STEP 3: The Key To Startup Victory Is The MVP

Peter Cauton

(This is the 4th post in the series 6 Steps to Startup Launch. You can find the introductory post here, and the previous post here.)

So you have your idea and you have your team. Now all that’s left is to start, right?

To your credit, a lot of you will say, “not yet,” because you know that a blind leap is risky. You know that those who purely rely on gut and instinct are either foolhardy or have oodles of money to spare.

“Look, before you leap.”

And so lot of us startup founders find ourselves looking first. We do a lot of “market research” and get info about market share the competitor’s 5-P’s, and the like. Some of us even do surveys which asks questions like:

“Our product is _______. It’s great because unlike what’s in the market, it’s _______. Will you buy this product? Y or N?”

For most of us, a large number of people saying “Y” is enough to say, “Let’s invest a huge chunk and get this baby going!”

However, there is a huge gulf which exists between this sort of survey result and the actual reality of customers opening up their wallets. It’s presumptuous to assume that just because one million customers are currently using ABC product with this feature set, they will immediately jump to your product because you think you have better features. They might say they will buy your product in your survey, but how they WILL act might be different.

Look, going to the customer for input is exactly the right thing to do. There is way to do it much better though – don’t give them a survey which asks them to IMAGINE the product. Give them an ACTUAL product to try out.

THIS is the minimum viable product – your MVP.

The MVP was popularized by Eric Ries in his book, the Lean Startup, which focuses on software products. (buy it NOW) There is no reason though to limit the concepts to just IT. You can apply the MVP to any product or industry.

The idea is to think of the MOST BASIC features your product should have. This can prove to be tricky because we live in a features-heavy culture and the temptation is to cram our product with features. Resist this.

List the most basic features of your product/service. Got it? Now cut these features in half. With your new list, try to create your MVP. Why limit your features? Because every feature is an assumption you have to prove. Rather than go to the customer with 30 assumptions, just go with five essential ones and listen for the customer to tell you what features he or she wants.

Ideally, you can come up with a “bare bones” version of your product. For example, if you want to build sales tracking software, perhaps you can do a bare, working version of the system. Selling a new type of sandal? Create the prototype. For StreamEngine, our MVP’s are the videos you can see on the website.

Do remember that the MVP isn’t necessarily a minimum product, though. For some cases, it will be impossible to do an actual prototype without actually spending. In this instance, you have to get creative.

One of my favorite startups, Dropbox, faced this when they launched a couple of years ago. They didn’t have the resources to create the actual online service yet. So what did they do? They created a video. It wasn’t the actual product, it was a demo which used mock-ups. The video worked though. It increased their beta waitlist from 5000 to 75000. More importantly, it validated an assumption. Contrary to what people were saying (you have a million other cloud-storage services around), people were willing to buy their product. Be sure to read this Techcrunch post on how they did it.

Validate your assumptions. I can’t stress this enough. Your MVP should help you do this.

Remember, to mitigate risk, it’s best to do this step BEFORE you launch, BEFORE you commit to anything significant, like money, or quitting your day job.

Once you have your MVP ready, it’s time to bring it to your customer.

So how exactly to you do that? Isn’t it a misnomer to have customers at this point? What will you ask them?

All this and more in the next post!

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STEP 2: The MOST Important Thing: Picking Co-founders

Peter Cauton

(This post is part of the 6-Steps to Startup Launch Series. Introductory post is here. Step 1 is here.) 

Very first question: do you really need co-founders?

Short answer is: no you don’t. You can own 100% of the equity. If you need people, you can instead hire them. One of the entrepreneur/VC’s I follow, Mark Suster, recommends starting this way. I’ve also encountered entrepreneurs here in the Philippines who absolutely will not relinquish any equity under any circumstance. One of the startups I founded, Searchlight, was a deliberate attempt go through startup process by myself, in a grand experiment of sorts.

So do I recommend going at it alone?

Nope.

Why?

One key reason is that startups often become quite multi-faceted – almost immediately, it will require skills from you which are simply not strengths.

You then will need other people who complement you. (complEment, not compliment, just making sure ) The reason STORM works is because Pao and I complement each other very well.

