Category: STARTUP ADVICE

6 Crucial Lessons From The Rise Of THE Startup Nation, Part 1 of 3

6 Crucial Lessons From The Rise Of THE Startup Nation, Part 1 of 3

Peter Cauton

So who’s the real Startup Nation?

Nope, it’s not who you think.

The country we are talking about received more venture capital per capita than any nation in the world – 2x as much as the United States. They have more companies listed in the NASDAQ than Korea, Japan, Singapore, China, India and all of Europe combined. They’ve done this despite their small populace (just 7 million people), having relatively little natural resources, and being in a perpetual state of war (it is surrounded by its enemies).

israelflagIt is Israel.

In their amazing book, Start-up Nation: The Story of Israel’s Economic Miracle, authors Dan Senor and Saul Singer tells the story of how Israel has recently achieved tremendous economic growth through the development of startups.

As someone whose passion lies in the development of Filipino startups precisely for economic growth and poverty alleviation, the book simply enthralled me and made my imagination run wild.

The book talks about innovation, about “battlefield entrepreneurs”, about the importance of survival mentality, nationalism through enterprise, about the critical role of diaspora, and naturally, about chutzpah.

The book talks about how a powerfully entrepreneurial culture made all the difference in their transformation into Startup Nation.

We HAVE to emulate their example.

Here are some the most compelling arguments and ideas which crossed my mind while reading the book:

1) We have to destroy hierarchical thinking

Precisely because they are surrounded by enemies from all sides, Israel requires all young men and women mandatory service in the IDF – the Israeli Defense Forces. Now, you might be thinking “joining an army?! this is the absolute LAST thing you want to do to challenge hierarchical thinking!”

But this is where it gets interesting.

The IDF employs a curious bottom-up culture where hierarchy is thrown out the door. Subordinates are actually encouraged to challenge their superiors. In fact, subordinates can oust superior officers through vote (!).

miss israel
Miss Israel 2009, IDF soldier

Consequently, from a very young age, Israelis are trained to challenge the status quo and assert themselves – in extremely high-pressure environments.

Is there a better way to train would-be entrepreneurs?

With the combined experience of University AND a 2-3 year, one-of-a-kind stint in IDF (which the book explains through a greatly-named chapter, Battlefield Entrepreneurs), the Israeli 25-year old would-be entrepreneur has no global peer.

So…how can we start changing our culture here?

Our schools, by and large, teach our children to follow rules and singular ways to solve problems (multiple choice, fact-based learning, etc). Our companies, by and large, teach our workers to follow very defined job descriptions and kowtow to the boss.

This needs to change. We have to find a way to reward risk-taking and encourage doing things different, especially with our younger generations.

(Note – this school thing really worries me. My 5-year old was recently accepted in a big university, and when we were given the official introduction of what happens in school – I really second guessed this decision. I think our schools still produce graduates built for the industrial age – and the industrial age is dying fast. 

Startup dreamers take note – the education system is just waiting to be disrupted – it is now starting in the US. Why not here?) 

2) We need to embrace and use technology, regardless of our “field”

I talk to a lot of entrepreneurs who say “technology isn’t for me,” and that’s that. I think a quick dismissal of using technology is huge mistake. Technology is precisely what has made this world flat. Technology is what leveled the playing field for any entrepreneur in any part of the world to compete on a global scale. Why not use it? It is precisely what can take us to the next level.

Technology can be applied to ANY field, with wondrous results.

A budding social entrepreneur can say “I just want to help the farmers, I don’t want to be involved with tech.” Guess what? Hi-tech in Israel started with agriculture. Without much land (and most of it infertile) and much water, Israel was able to turn itself into an agricultural force, increasing its agricultural yield a whopping 17 times!

How did they do this?

Technology.

Are you a doctor who wants to build a startup? A musician? A publisher? An events organizer? A marine biologist?

Look hard at technology. Embrace it. It isn’t your enemy, and it can become your bestest friend.

How can technology allow you to do something different and new and innovative in my field?

(In Israel for example, you’ve got doctors working with engineers on a startup which aims to build a credit-card like device which aims on making the injection obsolete. The book lists so many of these “mashup” startups which combined expertise and technologies from different fields. Amazing.)

3) We Need More Venture Capital, Much More (and the government needs to get into the game)

The book is very very clear on the role of venture capital in Israel’s startup-powered economic transformation. They call it “Innovation Finance.”

