you what’s going wrong, not why. It would be best if you talked to people about that. The best way to validate hypotheses is in two phases: First Qualitatively, Then Quantitatively.

The Fallacy of Customer Development

Unless you build a business (like Enterprise software) where the primary channel to customers is through direct sales, customer development is NOT a scalable way to reach customers. Instead, Customer Development is a form of qualitative learning, and while it’s the fastest way to learn from customers, that alone may not be enough. The biggest challenge most web applications face is building a significant path to customers. Rather than going through customer discovery and customer validation and then tackling customer creation, which can take months, I find it critical to start building and testing “significant enough” paths to customers much sooner.

Content Marketing Works

One way to build and test a significant path to customers is through content marketing. Content marketing is built on three pillars of inbound marketing — great content, SEO, and social media. Done well, content marketing can actually help fuel and complement the Customer Development process. 37signals, Gary Vaynerchuck, Dharmesh Shah, and David Garland are all examples of brilliant content marketing at work.

Speed, Learning, AND Focus

Lean Startups are built around the Build/Measure/Learn validated learning loop, and Eric Ries stresses the importance of speed through the loop. But something that doesn’t get as much attention is focus which is best epitomized by Bijoy Goswami as Right Action, Right Time.

Speed and Learning alone can lead to pre-mature optimization, which is a form of waste. You need all three — Speed, Learning, and Focus, to build an optimal learning loop.

Lean Startup is a Rigorous Process

Much like Agile gets reduced to a collection of techniques like pair programming, stand-ups, etc., Lean Startup gets reduced to a collection of techniques like split testing, continuous deployment, etc. Not all techniques apply to every environment (or stage of the company), but more importantly, you can’t simply cherry-pick a few and call yourself Lean. The terrain before Product/Market fit is riddled with qualitative learning, which makes it more challenging to reduce these principles to practice. Ironically this is also the time when startups need the most guidance.

Document your Plan A

The biggest challenge, especially during the early stages, is documenting your hypotheses, measuring progress, and communicating your learning. The best way I found to do all these is through using a one-page Lean Canvas format. Lean Canvas is my adaptation of Alex Osterwalder’s Business Model Canvas for Lean Startups.

Having More Passion for the Solution is a Problem

When I started my last company eight years ago, I imposed a rule on myself of not going into debt or missing payroll as the condition for running my own company, which has served me well. Even though I founded the company around a strong vision that was too early to market, year after year, I’ve been able to incrementally refine my Plan A without running out of resources. But at a cost. Binding yourself early to a solution limits your flexibility to pivot. The last year has been instrumental in finding the right positioning and market for the technology. Still, it’s neither a market I am qualified to address nor one I am passionate about. I believe you need the latter before doing justice to the former.

Customers, Customers, Customers

Customers hold the key to success, and sometimes all you need is just one customer. A single customer found me five years ago and helped bootstrap my company. The same customer just bought all the technology assets of the company. The timing was just right. He had been licensing the technology for a music-based product, and I was looking for someone to carry the torch forward from here. He just closed an A round and jumped at the opportunity.

The Year Ahead

The main reason I started blogging was that I had more questions than answers. While the Lean Startup/Customer Development principles resonated strongly with me, I found it hard to directly apply the techniques Eric Ries and Steve Blank were describing because they were coming from either a more mature “Lean Startup” (IMVU) or a very different type of business (Enterprise software).

My analytical mind needed something more. I wanted a repeatable, actionable process for building web applications — one that raised the odds for success while minimizing waste.

I used my last product as a testing ground for many techniques. Finding a systematic process for building a web application slowly became as much of the focus as building my product. I still remember the day after I posted my first blog post. Sasha (my wife) asked me what I’d keep writing about. I had no idea. But week after week, month after month, there has been a lot to say, learn, and share. Thanks to your encouragement, I have almost finished a book, launched a business model validation tool, and found a problem I’m really passionate about solving that is worth solving.

Much like hitting the reset button on my last blog was the best thing I did, I believe closing the chapter on my last company will prove to be the “right” decision too.

Whatever happens, I will continue sharing my journey with you right here…
Thank you for bringing 2010 to a great end.

Happy Holidays!

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