I provide the HR domain expertise, Pao makes IT systems. STORM creates HR-IT systems.

I talk about going for ideas all the time, Pao is the voice of reason.

I sell. Pao makes.

I am all over the place. Pao focuses.

And so whole we ended up creating gets to be much greater than the sum of our parts. By myself, I can never do the things we do in STORM. This is why you should never get clones of yourself. A strong, complementary founding team can move mountains.

Note: You do have to be the same with regards to values though. As different as we are on skill sets, Pao and I are so aligned when it comes to principles. We both agree in treating employees as partners, we are both God-driven people, we are both very family-oriented.  Because of this, it becomes easier to create a more aligned, powerful workforce culture.

Yet another reason for not going at alone is simply that it just isn’t as much fun.

I don’t know about you, but I love working with great people – solving problems, arguing, discussing, creating. I love that I am a part of great teams. This is where going at it alone can be bummer. When I started Searchlight, I immediately felt this. Yes, it was a thrill of sorts to be completely accountable for everything – but it was weird to just think things by myself when  I had to solve a problem or strategize. This is why I’m rethinking the Searchlight experience to possibly bring in more partners. (anyone out there who’s interested in the executive search business? 🙂

Oh, and employees you hire can never fully share the startup experience with you. You will end up looking at stuff from different perspectives. It’s different when someone co-OWNS it with you.

If you’re somewhat a super-Swiss Army knife mega entrepreneur who’s also a bit of a loner – then yes, you can pretty much put up a startup by your lonesome, it might even be faster.

But for the rest of us? Bring in co-founders!

Let’s now tackle some fundamental questions about co-founders.

1) How many?

The quick answer is that it depends. One of the things I do is I break up a business opportunity into its key areas, then I try to look for people who would fill those key roles.

STORM is pretty much a combination of HR and IT. There were early iterations, but this quickly settled into me and Pao.

When I was trying to find that founding team to do a UI/UX consulting firm, I figured we needed to have a user-experience person, a design person, then I figured I can do the selling. I experimented with a few iterations with this one.

I suggest you bring in as few co-founders as is necessary though, as too many heads can quickly become counter-productive. The trick then becomes finding people who can fill in multiple roles. If you identify 6 roles, try finding them in just 1-2 more people – don’t bring in 6 founders.

Easy? Of course not. 

From experience, I’d say 2-3 co-founders in a firm is ideal – decisions are much faster, there is less lost in the translation, increased accountability, and the best ideas win out.

2) Does doing it with friends benefit?

One thing I’ve had to learn in my years in HR was to properly assess friends when they applied in the firms I worked in. I had to push my biases aside and be very objective.

This is even MORE crucial in startups. I’m sure all of you have heard of friends fighting in their joint business exploits. This almost always boils down to one reason: one friend didn’t live up to expectations.

Remember those crazy things you did in high school? Isn’t it just so easy to put something up with friends? It’s exciting, there’s no feel-out process, and of course, you feel that you can trust friends easily, and therefore jump into things more easily.

This isn’t about high school escapades though. It’s war. In war, you want the most qualified generals.

If your friend is the best qualified person out there, and if she complements your own skill set, then go on right ahead.

Those IF’s are just huge though. Evaluate objectively.

3) Is a pre-nup possible?

Where rich ex-wives happen.

If there’s one more thing Kobe Bryant and Michael Jordan have in common, is that they both failed to do a pre-nuptial agreement – so both lost (Kobe just about to) half of their huge fortunes because of their respective divorces.

Is there any way to do a prenup in startups? This would seem so practical.

Fortunately, the answer is yes. This is called vesting, and it should be something all startup founders should agree to.

Vesting involves not getting your stock immediately, instead, it is distributed or “vests” over a period of time. A classic model is a 3-4 year vesting period with a 1-year “cliff”.

Three years means that you will have 100% of your stock after 3 years. Vesting is usually linear: 25% vested after 1 year, 50% after two, 100% after three, etc.

The “1 year cliff” means that you don’t vest anything the first year, but you get 25% on your one-year anniversary.

The idea behind this is to prevent rewarding partners who just disappear or cease contributing. This is a great insurance policy.

