Get to profitability — here’s how

Edited excerpt from How We Got off the Addiction to Venture Capital and Created Our Own Way to Profits by Rafat Ali:

I focused on revenues and revenues alone. That meant doing things today that brought in revenues today. That meant media, branded content, subscription reports, a conference. We knew how to do this from experience and our team knew how to wrap their heads around it.

We learned to focus on the efficiency of our effort. It meant doing one big thing a year that brought in big revenues in one go, instead of four small things which took almost 4X more effort but perhaps all added up equal in revenues to that one big effort. That meant we would only do one big multi-million dollar franchise conference a year, not 10 one-day smaller conferences like I did in my previous company.

I learned to say no, again and again, to anything that deviated me and our company from the focus. It meant we would only entertain the enquiry if it brought us direct revenues, or emails to build our newsletter list.

It meant saying no to going to random media or startup conferences for us founders. I created a rule that if we didn’t have any customers at a conference (which for us meant the travel industry), we wouldn’t even consider it, and even then we would only go to if we could see direct revenues coming out of spending time there.

(1) Rafat focused on growing revenue and profits so Skift wouldn’t be dependent on outside funding. See Profitability = control of your own destiny.
(2) There’s more to it than that, though. Many startups are struggling to achieve dramatic user growth, for two reasons: (i) search, social and other user acquisition channels work less well now than they did a few years ago, and (ii) many companies — I’d include Seeking Alpha in this — aren’t willing to dumb-down their product or generate link-bait to attract a mass audience. Since growth rate in revenue or active users are the only metrics that matter, this has pushed high quality companies to focus on revenue growth, ie. to deepen value for their current users and target users.
(3) For the case against focusing on revenue as opposed to user growth, see Is revenue a good metric for early stage startups?
(4) Even if you focus on revenue growth, Don’t be satisfied with sales, seek love.

How to avoid unconscious bias when hiring

Edited excerpt from The Boss Doesn’t Want Your Résumé ($$) by Rachel Feintzeig:

Research on unconscious bias has shown that information like a person’s name can affect how they’re viewed and subtly prompt managers to make unfair decisions.

So-called “blind hiring” redacts information like a person’s name or alma mater, so that hiring managers form opinions based only on that person’s work. Companies invite job candidates to perform a challenge — writing a software program, say — and bring the top performers in for interviews or, eventually, job offers.

Bosses say blind hiring reveals true talents and results in more diverse hires.

(1) Thank you Persha Valman for the tip.
(2) “Unconscious bias” — cf. How to avoid hiring someone just because you like them.
(3) “Form opinions based only on that person’s work” — see (i) The best way to find out how good a candidate really is, (ii) How to run a job interview and (iii)  How to test job candidates for “learning agility”.
(4) However, there are pitfalls in testing and looking at past work — see The limits of trying to test people when you’re hiring and Don’t hire based on past experience.

Five tips for founders to get the most out of external meetings

After meeting with a bunch of startup founders a while ago, I wrote a post containing tips about how to get the most out of meetings if you’re a founder. Since then, I’ve met with a bunch more founders, and on the basis of that experience I’ve updated and improved the post. I hope you find it useful:

Startup founders’ most common mistake in meetings — and how to avoid it.

There are only two ways to build a $100m business

Edited excerpt from The only 2 ways to build a $100 million business by Boris Wertz:

There are only two ways to scale a business to hit that $100 million threshold:

1. Your business has a high Life Time Value (LTV) per user, giving you the freedom to spend a significant amount of money in customer acquisition. High LTV can usually be found in transactional or subscription businesses. The biggest driver for high LTV is repeat purchase behavior in an e-commerce business, and a low churn rate in a SaaS company.

2. Your business has a high viral co-efficient (or perhaps even a network effect) that lets you amass users cheaply without worrying too much about the monetization per user or spending money on paid acquisition. User acquisition is generally close to free, and monetization per user is often low (advertising-based or freemium businesses).

Unfortunately, many consumer internet startups find themselves stuck in the middle of these two strategies: they have low monetization per user and limited viral effects.

(1) In the early days of Seeking Alpha, one of our investors felt we should be spending far more on PR and marketing. But with an ad-based revenue model and thus low lifetime value per user, that never made sense to me. Boris’ post puts its finger on why this is the case.
(2) Re. “Your business has a high viral co-efficient (or perhaps even a network effect) that lets you amass users cheaply”. Many businesses relied on social networks for viral growth, but forgot that they weren’t in control of the viral mechanism. As the social networks increased their own monetization, the traffic they sent to publishers plummeted.
(3) Both models require high frequency of use, because even in a viral model it’s hard to amass users who use your product infrequently. See Google’s Toothbrush Test.
(4) Re. “The biggest driver for high LTV is repeat purchase behavior in an e-commerce business, and a low churn rate in a SaaS company”: see the posts on Churn and Retention in Startup Best Practices.

Why Skift rejected monthly uniques as its key metric, and you should too

Edited excerpt from How We Got off the Addiction to Venture Capital and Created Our Own Way to Profits by Skift co-founder and CEO Rafat Ali:

We gave up chasing scale. We took out *all* goals on traffic on the site, for everyone. We could do this because we didn’t have tons of outside money pumping through our veins, and this was a useless pressure we created for ourselves in an effort to show the illusion of growth to investors. And since we weren’t chasing investors, we didn’t need to chase what they would consider scale. It was a vanity metric.

We cut back on spending any money on getting users through Outbrain/Facebook/Twitter. We cut back on the number of stories we were doing on a daily basis, on chasing the tail on disposable news stories. We also cut back on syndicating our stories — in which we put in a lot of effort at the start, publishing on NBC News, CNN, Quartz, Fox News, Business Insider, Mashable and many others, to zero effect on our revenues — and also cut back on publishing useless filler syndicated stories we got from a third party syndication service.

In an era where everyone is tripping over each other to call themselves a “distributed media platform”, we decided to focus solely on building direct channels to our users, which for us meant email. Email, despite all its shortcomings, is that direct promise day in and day out to our users, you see us the first thing in the morning, in the intimacy of your inbox.

(1) Rafat’s rejection of broad traffic growth as Skift’s key metric is similar to the approach I took with Seeking Alpha: I made our key metric daily direct uniques, (“DDUs”). Daily uniques captures loyalty via frequency of daily visits, and direct visitors focuses you on people who value your brand and content, rather than those allured by link-bait. As a result, making DDUs your key metric pushes you to create genuine value for your users.
(2) Once you measure success by the number of direct visitors, you’ll almost inevitably focus on converting readers to email subscribers, as Rafat describes he did. We’ve did the same: Seeking Alpha has over three million email subscribers, most of whom are subscribed to email alerts on stocks in their portfolio. (The free alerts let you know about breaking articles and news stories on your stocks. Subscribers include individual investors, most public company managements, and thousands of hedge funds.)
(3) This does not mean that broader audience metrics like monthly uniques, which include indirect and infrequent visitors, are unimportant. You should view them as the top of your funnel, as a means to an end. Your job is to attract indirect or infrequent visitors so you can convert them to frequent, direct users. You should have a team (and owner) responsible for conversion to frequent, direct users. And you should report DDUs (or maybe the ratio of DAUs/MAUs) as the key metric for the company.
(4) On key metrics, see (i) Growth rate in revenue or active users is the paramount startup metric, (ii) The key metric for your startup must satisfy these 4 criteria, and (iii) Why you shouldn’t optimize for social sharing.
(5) On using email subscriptions to convert infrequent to frequent users, see De Correspondent’s use of email subscriptions to convert Facebook users to loyal readers.

