Category: STARTUP ADVICE

The Crucial Art Of Momentum Management, part deux

Peter Cauton

In the previous post, we talked about managing YOUR momentum in the startup process, about how we have to strike when the iron is hot and take advantage of our energy.

But what happens now when you’re now working with a team of either founders or employees?

Things become a bit trickier because now the startup exists outside of you. It now exists in your co-founders/employees, as well as the product you are now presumably working on.

Identifying Momentum Shifts

First of all, you have to be able to learn to READ how your momentum is. Is there an impasse in activity? Is output slower?

Sometimes the signs are subtler: has a co-founder’s energy dwindled? How does undergoing your first bad break affect the team?

The more you get to know your team, the better you would be at reading the signs.

Then, as startup founder and dreamer, it is up to YOU to ensure energy is sustained, up to you to pick guys up.  I have yet to meet a startup founder who can be described as “low batt.” They can’t afford to. When momentum slows and the difficult times come, people look to the founder for motivation and energy.

Challenge: Doing It Part-Time

For practicality purposes, a lot of startups are founded by people with fulltime day-jobs working on the startup part-time, very typically with other part-time co-founders.

This is a challenge because it becomes easy for people to miss meetings, or miss updates, or miss deadlines. String together a few of these and sometimes before you know it your startup is dead – and people are just too distracted/disheartened to pick up the pieces and start anew.

Keeping momentum in this sort of situation requires one thing: that you become relentless. You have to be relentless in finding time to work on your startup. You have to be relentless in keeping your team accountable to deadlines. You have to be relentless in managing and sustaining momentum.

Creating Cadence

There has to be some structure that your team can adhere to and bank on. Introduce these and make sure the team sticks to them. It could be in the form of start-of the week Skype teleconference meetings between the founders, or Googledoc files people fill in with weekly updates, or perhaps 2x a month Saturday lunch meeting. Monitoring progress helps a lot in achieving more of it.

Just Care

In the end, perhaps the most important thing to remember here is that you just have to care enough and do something if you see slippage. Sure, it can be awkward as hell to call out a slow-performing co-founder. Yep, you don’t want to be the bad guy who called that meeting when it’s 5:30 pm on a Friday, and everyone is tired from their day jobs. Someone’s gotta do it though. And yes, that means you.

Hey, no one said it would be easy.

The Crucial Art of Momentum Management

Peter Cauton

“There is a tide in the affairs of men, Which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries.” 

– Brutus (in the play Julius Caesar, by William Shakespeare)

This is a line from my favorite Shakespeare play, where Brutus urges his comrades to seize a fleeting opportunity in an armed conflict.

Ships tend to leave ports during high tide, so as to go along with the flow. Brutus is basically telling his mates to seize the day while the tide is high, because that opportunity will come and go.

Of course, seizing the day is basically the mantra of any entrepreneur – I’m not here to expound on that. What I want to expand on is the notion that entrepreneurs have to seize the day when    momentum is at its highest. Because like the tide, momentum comes and goes – and like voyaging ships, its tough to leave the port when the tide is low.

Startup founders know – it’s all about managing that momentum.

When you begin, your startup is a delicate, fragile baby – perhaps existing only in your mind as a concept or an idea. It grows slowly, as you talk about your idea with other people. It grows slowly, as you begin forming your team. Within your team, it will grow as you sign papers and begin working on fleshing out your business model. Along this process, you will feel an energy – an excitement, almost palpable. With each step taken, you will feel this energy grow, and this energy allows you to hurdle the next step a bit more easily. This is startup momentum. It is very critical that you manage it well, as it could mean the life and death of your startup.

Your momentum will suffer blows: I remember being rejected by potential partners and investors or people telling me that the idea sucked. These were a bummer, but I had to keep my momentum afloat, so I didn’t let them burst my momentum.

Important realization: I never stopped. And come to think of it, this is what works for me. From idea to coffee talks to forming teams to creating the product to creating the company to running it- there were no long breaks in between, I just kept chugging along, riding my momentum till the “next step,” until either a company is founded or the idea fails.

