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Tech, Strategy, and other interesting things by Roberto Zoiaby Roberto Zoia

entrepreneurship

Create or Hate. Successful People Make Things, by Dan Norris

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Even if some factors that lead people to be successful could be attributed to sheer luck, a common trait is that successful people create things.

In Norris’ vision, creating something –that is, being creative– has little to do with wild talent and is more about productivity. The first requisite for being creative is to start to do something.

In his book The War of Art, Steven Pressfield writes about The Resistance, the voice that delays us from doing our work, the self-sabotaging habits of procrastination, self-doubt, susceptibility to distraction, perfectionism, and shallowness. Dan Norris’ nemesis to creativity is Hate.

“Haters don’t create anything, and instead get caught up in a never-ending cycle of Hate feeding Hate and criticism triumphing over creation.” The hate ecosystem nurtures from negative people that may surround us or work with us. However, what most hinders our capacity to do things is own self-hate.

It turns out that people can be very good at making up reasons [for not making things]. Not all reasons are invalid, but we have to beware of Hate breeding excuses.

Some common excuses are:

  • It’s expensive
  • I don’t want to divide my attention
  • I don’t want to be one of those guys/gals that teaches people something before they know it themselves.
  • There is too much effort needed to start
  • The learning curve. I will definitely suck at the first try
  • I see no purpose to get it going
  • I don’t have what it takes

The second half of the book is about how to fight hate. For conquering hate, we need to accept failure as part of the creative process, an essential part of creating anything. Self awareness and gratefulness are our allies in our fight for being creative.

The final chapter gives practical advice that can give you some ideas on how to improve your creative process.

I specially liked to chapter on how empathy breeds creativity. Empathy is hard, and not commonly understood.

Your goal in being empathic is to imagine what it’s like to be that person and feel what they are feeling. If you can improve your empathy, you improve your imagination. And imagination is the source of all creativity.

The author is not shy about his own failures and learned lessons. For me, this showing himself vulnerable by reflecting about his own experiences is one of the things that makes the book valuable.

The Traits of the Most Successful Founders according to YCombinator’s Jessica Livingston

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Sam Altman interviews Jessica Livingston, co-founder of YCombinator and author of Founder’s at Work. Stories of Startup’s early days.

The interview is great, and you should watch or read it in full if you are involved in startups, building your own product or service. Traits of the most successful founders are determination, understanding your users and building a product with a great user experience, being flexible minded, and being great leaders.

How about looking for these traits in your future hires?

Jessica: The most successful founders I have noticed are totally focused on two things, building their product and making something people want, which of course, is our motto, and talking to their users. And they do not let themselves get distracted by anything else. And that seems so obvious, but what’s not obvious is how easily distracted founders can be by lots of other things going on, and the most successful startups are like hyper-focused on their product.

(…)
Sam: Are there other traits in the founders that go on to really change the future, besides determination that separates the very best founders from the mediocre founders? Have you noticed any other traits that kind of founders should aspire to that really wanna have a big impact?

Jessica: Yes. If I had to say the most important traits of the most successful founders, I’ve already mentioned determination. That is by far the most important.

Sam: More than intelligence?

Jessica: More than intelligence, more than previous success, you know, in school. I mean, remember when we started Y Combinator, our hypothesis was, “We’ll just fund all the best hackers from MIT and Harvard, and they’ll turn out to be great sort of founders.” That is not true. That is absolutely not true. A lot of them are good. (…) Determination is the most important thing. Again, sort of understanding your users and building a product with a great user experience is second most important. Not being distracted, not getting lured down these paths that aren’t gonna be important for building your product. Being flexible minded I’ve always felt this very important, because you have this idea and you test it out, and it doesn’t always work the first time. And so you have to be able to say, “Okay, I thought I was gonna do this, but let’s try this. Even though I have like a lot of energy invested in this, let’s try this direction.” You really have to be open-minded. And then, ultimately, you have to be a good leader. You have to be convincing and a good leader because you are gonna be convincing employees to join you, you are gonna be convincing investors to invest in you. When you do get to the point where you are doing deals with bigger companies, you have to convince them. Like, your whole world is convincing people. And so you have to be able to communicate your idea and convince people why they should care about you more than any of the other hundreds of startups out there.

(emphasis is mine)

Watch the whole interview (also available on YouTube{: target=”blank”}) or read the transcript here.

Las ideas menos obvias de emprendimiento pueden generar grandes retornos

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MakeSpace logo

Según Mark Suster1, Amazon es el tipo de empresa disruptiva que derrota a sus competidores en actividades “detrás del telón” como distribución, logística, manejo de inventario, almacenaje, soporte al cliente, etc.