Friends, finding the right co-partners(s) is the MOST important aspect of startup life. You may find out your idea may suck, or that your strategy isn’t working – all these things can be overcome by a strong team. When it’s the team that’s the problem that it gets to be debilitating. It’s very very difficult, to recover from drafting a non-functioning co-founder –  someone you cannot so easily get rid off. The effect on your company can be incalculable.
The best way to solve this problem? Avoid it entirely.
Pick a few people. Evaluate ruthlessly. Vest.
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STEP 1: Pick a Product and a Market

Peter Cauton

This is the 2nd of a series of 7 posts about the steps to launching a product. You can find the introductory post here. Step 2 is here. 

So you want to launch a startup.

First thing to do is to pick out an idea. Its sounds simple, but I do know that for a lot of us, this can be pretty challenging – its either we have too many ideas or none at all. The secret is to choose to commit. If you have too many ideas, and its already bogging you down, force yourself to commit to a few ideas and eliminate those you feel lukewarm about. For those who feel “none of my ideas are exciting,” I find that this is usually a confidence thing. You have to take a deep breathe, box out all the negative thoughts from your head, and choose. I don’t think you would be reading this blog if you didn’t have some ideas in mind.

The 3 circles exercise, detailed here, can be quite useful in helping you finalize a pool of ideas you can seriously consider. Remember, it is extremely important that you select a field which 1) you are passionate about, 2) which people will pay you for, and 3) something which you are genetically great at. Using the 3 circles, you might end up with something like this:

“great web design”

or

“baking marvelous cookies”

or

“finance auditing”

These are actually still pretty broad categories to consider building a startup around.

So focus on researching on your field of choice, with the intention of narrowing down your idea further. Why do you need to narrow down your idea?

Let’s say you are an artist who wants to start a web design firm. Go research. You’d find out that there are different subgroups and services categorize under web design, such as html programming, flash design, logo design, CMS set-up, site optimization, social media design and management, “clean” site engineering, etc…. They also service different markets: corporate, the government, small businesses, individuals, etc…

Understand all of this. Research. Use these services yourself. It’s important to understand the entire industry. It is only when you understand things – and the gaps between things – that you can truly innovate. It’s tough to innovate with the wrong assumptions.

Then, niche.

Unless you are a gazillionaire, it would be difficult for you to just go after the broad market and take on every single one of these services. Since you have limited resources, the wise thing to do is to divide and conquer. You have to go after a more specific subgroup. Besides, its way easier creating a name for yourself as the best in _______, rather than a generic supplier. The more focused you are, the more likely you can create something worth noticing. You have to niche and niche some more.

This was the process when we were cooking up Streamengine. We could have gone broad and created a “one-stop shop” of web services. But this was expensive, and not so strategic. So we focused on videos, then we focused some more and decided to do online videos, and then focused some more on motion graphics videos. This is what we want to be best in – online motion graphic videos for businesses.  I think this is a much better strategy than targeting everything.

Whats important to remember is to get out into the world when you do your research. It’s tough to “just rely on your gut” that there is a huge market. Talk to people. Talk to veterans in the industry.

If, after your research, you realize that your idea of choice wasn’t as hot as you’d thought, then congratulations, you can cross it out of your list and move on to the next idea in your pool.

Remember that ideas are cheap, so don’t spend more time than is necessary in this step. Step 2 (co-founders) is far more important than this step. That’s up next!

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Launch Your Startup in 6 Steps

Peter Cauton

So you a want a startup map? Here’s one.

This 6-step process is heavily influenced by my own experiences, and 2 canonical entrepreneurial books: Steve Blank’s 4-Steps to the Epiphany, and Eric Ries’s Lean Startup. Both obvious recommendations.

Again,  please note the differentiation here between a startup and a small business.

Here we go.

For a lot of us beginners, our idea of a startup goes like this: we have an idea, we build a product, market it, and then wait and see if it sinks or swims. So essentially, we take a guess and see if it works. This process IS risky, because if you invest a lot of money in the product development and the marketing, and it fails, that’s it – you’ve lost. In a way, it is also egotistical, because you THINK you know what the market wants, and go to market with it. This was actually how we started, and I wouldn’t recommend it.

