by Brad Feld
The best entrepreneurs we know are obsessed with their products. Dick Costolo, former CEO of Twitter and previously the CEO of FeedBurner, wakes up each morning with his product on his mind. Rob Hayes of First Round Capital talks about how to pivot when your product isn’t working. And Jeremy Achin and Tom de Godoy of Datarobot regularly improved, dropped, and re-created products in building their company.
You’ll find that much of this section is about how to get to the right product, not about the tactics of building what you imagine the right product to be. That, as they say, is a feature and not a bug.
Chapter 48
Don’t Wait Until You Are Proud of Your Product
Ajay Kulkarni and and Andy Cheung
Ajay and Andy are cofounders of Sensobi, a company that makes better mobile address books, and completed Techstars in 2009. Sensobi was acquired by GroupMe in 2011 and later in 2011, GroupMe was acquired by Skype.
Startups are like music bands—without fans (or users or customers), you don’t have much. At first, we thought building a business was a linear process: build the product, charge for it, and people will pay you. If you’re launching a business in a known industry with a known product, like a coffee shop, you can follow that model. But tech entrepreneurs don’t live in that world. Instead, we live to innovate and to build a new product that transforms an existing industry or creates a whole new industry.
If you are innovating, you actually don’t know what your product needs to be. Neither do your customers. No one does. But what you do know is that there is a problem that the right product will solve. It’s through rapid iteration—trial and error—that you can begin to figure this out. You’re basically running experiments. For these particular experiments you need test subjects. You need users, especially the kind of users who want to experiment alongside you because they believe in your vision and the potential of your product.
When we started at Techstars, we had a working demo of our product, but no users. We thought we had a good idea of who our target user was. Our goal with our product was to help professionals stay on top of their important relationships. We initially thought salespeople would need our application the most; this had a big influence on our product roadmap and our positioning. We even designed a persona around the sales professional.
As Shawn Broderick, the managing director of Techstars Boston, cracked his whip at our backs, we launched our beta. A lot of different types of people downloaded the app. We tracked usage, ran surveys, interviewed our power users, and iterated with new releases every two weeks. To our surprise, only a few of the core group of early users who loved our app and used it every day were salespeople. Yet everyone who used it saw the value in having stronger personal relationships.
Our early beta users helped us realize that there were a variety of professionals out there who relied on personal relationships for their business, and very few of them were actually in sales. This caused us to reconsider our product and marketing plans with this broader base in mind.
While we were at Techstars we were an early pre-revenue startup and hadn’t entirely figured out how to position our product. But we did realize that we didn’t know what we didn’t know. And it was only through conversations with our users that we figured it out.
We learned that you need to have the discipline to let your product go, warts and all, into the world. For the perfectionists in the room, you have to cut yourself off from the temptation of adding just one more thing. When you are your own boss, it’s so easy to push off the release date. Don’t do it. As our mentor Dharmesh Shah of HubSpot told us, “If you aren’t releasing your crappy bug-laden product, you’re too late.”
Having a great product doesn’t mean that you hold on to it for years and years and polish it endlessly. As Ajay and Andy point out, releasing early and often is the key to figuring out how to make your product great. They weren’t afraid to get their early version out there, and when they did, they learned more from the experiences their users had than they would have from months of internal discussions about what their users might want.
At Techstars, we encourage everyone to use an agile software development methodology, using a real agile project management tool from a company such as Rally Software or Atlassian, with product releases at least every two weeks. A few companies manage to get to the nirvana of continuous development, where they deploy changes to their application many times a day. Regardless of the approach, getting your product into the hands of your users quickly, with regular updates, is a key to creating a great product.
Chapter 49
Find Your Whitespace
Raj Aggarwal
Raj is a cofounder of Localytics, a provider of mobile application analytics. Localytics raised $700,000 from angel investors after completing Techstars in 2009. In 2019 Localytics supports more than 6,000 customers and reaches 37,000 apps, 2.7 billion devices, and 120 billion data points monthly. They have raised $69 million to date.
While companies with monopolies don’t worry much about differentiation, startups are not afforded that luxury. Nearly every startup must find ways to differentiate itself from competitors, whether it’s through location, service, price, product features, or something else. As your competition increases, so does your need to differentiate. This becomes even more critical in a crowded market, as your product’s differentiation needs to be clear enough to help you rise above the noise.
In the midst of the financial crisis in the fall of 2008 and spring of 2009, very few people were thinking about hot new market segments. There were a few notable exceptions, however, including the fulfillment of the longtime promise of the smart phone. Kickstarted by the Apple iPhone and the App Store in early 2008, developers were busily creating apps for this new platform. We created Localytics to provide analytics to these mobile app developers. We initially set out to address a need we saw in mobile app market, which was that the analytical data about usage of mobile apps was lousy. We worked closely with several mobile app makers from the beginning, understanding what they wanted and what they were willing to pay for, and created a service to address their needs.