Better alternatives to “Learn more” links

Edited excerpt from “Learn More” Links: You Can Do Better by Katie Sherwin:

“Learn More” is dangerous because of its ambiguity and poor information scent. Here are three alternatives:

Option 1. Use keywords that describe the link’s destination. This is the most common and, typically, the best approach. Look at the destination page and see what it’s about. Front-load the link text by putting the most relevant keywords at the beginning of the text. For example, instead of “Learn How Professional Chefs Cook Squash”, try “Cook Squash Like The Pros.”

Option 2. Retain the “Learn More” format and add descriptive keywords. There are times when it is acceptable to retain “Learn more”, if you qualify it with information about what is to be learned (e.g., “Learn more about our services”). The downsides to this approach are space constraints for the longer label, and reduced scannability because the relevant keywords appear at the end instead of the beginning of the phrase. Nevertheless, a long link does create a larger target, which is faster for users to click and tap than a small target.

Option 3. Convert the preceding-paragraph heading into the only link. If the heading of the preceding paragraph is obviously styled to look like a link and the copy clearly describes what the link points to, then a Learn More link is probably redundant.

Product development — how NOT to conduct a survey

Edited excerpt from Surveys and focus groups by Seth Godin:

The story is told of a focus group for a new $100 electronic gadget. The response in the focus group was fabulous. All the people talked about the features of the new device with excitement.

At the end of the session, the moderator said “Thanks for coming. As our gift to you, you can have your choice of the device or $25.”

Everyone took the cash.

Surveys that ask your customers about their preferences, their net promoter intent, their media habits — they’re essentially useless compared to watching what people actually do when they have a chance.

(1) Seth Godin is right that surveys which ask people what they think or would do are ineffective. But that doesn’t mean your only option is to watch directly what people do. Sometimes you don’t have the opportunity to observe actual customer behavior. For example, if you’re trying to assess potential demand for a product you haven’t yet developed, you might want to know what similar products your customers buy. In cases like that, surveys can be very useful.
(2) How then should you run a survey to avoid the pitfall Seth describes? Ask questions that get your customers to share facts and experiences rather than opinions. In the words of Benson Garner: Don’t ask “Would you..?”. Ask “When is the last time you..?” or “Tell me about a time when you..?”. See How to interview customers to get great product insights.
(3) Cf. The survey question you should never ask.

Frictionless vs. minimalist product design

Edited excerpt from Frictionless product design by Steven Sinofsky:

Frictionless and minimalism are related but not necessarily the same. A design can be minimal but still have a great deal of friction. The Linux command line interface is a great example of minimal design with high friction. You can do everything through a single prompt, as long as you know what to type and when. The minimalism is wonderful, but the ability to get going comes with high friction.

Minimalist design is about reducing the surface area of an experience. Frictionless design is about reducing the energy required by an experience.

(1) Product managers should care about friction, not minimalism. Minimalism only matters if it reduces friction.
(2) Cf. How to reduce friction in your product.
(3) Cf. The best products satisfy a frequent user need with minimum friction.

Is your product a “must-have” according to this definition?

Edited excerpt from Must-Have vs Nice-to-Have SaaS Products by David Cummings:

A must-have product fundamentally alters the way works gets done — either changing existing processes to be 10x better or unlocking new value that wasn’t previously achievable — and once used, companies will never go back. A nice-to-have product provides some value — perhaps being twice as good as doing it by hand or with spreadsheets — yet isn’t valuable enough to compel a critical mass of adopters. Apps that unequivocally help companies make more money, like marketing automation, are a must-have.

(1) Not sure this is a convincing definition of a must-have product. What about Gmail? Did it “provide a 10x improvement” over Yahoo! Mail or Hotmail,  “unlock new value”, or “fundamentally alter the way work gets done”? I don’t think so, but many people regard Gmail as a must-have product.
(2) So here’s an alternative definition, using the Job To Be Done framework: “A must-have product enables you to (i) get a job done which you otherwise couldn’t get done at all, or (ii) get significantly more of the job done, or (iii) get the job done in a significantly less painful way.”
(3) Whether a product is “must-have” is always relative to the alternatives. See, for example, the focus on alternative solutions in How to conduct customer cancellation interviews in the “Job To Be Done” framework.
(4) Can you come up with a better definition of a “must-have” product than this?

Questions to ask your customers to validate product-market fit

Edited excerpt from 8 Customer Discovery Questions To Validate Product Market Fit For Your Startup by Tomasz Tunguz:

1. How did you hear about the product? Clarifies which customer acquisition mechanisms are working, and if they are consistent with the company’s perceptions.

2. What process did you use to pick this product over the competition? Sheds light into the sales process, key stakeholders and ultimate decision-maker, and sales cycle length.

3. Why did you choose this product? Clarifies product differentiation, whether there are different customer segments in the market who might use a different product to satisfy unique needs.

4. Which teams in the company use the product, and how has that changed over time? Reveals the key users, potential for account growth and negative churn possibility.

5. How important is this product compared to other software? Validates that, in the words of Paul Graham, this is a hair-on-fire problem.

6. How much do you pay? Is it worth more or less than X product? Ascertains whether the customer believes the return on investment is wildly in their favor.

7. How quickly is the product evolving? How satisfied are you with customer support and working with the company? Indicates churn risk.

8. To whom would you recommend this product? Clarifies the breadth of potential customers the product can serve, and the vigor with which an existing customer would recommend.

(1) “To whom would you recommend this product? Clarifies… the vigor with which an existing customer would recommend.” This is the net promotor score approach. For an alternative, see Surveying customers to answer Sean Ellis’ “One Question That Matters.
(2) Note the similarity to Sachin Rekhi’s template for Documenting your product-market fit hypotheses. See also Three warning signs you’re not solving a meaningful problem for your customers and How to identify your customers’ “Job To Be Done”..

What’s the right framework for one-on-ones?

Edited excerpt from eShares 101 by Henry Ward:

You will do a 1-on-1 walk with your manager every 2–3 weeks, with your manager’s manager every 4–6 weeks, and with me every 4–6 months. Go for a walk for 30-40 minutes. Have fun — this is your time. Talk about what’s on your mind. It doesn’t need to be work related.

We have been doing this since we were three employees. Managers at eShares are required to take a class on how to do 1–on-1s. For managers, the instructions are simple: listen. For you, just talk about whatever you want. It doesn’t have to be work related. It is your opportunity to share what’s on your mind.

Our competitive advantage is the strength of our team. Think of our team as a network of nodes, connected by edges. 1–on-1s are how we strengthen those edges. It is the most important activity you will do here.

(1) Note the purpose of Henry’s one-on-ones: “Think of our team as a network of nodes, connected by edges. 1–on-1s are how we strengthen those edges.” As CEO of Seeking Alpha, I used one-on-ones differently: their purpose was to help my direct reports achieve their goals and hit their metrics.
(2) Your goal for one-on-ones will impact the frequency and number of people you do them with. Because I wanted to help my direct reports to achieve their goals, I did one-one-ones with them every week, and didn’t meet regularly with anyone else. Because Henry’s goal is to “strengthen the edges”, his one-on-ones are with far more people, but are less frequent.
(3) See The right way to do one-on-ones.
(4) Re. “Go for a walk for 30-40 minutes” — see Walking meetings.