I think this is important because once you stop and “take a break” for whatever reason, momentum stops and it’s just really so hard to get going again.

Do you feel charged up and inspired?  Take advantage of this tide and do something. Call an entrepreneurial friend up NOW and ask her if she wants to have coffee tonight or tomorrow. You will be amazed at how things can quickly go from there.

Now what happen when you’ve assembled a group of people already? How do you keep momentum?

Next post!

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Why Uncertainty Is Your Friend

Peter Cauton

Do you know what you will be doing in your job in 2 week’s time? In 2 month’s time?

I did. I knew my HR routine for the day – around 10 email requests, 2-3 interviews, 1-2 disciplinary cases to type up, perhaps one meeting with a manager who either wishes to hire or fire someone. I’d also meet with the occasional employee who wants to talk to me about resigning,  and perhaps a general meeting with other managers if it’s a Monday.

Then it would depend on the time of year. Mid-year and year-end, I’d also be calling managers to submit their late performance management forms. First quarter? Meetings on increases and promotions. Summers, I’d have meetings about the company outing. Rainy season – perhaps there’d be inquiries on re-evaluating that policy on leaves and absences due to typhoon.

So give me a random date – and I can give a reasonable forecast of what I’d be doing.

You know, I’d bet a lot of people in corporate can give a similar, reasonable forecast.

Doesn’t that, you know… suck?

Certainty is overrated. Certainty is boring.

Don’t we hate predictable movies and TV shows? Isn’t uncertainty why we watch sports? We want to be thrilled by the battle of who comes out on top. The more evenly-matched the protagonists are – the more uncertain the outcome is – the better.

Being an entrepreneur, certainty is the first thing you throw out.

I was a ten-year corporate lifer before I leapt into startup life, so yes, having so much uncertainty was certainly scary. But over time, I have found that uncertainty is liberating.

Not knowing what I’ll be doing in 2 weeks is a gift. It’s a gift because it means I have control over what I will do in 2 weeks – and I know it will depend on what I’ll be thinking at that time.

It’s a gift because it also means that what I choose to do now has an effect on what will happen in 2 weeks. If I choose to put a lot of emphasis on sales today – that might mean that in 2 weeks I will be negotiating contracts. If I emphasize hiring today, then it increasingly means that I’ll be interviewing people in 2 weeks.

It’s a gift because it means I am quite equipped to pounce on opportunities should they arise. If in two weeks, one of the people I’ve been wooing to work with me suddenly wants to have a talk on the merits of leaving the corporate life – I can make an invite for coffee that very night.

Uncertainty means you have choices. Uncertainty is a gift. Learn to embrace it, to handle it with grace.

A Warning to the Dreamer: The World Will Make You Reconsider

Peter Cauton
This Is How The Status Quo Looks Like

Two friends mine are taking the leap.

One is a longtime banker. She is practical and very OC. She is married with one son, who is in his teens. She has been planning meticulously for a long while to take the leap and go into pre-school teaching, and ultimately, to owning a school. The past few years she’s been busy finishing her MA in Education. Late last year, she was finally going to submit her resignation.

Even before she got to talk to her superiors about leaving, she was suddenly offered a substantial raise and some other perks.

This led her to reconsider her decision.

My other friend has been in the FMCG business for a long time as well. She works as a brand manager for one of the bigger brand umbrellas in the country. She’s bright, smart, and always seems to do well in whatever company she goes to. She wanted out of the rat race though, to pursue her heart’s desires. So she gave her resignation, a number of months in advance even, just to be fair. How did the company respond? By giving her a substantial raise and assigning her to a team where one of her close friends was in.

This led her to reconsider her decision.

My banker friend had the will to push through with her resignation. She now teaches kids, to which she expounds “I’m so happy. This is something I would do for free.” You just know that her eventual school will be built by passion and love for the game. (Isn’t that a place you’d want to send your kids to?)

My second friend filed her resignation and is now counting the days down. I pray she doesn’t reconsider anymore.

When I took that leap a few years ago, my bank account (my “reserve”) was virtually wiped out by a new banking policy instituted the day before I left my day job.