There is a large difference between: “Oh, if we only get 5% of the market, that’s a million customers.” and that million people ACTUALLY opening their wallets to buy your products. You have to explore that gap.

You can largely mitigate the risk by testing out your idea with actual customers and iterating accordingly.

Here are the steps. I will cover each of them in detail over the course of the next 6 posts. Links will appear below as the posts are published.

1. Pick a Product for a Market

2. Pick Your Co-founders

3. Build your MVP (Minimum Viable Product)

4. Gather Feedback From Actual Customers

5. Iterate (and go back to 4 if necessary, when ready proceed to step 6)

6. Launch!

When we think of launching a startup, its mostly about art. Steps 1, 2, 3, and 6 are all about art: the art of picking a business opportunity (step 1), the art of selecting your founders (step 2), the art of actually creating a working product (step 3), and the art of selling a product (step 6).

Steps 4 & 5 basically incorporates the scientific method into the process. Your MVP becomes your hypothesis, and you basically test it out during step 4. Using what you will learn, you now iterate – and calibrate your MVP. Then test it out again.

Until your hypotheses is proven right.

Then and only then should you launch.

Step one in detail, next!

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How God Founded Our Startup

Peter Cauton


When a new employee starts in STORM, or any of the startups I’m associated with (we’re all in one building), they are treated to something different (especially if they’ve previously worked in corporations before) which happens every three o’clock. We invite the newbie to our conference room, where we read the Gospel for the day, and then everyone gets her turn to say a prayer.

When we celebrate a victory, we quickly remind ourselves that ultimately, it was God who enabled the victory. Yes, we have very talented and intelligent people on our team – but where do all these gifts come from anyway? We cannot and will not take full credit.

On the lower-right corner of our website, you will see Whom we dedicate this company to.

Why am I so obsessed with creating a workplace where culture is defined by faith?

During the company newbie orientation process, I give the talk on our history. A history of a startup is pretty much the history of its founders. When I give this talk, I get quite emotional because it is my life I am sharing. I tell new employees about how truly blessed we were in those early years – about how timing would always be so eerily perfect. The right client when we need it. A founder who backed out, only to become our first (needed) client. The right employee when we need it. Never missing payroll even in those times when we didn’t know where we could get the cash – I consider this nothing short of a miracle.

Soon, I reach the point where I talk about making my great leap in 2008 – from part-time to full-time, from corporate lifer to full-blown entrepreneur.

I made that leap at the MOST inopportune time ever – a full-blown recession, STORM having all sorts of problems, a person borrowing a huge chunk of money from me disappearing (and in doing so, wiping out my funds), a newborn son and a wife to support, our then-largest client alerting us through fax that they were letting go of us in two weeks, an impending 80% salary cut if I went full-time in STORM.

It was a completely idiotic decision.

So why, why, why, did I choose to make that leap when I did?

Discernment – I knew God wanted me to do so.

That’s it.

There was no secret client I was wooing, nor did I have a cash stash somewhere. No ace in the sleeve. Nor did I possess any irrational confidence that I could turn things around. I was wracked with doubt. Logic screamed at me to reconsider. I was not at peace.

(side note: I find that having “peace” with a decision is an overrated discernment element. I find that a lot of times, God talks to us by disturbing us. Oftentimes, when God asks us to grow and expand our horizons, it isn’t peace that is felt. It is disturbance. It is disturbance because when we expand our horizons, we always step out of our comfort zones)

But God was my rock.

So I leapt when He said so. It was truly a leap of Faith.

And ever since that leap, God has remained so faithful.

Not only has STORM been doubling revenues every year since ’08, but I have found what I want to do for the rest of my life: building startups and helping people build startups. I can talk about this topic nonstop for weeks. For the first time in my life, I have voluntarily devoured tons of (non-fiction)books on a topic. You could ask my wife – I have given up radio and I now instead listen to audiobooks and podcasts while driving. I would do this for free – I love this stuff.

I sometimes think of what I do now: the thrill of starting things, the experience of learning something by making decisions and truly being accountable for the ramifications, growing my startup family, work becoming my hobby and vice-versa, being involved in radically different but interesting things, writing and talking to people about something I am truly passionate about, I think of all these and I shudder. I shudder at the thought of how quickly and easily I might have decided to ignore that call to leap. Then I thank God again and again for the inspiration I was given.