Over the next several months, new competitors entered the market. Each new company caused us some anguish and sparked questions about the viability of our business. On inspection of the competitive solutions, it was clear that competitors were going after the middle and long tail of the market and that we could differentiate ourselves at the top end of the market. The needs of large brands and enterprises creating apps are unique, and we refocused our efforts to address their needs. At the time, the mobile analytics market was just emerging, and we wondered whether our differentiation would be strong enough for the top app publishers to work with us.
When we look back on what we did to find our whitespace, it came down to a few things. First, we identified a target market and researched it by speaking to as many people in it as we could. Through our research we found some early enthusiastic customers and developed a product to meet their specific needs. We iterated with them frequently and weren’t afraid of redefining our product based on their feedback. This process made it clear that our competitors were not addressing the needs of top app publishers, and we focused all our product, marketing, and sales efforts on them. After getting over our initial concern about competitors, we didn’t worry about them. Instead, we learned as much as we could about them to make sure that we were articulating our differences—specifically why we were better for certain customers.
Creating a startup in a crowded market can be intimidating and the typical ups and downs that any startup experiences will be amplified. Realize that the reason your market is crowded is that there is big growth opportunity. If you understand your customers and your competitors well enough, it usually becomes obvious what your whitespace is and what you’ll need to do to exploit it.
As part of finding their whitespace, Raj and his team did something we encourage every Techstars team to do—they obsessed about their compet
itors but weren’t afraid of them. From the beginning, Raj studied the products of each of his competitors. He built relationships with them, talked to them, and explored ways to collaborate with them. While he didn’t know what would come of this, he got to understand them better, which helped him more clearly define his whitespace.
We often encounter entrepreneurs who mythologize their competitors. Rather than try to understand them and relate to them, they make up stories in their minds about them. They believe everything they read on blogs, allow rumor and innuendo to define them, and attribute behavior, aspirations, and goals to them.
In many cases, your competitors don’t even know you exist. This gives you a huge advantage as an early-stage startup because you can learn from what they are doing and how they are talking about the market and their customers, while approaching things from a different perspective. At the same time, don’t be afraid to reach out to them and get to know them. Where it leads might surprise you.
Socialthing (acquired by AOL, Techstars’ first-ever acquisition among what is now hundreds) works on filling up whitespace.
Chapter 50
Focus on What Matters
Dick Costolo
Dick was the CEO of Twitter from 2010 to 2016. He was previously the cofounder and CEO of FeedBurner, which was acquired by Google in 2007. Dick has been a Techstars mentor since 2007.
It’s easy to lose your focus at a company of any size, to go chase some shiny object instead of making sure you have nailed down the single most important thing. This is most dangerous when you are a small company starting to gain traction. People are calling you! Other companies know who you are! Journalists know who you are! At this point in your company’s life, there are numerous opportunities to lose focus coming at you every day. Large financial opportunities appear that are off strategy but have big revenue attached to them. Strategic opportunities that are not central to what you are doing, but possibly could provide real lift and momentum to your business, show up at your doorstep. Each day you think about all the progress you could make if you just changed some of your priorities for next week, next month, and next quarter.
When FeedBurner was starting to become popular in 2005, and we’d hired our first director of business development, Rick Klau (now a partner at Google Ventures), he would occasionally come to my desk and say, “Company X will pay us an extraordinary amount of money to do this thing with their feeds. We’ve never really talked about that before, but it could be a good opportunity and it’s really a ton of money.” My reaction, which eventually became Rick’s reaction, was “Do we have all the feeds yet? No? Okay, then let’s just focus on getting all the feeds. Step one is to get all the feeds. Don’t bring me a rabbit; bring me more feeds. Throw away the rabbits.”
What I meant was that our first job as a company was to gain market share. We had a few competitors and we knew that a media opportunity around advertising would demand significant market share. As a young company, market share and market penetration mattered a lot. It’s easy to say you are going to focus on what you set out to do, but you have to have the courage to stay focused when you are spending money and there are exciting revenue opportunities that pop up in front of you. If you have a plan and you haven’t yet seen that the plan doesn’t work, then stay on plan and execute as quickly as possible so you can test the hypothesis of the plan.
Focusing on what matters doesn’t mean that you should be obstinate about your strategy and never change it. The key is to test the hypotheses of your plan as quickly as possible so that you can understand if and when you need to change course. When I would tell Rick “First, get all the feeds,” what I really meant was “First, get enough of a critical mass of feeds to test the advertising hypothesis.” Once we’d tested that, we redoubled our focus on “getting all the feeds” and began to have a second team work on iterating the advertising model.