This led me to reconsider my decision at the time.

Bottom line: if you are planning on taking that leap, the world will NOT make it easy on you. It will fight frantically to keep the status quo. It will either show you even more rewards the status quo brings, or more risk if you don’t choose it. And as the countdown ever draws closer, it will have aces up its sleeve.

This doesn’t help at all of course, because you are already conflicted on the inside as well.

What if I fail? What if this goes wrong? What will people think? Oh, a raise? Now?! So, hey, maybe I’m not supposed to be doing this after all…

The World will test your resolve. No one likes getting conquered, after all.

If you want to make money, you need to FORGET about the bottom-line. Seriously.

Peter Cauton

Here is how you make money in this world:

You create something of value to people. Once value is recognized, money is exchanged. That’s it.

This is my problem with the endless get-rich-quick schemes of the world: they make you focus your eyes on the money first. 

Think Rich. Millionaire’s club. Financial freedom. ALL focused on the cash. Or lack of it.

So HOW exactly do you make it?

I remember being entranced by the “think rich pinoy” movement. It basically tells you to get passive income through real estate rentals.

I convinced my family to devote a large amount to buying 2 condo units, that we could rent out at a profit. Worked for the first year, then the tenants left. Then Anne Curtis went out selling condo units in a new nearby SM condo. Moreover, it turned out this wasn’t “passive” at all. We needed to maintain the unit. We needed to aggressively market the unit. We needed to monitor tenants. Oh, and one more thing – I am not really into real estate. I have ZERO passion for it. So what now?

So, coupled with my dwindling lack of passion for my corporate day job, I had ANOTHER job I had no passion for. The units are available as we speak. (call me if you are interested, seriously – they’re near SM North Edsa, very strategic)

Why was I suckered into this? Because the lure of money is strong. My focus was directed on making money above all else.

You see a lot of “entrepreneurial” gimmicks advertise this way. People showing off their Lamborghini’s (cringe), or people talking about how they made their first million in a month selling to their downlines and just passively reaping in the rewards.

Wrong. Wrong. Wrong.

The focus should be on creating value. When value is created, the money will come after.

When it boils down to it, what is value? Value is simply helping people. All the companies in the world are about helping people. The moment they focus on making money rather than helping people, value is lessened and ultimately the company suffers (eg. Enron).

Sure, financial literacy is very important, but if the focus becomes merely stockpiling assets for a profit as opposed to focusing on how the assets will actually help people – then it’s easy to miss the point.

And what is it with this whole  “passive” bit? This just irks the hell out of me. What is the value being communicated here? That work is something to be avoided? That the trick to life is to find ways to reap the fruits without working?  Isn’t there something wrong here?

One thing I’ve learned: work is an integral part of who we are. Look at the most successful people on earth. They love what they do. Look at them carefully – it’s not about the money. It’s love of the game. 

You have to love the game, people. Life is too short. Take it from Steve Jobs. 

One of the more entertaining entrepreneur books I read last year was “Anything You Want,” by Derek Sivers. In the book, Sivers talks about how he founded CD Baby. He talks about how he just wanted to help struggling musicians solve a problem. He shunned the big contracts with big record labels. Said no to them. He just kept at helping artists while keeping his vision pure. How does this story end? He ends up selling his firm for 22 million dollars, and then giving most of it to charity.

So forget about the money momentarily first. Focus on helping people. Focus on solving a particular problem. Relentlessly. If you do that, believe me, the money will come. Think about all the great startups that were developed over the course of the last few years. Now think about the problems they solved for you.

I remember being so anti-Apple early on, listing down the things Macs couldn’t do. Then my friend Elmer convinced me to purchase an I-pad. Changed my life. I never went to National Bookstore again, as I was introduced to the world of e-books. And Amazon’s Kindle on I-pad. I could pre-order a book and get it the very day it got released. Then I also noticed I wasn’t watching a lot of TV anymore, but instead found myself consuming videos on the tablet in bed. No more awkward surfing-with-the-laptop-on-my-chest while in bed as well. Now I’m a fanboy, and they’ve got me for life. Why? Tremendous value.