I am utterly convinced with my entire being that if God had not intervened, if I had not been sufficiently guided, if I just followed what the world would have had me do, I would not have taken that leap. I would still be in a corporation now – completely uninspired, working for just my salary, totally waiting for Friday just like everyone else. No startups for me. No juangreatleap.

Instead, I had been redeemed.

This month, I met up with two blog readers I haven’t previously been acquainted with who invited me for coffee. Both asked me why I was doing this. Both noticed there weren’t any ads on this site. Both noticed I wasn’t asking for money during the meeting.

This is my answer, guys 🙂 There will never be ads on this site, nor will I be asking for money for “consulting” when I meet people. This part of my life has been Gift. And so, for my part, I will share what I can with those who trust me enough to ask.

In all the ways I can think of, I try to make God the center of my work.

Just simply to give credit where it is due.

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Stuck in Traffic? Use the time to listen to these invaluable podcasts!

Peter Cauton

One habit I picked up in my startup life is reading business books. I started slowly, and then grew to read them voraciously.

But when I transferred houses from one which was a stone’s throw from the office to one which was an hour and a half away, my reading time got stymied.

This was how I introduced myself to the world of podcasts. I would download podcasts from the web, upload them into my mobile, and listen away: 3-4 hours a day sometimes in the traffic. Great, wonderful learning – during a time when there is minimal distraction.

Want to get started?

Let me introduce you to one of the most elaborate startup resources available online: The Stanford Entrepreneurial Lecture Series.

This is a series of podcasts from some of the most renowned startup founders in the world, talking about a variety of topics concerning entrepreneurship.

You can download the podcasts freely here. You can view the videos here, but I don’t recommend that while driving 🙂

Some of the podcasts you can start with:

A) Unlearn Your MBA

B) Honest Advice on Starting a Company

C) A Devotion to New Ideas

But believe me, almost all the entries are worth listening to.

If you do garner any concrete, meaningful insights from these sources, do share them below.

Happy learning people!

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The 4 most common excuses for not taking the startup leap

Peter Cauton

Here they are, in no particular order:

EXCUSE NO. 1: PARANOIA

Sounds like: “Huge risk! The LIVES of my kids are at stake!”

Commentary: First, it’s never ever as bad as you imagine it would be. Too often we fall victim to our wild imagination. Moreover,  you can always mitigate risk, through research and early customer feedback. You can do this without quitting your day job. Small, calculated leaps. Then, you will inevitably come across a crossroad – the big leap. By then, if you did your homework, you should have a clearer idea of your cashflow and the projected (or even the actual) monetary risk. By then, you should have calculated how much you can really, really live by (you’d be surprised with this amount and what happens if you eliminate your “small” luxury expenses) By then, you should have saved, say, around 6 months of expenses in preparation. Also, by then, you should have contingencies. If let’s say the cash flow isn’t as healthy as you’d thought in month 2, perhaps you should be planning to take up part-time work to supplement your startup income. If it really doesn’t fly, you have a safety parachute for use at anytime – you could always go back to the corporate grind: most likely with slightly higher pay than your previous point. Moreover, if you go back, you will now be armed with a business experience no training course could ever duplicate.

The solution is merely to plan.

Among all the excuses, “too risky” is the lamest and is usually given as the cover for the other excuses. It’s the lamest because there is NO risk in taking the smaller steps. HOWEVER, people talk themselves into thinking it’s such a big risk that they don’t even bother to initiate even the smallest of steps.

Excuse no. 2: SELF-DOUBT

Sounds like: “ME?! Oh no, I am not an entrepreneur! I’m not built that way! I don’t have what it takes.”

Commentary: When we started STORM, I had no MBA, no cum laude standing, no cash endowment (but a lot of financial problems), no entrepreneur mentors, no entrepreneurial background. I even came from a job function (HR), which was described by two separate people to me as, “the function where the least amount of CEO’s come from.” (Gee, thanks.) Entrepreneurs and startup founders come in all shapes and sizes, personality types, family  backgrounds, education backgrounds, and experiences. There is no template.

They do have one thing in common: all of them overcame their insecurities and took leaps. You can, too.