I always try to encourage bootstrapping, and essentially, this was also how Israel started – with an awful lot of bootstrapped firms fighting for survival. But in order for us to scale our businesses on a global level? Venture capital is a crucial key.

fundingSeeing the strategic role venture capital had in its development, the Israeli government started a program called Yozma (Hebrew word for initiative) in the 1990’s. The government investment $100 million in forming ten venture capital funds. A key part of the strategy was to have each fund represented by 3 parties: a young Israeli venture capital company (in training), a foreign venture capital firm, and an Israeli investment company of bank. To attract foreign VC’s,  the Israeli government offered that its shares can be bought out cheaply after 5 years, if the fund was successful. This essentially meant that while the government shared the risk, it offered the investors all the reward – an unusually great deal.

The government did this not only to attract foreign capital, but to have the young Israeli VC;s learn about successfully managing venture capital from their successful foreign counterparts.

In a few years, this same fund has grown to around $3 Billion, all to support hundreds of Israeli startups and ventures. The Yozma program has resulted in copycat programs all over the world.

Is there any innovative Philippine politician, lawmaker, or national leader listening?

(and if you know anyone, please forward this to him or her)  

If there are, let me tell you personally, startups are the key. We Filipinos LOVE technology. We are naturally innovative. We speak great English, the startup language. We can build great, globally-relevant startups.

Over the past year, we’ve seen fund sources sprout up from the business sector, all aiming to help startups. This is great news and has to continue. We have also seen startup-related initiatives by DOST, and a few other government sectors, but you know what, I think we might just need MORE help.

Game-changing, Yozma-type help.

(Jump to Part 2 here!) 

PS: If you know anyone who would resonate with this post or to whom this post would be pretty useful for, do practice some yozma and share! Who knows what could happen if you do?

THINK: You Only Have 1 Peso

I started out my day with 50 pesos in my pocket.

php_coin_1_obv

By 5pm, I had 1 peso.

I had food waiting for me at home. True, I didn’t have any more expenses for the day, but I still needed to hop on the MRT to get home. Good thing, I had a stored value card to get me there.

On the journey home, I was drunk with excitement. I felt liberated without the resources that would usually shield me from hardship. I was ready for any obstacle because I literally had nothing to lose.

The only thing on my mind was to get home to food and shelter, and I knew I’d get there someway, somehow. 

While this romanticized anecdote is a product of my own recklessness and negligence, I savor that 1 Peso Moment. It reminds me of the rewards that come from making do with less. In this instance, I was pushed to the limit because I was down to my last peso and I was provoked to push back because I had to survive. In contrast, an excess of resources could do the complete opposite.

In the startup scene, they say that when a company acquires funding it actually increases the company’s likelihood of running out of funds. I see the concept play out in my own life.

When I’ve got a couple of thousand pesos. The money exits from my pocket without attachment. I can barely remember where it goes when I have more of it. Money, in this case, has less of an impact because it’s dispensable. Since I don’t value the money properly, I don’t foresee any consequences until I’m down to my last peso.

If I were to apply the principles of startup methodology into my own life, as I transition from life in a developed country to life in a developing country, I would say that bootstrapping is the way to go. I’ve heard so many stories about how funded startups fail because they get investors too quickly or how founders lose control of their businesses by giving up majority of their shares. The list seems to go on and on, but aside from the many reasons, I’d like to put emphasis on this Juan Great Thought:

If you’ve only got 1 Peso in your pocket, you stay hungry.

When you don’t have any money for a basic human need like food, you will work at any cost to fulfill that need.  That need to live is what will ferociously drive you to great measures, and that determination opens the doors for great rewards.

I’d like to work with that hunger to survive day in and day out. In days of doubt and despair, I will always remember that moment when I had just 1 peso.

 

How To Shut Your Way Up To Sales Success

How To Shut Your Way Up To Sales Success

Peter Cauton

zip itBack around 2007, I remember being thoroughly underwhelmed by the CEO of a multinational company our startup competed with. Our companies were summoned by a client in a joint meeting to compete for a bid.

I distinctly remember telling Pao: “The guy didn’t say anything and just wrote down notes. He was so unimpressive.”