The startups I’m involved with try to focus on helping out as well: STORM focuses on helping companies solve the problem of rewarding employees better. Newly formed Streamengine seeks to help solve the problem of explaining processes better (through video instead of text). Newly formed Cloudexterity will help startups solve the problem of finding a trustworthy source to develop apps.

Its simple really. You want to make money? Establish a business model which helps people. Solve problems. Want to make the ride sustainable and meaningful?  Choose to work on something you are passionate about.

How will your startup help people? What problem out there will you solve? Focus on these relentlessly and THEN the money will come.

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Startup Sacred Time for 2012

Peter Cauton
For all those calories...you HAVE to use the planner!

From 1:00pm to 6:00 pm every Friday afternoon, all Storm employees are required to work on a pet project of their choice.

We call this “Innovation Friday.”

The endeavor isn’t exactly original. I know Google employees need to devote 20% of their time on a personal project of their own.

The difference here is the forced schedule. At 1pm every Friday, you have to drop what you are doing to work on your thing. No official project timelines are moved or extended – so you have to be able to keep your usual work commitments with half of a weekday removed.

People love it though, and adjust accordingly.

What strikes me is how different the projects are – from each other and from the “official” work which they are doing. We have a QA analyst doing office beautification and ergonomics. We have a programmer doing SEO work. We have our HR guy doing a podcast project.

The early returns have been great – people are engaged and productive. I’m excited to see the results.

The big difference here is the commitment to the cadence: every Friday afternoon people are required to drop everything and work on their personal project. If we made the rule an ambiguous: “devote 4 hours of your week to a project of your own,” I doubt if it would have been as effective.

Commitment oftentimes needs structure.

You want to lose weight this 2012? Spend more time with your family?

You can surely see how creating a “sacred” time for exercise or time for the family can work.

Why not do the same for launching your startup?

You can do something like spending 800pm-900pm working on your startup – and making this time sacred. You just drop everything. You can use this time to evaluate your startup ideas, research, talking to potential partners, talking to potential clients, and just honing your business model. For those who are married with kids, I’d recommend early in the morning before working.

(I’d advice against using the time from your day job to do this work though. Not only does this comprise an integrity compromise, but if you get caught, you can get fired. )

It’s difficult, yes. But similar to any worthwhile habit you want to develop, you tough it out the first month or so, and then it becomes easier.

Happy 2012 everyone!

An Open Letter to Philippine University Deans and Leaders

Peter Cauton

(My friend, please read through this. If you agree with its content and find it important, stop being passive – don’t hesitate and SPREAD where you feel is necessary. Post it on your Facebook account, Tweet it, comment on it – agreeing or disagreeing, email it to directly to University Leaders in your network, or print it out and send it to their office, then perhaps tell them what you think about it. Let’s not wait for other people to do it, nor think that “this isn’t my problem,” because in some way, it is  –  peter)

Dear University Deans, Leaders, and Administrators,

If a young, impressionable Steve Jobs or Mark Zuckerberg were studying in your institution right now, would he be in an environment that would allow him to fulfill his potentials?

Leaders, there is an urgent need for you to help in spurring startup activity in the country

Let me explain.

Fueled by the internet economy and inspired by the likes of startups Google and Facebook, there has been a global upsurge in the formation and development of startups.

In fact, startup incubators have sprouted left and right. Incubators such as Techstars, Startup Weekend, and Y-combinator have created successful company after successful company. Young people, fresh grads – the best of the best – now see startups as a real, exciting alternative to the corporate grind. Startups are being formed at a rate unseen in human history. It’s already cliché to say “now is the best time to be an entrepreneur versus any other time in the history of the world.”

And it isn’t just happening in the US.

Google “India Startups” or “Indonesia Startups” or “Singapore Startups.” Exciting isn’t it? Lots of activity. Lots of firms.

Now, Google “Philippine Startups.”

As a country, we are missing out. Badly.

For the last 7 years I’ve been busy recruiting hundreds of young people, both as employees and/or partners to some of the startups I’ve been associated with.