Excuse no. 3: READINESS

Sounds like: “Not yet. I need to go through some things first before I take any leaps. Getting there though.”

Commentary: Much like getting married, there is never a “perfect time” to take the leap. You are never completely ready. There will always be something you will tell yourself “has to be right first.” You have to overcome this feeling.

If you want to develop a true-blue start-up, the situation becomes ironic.  A trailblazer hacks a path into the unknown. Readiness implies anticipation of the known.

You can never be truly “ready” for startup life. Startup life itself is the only thing that can prepare you for startup life. The sooner you leap, the sooner you learn, the sooner you garner relevant startup experience. The compromise? Join an existing startup.

Excuse no. 4: SOCIAL APPROVAL

Sounds like: “I am thinking of leaving my VP-Marketing post in ABCD Telecoms to put up a startup in… the flowers business?! Egad! What will other people think?! Heck, what am I thinking? Away, thoughts!”

Commentary: This I think is a subtly common excuse. We wear our corporate titles like badges sometimes, don’t we? It’s how we are often introduced, or even how we introduce ourselves.

“VP” “REGIONAL” “CXO” We love the ring of it, don’t we? This is to be expected, after all, work IS important to us, as well as the opinions of our peers.

So what would happen if we are stripped of our relation to the biggie firm, stripped of our corporate title?

Is our identity and self-worth really that much tied to these titles and company names? More importantly, will you let what people think ultimately bar you from pursuing your heart’s desire? (which actually allows you to pursue a more real self)

I hope not.

My own leap into fulltime entrepreneur wasn’t met with universal acceptance. After all, the safer bet was staying in my salaried job. But at that juncture, I had reached a point where I just didn’t care anymore. As long as my wife supported me, I was good. And she did.

I actually encountered ALL these excuses in my head when I was deliberating on my leap, and all throughout my startup life – even up to now. I encounter them in my interviews as well – consistently.

Realize one thing: most of it is ILLUSION.  It’s really all in your head.

Break through. Break free.

(Addendum: readers, if you have more common “excuses” to add, then please share! Thanks!)

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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Pick your startup idea using the 3 circles

Peter Cauton

A long time ago, I read the bestselling book by Jim Collins, a book which a lot of you are probably familiar with, Good to Great.

I have forgotten everything about the book except his 3 circles framework. Jim illustrates that for good companies to become great, they have to exist in the “sweet spot” of 3 overlapping circles. While the book was really made for large corporations, and used data mainly from large corporations, I realized how applicable the “3-circle” framework is for startups. I use this framework extensively in startup product development.

My simplified version of the framework looks like this:

So let’s say you’re deliberating on what startup idea you’d like to pursue, and you have a few ideas you’re evaluating. This framework then becomes extremely useful. Each of the elements are crucial.

Some scenarios:

1) You have an idea you are passionate about, and can do it brilliantly, but people probably won’t pay you to do it.

Then this is simply a hobby, not a business. I could be the very best in the world in naming every G.I. Joe character who ever existed and recite their complete profiles, but the likelihood of me getting compensated for this skill might not be so hot.

Here’s the interesting thing here though: because of the internet, you can now easily find people with similar passions as you have. If you can build a related skill-set to world-class levels – the internet makes it so much easier to find a market. So say you’re the world’s best in restoring action figures, there’s a better chance of finding a market now than there was pre-internet.

2) You can pursue something you are passionate about and people will pay you to do, but you aren’t so good at it.

Then at some point your startup will fail, because consumers don’t like settling. This is still a pretty good spot to be in though, because your objective becomes clear – you have to build competence.

3) You can also choose to work on something which you are really good at, and people will pay you for it.

If you leave your corporate job and form your startup under these circumstances, then this is really jumping from the fire into the frying pan. This is really the corporate assembly line all over again. It’s actually a bit worse, because it will be harder to extricate yourself from the situation. So while this is tempting, it’s a recipe for frustration and zombification. Don’t.

One important thing to consider is that startups are typically composed of more than one founder. So it becomes more interesting (and fun) to tackle these questions.

What are we passionate about? What will people pay us to do? What are we collectively awesome at?

Time for that coffee meeting.