Little did I know that not saying anything and taking down notes were quite strategic in one on one sales, so much so in B2B sales. Stubborn that I was, it took me a year or two to incorporate the same strategies in my own sales meetings.

Back then, whenever we did sales pitches, people would always react at how young we were – and this always felt like a hurdle in the selling process. (as the years went by, losing hair and gaining pounds remedied this – ah, the perks of baldness!) This, plus our being rookies in the industry, made me feel a gap in credibility.

So in the back of my mind, whenever I’d go to pitches, I thought – “I have to prove to this person how capable I am.”

So my pitches early on became exercises in hearing all about how great we and our products were.

One BIG problem: clients don’t care about how great you are. They only care about how you can help them out.

I remember seeing this in their faces before: they WANT to say something but I was so busy wanting to blurt out my “piece” that sometimes I didn’t let them get a chance to.

HUGE mistake.

The whole pitch has to be about the client. How can the product help them out? What’s in it for them? It only becomes a great product if they can see how it helps THEM to be great.

Listening and writing down notes are great visual indicators that the client’s needs are precisely what you are prioritizing. I’m not talking about putting on a show though – you really have to listen. Authenticity is pretty easy to sniff out. The client’s needs HAS to be first.

A client who is excited, talking, and feeling good about herself and her company is a much more likely sale than the one who is repressing herself to listen to someone saying how great they are.

Putting themselves first is a great temptation especially for new entrepreneurs. Entrepreneurs are entrepreneurs precisely because they have a lot of confidence in themselves. They also usually have a chip on their shoulder – a great need to prove something to the world. Inviting them to talk about their passions could easily turn into a couple of hours of monologue.

Overall, this is a good thing. Entrepreneurs need this to go through the roughest cycles of the job.

Just remember to rein it in sales meetings: just give a concise, well-thought pitch…

And then shut the hey up.

Hope Is the Common Entrepreneurial Thread

Hope Is the Common Entrepreneurial Thread

Peter Cauton

I have interacted and talked to a multitude of startup entrepreneurs over the course of these last few years.

You can bet I have tried to figure them out.

What is the common thread?

What makes an entrepreneur?

There are a number of things which stand out: tenacity, hard work, execution, with good doses of people skills and creative problem solving.

You’d probably find these characteristic in a number of entrepreneurial books and blogs.

What I realize now though is that perhaps the most common thread is a bit more rudimentary. It isn’t a skill in as much as it is a paradigm, a state of mind, a way of looking at things.

It’s hope.

sunrise

All startup founders I’ve met are hopeful people.

It sort of comes with the territory.

Lean Startup author Eric Ries describes a startup as:

A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.

If you take this level of uncertainty and couple it with the sobering thought that up to 70%-80% of startups fail?

Well, you sort of NEED to be a hopeful person, right?

But there’s more.

Perhaps the best illustration of hope in the entrepreneur is the way she conquers Hope’s polar opposite – Fear.

“This will never work!”

“This is going to be B-I-G!”

“I will be out in the streets begging for food if I fail!”

“If this doesn’t work, I can just go back to corporate. No problem.”

“I will be laughed at!”

“I will be the next Zuckerberg!”

“It’s a recession. This is a very bad time to startup a company!”

“It’s a recession! There’ll be hundreds of opportunities to start a company!”

How we see what the future holds largely dictates what sort of risks we take.

A hopeful person will take many leaps. Even if some of those leaps fail, they’ll think well enough of the future that they’ll take even more leaps.

A fearful person might not take a single significant leap at all. (not realizing that stagnancy in this new, ultra-dynamic economy is the worst risk of all)

In fact, the very interesting thing is that a hopeful person doesn’t see risk at all. She sees opportunity.

opps

When you attend meetings of entrepreneurs, want-to-preneurs and startup owners, there is a certain energy that fills the room. It is palpable. Get these people together, and almost immediately, discussions about a better future happen – a new business concept, possible partnerships, new ways of working together.

This energy, this hope, is what I love about the startup scene and talking to entrepreneurs. I seldom saw this in my corporate stints. Hope is engrossing, uplifting, and contagious.

Want to put up your own startup someday? Perhaps one stumbling block is your mindset.

You just have to get rid of your dark glasses and look at the world with rosier lens. And you know what?

You CAN change a mindset.

Like love, hope is very much a decision.