I thought it would be easy for me to convince them to take a leap by offering good pay, equity, the chance to be the captain of their ships, and the chance to work on something meaningful.

It hasn’t been easy. In fact, it’s been quite the opposite. Automatically, most young people would explain to me their perceived  singular path to success: a few years climbing the corporate ladder, then an MBA, hopefully abroad, then back to that ladder again.

And they toil away in corporations, working for just their paychecks, a good number devoid of any passion for what they do. Worse, they think it’s as good as it gets. They end up wasting talent – Filipino talent being highly lauded as some of the best in the world – doing cookie cutter work that is beneath them. There are a lot of these people.

This is a perception tragedy of the highest magnitude.

The world has become flat. There is no reason anymore why a few bright kids in your school can’t create the next Google, or Facebook, or Zoho.com (a huge global Indian startup).

There are a number of valiant entrepreneurs out there who are making a difference, like ProudCloud’s Jay Fajardo or Brain Gain’s Paco Sandejas, but they are few and far in-between. There needs to be a grassroots-level effort in spurring interest in startup development.

Leaders, this HAS to begin in our schools.

We have to ingrain in our students that creating startups is not only possible, but it is the highest form of work, because it involves creating a company around what they are passionate about. We all know what happens when we work on our passions – GREAT WORK happens. GREAT IDEAS ARE ENFLESHED and become real. Startup work is hard, yes, but it is also extremely fulfilling, liberating, and a big part of nation building. Startups spur economies.

It is already too late to target people when they graduate. Observe what your graduates do upon getting their diploma. They create cookie-cutter resumes and send them en masse, hoping to get calls from whoever firm  finds their resumes attractive. A good number of your graduates even go for the “first company to call,” blatantly ignoring their natural God-given inclinations and talent.

They only would need to look around a bit to see that some of the best startups in the world were founded by young, inexperienced people. In fact, these startups work precisely because they were founded by young, inexperienced people.

Why not young, inexperienced Filipino professionals? There is no reason. None. In fact, with the sheer talent and ingenuity of Filipinos, we should be natural startup founders. Sadly, most young people do not realize this. Most of them have never even heard of Filipino startups.

This is a serious problem you can do something about.

Leaders, you have to do your part in making them fall in love with this idea. It is in your hands. Convince them that they CAN go after what they love to do. They do not have to compromise. We have to target them on the undergraduate level because this where dreams are created. This is where they fall in love.

I do have some humble practical suggestions, which I hope you can consider:

1) Emphasize Technology Startups

This is where the world is headed. This is how our country can be recognized – if we create a great tech startup. Or two. Or three. This is where costs have fallen so dramatically that geography is almost negligible. We can compete.

When I talk annually to management graduates who go through business simulations, I always get disappointed because 99% of the ideas pursued would be retail. It is SO hard to get noticed in retail. So hard to go against P&G, URC, or Unilever. It also costs a ton of money to produce inventory. Huge risk. On the other hand, the original code used for Google and Facebook were essentially created with no cost of goods sold – by students. There is now even a science emerging behind creating web startups which you can include in your curriculum: The Lean Startup Methodology.

Next suggestion is related.

2) Multidisciplinary Projects

This is how I basically build startups: I get a business domain guy, a programmer, and sometimes a design guy together and sell all of them on an idea. Then I let them work.

Actually, this is how most startups are built – complementary pieces. During the last Startup Weekend in Fort, people were grouped exactly this way.

Why can’t we do this in the University? Get a computer science student, a management student, a psychology student, and a design student together – then ask them to build something. These people all end up working for corporations anyway – so it doesn’t make sense that only business students are required to participate in simulations.

Can you imagine a business simulation activity where your best tech people are coupled with your best business people and your best design people?  Isn’t this exciting? Wouldn’t they produce great ideas and great work?

Under this lens, it’s a bit easier to envision to imagine lasting startups coming from your incubator programs.