It is easy to think there are nine things you should be doing as a company when you should be doing only two or three. Always trim away what you don’t need to be doing and ask yourself, “What is the thing that matters most to making progress right now?” Focus on these two or three things and let the other bright ideas sit on the sidelines until the company has proven that it’s ready to tackle another opportunity.
Chapter 51
Obsess over Metrics
Dave McClure
Dave is an angel investor and has been geeking out in Silicon Valley for almost 20 years as a software developer, entrepreneur, startup advisor, blogger, and Internet marketing nerd. He’s been a Techstars mentor since 2007.
The ability to get real-time data and feedback is unique to the Internet. If you’re smart, you can take advantage of that and build better products by collecting real-time usage metrics and by making decisions based on measured user data.
Today, you are probably building too much stuff and you are also probably measuring too much stuff. Contrary to popular belief, engineering is generally not the most important thing in an Internet business. You’ve probably engineered too much already and there are probably features that you should remove from your product. What’s really hard is simplifying your product and building a great user experience.
It’s important to start by building a culture of feedback and measured analytics into your process and your organization. The reason for this is that startup success often boils down to your ability to do two things: make money and make users happy. If you can figure out how to do both of those things at scale, then you probably have an interesting business on your hands. Luckily, you can tell if users are happy or not by measuring their behavior.
There are five key metrics to measuring user behavior and happiness:
Acquisition—How are users coming to your site through various channels?
Activation—Are users happy with their first experience?
Retention—Are users coming back?
Referral—Are users telling others?
Revenue—Are users spending money or allowing you to monetize in some way?
In case you need any help remembering these metrics, the first letters spell AARRR! and are at the core of my presentation (which you can find on the Web) about Startup Metrics for Pirates.
For many years Dave made a trip out to Boulder and spent a day with each of the Techstars teams. In addition to encouraging them to think like pirates, he gives them all a rapid-fire dose of product feedback from someone who has probably looked at as many products on the Web as anyone on the planet.
Dave’s insights are powerful while always trending back to a core set of questions—is this going to delight your users and will they tell everyone they know? If they will, you’ll win. If they won’t, you won’t.
Chapter 52
Avoid Distractions
Andy Sack
Andy is the cofounder of Founders’ Co-op and the cofounder of Lighter Capital. He also cofounded three successful Internet technology companies: Kefta, Abuzz, and Firefly Network, and was the first Techstars Seattle managing director.
I became the lead investor in Tom Staples’s company, Cooler Planet, in July 2007. The company was originally conceived to do lead generation in the energy efficiency market. Neither Tom, Chris DeVore (my partner at Founders’ Co-op), nor I had experience in anything remotely related to the energy efficiency market. We didn't let that ignorance stop us; we were knowledgeable about online marketing and we thought the trend toward green energy was going to grow a bunch over the next five years.
Tom decided to focus on and win the solar market first. His theory was that energy efficiency was too broad a market to cover. Solar was narrower, and it'd be easier for us to matter to both consumers and merchants. At first, Tom thought that winning the solar market would take about six months. We were right about narrowing our focus but underestimated the time that it would take to win the solar market.
Tom spent the first two years building a series of websites that provided the backbone of becoming the key online consumer
resource for solar information. The business model was simple: The company attracts user traffic interested in solar (both paid and organic) and then monetizes the traffic by selling leads to solar installers.
During our early years, we had regular conversations about expanding into other submarkets in the energy efficient market such as energy audits, HVAC, wind, and geothermal. Every time we had the conversation about expanding into a different or broader market, one way or another we decided to stay focused on winning solar. The consideration of diverting our scarce resources, time, money, and focus to other markets forced us to determine what winning in the solar market meant.
Ultimately, we came up with a concrete metric for what winning the solar market meant—we needed to rank in the top five organic search results for the top five keyword terms such as “solar power.”
We were forced to work hard to achieve that metric. Often, we wondered if it was the right goal or if we should have expanded our business sooner. We also wondered if we were in the wrong business altogether—or if we even had a business.
We entertained conversations of switching goals and markets most often when we lacked confidence in our vision because current results were not as big or coming as fast as we wanted. But every time we wondered, we came back to focusing on the goal of winning the traffic and search engine game for solar. We knew that if we achieved that position then a lot of companies would be interested in paying us money. We also believed we would be able to command a large premium in the market for being the online leader in the solar business.
At the beginning of 2010, while we were making the annual operating plan for the company, we once again had the conversation about expanding the business by going into a new market. We figured we had some final housekeeping to do on one of our solar websites, after which we would start our expansion. We conducted simple multivariate testing on this website and within a few days increased conversion by 40%. This blew our minds—we knew that if these simple tweaks could improve performance this much, we had a lot more work to do before we expanded into a new market.