Amazon empezó vendiendo libros online, pero una vez que tuvo desarrollada su infraestructura, se expandió rápidamente a la venta de artículos electrónicos, juguetes, ropa, accesorios… copando casi cualquier categoría de retail en la que podamos pensar. Hoy en día Amazon está revolucionando no solo la venta de libros sino en la venta de todo tipo de bienes.

MakeSpace

El artículo de Suster, sin embargo, es sobre MakeSpace y no de Amazon. MakeSpace es una empresa de almacenaje de objetos personales cuyo lema es your closet in the cloud, tu ropero en la nube. De su página web:

MakeSpace ocupa el #1 en el ranking de empresas de almacenaje en Nueva York. Nunca más tendrás que visitar personalmente un almacén. Te hacemos llegar sin costo las cajas que necesites para empacar las cosas que quieras almacenar; nosotros recogemos las cajas con tus pertenencias y las almacenamos. Luego, cuando necesites tus cosas, las hacemos llegar a tu domicilio.

En nuestros locales, altamente seguros, fotografiamos tus pertenencias y añadimos esas fotos a tu cuenta: siempre sabes qué tienes guardado en MakeSpace. Recuperar tus pertenencias es más fácil que nunca.

Suster hace un buen análisis del modelo de negocio de MakeSpace, de sus oportunidades de mercado, y de la disrupción de una industria existente pero estancada. Lo más interesante, sin embargo, es la similitud entre lo que MakeSpace está haciendo y lo que Amazon hizo en su momento:

¿En qué hemos gastado el dinero que obtuvimos de nuestros inversionistas? En sistemas de ruteo, de programación de entregas, de manejo de inventario, en sistemas de almacenaje, en automatización de la toma de fotografías, aplicaciones de servicio al cliente y, además, en las aplicaciones obvias de front-end que usan los clientes para rastrear sus pertenencias.

Tenemos un equipo increíble de choferes en NYC, Washington D.C., y Chicago, con almacenes regionales en cada territorio. Nuestra tecnología hace que los recojos diarios sean altamente eficientes y que los paquetes viajen por las rutas más económicas. Pero también hemos desarrollado nuestra tecnología de modo que, en los lugares en los que no nos interesa tener camiones propios, nuestros proveedores de transporte se integran a nuestro sistema. Además, gracias a nuestra integración con UPS, podemos hacer recojos en todo Estados Unidos.

Estamos creando una empresa a nivel nacional y un love-mark en una categoría inmensa, muy fragmentada, y universalmente odiada. Yo sé que la palabra almacenaje suena poco sexy, pero ¿en términos de ser disruptivos en un mercado inmenso donde los competidores no pueden reaccionar? Para mí ese mercado es el cielo.

La pregunta es, entonces, como Suster señala, en qué otros mercados está pensando entrar MakeSpace en el futuro.

  1. cfr su artículo Here is Why Non-Obvious Startup Ideas Can Yield the Largest Results (Por qué ideas menos obvias de emprendimiento pueden generar los mejores resultados). ↩

Non-obvious startup ideas can yield the largest results

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MakeSpace logo

Amazon business started by selling books online. But for Jeff Bezos, selling books was just the starting point. Once Amazon had its infrastructure in place, it extended its business from books to electronics, toys, apparel, and almost any retailer category you can think of.

As Mark Suster points in his article Here is Why Non-Obvious Startup Ideas Can Yield the Largest Results, Amazon is emblematic of the sort of company that mostly disrupts industries behind the scenes, winning through distribution, logistics, inventory management, warehousing, customer support, etc. It never intended to disrupt just the book seller’s market… it intended to disrupt the selling of all kind of goods.

MakeSpace

Mark Suster’s article is not about Amazon, however. It’s about MakeSpace. If you haven’t heard of MakeSpace, they define themselves as your closet in the cloud:

MakeSpace is New York’s #1 consumer rated storage company. We deliver free bins (or boxes if you’re outside of NYC, Washington D.C. or Chicago) for you to pack with items you’d like to store. We pick up, store, and deliver your stuff back when you want so you never have to visit a storage unit again.
At our secure storage facility, we upload high-quality overhead photos of your bins or boxes so you know what you have in MakeSpace at all times. This makes ordering your things back simple.

He makes a great analysis of MakeSpace’s business model, market opportunity, and the disruption of an existing but stagnant industry. And they are doing something similar to Amazon:

What tech has our capital raised gone into? Driver routing systems, scheduling, inventory management & tracking, warehousing systems, photography automation, customer service applications as well as the obvious front-end apps such as our consumer apps for keeping track of your goods. We have an amazing team of W2 drivers in NYC, Washington D.C, and Chicago with regional warehouses in each territory and our technology makes it more efficient for them to do their daily pickups with least-cost routing. But as you can imagine we’ve also built technology to allow third-party drivers in markets where we don’t want our own vans. We have built UPS integration to allow a product called “MakeSpace Air” to allow us to do national pickups.