How paid content site De Correspondent acquires users from Facebook

Edited excerpt from Dutch journalism platform The Correspondent reaches milestone of 40,000 paying members by Ernst-Jan Pfauth:

Because we give our existing members the chance to share articles freely with anyone they wish,  potential members can get acquainted with the Correspondent before joining. We also share one or two pieces every day with 122,000+ users who have liked us on Facebook. When they opt to read an article, we ask them (using a popup and a call-to-action at the end of the story) if they would like to receive a sample story each week by email.

Once they’ve signed up, readers will receive the email newsletter from Editor in Chief Rob Wijnberg with a selected article from the past week. He emphasizes in the newsletter that the Correspondent owes its very existence to paying members. Last weekend alone, the conversion rate of newsletter recipients who become paying members was 1.8%.

With the sample story newsletter, we try to benefit from the massive reach of Facebook while at the same time establishing our own bond with these new readers. We organized a “Likers-turned-Members” Day, for instance, a special Facebook event during which we explained to Likers why we cannot continue to do what we do without their support. One of the things we shared with them was a pie chart, showing how we invest the fees paid by members.

(1) Facebook has one strength and two weaknesses for publishers. The strength: Facebook’s daily audience is massive. The weaknesses: (i) While Facebook users have sky-high engagement with Facebook itself, they have low engagement with individual publishers because addictive platforms like Facebook have high content cadence. (ii) Publishers who rely on traffic from Facebook face acute business risk as Facebook controls that traffic.
(2) The right strategy for publishers is therefore to convert Facebook (and Twitter and LinkedIn) users to a higher engagement channel in the publisher’s control. This is what De Correspondent achieves by signing up Facebook users to its free weekly email.
(3) Once De Correspondent has Facebook users signed up to its free emails, it can then promote its paid product. The “engagement ladder” is thus: Facebook Passer-By >> Free Email Subscriber >> Paid Subscriber.
(4) Cf. Why the Facebook threat to most media businesses will only get worse.

Why startups shouldn’t develop iPad apps

Edited excerpt from Finding iPad’s Future by Neil Cybart:

When the iPad first started to show signs of trouble, many market observers were shocked, thinking Apple must be losing to low end Android tablets. In reality, one reason sales momentum was slowing was iPad owners weren’t upgrading their device. Consumers have held onto their iPad, on average, for three years, which is longer than the iPhone’s 2.6-year upgrade cycle. Since the tablet category is still young, the iPad’s three year upgrade cycle is still extending and will likely go out as far as 5-6 years.

There are currently approximately 3 million units of the original iPad still in use, or 20% of the devices Apple sold. For the iPad 2, it is possible that close to 60% of the units Apple sold are still being used. These two devices are not superior tablets. The initial iPad lacks a camera, while the iPad 2 has a mediocre camera. When compared to the latest iPads, these first two iPads are simply inferior tablets with slow processors, heavy form factors, and inferior screens. But none of that matters with owners, suggesting that many of these tablets are just being used for basic consumption tasks like video and web surfing and not for the productivity and content creation tools that Apple has been marketing.

There are signs that Apple believes there may be some kind of iPad revival around the corner. I’m skeptical. Why would someone upgrade an iPad that is just being used to watch video?

(1) Another possible reason the upgrade cycle is longer for the iPad than the iPhone: the iPad is used less frequently because it’s not with you all the time. This is important for developers, due to the relationship between frequency of habit and customer retention.
(2) The failure of the iPad to be anything other than a viewing and gaming device compounds the challenges for mobile-only startups. See Why mobile-only business models aren’t working.
(3) See also Why mobile traction is getting harder, not easier.

How to reduce friction in your product

Edited excerpt from Frictionless Design Choices by Steven Sinofsky:

1. Decide on a default rather than options. The more testing you do the more likely you are to find a cohorts of people who prefer different approaches. The natural tendency will be to add an option or setting to allow people to choose their preference or worse you might interrupt their flow to ask preference. Make a choice. Take a stand. Every option is friction in the system (and code to maintain).

2. Create one path to a feature or task. Where there was once one path to get to a feature you now think about adding multiple paths, leading to shortcuts, floating buttons, context menus, and more. All of which are favored by your early adopters and add friction for everyone else.

3. Offer personalization rather than customization. The theory is that customization makes a product easier to use because every use case is different enough that the time and effort saved by customization is worth it and important. In managing a product over time, customization becomes an engineering impossibility to maintain.

4. Stick with changes you make. When you change how a feature used by lots of customers works, it’s tempting to introduce a “compatibility mode” or a way to turn your new product into the old and comfortable product. Doing that creates a technical debt that you can never dig out of, and means your product will be surpassed in the marketplace.

5. Build features, not futzers. You’ll receive a lot of input from early customers to enable slightly different options or adjustments which will add friction to your product without growing the breadth of scenarios your product enables. Stay focused on delivering features will enable your product to do more.

6. Guess correctly all the time. Many of the latest features, especially those based on machine learning or statistical models, involve taking action based on guessing what comes next. These types of features are magical, when they work. The challenge is they don’t always work and that drives a friction-filled user experience.

(1) Cf. The best products satisfy a frequent user need with minimum friction.
(2) Cf. Why another new feature won’t get people to use your product.

How to identify your ideal customer

Edited excerpt from How to Find Your Ideal Customer by Sachin Rekhi:

1. Generate candidate customer segments. First, take an inward look at your existing customers, using available customer registration data, your analytics tool’s demographic segmentation capabilities, customer surveys, tools like FullContact, Clearbit, Pipl, ZoomInfo, and MaxMind’s IP Address database, and interviews with sales reps, account managers, and customer service reps. Then, take an outward look across the broad industry by reaching out to industry experts, analyzing competitor websites, marketing materials, and customer forums, and by conducting potential customer interviews.

2. Determine the most meaningful attributes by which you can segment and cluster your candidate customers. Some of the most common segmentation attributes include use case, role, demographics, firm characteristics, and psychographics (like willingness to try new solutions, personality characteristics, and personal goals).

3. Evaluate the attractiveness of each of your determined customer segments based on attributes that you’ve developed. Typical evaluation criteria include segment size, resonance with value proposition, willingness to pay, strongest delivered value, acquisition strategy, and strategic fit. As you start to build up an existing customer base, you can start directly measuring the attractiveness of given customer segments empirically by studying product engagement rates, analyzing monetization and churn metrics, analyzing sales funnel conversion rates, and conducting NPS surveys.

(1) With the Job To Be Done approach, customer characteristics are not the primary focus, because different types of people may share the same need for a job to be done. But identifying the characteristics of your ideal customer can still be important, because they are relevant to pricing, marketing and sales channels.
(2) Cf. How to learn about your customers.
(3) Cf. Why it matters who your early customers are.

Five tips for men who manage women

From 5 Tips for Men Who Manage Women:

In a Wall Street Journal article Women at Work: A Guide for Men, Joanne Lipman says that many men “misunderstand us, they unwittingly belittle us, they do something that they think is nice that instead just makes us mad. And those are the good ones.”

Here are some of the things she says male bosses need to understand about their female employees if they want to have the most productive and efficient workplace possible:

1. Don’t restrain yourself when giving feedback.
2. Actively include them in meetings.
3. Consider them for promotions even if they don’t ask.
4. Cut the cute talk — don’t talk condescendingly to women.
5. Understand that having kids doesn’t mean the end of ambition.

How to reduce churn by winning back cancelled customers

Edited excerpt from Why a SaaS customer hasn’t churned when they cancel by Andrew Tate:

Send a succinct, targeted survey that forces the cancelled customer to pick the biggest and smallest reasons for churning. These surveys work best in three main forms: An exit survey that’s displayed upon hitting cancel, an automated (but seemingly personal) email survey in the cancellation confirmation email, or a highly personalized email with an open-ended question: What made you cancel?