3) Hire entrepreneurs

At some point, there needs to be a limit as to getting corporate people to teach business classes. Get people whom you would normally NOT get: the misfits, the square pegs, the heretics. These are the best entrepreneurs. Give the misfit, the square-peg, and heretic students in your school a hero they can learn from and relate to. They will be the best entrepreneurs. Under no circumstances can you allow your part-time teachers from corporations brainwash them into thinking that the only way is the corporate way.

And, since these entrepreneurs are few and far in between, you may have to go after them, instead of waiting for them to come to you.

4) Give startups a chance in your job fairs

If you think about it, the whole system is stacked for the big corporations, who are the biggest advertisers, and therefore are treated like superstars during the whole senior recruitment process. You can do something about this. Hold a “startup day.” Invite Philippine startups to recruitment events and don’t charge them large fees. At the very least, you can level the playing field. The big corporations may complain, but you can chalk it up to “supporting the national movement for entrepreneurship.”

These are but some ways you can spur your student population to fall in love with startups and entrepreneurship. I am sure you have even better ideas which are brewing right now.

Bottom-line is, something needs to change. The status quo isn’t cutting it. We are being left behind.

Leaders, I have faith in your ability to really listen, make the needed changes, and commit. We need you to. The country needs you to.

That great potential entrepreneur studying in your school right now needs you to.

9 Startup Myths Part 3 of 3

Peter Cauton

This is part 3 of a 3 part series. You can find part 1 here, and part 2 here.

7) Bigger is better

Last year we were up to around 15-16 people. This year, while we’ve lessened our headcount to around 10-11 people,  we’re set to double last year’s revenue level. Guess which situation I’m happier with?

Early on, it was always an assumption of mine that the successful companies are the bigger companies – bigger headcount, bigger operations. So expansion was one thing I was conscious about. I also remember the saying that you MAKE room for an A-player in your firm even if there’s isn’t exactly an urgent opening.

This was until I experienced needing to fight to meet payroll. This was something that I’ve never experienced before – if I didn’t make a sale, my guys don’t get any money for the month. Remember, recruitment in a startup entails selling dreams and encouraging people to take risks. The LAST thing I wanted to do was to face them and tell them we don’t have any salary for them for this month. So we did everything we could to meet payroll (and thank God that in our 7 years, we’ve never missed payroll – I find this to be nothing short of a miracle, especially during the early years). We also exhausted all means necessary before having to actually hire a new person.

This also allowed us to look at opportunities in a totally different light – how do we help this new client and make it work with only our current manpower? We forced ourselves to reconsider our assumptions and leverage everything we had (technology, network, processes) into making it work.

The results?

Larger revenue per employee. Lower costs. Better efficiency. A more versatile team. A smaller team which feels more like family than anything else. If, 5 years we experience much revenue growth and we’re still at 12 people?  I’d be ecstatic.

8) There will be no more jerks

The term I wanted to use was this one (an interesting book – talks about the negative bottom-line effects of employing jerks, even super-talented ones). I changed my mind, thinking my kids might end up reading this someday.

So, jerks it is.

You know the type – every company would seem to have them – pompous hotshots who humiliate and specialize in public lashings. After 10 years of encountering people like these in all the corporations I had worked for, I said to myself, “No jerk shall ever set foot in my firm! If one of them slips throughout the cracks, I will fire the person immediately.”

You know what, we’ve actually never hired a jerk (well, maybe one teetering on the edge). Our office has always been a fun, light place to work in.

Alas, while our firm has largely been jerk-free (not a small feat, as there are stealth jerks who don’t register during the recruitment process), I had forgotten that I was now exposed to more of the outside world – clients, suppliers, partners, government agencies, etc. While a large majority of the people we work with are fantastic people whom we love interacting with, there are always one or two exceptions to the rule.

Sigh. So I guess there will always be jerks. The trick is learning how to manage them.

9)You can do it part-time

Sure, you can do small businesses and lifestyle businesses part-time. But a startup? (definition here)

In a lot of ways, growing a startup is like parenting. You need to spend TIME with your baby – nurturing, guiding, supporting. Like a parent, there will be some point where your startup baby can fend for itself without you. But during the formative years? Your startup will not grow to its fullest potentials if you are an absentee startup parent. Name one uber-successful startup with part-time founders. There has to be someone full-time.