For the Young Entrepreneur: Do not Fear the Lingo, Get down with it! (Even more fun with wise friends!)

(Matt Lapid will be regularly posting original articles with me here on JGL, with the perspective of being brand-new entrepreneur. Heres his second article. As usual, please tell us what you think with the content we are pumping out for you. Gracias! – Peter)
256px-Math

“So is it a B2B or B2C…Kasi pwedeng B2C…Pwede rin B2B, but you need to define your niche market and validate…BOOTSTRAP…Looks like you have an MVP!”

This is the lingo that resonates after being with JGL for one week. Initially, I felt like “huh?” all the time.

“What’s a B2B? I never took calculus.”

In spite of my ignorance, I understood that even if I were to attain a tiny bit of knowledge of simple business terms it would give me a deeper understanding of the negotiations being made around me. So I made sure that if I didn’t know a word, I’d jot it down and look it up. That simple act of discovery made all the difference.

As a result, when Peter articulates that tech enterprises can be looked at in terms of both B2B and B2C, I can at least understand that he is saying that their business relationships can be based on a Business to Business or a Business to Consumer interaction. It’s a small feat, but understanding the lingo that’s being used nurtures free-flowing discussion, in which the speaker doesn’t feel confined. In my relatively minimal exposure to entrepreneurship, I’ve observed that the free-flowing, out-of-box thinking is where the best ideas are conceived and the best work is produced. If we do not allow our minds to run free, we will not create our best work.

In addition, if we seek to work efficiently, we must equip ourselves with the right tools to do so. At times, as young and passionate people, we want to do and do out of anxiety, but if we’re doing things on our own without the proper knowledge and guidance, success will be near impossible to attain. There are so many of us who have the passion and allow it to drive us, but that passion will eventually burn out, if we run without an understanding of business.

On a brighter note, there are many seasoned entrepreneurs that would love to teach you. I’m not sure exactly why this is because entrepreneurs are some of the busiest people around, but from what I have inferred it’s a type of pay it forward approach, and perhaps even a little narcissism that goes into play.

Let me explain my hypothesis.

Seasoned entrepreneurs see themselves in us. That entrepreneurial itch that you have is the same type of itch that compels entrepreneurs to move. That passion and tenacity that you possess is the same force that drives entrepreneurs day in and day out. Seasoned entreps can spot that entrepreneurial energy and determination. They see themselves in us young folk, and want to help by sharing their knowledge and experience because it is actually gratifying for them to see us succeed, as so many others have done for them.

For us young and aspiring entrepreneurs let us not fear what we do not know. Let us not act like we have all the answers. Let us be real and learn from one another.

I leave you with this list of common terms I hear on a regular basis, which are simply defined. Taking in consideration that these are the bare bones of rich definitions, let’s spark some discussion and provide some insights! Perhaps, we could even add to the list to gain more knowledge! Anything goes, as we long as we learn together! Do hit the comments!

List of Terms Defined:

1) B2B– Business to Business

2) B2C– Business to Commercial

3) MVP– Minimal Viable Product

4) YTD– Year-to-Date

5) Bootstrap– act of starting your business with the resources you have without any outside funding at all

6) Traction– indicator that tell us if the business has generated revenue

7) Cash Cow-moneymaker but possibly stagnant

8) SRP– Suggested Retail Price

5 Things I Learned in Raising Investment Money

5 Things I Learned in Raising Investment Money

Peter Cauton

You guys know that I’ve always advocated bootstrapping.

I will ALWAYS advocate bootstrapping as the way to go. But when someone asks me if she should raise money though, I never ever blurt out a “you should always bootstrap first.”

The real (sometimes frustrating) answer is of course, “it depends.”

It depends on whether your idea needs a lot of capital to begin with. It depends on the market. It depends on how defensible your position is to new entrants. It depends on your market adaptability rate.

Sometimes, it also depends on where you want to take your startup.

Our first bootstrapped startup, STORM, became profitable on around its 3rd year, then it just grew pretty fast during the next 4 years, all organically.

Then, my business partner Pao and I saw a new business opportunity for STORM, a new strategy dripping with potential, but one which  required a sizeable capital investment – a bit more than what the company could afford using its own funds.

So Pao and I talked about it. We came up with two initial plans:

Plan A: Go on our current organic trajectory (which wasn’t bad)

or

Plan B: Go for the new strategy by raising money and sacrificing equity.