Then, catalog why the customer is leaving and align the easiest solution to bring them back:

Bought away: Customer feels they aren’t getting value. If you don’t have properly aligned buyer personas, you’ll likely here this excuse considerably more than if your pricing is aligned correctly. Solutions: discounts, downgrades, and better customer persona alignment.

Moved away: The customer decides your services are no longer needed. Especially true of customers who “graduate” to an enterprise product or downgrade to a lighter weight option. Solutions: trials and product feature/plan expansion.

Pulled away: Customer switches to a competitive product. Solutions: discounts/downgrades, re-aligned value propositions, and better feature hooks.

Pushed away: A member of your customer’s team starts briefing against your product, or customer feels that the service is poor quality or that expectations of the service have gone unmet. Solutions: Better communication and customer support.

(1) Cf. How to conduct customer cancellation interviews in the “Job To Be Done” framework.
(2) Cf. How to reduce churn — a process, also by Andrew Tate.
(3) Cf. The customer success role — a job description.

How to conduct customer cancellation interviews in the “Job To Be Done” framework

Edited excerpt from Doing SaaS Cancellation Interviews (the Jobs-to-be-Done Way) by Ruben @bidsketch:

My favorite way to implement the Job To Be Done framework is by doing “switch interviews”, in which you focus on how the customer stopped using one product and started using another. Here’s how to do switch interviews for cancellations / churn.

Switch interviews typically last 45 minutes, so recruiting people can be a little tricky, particularly someone that just cancelled. We used an incentive ($100 Amazon gift card) and recruited inside the app.

Switch interviews focus on the actual story of someone getting fed up with a product enough to switch to something else. The decision to cancel didn’t take place the day they cancelled, so you can’t just get the story of the day they cancelled. You need to build the entire timeline of key events that led to the cancellation:  (i) first thought that the product wasn’t working for them, (ii) started considering alternatives, (iii) a time sensitive event that triggered active looking for an alternative, (iv) evaluated options and actually bought/canceled, (v) when and how they consume or use the product, and (vi) product satisfaction.

Below is our cheat sheet for these interviews:

Setting the stage

Thank them for taking the time and explain that we’re doing these interviews to learn how we can improve Bidsketch. Mention: “We love blunt feedback, so don’t worry about hurting our feelings, it’s not going to happen.”

Tell them: “We’re going to focus on the story of how you started using Bidsketch, first started struggling or not finding it helpful, and then eventually cancelled. So we’re going to ask detailed questions about where you were and what was happening, to just help paint the picture.”

Key questions

– Why did you initially sign up for Bidsketch? Did you evaluate other tools?
– When was the first time you thought that maybe Bidsketch wasn’t going to work? Or realized that you weren’t using it?
– What happened the last time that you used Bidsketch for a proposal?
– What happened the first time you had a proposal that you didn’t use Bidsketch for?
– Why did you cancel the day that you cancelled? Why that day, and not the day before or after?
– What are you using now? How did you start to prepare to use the new product (export data, etc.)?
– What happened the day you started to move to the new product/solution?
– Why did you start that day and not after?

(1) Here’s the basic framework for Job To Be Done. See the notes there.
(2) Remember that in the “Job To Be Done” framework, an alternative solution for the customer might not be a similar product, but a work-around. So don’t expect customers to switch only to competitive products.

Why startup founders should learn to code

Edited excerpt from If you’re “looking for a developer” you’ve already failed by David Olk:

I’m not telling you to become a professional manufacturer of software. I’m simply saying that learning how to code will be very helpful to the journey because it will:

(i) make you more interesting to the people you want to work with if you can speak their language – literally and figuratively;

(ii) show you’re not just another person who’s smarter than everyone with a big idea, but with no ability to learn, hustle, and execute;

(iii) provide the foundation where you can actually kick start your big idea on your own with your own time, money, and effort;

(iv) help you understand what you are actually asking people to build for you; and

(v) actually provide some relevant friends and colleagues that can ingrain you into the community you are seeking out in the first place – but from a different more appreciated angle.

I’ve personally found that software engineers love it when people try to learn how to code. They are always helpful and nurturing and accepting.

Anyway, learn how to code. It’s fun and not as hard as you’d think at a basic level. There’s so many resources to help now as well. Just check out Codecademy if you don’t even want to leave your house.

(1) Thank you John Gannon, founder of BEMAVEM, for the tip.
(2) Cf. Startup founders need to be learn-it-alls.

How to reduce churn — a process

Edited excerpt from How to reduce Churn by building a bulletproof retention process by Andrew Tate:

The key to fighting churn is to develop a systematic, defined retention process, that allows you to find all the small ways to reduce your churn. Here are 5 steps of a retention process:

1. Define your goals
Your overall goal is to reduce churn, but to make this actionable you need to both quantify this goal and break it down further into smaller goals, corresponding to the 3 stages of churn. For example, Main Goal: reduce churn by 50%; Stage Goals: reduce short-term churn by 20%, medium-term churn by 20%, long-term churn by 10%.

2. Ask the right questions
Drill down to specifics as much as possible. Brainstorm ideas for reducing churn in the short term, during the first few months of use, then the medium term, then the long-term. Segment customers by how they use your product, and target specific experiments at them.

3. Develop your hypothesis
Developing a hypothesis forces you to think about your questions in more detail and the impact of experiments on churn. It helps prioritize ideas, through defining the probability of success of the experiment, and resources needed. Low impact, high probability, low resource ideas should be high on your list —  a number of them will add up.

4. Test and analyze your ideas
Get the minimum viable test up and running as quickly as possible. Don’t overthink the experimental design or over-engineer a solution. You are looking for quick results. If the experiment didn’t reduce churn, what assumptions did you make in the hypothesis that led you to think it would, and how can those be fed back into the process to improve future experiments?

5. Refine, reject, repeat
Perform a post-mortem on your techniques so that you can optimize the process for future iterations. Were you improving over time? Did you improve your accuracy? Did you run enough experiments?

(1) On reducing short-term churn before medium-term churn, cf. The first ten minutes of a customer’s experience are crucial.
(2) Cf. How to reduce churn and The customer success role — a job description.

Why you should bootstrap your startup before raising money

Edited excerpt from After raising $125M at my last company, I’m bootstrapping PeopleSpark — here’s why by Mitchell Harper:

Bootstrapping or raising money aren’t mutually exclusive. There are immense benefits to bootstrapping before you raise money:
1. You’re 100% focused on generating revenue and profit as quickly and as efficiently as you can
2. You learn to keep costs low and keep an eye on anything taking money out of your pocket
3. Your employees adopt your mentality — careful where they spend money, resourceful with limited resources
4. You’re forced to experiment with different, low/no cost ways to win customers
5. You invest in your product, which matters more than anything else, and spend less on superficial stuff like a nice office, catered lunches and all the other crap most startups waste money on
6. You don’t have to spend time preparing board slides or attending board meetings
7. You can still get access to great (future) investors and pick their brains — the best VCs will understand that you don’t want to raise money right now, but will still work hard to build a relationship with you
8. Bootstrapping significantly de-risks your business in the eyes of future investors —“If they can get to a few hundred grand in revenue a year with no outside investment, imagine what they could do with $5M!”
9. If you can get to profitability, you have immense leverage when you decide to raise money, because you’ve done what probably less than 2% of startups have done

(1) Cf. Why you shouldn’t raise too much money in your early funding rounds
(2) Re. “If they can get to a few hundred grand in revenue a year with no outside investment, imagine what they could do with $5M!” — see The real difference between funding rounds

Do the most important stuff first thing in the morning

Edited excerpt from 8 Things Every Person Should Do Before 8 A.M. by Benjamin Hardy:

Willpower is like a muscle that depletes when it is exercised. Similarly, our ability to make high quality decisions becomes fatigued over time. The more decisions you make, the lower quality they become — the weaker your willpower.