He's going to need your full-time help...

What made STORM work was that for the last 7 years, either Pao or I were at it on a full-time basis at any point in its existence. Now that we are both back at it full-time, we are experiencing tremendous growth. That’s no coincidence.

So Peter, how can you do these other startups if you are full-time in STORM?

Just early this year I’ve had illusions that I could somehow pull this off – being CEO of multiple firms, in effect. This is a fool’s errand, I have quickly come to realize. For these other, newer startups to work, I know I will have to groom quarterbacks. I can coach, but only from the sidelines. Someone else needs to quarterback.

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9 Startup Myths Part 2 of 3

Peter Cauton

(The following post is the second of a 3 part series. You can find part one over here)

4) Business Plans Are Important

Yup, it's for dummies alright.

What 4 years of college business teaching hammered in me was that I needed to create a business plan for my startup. I needed to put everything in writing and project my financials – on a short-term, medium term, and longterm basis. So during our first foray, we spent several days crafting an 80+ page business plan, crammed with a boatload of projections and analysis. We had a five-year sales forecast with assumptions on pricing, costs, and market. We had complete projected financial statements across those five years. It was a nice plan. It was something you could submit to a marketing class and get an A with.

It was also a complete waste of time.

The investors we gave it to never read it and instead asked us for a “simpler” 2-page summary. Moreover, after our initial effort to draft this plan, we ourselves never bothered to look it again.

Why? We really had no idea how people would react to our company. None. Our initial product, a fully customizable flexible benefits system, was a first in that 2005 market. Who knew how people would react? Our assumptions were guesses.

Remember this very important quote from renowned entrepreneur Steve Blank:

No plan survives the first contact with customers.

True enough, the moment we talked for the very first time with potential customers, we threw the initial plan (our 80 page masterpiece!)  out the window almost immediately. Almost all our assumptions were wrong. 2 weeks of work flushed down the toilet in seconds.

So instead of a crafting a long, static business plan, draft a short, flexible 2-page one. Use common sense to check if your numbers look alright. Take note of your assumptions.

Then, MOST IMPORTANTLY, immediately talk to potential customers and check out all your assumptions. Most of them will be wrong. Using what you learned, redraft your 2-pager. Rinse and repeat. Test and iterate till you get your model right.

5) Things Stabilize

Pao and I always thought, “OK, in time, we’d stabilize.”

Uhm, no.

What we’ve discovered instead is that every year is different. Vastly different. The moment we’d think that, okay, steady na tayo, let’s just stick with this, the market throws us a curveball and forces us to change things. Twice, we’ve decided to kill off certain services, only to have a huge company come and ask us for exactly those services. When it happened a second time, we even joked that the best way to make a business line profitable is by killing it off. Once, we were excited to bring out this new retention tool in the market. We made a big launch and started getting new clients. In a few months however, the recession came out of nowhere. Retention was the last thing on our clients’ minds, and one by one, our clients pulled out.

Bring it on!

Running a startup involves navigating your firm through a sea of constant change. So, while there’s always that huge problem which can sometimes threaten your very existence, thank God there are always even more opportunities to seize and take advantage of.

Yep, it isn’t for the faint of heart, but hey, you can bet it’s so much more exciting – and gratifying – than being a cog in the machine.

6) You need to pump money into traditional advertising

For years, I would always bemoan the fact that most of our clients came from word-of-mouth. I would always say, “imagine if we did active marketing instead of…nothing” And I would dream of big marketing campaigns – but couldn’t do it either because of a lack of time, a lack of budget, or both.

Eventually, we did direct marketing campaigns and sent an untold number of letters and email to potential customers. For all the time, money, and effort this necessitated, we got meager results – we got very few clients through this route. I then realized when I was in corporate I would just shred unopened sales letters, and delete sales emails before I read them. I hated spam.

In the meantime however, the “nothing” marketing strategy was churning out client after client. There would be phone calls from strangers referred by people we worked with, even people whom we didn’t work with, but with whom we shared an interaction or two with. Our biggest clients are almost all from referrals.