Being the entrepreneurs that we were, of course we went for Plan B. BUT, we said that if we didn’t like the terms, or if we didn’t feel fully confident with the would-be investor, then we would do a Plan C and try to make it work ourselves. (nope, plan A was never considered)

So around a month ago, we began the process of raising money for our company. It was our second time to do so.

The very first time we tried raising money was back in 2004 when we started STORM. We failed to raise a centavo and resorted to try doing it ourselves (which in retrospect, was a blessing).

Around a week ago, we got the verbal go for a substantial sum – exactly what we needed to shore up operations in line with our new strategy.  More than that, we partnered with a great investor whom we felt could help us take the company to the next level.

Here’s what I learned from the whole process:

1) Traction Reigns Supreme

Traction can be defined as the startup’s history of actually making money. Which, you know, is what companies are supposed to do.

Traction means everything on the entrepreneur-investor negotiation table. Without traction, the negotiating power of the entrepreneur falls considerably.

The best asset any negotiator has in any negotiation process is the ability to walk away from the deal. Traction gives the entrepreneur the much-needed leverage to say no and find the best deal available. When we did our pitches to investors, we were able to show them 5 years of increasing profitability and a host of longterm relationships with substantial clients. We had no problem finding people interested in investing, our problem then became choosing who to partner with.

This is a much better problem than the former.

2) The Founding Team Counts

We’ve always heard investors say, “we bet on the jockey, not the horse.”

This is true. Investors will not merely give their time and money to anyone with a grand idea. The idea is secondary. Who the entrepreneur is is primary.

So you can bet investors will do their due diligence with you. They will check with their network for references. They will look at your past work. They will schedule multiple meetings with you to ascertain comfortability and working style.

In a very real way, the process is much like job-hunting. You and your founder team will need to be impressive.

3) Cast a Wide Net

I can’t think of any reason why your startup should not let as many people as possible know that it is raising money. Again this process is like recruitment. In recruitment, if you want to be able to get the BEST PERSON possible, you cast a wide net and consider as many qualified people as possible.

During the STORM process, we talked to VC’s, angels, friends, family, and went deep into our network for other connections. We presented in PhilVenCap (they meet in AIM every third Thursday of the month), posted on startup-related FB groups, talked to high net worth friends abroad, and told everyone we thought MIGHT be helpful that we were raising money.

The result? We were able to pool a relatively large number of investors of different backgrounds and strengths and get them to be interested with our cause. We also learned a lot, got a large number of useful contacts, and even potential clients. Oh, and in the end, we were also able to partner with someone whom we thought fit our needs to a T.

4) Look for Much More Than The Capital

Essentially, looking for an investor means looking for another founder. It’s important to remember this and not be consumed solely on raising the fund.

I’ve done numerous posts in this blog on why and how founder recruitment is crucial to the success of a startup. Partnering with the wrong investor can very easily doom your startup.

You HAVE to look at what the investor brings to the table. Will the investor be a meddlesome sort who will want to monthly reports and meetings (this can be CRIPPLING for a startup for the sole reason that these meetings end up being a distraction more than anything). Or on the other hand, will the investor just give you the money and contribute nothing else to the cause? A good investor choice is someone who will be there when you need her and not be there when you don’t need her.

Aside from the money, you have got to consider how else will a potential investor help grow the pie. This was the clincher with our own process in STORM. The investor we partnered with had much more to offer than just the funding.

When choosing an investor, you ALSO have to require multiple meetings to properly ascertain comfortability and fit.  Moreover, observe carefully at how interested the investor is with the business concept, NOT MERELY the ROI potential. This is crucial. If the investor is genuinely interested in the business concept (she comes up with new ideas, she gets palpably excited talking to you about the idea), then thats a good sign she will render real support when you need it.

5) Have a Plan, Then Execute Fast

Remember, the most important element a startup needs is not money, but TIME. (when you think about it, the money usually just pays for the time).

I can see how fundraising can prove to be quite the distraction, especially since you are talking about money and essentially selling kool-aid about how great your company is. It can be tempting to try and extend the process to try to see if you can get a better deal than what you have. An investor can also lengthen the process by dangling more money in return for a bigger pie piece. All this results in one thing: less time for your startup.