Consequently, you need to do the hard stuff first thing in the morning. The important stuff.

If you don’t, it simply will not get done. By the end of your day, you’ll be exhausted. You’ll be fried. There will be a million reasons to just start tomorrow. And you will start tomorrow — which is never.

So your mantra becomes: The worst comes first. Do that thing you’ve been needing to do. Then do it again tomorrow.

If you take just one step toward your big goals every day, you’ll realize those goals weren’t really far away.

(1) Not sure that “the worst” should come first. Surely it should be the most important task to hit your long term goals?
(2) Re. “The more decisions you make, the lower quality they become” — Cf. Limiting decision fatigue.
(3) The core advice here is to think about your goals and start your day by being proactive, not reactive. Cf. If you want to get more done, stop doing these things.
(4) Because the ability to focus and block out distractions is so fundamental to startups’ success, I’ve broken out a new category for Focus vs. Distractions. You can find it in the list of Best Practices for Startups.

Why mobile-only business models aren’t working

Edited (heavily) excerpt from Mobile App Developers are Suffering by Alex Austin:

If you look at the relative traffic to the top 1,000 non-games in the iOS App Store, the results are frightening. The 10th most popular app (Skype) has a small fraction of the traffic seen by the top app (Facebook), and the 1,000th app (Pixable) has just 0.2%. Yet in the past four weeks, there were 45,000 new apps submitted to the iOS App Store. The chances that any of them will ever break into the top 1000 are effectively 0%, and even if they did, they’re still not seeing any amount of traffic to build a successful business.

Monetization is an even worse story: According to a study done by Activate, the top 20 app publishers, representing less than 0.005% of all apps, earn 60% of all app store revenue.

Why is the power law so harsh for the app ecosystem? By far the most challenging problem that developers face is app discovery. Paid promotion is completely unsustainable for most apps given that the cost for an active install increased to $4.14 in the last few months. In the app stores, the search function is unusable unless you know the name of the app you’re looking for, the home page is reserved for the select few with a relationship to Apple or Google, and the top charts are self-reinforcing.

Then, conversion to download the app is dramatically reduced by the fact that the app store page is incredibly limited in terms of display, and the user must be willing to give away their precious disk space to the app.

(1) Cf. Why mobile traction is getting harder, not easier and The biggest challenge in mobile.
(2) Another key reason: if your app isn’t a daily habit, you’re toast.

Five principles for how to structure startup compensation

Edited excerpt from eShares 101 by Henry Ward:

1. Compensation (salary + equity) is determined by the market for your skill set, and your skill level. That means there is no automatic annual raise of 2.4%. There is no subjective increase based on whether your manager likes you better than the others. Your compensation is exclusively determined by your marketability.

2. Increase compensation by increasing marketability. Lobbying, staying late, taking credit, buying beers — these have nothing to do with your compensation. If you want to increase your compensation, become better at what you do. It is very simple. The rest is noise.

3. You will be marked-to-market at your 9-month anniversary and every 12 months thereafter. If the market for your skill has increased in value, or your individual skill has increased, your compensation will increase. Similarly, if the market value of your skill set has decreased or your skills have atrophied, your salary will adjust down.

4. We target being in the 75th percentile for your compensation. That means if you were to interview elsewhere, we would expect 1 in 4 companies to offer you a higher salary than us. Why don’t we just pay top-of-market?

5. We earn our people. The best people are recruited, not bought. The companies who pay top-of-market will always win the salary-optimizing people. The best people optimize to learn. Winning and retaining those people means creating an environment where people are willing to trade short-term compensation for long-term career capital. Many companies think paying the most gets them the best people. They are wrong. Companies that teach the most get the best people. Our compensation structure is our checksum to ensure that we offer the best learning environment.

(1) Henry says that these principles are drawn from Netflix (presentation here) and Mark Suster’s Learn vs. Earn. The Netflix presentation also had a huge impact on how we think about compensation at Seeking Alpha.
(2) Note the balance between paying people well (75th percentile) and not targeting “salary optimizing people”. Do you think he gets the balance right?

Why VCs push startups to scale prematurely

Edited excerpt from The most fatal mistake to avoid as a startup, a presentation I gave to a group of startup founders:

1. VCs are not product people, they are momentum investors. They look at their companies which are growing (ie. found product-market fit and are now scaling) and incorrectly pattern match to your company. “My most successful companies invest a lot in customer acquisition, so you should too”. But they don’t realize that those companies found product-market fit, and you haven’t yet. It’s like saying “The most valuable buildings have many floors, so you should be adding floors to this building” — when you haven’t yet finished the foundations.

2. They just invested money in your company, and they want to see you use it. VCs often view a successful investment as one which accelerates a company’s growth, and they want to see you achieve that growth immediately. For example, they’ll ask: “What’s your hiring plan?” But scaling your hiring is one of the key things you shouldn’t be doing before product-market fit.

For these reasons, VCs often add bad pressure on founders to scale prematurely.

(1) “Most VCs are not product people” — see VCs are not product managers and Investors, VCs and product advice.
(2) “…they are momemtum investors” — see Most VCs are momentum investors.
(3) VCs can add bad pressure — see For CEOs and VCs: Good pressure or bad pressure?

How to handle public questions you don’t know the answer to

Edited excerpt from How To Demo Your Startup by Jason Calacanis:

Take a moment to think about the question. You can even say “Hmmm… that’s a good question. Let me think about that for a second.” Folks appreciate a little consideration when someone takes a question.

If you don’t have an answer be honest and say you don’t. The worst thing to do when you don’t have an answer is to b.s. the person. No one has an answer for everything, except a b.s. artist. So, feel free to say you don’t know –- folks find it refreshingly humble and honest. There are many ways to say this including: “I’m not really sure, I’m going to have to think about that for a bit and get back to you,” or “I’m not sure to be honest. What do you think?”

Feel free to think out loud and brainstorm with the person. You can do this by saying “I’ve never really considered that. Perhaps you can expand the question a little and we can explore it right now.”

How low retention of customers and suppliers bankrupted Homejoy

Edited excerpt from Homejoy at the Unicorn Glue Factory — Why Homejoy Failed by Christina Farr:

Only about a quarter of Homejoy’s customers continued to use the service after the first month, and less than 10% used it after six months. Many first-time customers were not satisfied with the cleaning, or experienced a last minute cancellation.

Cleaners who excelled would sometimes strike independent relationships with clients. This often resulted in a pay increase, and some cleaners even attracted enough new clients to start their own small cleaning businesses.

Meanwhile, Homejoy’s cost of customer acquisition was crippling. By mid-2014, thousands of people were scooping up deeply discounted first time Homejoy cleanings for $19.99 on daily deal sites like Groupon. The company offered these aggressively even though its own internal data showed most of these people never used the service again.

By focusing on growth above all else, other projects to boost retention and reduce costs fell to the wayside.

(1) Thank you Zach Abramowitz, founder and CEO of ReplyAll, for the tip.
(2) Homejoy is a striking example of a company which scaled customer acquisition before achieving sufficient product quality, ie. basic product-market fit. The tell: poor customer satisfaction, low repeat usage, and high churn.
(3) See: The most fatal mistake to avoid as a startup

Why startups shouldn’t scale prematurely

Edited excerpt from The most fatal mistake to avoid as a startup, a presentation I gave to a group of startup founders:

What’s so bad about scaling prematurely?