It turns out, it wasn’t “nothing” at all. The good work we poured in with our current clients – the service levels, the innovation, how we made it easy for people to relate and work with us – created ripples we never realized were spreading. In 2011, we spent I think the least amount on traditional marketing as we have had in the last 4 years, yet, this year is shaping up to be our best revenue year ever, by far. This has really made me reevaluate what I think I know about marketing. The rules are changing.

Last three myths next post!

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9 Startup Myths Part 1 of 3

Peter Cauton

For the next three days, I’ll be talking about 3 assumptions I discovered were completely wrong as I went through the startup process:

1) You need a ton of money to start

Nope, you don't need it.

Back in 2005, we were rejected by 2-3 investors before we said, “The heck with it, let’s just pool our own money and start.” My initial cash-out as an owner was P30,000.00. Far cry from the hundreds of thousands we thought we needed. It turns out it was enough.

Nowadays, you could start firms with even less, as the cost barriers continue to fall.

Last Thursday, I had a productive brainstorming session with an old friend of mine who was in the printing/publishing business. I suggested, “Why don’t you try building a 2.0 version of your current business on the net?” He told me he thought it would take around P2-3 million to do a web startup.

I told him I could connect him to tech people so he can knock zeroes out of his initial investment assumption.

Web startups are the most cost-effective startup type of them all. If you can program, you can build an e-commerce website for less than a pittance and start a business. You don’t know how to program? Sell your startup idea to someone who does and offer her substantial equity. She can instead work on the website for the equity instead of you paying a salary or a fee.

A great entrepreneur will ALWAYS find a way to get things done without a huge initial investment.

2) You will be your own boss

This was one of the first myths I discovered just wasn’t true.

When Pao and I started, we immediately made business cards which said “CEO” and “COO.” Yeah, we just loved the sound of that!

The moment we worked with clients though, it became very apparent who the real boss was. Needing to prove ourselves and earn trust in the market, we needed to over-deliver every time with every new client. That usually meant being under the beck and call of each client who chose to work with us. They were the real bosses and dictated everything.

Oh, you want this 4 month project crammed into a month?

Sure, no problem!

Oh, so you want me to do this 20-slide presentation which isn’t in the contract we signed? For free?

Sure, no problem!

Even the titles themselves worked against us. Once, Pao was in a presentation with a bank executive,  to whom he gave his “COO” biz card. Upon looking at the card, the client smiled and replied, “Oh, COO ka pala eh, ibaba mo naman young presyo.”

From then on, we just changed our titles to “Consultant.”

3) My corporate life would prepare me for startup life

When we were starting, I thought my 10-year corporate experience would help me run things in STORM.

Wrong.

There is nothing in my corporate career that could have prepared me for life in a startup.

Here’s the big difference: in corporations, unless you are the CEO, you think only as far as your function is concerned.

Going up the corporate ladder in human resources, I only thought as far as HR was concerned. Yes, I was trained to be a “strategic business partner” and know the business better – but I never made decisions for anything beyond my departmental role, and I would always look at things through the lens of my function.

In a startup, you learn veryveryvery quickly how and why every decision affects every other business function. Since resources are extra-scarce in new startups, you are forced to make (quick) decisions considering ALL the affected functions. Nothing in isolation.

Let’s say you want to implement a particular marketing plan. You then make an analysis that you would need someone full-time on it for 3 months. You could do it yourself, but then who would do current consulting work you are doing for a current client? Let’s say you consider hiring a person instead, what would that person do after the 3 months are up? What sort of person will you need? Do you have enough money to afford her? Who would train her? What happens if she’s successful and lands projects within the first month? Who would do the account management for these new clients?

Corporations train us to do work on a per-department basis. Sure, you have your management trainee programs – but each of these trainees is ultimately assigned to a home department after their tour of duty.

Startup work demands immediate holistic, systemic thinking. A corporation trains us in a singular function, because this is the most efficient way to structure things (like an assembly line).

This is why I’ve always said to friends that in a single year in a startup, I learned more about business than a decade in corporate.

Three more myths busted in part 2!

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