You have to be very clear on how much money you will need, how much equity you are ready to sacrifice, and who you are looking for in an investor. Then cast a wide net, talk to as many people as possible and then decide fast so you can go back to working on your startup.

Homecourt Advantage: 4 Reasons Why It’s STILL Awesome to Have an Actual Office

Peter Cauton
The new STORM office along Escriva – do visit if you’re in the area

A few of my startup founder friends are deliberately choosing NOT to have a physical office.

Their logic is simple:

  • Smaller utility costs (electricity, water, rent)
  • No travel costs (gas AND cost of time lost to traffic)
  • No furniture costs
  • Mobile technology now allows for free video conference calls across the internet

Last weekend, we moved to our new office along Escriva Drive in Ortigas. It is the fifth office we are moving into. Our original office was in the living room of my condominium, where we used a friend’s second-hand restaurant furniture.

When I think about it, we could save a small fortune NOT having an office and going purely mobile. Here are reasons why we would probably never do this:

1) Actual Interaction Beats Mobile

I’m not talking about production here. There are actually some studies which say that production actually increases when people work from home. What I’m pertaining to is teamwork and a shared purpose.

There’s a reason why training companies (paid billions by companies around the world) do a lot of teambuilding through actual shared experiences. Have you seen any team building activity done online?

The best way camaraderie and teamwork are built? When you are working in the trenches together. When it’s the deadline in a few hours and the guy to your left and the girl on your right are downing Cobras with you and its crunch-time. It’s the pizza and drinks you share as you celebrate beating the deadline the next day. This reasons alone justifies the costs of running an actual office for me.

Hmmm. I can picture a company wiring you money to buy pizza, then you celebrating together with you on Skype – but you know what, I just think it wouldn’t be the same.

I was with a startup company before who chose to do it the mobile route. And I don’t know, there was just less energy and excitement with that route. That company has since closed down – there were a lot of other reasons why it did, but working on a purely mobile environment certainly did not help.

2) Working at Home is Tough

It’s funny. I know a ton of employees who want to work from home. But you know what, I know freelancers and founders who work from home who “want to take the next step” by working in an outside office. It’s not so surprising.

Have you ever tried working at home? Not only is your gaming console there, but there’s also your bed, your very comfortable couch, plus dozens of other distractions. There’s also perhaps your mom who would suddenly want you to buy eggs in the grocery, or maybe your 4-year old kid who needs your help in finishing a stage in Bad Piggies.

 3) There’s Something Gratifying About Having a Home

I remember when Pao and I moved STORM from my condo to our first 20-square office space. We had just bought furniture and we were carrying it in. When we were placing the last table in its proper place, we looked at each other and couldn’t help but smile. It wasn’t verbalized, but it was clear – STORM had a home at last, and this was a moment to be remembered.

4) Having an Office Enables Recruitment

Or, more accurately, not having an office cripples recruitment.

After a few months on the job, our new hotshot programmer, Angela told me that she was thisclose to not doing the interview with our company at all. She said that she was standing in front of our door for a good 15 minutes, thinking whether she should ring the bell or not. After all, it was a RESIDENTIAL room.

Angela went on to design and build our first flexible benefits systems – the lifeblood of our firm. Had she not rung, things might have been very different for us.

I remember last year when Applabs (mobile development startup) CEO Ian Atienza was working feverishly on the details of their new office in Eastwood – where every brick went, what piece of furniture went where, how the conference room looked like, how the colors went together. After a few weeks I saw the office and it was amazing. In the next few months, I saw the rewards of what Ian was sweating over: some people were saying yes to his job offer just on the basis of what the office looked like.

Of course, ultimately, what matters would be the type of work and the fit. But you know, having a nice-looking home helps plenty. Unfairly or not, an office adds legitimacy.

Ultimately, of course it will boil down to whether your startup can safely afford the costs of having a home. But as soon as you can financially afford it, don’t hesitate – it’s easier to build with a foundation in place.

Think Bigger. Much Bigger.

Think Bigger. Much Bigger.

Peter Cauton

Whatever you’re thinking, think bigger. – Tony Hsieh, Zappos CEO

When thinking of or developing your startup idea, the overwhelming advice now is to “get out of the building” and do honest-to-goodness research with potential customers.

Intuitively, you’d think that what should happen is that your idea would narrow down, right? This was what I thought: that as the “big idea” comes into contact with research and reality, you’d have to scale your plans down and “get real.”