  • Low ROI, high burn rate: Sales and marketing for a product without product-market fit will suffer from low conversions and low renewals.
  • Frustration: When you don’t have product-market fit, everything seems too hard, and everyone is frustrated. See:
  • Not building permanent value: When you eventually fix your product, you’ll have to redo your sales and marketing anyway.
  • Distraction: Managing all those people will distract you from your key task — finding product-market fit. (See: The most important factor in startup success.)

Bottom line: Don’t scale before you have product-market fit. You’ll burn money, delay true success, and be miserable.

How to price your product based on quality versus the competition

Edited excerpt from Five Words Of Wisdom From SaaS Office Hours With Bill Macaitis (CMO of Slack, ex-CMO of Zendesk and ex-SVP Online Marketing of Salesforce) by Tom Tunguz:

The price a software startup can charge is a function of the difference in net promoter score between that startup’s product and its competition’s. In other words, a startup product with a very high promoter score compared to the competition can charge a premium in the market and vice versa. High promoter scores indicate great product market fit, good customer relationships, and substantial value creation, all of which translate into pricing power.

(1) I like this a lot, because it reinforces the centrality of product quality (in this case measured by NPS, net promotor score) for everything a startup does.
(2) For more on NPS, see Net promotor score — how to set up the survey and How to use net promotor score surveys to improve your product.

Documenting your product-market fit hypotheses

Edited excerpt from A Lean Alternative to a Business Plan: Documenting Your Product/Market Fit Hypotheses by Sachin Rekhi:

The most efficient way to operate during the earliest phases of a startup lies in between a formal business plan and unstructured iteration. The process I’ve used involves documenting your initial product-market fit hypotheses, and systematically validating, iterating on and updating them.

1. Target Audience. Who is the target audience is for your product or service? Be as specific as possible. Name the “core” audience to whom your product is best suited, as opposed to the “total addressable market” for folks who might get value out of it. In B2B products, specify both the end users of the product and the business decision makers who have the budget.

2. Problem You’re Solving. What specific problem or pain point does your solution solve for? There is no substitute in product development for developing an incredibly strong understanding of the problem space of your target audience.

3. Value Propositions. Value propositions shouldn’t be the features that you are building, but the “promise of value” that you are giving your customer. This should be phrased in the customer’s terms in how it will address the problem you’re solving as well as improve their lives or business.

4. Strategic Differentiation. What unique assets or capabilities will your solution have or take advantage of to make it a superior offering?

5. Competition. Who is the competition and how are they doing in addressing their customer needs? For nascent markets its important to take a very broad view of competition, including alternatives and substitutes to your solution.

6. Customer Acquisition Strategy. What are the primary ways you expect to drive awareness, interest, desire, and adoption of your solution? As you iterate, developing a more detailed understanding of your acquisition strategy involves understanding the cost of acquisition of customers for each of your primary acquisition channels.

7. Monetization Strategy. How will you generate revenue from your product or service? A more detailed understanding would cover price points and an understanding of willingness to pay in the market, often based on understanding the value you are creating for the customer or based on comps to existing solutions in the market.

8. Key Performance Indicators (KPIs). Document the key performance indicators which you plan to use to gauge how well you’re business is doing. Defining these are early as possible is critical. I like to have a suite of acquisition, engagement, monetization, and customer satisfaction metrics.

(1) Compare this to the template in Clarifying your strategy using a simple template.
(2) Note also how this can provide clarity for marketing and PR. See: Questions to answer before you talk to a journalist.

If you must use Powerpoint…

Edited excerpt from How To Demo Your Startup by Jason Calacanis:

Do not make slide after slide explaining your business in bullet points, because it’s really, really boring. Powerpoint slides that are not boring include charts, product shots, feature set tables and the like. Things that explain big concepts with ease and grace are great, but bullet points of obvious facts show that:

a) you don’t have the ability to create a compelling story with data

b) you don’t think that much of the person being presented the information

I’m not a huge fan of “funny slides” or lots of graphics for graphics sake. You’re not pitching your company to get laughs–unless you’re on stage–you’re doing it to raise capital, close a partnership or get on stage at a conference. Keep it focused and to the point.

How to deal with anger at work

Edited excerpt from How to get rid of anger by Eric Barker:

How can you control emotions of anger in yourself? Here’s how:

— Suppress rarely. They may not know you’re angry but you’ll feel worse inside and hurt the relationship.
— Don’t vent. Communication is good but venting just increases anger. Distract yourself.
— Reappraisal (changing the story you’re telling yourself about the event) is usually the best option. Think to yourself, “It’s not about me. They must be having a bad day.”

Sometimes someone gets under your skin and suppression is the only thing you can do. And sometimes reappraisal can cause you to tolerate bad situations you need to get out of. But that said, telling yourself a more compassionate story about what’s going on inside the other person’s head is usually the best way to go.

And what’s the final step in getting rid of that anger over the long haul so you can maintain good relationships? Forgive. Forgiveness makes you less angry and more healthy.

(1) On interpersonal relationships at work, see also: A better way to view people and Ideas spread inside a company due to positive energy; 8 ways to increase it.
(2) On managing emotions and pressure, see: How to stay calm under immense work pressure — Charlie O’Donnell and How to stay calm under immense work pressure — Jason Lemkin.

Net promotor score — how to set up the survey

Edited excerpt from A Practitioner’s Guide to Net Promoter Score (NPS) by Sachin Rekhi:

How NPS is calculated. Ask your customers: “How likely is it that you would recommend our company to a friend or colleague?”, with the possible answers ranging from 0 – 10. Group your customers into Promoters (9-10 score), Passives (7-8 score), and Detractors (0-6 score). Then subtract the percentage of detractors from the percentage of promoters and you have your NPS score. The score ranges from -100 (all detractors) to +100 (all promoters). An NPS score that is greater than 0 is considered good and a score of +50 is excellent.

Additional NPS questions. It’s essential to also ask the open-ended question: “Why did you give our company a rating of [customer’s score]?” This turns the score from simply a past performance measure to an actionable metric to improve future performance.

Sample selection. Survey a random representative sample of your customers each NPS survey. We found strong correlation between engagement and customer tenure and NPS results, so ensure your sample reflects your user base.

Collection methods. The survey is normally sent via email to your customers or delivered through an in-product prompt. Use one of the NPS survey solutions that support collection and analysis across a variety of channels and interfaces, such as SurveyMonkey’s.

Survey frequency. At LinkedIn we found it best to administer our NPS survey quarterly, which aligned with our quarterly product planning cycle. This enabled us to have the most recent scores before going into quarterly planning and enabled us to react to any meaningful observations from the survey in our upcoming roadmap.

(1) Net promoter score, writes Sechin, was “devised by Fred Reichheld at Bain & Company in 2003 and introduced in a seminal HBR article The One Number You Need to Grow, which I highly recommend anyone serious about NPS to read in detail. Fred found NPS to be a strong alternative to long customer satisfaction surveys as it was such a simple single question to administer and NPS score was correlated with long-term company growth.”
(2) See How to use net promotor score surveys to improve your product, also from Sachin Rekhi.
(3) Compare Net Promoter Score to Sean Ellis’ “One Question That Matters”.

Here to get independent references for a job candidate

Edited excerpt from The Big Reference Check Scam! by Tim Sackett:

Stop accepting references candidates give you. Instead, during the interview ask for names of their direct supervisors at every position they’ve had. Then call into those companies and talk to those people. Even with HR telling everyone “we don’t give out references,” I’ve found you can engage in some meaningful conversations off the record.

