This blog is the first of its series called the Start-up Log. Here you will get an insider’s view of what each BootCamp team is going through. Each team will write a blog about a specific day or theme.
Stay tune for more.
Blog entry Monday, April 12th, 2010:
Moaffak Ahmed of Veturi started off day two of Bootcamp emphasizing the importance of basing our business plans on customer pain. “Are you providing the customer with a painkiller or merely a vitamin? Is your solution a ‘must have’ or a ‘nice to have’?” Ideally the solution would solve both the user’s pain and the industry’s pain, as is the case with iTunes.
Juha Ruohonen, the Aalto Venture Garage Entrepreneur-in-Residence, illustrated an example of targeting “lighthouse customers first.” Estimates are that there are 1.3 million people in Finland on Facebook. The adoption of the new service started with “Freaks first, mainstream later, then laggards.” Once a tipping point is reached with the mainstream, latecomers are often forced into adopting the de facto standard.
The co-founders in the audience have not been shy about asking for specific advice to make their value propositions stronger, and both the coaches and fellow entrepreneurs have been helpful. Henry Ford completely disrupted the transportation business in the early 20th century, and is famous for having said “If I had asked people what they wanted, they would have said faster horses.” We were reminded that it is crucial to figure out if the customer’s perceived need is actually their ultimate need. “His customers had the need to get from point A to point B – that was their pain,” said Moaffak.
The importance of clearly differentiating our startups from the competition could not be stressed enough. Speed is important in new markets and it’s often an ‘execution game’ in the beginning. Once the market is big enough, the competition grows and eventually “a shark comes into the market” in which case the threatened big industry player will focus on (a) destroying you or (b) buying you. Large competitors could potentially end up providing a pile of cash for a startup in the form of an acquisition.
Another commonly recurring question involving competition that every entrepreneur needs to ask is how much to start pitching and how much to keep secret. In Finland especially it has been said that people overemphasize patents and NDAs. Moaffak is of the opinion that startups should talk about their idea as much as possible and refine their pitch as they go along. One doesn’t need to divulge trade secrets to whet the appetite of the potential customer, business partner, investor, or mentor. At heart, in my opinion, is the cost/benefit analysis of talking about your idea. Successful entrepreneurs advise that although talking about your idea involves some risk (e.g. of the idea being stolen), the benefits of spreading the idea (e.g. people can help only if they hear the idea), far outweigh that risk. Ideas are important but execution is key.
One participant asked if it was better to focus on a niche or go to market “all at once.” The resounding answer was to start very focused, and to solve one pain very well. The history of successful startups such as Microsoft, Google, and Skype further the case for focusing narrowly, doing it well, and then broadening the scope later on.
“There are two types of VCs: ‘Google VCs’ and ‘Excel VCs,’” said Moaffak. Juha, our EIR, wholeheartedly agreed. The ‘Google VCs,’ focus on “what’s the market?” and do some quick research. The Excel VCs have a large corporate mindset, punch in the forecasted financials into their spreadsheets and ask “How do the numbers look?” Moaffak kept on talking for 45 minutes over schedule, but no one wanted to miss any of his advice. Before he ended his interactive talk he emphasized the need to travel and talk with people. “Go out and talk directly with your customer. Find out where they are and start talking with them. Talk to others who have been there, and ask them how they were able to travel cheap. They’ll tell you where the 20 pound per night hostels are in London.”
In the afternoon we listened to Jari Kaitera, the CEO of Twid. He reminded us that the entrepreneur’s lifestyle can be a roller-coaster at times, so it’s critical to have the right attitude and be positive. “Negativity will just infect others,” said Jari. Know your customer and your market – even visit with the competition.
Flexibility in adjusting the roadmap is important for all startups, and often (most of the time, actually) one doesn’t end up executing their original plan. Although Twid is now focusing on the physical fitness market, Jari couldn’t have predicted that a a year ago. Through persistent talking, traveling, and learning, he found the gym and fitness market a good match. Jari was recently in America and found that having a niche such as the fitness market provided needed focus to get traction and persuade business partners on their ability to execute. In closing he advised us to “Be patient. Success takes time.” The freedom and liberty gained from working in a startup are worth all the hard work.
The Aalto Brain Company will bring relief to the information-overloaded knowledge worker through cognitive fitness software based on neuroscientific research