What I’m finding out though, is the reverse.

Think Facebook. When Zuckerberg originally thought of “TheFacebook”, he was targeting only universities and campuses. As he developed his startup, he began to realize something: this could be bigger. Much bigger.

So he then went for it.

When we started STORM in 2005, I thought:

This could be a nice sideline business for me. 

Then as we developed our startup, did more research, and talked to our customers, we realized one thing: this could be bigger. Much bigger.

There are SUCH great opportunities out there. Getting out of the building will make you say things like:

No one’s done this yet?

or

This is the only thing in the market right now?

or

I could do a MUCH better job than this!

The funny thing I’m realizing is that my mind was wired to think in a narrow fashion. Perhaps this is the mindset that corporate life gave me: silos, rules, limited scopes. Stepping out into the world, I brought with me the same frameworks and limitations. We all need to trash these and dream big. Dream bigger. 

Could your idea work for ANOTHER industry? Instead of competing, why not go for a blue ocean? (create a market) Instead of a “safe” sideline why not innovate? Instead of being a player, why not be the best? Instead of local, why not go global? Instead of introducing, why don’t you consider disrupting?

Reach for the stars. Who knows, you might get the moon in the process.

Emulate Tony Stark: Intuit The Future

Emulate Tony Stark: Intuit The Future

Peter Cauton

When Pao and I started STORM, we thought of a product which people WILL be buying – an online flexible benefits service for companies. There was nothing like it in the market yet. We decided to pursue a FUTURE need, as opposed to coming up with something we knew people were ALREADY buying.

In 2005, we launched our product with a hotel seminar which exhausted the little capital we had. It was a fully-booked (free) event, which made us think, “We’re going to kill it!”

Uhm. Not really.

When we talked to everyone after, NO ONE wanted to buy our product – largely because people didn’t understand it, and no one was using it. Wet behind the ears, we concluded that we still needed to educate the market sufficiently before we could sell.

(where were you and your book in 2005, Eric Ries?)

Actually, that could have been it for our fledgling company, but we really believed in our idea. Stubbornly, we said we’d still develop our flexible benefits idea and sell the concept. (this sounds a bit heroic when I write it – don’t get that idea, we actually just didn’t know what we were doing half the time)

We had a big problem though: monthly overhead. We only had enough cash for one more month of overhead.

So we got creative.

I feverishly called around 20-30 HR people I knew at that time and asked them repeatedly, “What do you need? What do you need now? What would you buy now?”

(It was the type of market research I SHOULD have done in the first place)

From the data, one trend I saw was a need for an employee satisfaction survey.

Problem was, we didn’t have any manpower to do this. Pao and I then wracked our brains in a small cafe in the Renaissance parking lot along Meralco Avenue. We decided that Pao needed to come up with an online survey system which we can use to scale processes for a new service. We called the system Websurv.

Astonishingly, Pao, finished the system in a month.

Our Websurv-powered Satisfaction Survey service kept us afloat from 2005 up to 2008. Around 80% of our revenue would come from that business line, with the other 20% from our very few clients in flexible benefits.

Starting 2008 however, the trend would begin reversing itself. We would encounter more and more competition in the survey industry, and it was getting tiring and a drain on resources to sell. Meanwhile, we were getting more and more clients for our flexible benefits line – without doing any marketing to speak of. We were relying (up to now) almost purely on word-of-mouth.

As I type this, we have altogether DROPPED the survey service (and all our other business lines), opting instead to go all-in with our initial bet for the future, which was flexible benefits. We are now the current local market leader in flexible benefits, and we’re really really excited with how everything has been developing for us.

Lessons Learned: 

1) Targeting a known market means going to war

If you KNOW people will buy your product, it means YOU ARE SEEING that they are currently buying from someone else. This “safer” choice is difficult, because it will necessitate going into immediate war with current competition. This might not be so palatable for startups – which often have a limited budget.

It’s like deciding to dive into a densely populated pond as a fingerling. You’ll have a very small chance of getting to be the big fish, plus you’ll always be in danger of getting commoditized.

2) To make it big, you have to be a FUTURIST

You have to have the Tony-Stark ability to intuit the future if you want to make it big as a startup.