(1) Cf. How do to reference checks: Mark Suster.
(2) This is the final post (for now) on how do to reference checks for job candidates. You can see the entire series in the section Reference Checks in Best practices for startups — a list by topic.

Why startups should raise money after finding product-market fit

Edited excerpt from What I’ve Learned About Venture Funding by Mark Suster:

I know in my bones that there is a magic moment where capital plays a hugely differentiating role. As in back-up-the-truck, load on $20-30 million and let me blast the market with all I’ve got.

I’ve seen it.

I’ve seen companies who raise the mega round after they’ve truly started to scale and put scale on steroids. I’ve seen the companies that had they not raised the big round would have evaporated. I’ve seen companies who avoided the big round and then struggled without enough resources to ship products on time and then missed market opportunities and sold in mediocre outcomes as others sailed by them.

How can it be that over-funding is bad, bad, bad and then the best possible outcome? And what is the inflection point? It’s subjective. I know many inexperienced market prognosticators claim “VC is dead,” “capital is a commodity,” “crowd-source to the finish line” or “stay lean for life”. But I’ve seen directly just how much capital can separate the winners from the losers when raised at the right time.

(1) Cf. The real difference between funding rounds.
(2) Cf. Raising capital as an offensive strategy.

When checking references, get each of these types

Edited excerpt from Anatomy Of A Reference Check by Tom Tunguz:

I find it’s valuable to speak to references who have worked with the candidate in different roles:

Peers provide fair feedback. They often competed or worked closely together and are often the most impartial checks.

Managers offer the best insight on day-to-day interactions and work quality.

Direct reports tend to be a bit more positive than others. But they provide insight about culture, team building and mentoring.

Close colleagues are the least valuable checks. Friends at work don’t have much direct experience to share save for personality.

How to get the most out of attending a conference

Edited excerpt from Startup Founders Guide to Hustling a Conference by Dan Martell:

As a founder, it is your responsibility to carefully manage your startup’s resources, and invest your time and money in areas where you will see the highest return. This means that your decision to spend $1500 on a three-day conference should be based on expected returns, not just a decision made on a whim.

In order to do an effective post-mortem on the return on the conference, set aside some time before the event to determine your metrics for success, and use these as benchmarks to hold yourself accountable throughout the conference. For example, often times entrepreneurs attend events to meet new people, expand their network and get introduced to specific people. Make a clear list of the those you want to meet at the event and make sure you get the proper introduction. Other metrics for conference success could include recruiting, learning, discovering new innovations/ideas, or chatting about what you are working on.

(1) On setting measurable goals and metrics for marketing, see A better way to measure the value of marketing?
(2) Cf. Being “hot”.

Don’t overestimate the importance of launch and fundraising announcements

From Nine common things that start-up founders tend to underestimate or overestimate by Boris Wertz:

Start-up founders typically want to make a big PR splash when they’re launching their product or closing a funding round. A major launch announcement can make a lot of noise in moment, but it’s more important to focus on generating continuous demand than your 15 minutes of fame. Likewise, fundraising announcements can drive investor interest for future financing rounds, but I’ve found it’s usually better to just stay under the radar and build the company.

(1) Cf. Should you make a big PR push when launching a product?
(2) Contrast with: The case for PR.

How to demo your startup

Edited excerpt from How To Demo Your Startup by Jason Calacanis:

Show your product within the first 60 seconds. Most folks start their presentations with information like the size of the market they are tackling. The longer it takes for you to show your product, the worse your product is. Folks who have a kick-ass product don’t spend five or ten minutes “setting the stage” or “giving the background.” Folks with killer products CAN’T WAIT to show you their product. Their demos start with their homepage and quickly jump into the users experience.

The best products take less than five minutes to demo. The better the product the LESS time it takes to demo. If your product demo takes more than five minutes to demo, it probably sucks. All the tiny little features that matter to you are of course important. However, when presenting your company, you don’t have to show them. Leave people wanting more.

Talk about what you’ve done, not what you’re going to do. Weak startups and their leaders seem to immediately start talk about “what’s next,” as opposed to focusing on the core product. Who cares what you’re going to bolt on to your startup? What really matters is the core functionality of your startup.

How to think about mobile

Edited excerpt from Forget about the mobile internet by Benedict Evans:

For as long as the idea of the ‘mobile internet’ has been around, we’ve thought of it as a cut-down subset of the ‘real’ Internet. First, the phones themselves could only do a little bit of the internet. Second, and partly as a result of these limitations, our mental model of how and where you used ‘mobile’ was that it fitted into specific, occasional places and times where you were walking or waiting or needed a single piece of information and didn’t have a PC. That in turn shaped how people thought about their ‘mobile’ site – that you needed to think of ‘mobile use cases’ and provide only a little slice of your proposition.

I’d suggest it’s time to invert that. Mobile today does not mean ‘when you’re mobile’. It means ubiquity — universal access to the internet for anyone at any time. People use their smartphones all the time, very often when there’s a PC in the same building as them or the same room, or on the sofa next to them.

Mobile is a universal product in a way that the PC never was. Smartphones themselves are much richer, more sophisticated and powerful internet platforms than the PC web browser. What happens when almost everyone on earth has a pocket supercomputer connected to the internet? It’s not a subset of the internet – it IS the internet.

This is why thinking about ‘mobile’ as another bullet point next to ‘SEO’ misses the point: mobile becomes the platform, and it’s a much richer and more powerful one.

How to interpret negative feedback from a job candidate’s references

Edited excerpt from How to Make Better Reference Calls by Mark Suster:

You need to be careful about how you actually interpret references. If you get somebody who doesn’t say totally glowing things about your candidate:

  • Think critically about whether that person may have biases that led him to the conclusions he has about your candidates;
  • Ask other people about those specific qualities that the reference said weren’t good – even if you have to call back people with whom you’re already spoken;
  • Understand whether any negative information is something that would stop you from wanting to hire the person. Everybody has weaknesses.

(1) Cf. A simple rule for interpreting references for a job candidate.
(2) “Understand whether any negative information is something that would stop you from wanting to hire the person” — cf. The goal of checking a job candidate’s references.

A simple rule for interpreting references for a job candidate

Edited excerpt from 3 Essential Steps to Doing a Thorough Reference Check by Jeff Markowitz:

It’s hard to predict anyone’s failure or success in a given role, but I’ve found that references tend to be overly kind during a reference call. Roughly speaking, if you downplay positive feedback by 30% and amplify negative feedback by the same amount, it should give you a pretty good picture of the candidate.

Startup founder errors to avoid: not checking job candidates’ references

From Nine common things that start-up founders tend to underestimate or overestimate by Boris Wertz:

I’m always surprised at how often people still get hired without extensive reference checks. When you’ve got a good feeling about someone, it’s tempting to just move ahead without any kind of due diligence. But informal reference checks can be very revealing, particularly if you can talk to people that weren’t provided by the candidate, but know him or her very well.

(1) “People still get hired without extensive reference checks” — perhaps because “by the time the hiring manager is calling she is often already pre-disposed to hiring the candidate”. See The goal of checking a job candidate’s references.
(2) Re. “informal reference checks can be very revealing, particularly if you can talk to people that weren’t provided by the candidate” — see How do to reference checks: Mark Suster.