We are building a national business and a beloved brand in a category that is large, fragmented and universally hated. I know that storage sounds unsexy to most but in terms of disrupting a large market where competitors can’t respond? It’s a market made in heaven.

The real question, as Suster points, is which markets will MakeSpace move into the future.

Sustainable Business Models

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In pasts months, a number of startups have closed1. These companies raised money, launched good products, gained attention from the press… and then closed. It’s not my intention to judge the decisions the founders of these startups made. Their closing is sad news. But… what happened? Even with the limited information available publicly, there are some lessons that can be learned by trying to understand the business models of some of them.

Know your operating costs

Knowing your contribution margin –the selling price minus the variable costs per unit– is important, because if your contribution margin is negative, then you are selling at a marginal loss. The more customers you get, the more money you loose.

Everpix was a great online photo archiving and organizing service. They had nailed a problem worth solving. They also had an excellent team. Everpix got very positive reviews, the service was really good. Their user base was growing.

These graphs were published in 2013:

Everpix closed doors on November 2013.

Using Everpix’s own data, which they made public2, Ivan Plenty offers an in-depth analysis of Everpix’s operating costs. After converting Everpix’s-provided operational to an accrual-based revenue3, he concludes that Everpix’s operating income is negative, even before amortizing fixed costs. Contrary to what the Everpix team thought4, their main problem was not growth5. They were selling a paid product at a marginal loss.

If you raise money, use it for assets that generate money

“Editorially was a collaborative writing and editing platform designed to support and encourage the writing process. It featured a plain-text editor, a document version system, notes and activity feeds, discussion threads, and more.”6

On February 12, 2014, Editorially announced it was closing its doors:

Editorially has failed to attract enough users to be sustainable, and we cannot honestly say we have reason to expect that to change.

That is, they had spent their initial funding and were not going for a second round of investment.

WHY NOT JUST CHARGE FOR USE?

We thought of that, and in fact, it was always our plan to do so. But Editorially is a sophisticated application that requires a team of engineers to maintain and develop. Even if all of our users paid up, it wouldn’t be enough.

It would be mean to say now that Editorially should have charged its users from the start or at least adopted the fremium model. (That is, have a free tier and one or more paid tiers with premium features.) They made a decision on raising a certain number of users before charging, and how they would reach break even, and it deserves respect.

But they spend their money developing a product that offered great value for their customers, but no revenue for the company. As a general principle, you should only raise money to get or build assets that generate money. You should never raise money to pay salaries, unless those salaries are directly generating money.

Build a simple financial model early on, to see the flaws in your business model. If your users are your customers, charge them for your service, or at least adopt a freemium model.

Offering a service for free can make sense

On July 13, 2012, after a post on the founder’s blog titled What Twitter could have been, App.net launched as a Twitter replacement. Meant to be sustainable from the start, it started as a paid-only service. Free accounts were added later, but they were invite-only and limited in functionality.

The first round of subscription renewals was due on April On May 6, 2014, App.net announced that because their current paid subscription base was not enough to pay their fixed costs, the service would continue to operate but without any salaried employee.

The Value Proposition of a social network like Twitter is deliverable only if they have a significant number of users. Because Twitter is extremely successful and free, there is very little incentive for users to migrate to a new network. You can’t start a Twitter clone today with just a small user-base and grow from there. You need to offer something different and valuable. (That’s what services like SnapChat and Secret are doing.) Also, super-fast user growth is needed, and charging for the service certainly hinders that.

Having Product/Market fit is not enough, you need a sustainable business model

A business model is a scalable, repeatable process that your organization follows to create value that someone else is willing to pay for. Having a Product/Market fit is an essential part of any business model, but it is not enough. As Seth Godin notes, the fact that you are going to work hard is irrelevant. The fact that you have risked everything is irrelevant. To be sustainable… you need a sustainable business model.

  1. Some startups closing their doors are Everpix, Editorially, Springpad, Readmill, Bloom.fm… ↩
  2. Before closing, Everpix made their numbers public. ↩
  3. This means you can recognize revenue not when your customer pays but when you render the service or sell the product. For example, if a customer pre-pays for a yearly subscription of Everpix, you recognize as revenue only 1/12 of the amount each month (and not the complete amount the moment he pays). Otherwise, you’ll end ‘using up’ in advance the money you will need to pay in the following months for the user-generated expenses. ↩
  4. cfr High-Level Metrics: “At the time of its shudown announcement, the Everpix platform [was] generating subscription sales of $40,000/month during the last 3 months (i.e. enough money to cover variable costs, but not the fixed costs of the business). “ ↩
  5. cfr The Verge, Out of the picture: why the world’s best photo startup is going out of business, Lessons learned. ↩
  6. cfr. editorially.com. ↩