If we decided in 2005 to be an Employee Survey company, then chances are, we’d now be one of the many players doing this. (and with Survey Monkey and Mail Chimp being offered free, we’d be deathly afraid now) We’d be a small, or at best, a mid-sized fish in the pond. Betting on something we thought people WOULD buy made it easier for us to be a bigger fish in the pond.

It was also a bit easier for us to market: there was less competition, and we could concentrate on building our product and customer base.

The caveat is clear though: you have to build something people will buy. Much easier said than done.

3) You might need your own Websurv first though

Yes, you can bet on the future, but you also would need to account for present concerns, like you know, food and stuff.   One way you can do this is to diversify your product portfolio with products which YOU KNOW people will buy now, while working on the killer FUTURE NEED idea in the background.

This is one advantage of funding versus bootstrapping. If sufficiently funded, you CAN pour all onto your future bet.

While we have closed our Websurv line, I am mightily grateful towards it because that was what kept us afloat during a crucial time.

 

Delivering Happiness Delivers Big-time! (A book review)

Peter Cauton

After finishing a good book, I typically lie back, savor the moment, and say to myself, “that was a good book.” Then I try to think of ways of applying what I learned in different aspects of my life.

In the middle of finishing Tony Hsieh’s (pronounced “shay”) super cool book, Delivering Happiness, I HAD to talk about it to my team immediately. This book makes you want to jump out and change the way you do things. This is a great book.

Structurally, the book talks about 2 main things in sequence:

a) Tony Hsieh’s personal entrepreneurial journey (he started out wanting to be the King of the Worms)

b) The rise of Zappos (an amazing story)

But the neat thing is, he makes the book into something of a reference/how-to by providing quick lists and ordered suggestions.

The result is something unique: the book tells an engrossing story while providing practical tips in a very informal, accesible manner.

Culture Matters

This was the overwhelming lesson which was tatooed in my mind as I was reading. Zappos made customer service their number one, put-our-money-where-our-mouths-are priority. The Zappos brand is now synonymous with customer service – which is the main reason for their success. The internet is riddled with people telling stories on how Zappos made their day with jaw-dropping customer service. (just google)  After all, the goal of their every employee is to wow every customer and to “deliver happiness.”

The result? One billion dollar sales on just their 10th year of operations.

Every company would love to have this sort of customer service quality right? (well, maybe not)

Hsieh talks very transparently on how they achieved this: by focusing relentlessly on something a lot of firms ignore – culture.

“We may have 1200 to 1500 brand relationships and a good head start against the competition, but that can be copied. Our websites, policies – all can be copied, but not our special culture.”

Zappos’s competitive advantage is clearly their culture. Pause and consider this for just a minute, to help you realize how awesome it is.

Zappos has ten values which they passionately build their culture around:

Zappos 10 core values (p154)

  1. Deliver WOW through service
  2. Embrace and drive change
  3. Create fun and a little weirdness
  4. Be adventurous, creative, and open-minded
  5. Pursue growth and learning
  6. Build open and honest relationship with communication
  7. Build a positive team and family spirit
  8. Do more with less (see more in further reading)
  9. Be passionate and determined
  10. Be humble

They are extremely passionate about these 10 things, and make key decisions and structures around them.  Hsieh talks about rejecting highly talented individuals whom they knew would help the company out immediately, but rejected them because they didn’t fit the culture pillars above. That’s thinking long-term. That’s making sure the culture is protected.

Another amazing thing about recruitment? At the end of the recruitment process, once you pass everything, you’ll be offered $2000 if you decline the job. Yep, you read that right. To filter people who are only in it for the money, they offer a you $2000 to reject their offer. That’s literally putting money where your mouth is.

Throughout the book, Hsieh wows with dry wit, humility, honestly, and self-awareness.

Paradigm Shift

Part of the reason why this book resonated with me is my Human Resources background. Back in the day, I was the flag bearer for “Vision,” “Mission,” and “company values.”

Jumping into startups, I slowly felt that it mostly a crock of BS. Here’s the evidence. I felt it was how corporations “herded” their employees into docile sheep.

This book has singlehandedly shifted my paradigm, marrying my HR sensibilities with my entrepreneurial ones.

Vision and Values can be more than a plaque on the wall. Done right, it’s downright transformative.

Read this book now! (startup founders, HR people, customer service people – I can’t say enough how important this book is)

Culture. Matters.