Tom Tunguz on reference checks: Questions to ask

Edited excerpt from Anatomy Of A Reference Check by Tom Tunguz:

— Where does the referenced person shine? What kinds of work did the referenced prefer to do?
— What kinds of people does the referenced need around him/her to be successful?
— How is the referenced persuaded or convinced? What kinds of motivation does he/she respond best to?
— What is it like to work with the referenced day-to-day? How would you characterize your typical interactions?
— Would you hire or work with this person again? How highly do you regard this person? Top 25%, 10%, 5%, 1%?

(1) I’ve excerpted the questions which I think are most interesting. Tom’s post includes a complete check list of questions, and is worth reading.
(2) “Would you hire or work with this person again?”. This is similar to a question I asked when hiring senior people for Seeking Alpha: “If you were starting your own startup and you needed someone in this role, would you want this person to be part of your team?”.

How to name your product and create its tag line

Edited excerpt from The Simple Rules That Could Transform How You Launch Your Product by Brenden Mulligan:

Boil your product name down to two words max
Picture only being able to say a few words to potential users to convey what your product does. What would you say?

Summarize your product in ten words or less
If you can’t describe what your app does in ten words or less, something is off. Maybe you’re trying to launch too much at once. To troubleshoot and help economize your language, try asking yourself the following questions:
— What is the hallmark superpower of this product?
— What is the primary problem this product fixes?
— Who cares about the challenge that this product solves?

(1) That this is written about mobile apps. Is there any reason it shouldn’t apply to other products?
(2) Cf. Why messaging and positioning are fundamental to every startup’s success and The importance of product positioning, and how to get it right.
(3) “What is the primary problem this product fixes? Who cares about the challenge that this product solves?” — see Build your product to explicitly address a “Job To Be Done” and How to identify your customers’ “Job To Be Done”.

The goal of checking a job candidate’s references

Excerpt from How to Make Better Reference Calls by Mark Suster:

Seek “disconfirming evidence”

The strange thing about most reference calls is that by the time the hiring manager is calling she is often already pre-disposed to hiring the candidate. Most people delay reference calls until that point both due to expediency of time (why make phone calls unless you think you might hire the person?) and in fairness to the employee (why call a bunch of people and then not hire him – leading others to wonder why he didn’t get the job?).

I agree with the goal of waiting until late in the process. But the problem is that by the time you actually call people you really WANT to hire the candidate. So often people who do reference calls ask softball questions. That’s not your job. Your job is to seek “disconfirming evidence” meaning you go in with the assumption that Stacy is great but you want to be sure there isn’t something you totally missed.

How to ask the right questions when checking references

Edited excerpt from 3 Essential Steps to Doing a Thorough Reference Check by Jeff Markowitz:

Ask open-ended questions and get specific examples (e.g., “How would you describe the person’s leadership skills?”), not yes or no questions. Most importantly, don’t settle for vague answers such as “He/she is an experienced leader.” If you get an answer like that, ask the reference for an example of the candidate’s leadership skills in a specific situation. If the reference can’t think of one, then you should seriously question the relevancy of the reference.

As much as possible, always seek specific information about the candidate’s work and actions rather than generalities.

(1) “Ask open-ended questions” — this is one of the principles of asking questions generally. See How to ask great questions and Don’t ask multiple choice questions.
(2) “Always seek specific information about the candidate’s work and actions” — compare this to best practices in interviewing, in How to run a job interview.

Tom Tunguz on reference checks: How to find out about someone’s weaknesses

Excerpt from Anatomy Of A Reference Check by Tom Tunguz:

Asking for weaknesses tends to put the referencer on the defensive, as if he or she is sharing something illicit. Instead, I ask the referencer the question below. Everyone has strengths and weaknesses. And most jobs require teamwork. The best team members complement each other’s weaknesses. This is an indirect path at reaching the same answer. It doesn’t always work, but it’s my preferred route. I spend the most time of the interview on this question:

What kinds of people does the referenced need around him/her to be successful?

(1) Cf. Hanan Lifshitz’ approach: “After conducting dozens of reference checks filled with over-optimism, I found the best way for breaking through the praise is to say: “Listen, none of us are perfect; I have weaknesses, you have weaknesses, everyone has weaknesses… Now, what are John’s weaknesses?” At that point the truth almost always comes out.”
(2) Cf. Scott Cook’s method for finding out about someone’s weaknesses — see How do to reference checks: Scott Cook.

Can you achieve great things if you’re a regular Facebook or Twitter user?

Edited comments from Matthew Crawford, quoted in In an age dominated by distractions, there are still reasons to focus:

Just as food engineers figured out how to create hyper-palatable foods by manipulating levels of salt, fat and sugar, there are some forms of media that have created hyper-palatable stimulation that seems to tap into something hard-wired in our brains.

Strategies for asceticism or self-regulation are having a renaissance right now – which is interesting because it’s not an idea that we associate with consumer capitalism. You can sign up for these services that will turn off your Wi-Fi for some particular period of time. People are finding ways to use technology to regulate themselves against the temptation to use more technology, which makes perfect sense.

But ultimately, I don’t think we’re going to be able to either liberate or self-regulate our way out of mental fragmentation. I think the remedy is rather to be absorbed in some worthy object that has intrinsic appeal, the kind that elicits our involvement in such a way that our mental energies get gathered to a point. And once that gets under way, I think it feels more like abandon than self-control. I work on motorcycles and make parts for them, and when I’m in the shop, hours go by without any sense of distraction. I get really, really into it.

(1) “There are some forms of media that have created hyper-palatable stimulation that seems to tap into something hard-wired in our brains.” As entrepreneurs, this is the explicit goal we strive for — to create highly addictive products. The exemplar is Facebook, which has crushed Twitter on frequency of use.
(2) But from a consumer’s perspective, having easy and constant access to addictive digital products is destructive. As Matthew Crawford writes elsewhere, “Just as clean air makes it possible to breathe, silence makes it possible to think.”
(3) To achieve anything meaningful, we need to clear time for deep thinking. That is probably inconsistent with being a regular user of Facebook, Twitter, HN, Reddit etc. See Justin Musk’s description of How Elon Musk manages his time.
(4) As entrepreneurs, we need to ask ourselves whether the products we are building are good for users. Or are they the digital equivalent of heroin?
(5) Perhaps this question shouldn’t be binary, but about frequency of habit and usage. Seeking Alpha is a good thing — it helps you make better investment decisions, empowers you to think and decide for yourself, fosters open debate about stocks, and has created community and friendships for people who help each other with their investing. But is there a usage level above which it becomes negative? We’re nowhere near there yet — but would we have the courage to limit usage if we got there?

Most VCs are momentum investors

Edited excerpt from The Hacker’s Guide to Investors by by Paul Graham:

This is how most venture investors operate. They don’t try to look at something and predict whether it will take off. They win by noticing that something is taking off a little sooner than everyone else. That generates almost as good returns as actually being able to pick winners. They may have to pay a little more than they would if they got in at the very beginning, but only a little.

Investors always say what they really care about is the team. Actually what they care most about is your traffic, then what other investors think, then the team. If you don’t yet have any traffic, they fall back on number 2, what other investors think. And this, as you can imagine, produces wild oscillations in the “stock price” of a startup. One week everyone wants you, and they’re begging not to be cut out of the deal. But all it takes is for one big investor to cool on you, and the next week no one will return your phone calls. We regularly have startups go from hot to cold or cold to hot in a matter of days, and literally nothing has changed.

(1) Cf. There are only two ways to raise money for a startup.
(2) Implications for startups: Don’t raise money if you don’t have momentum in your key metrics, or you’re at an early enough stage that you can “sell the dream”.
(3) Cf. What one early stage VC looks for when he meets companies.