You may thinkyou have the best, most amazing idea but I’m sorry to tell you that your idea is worthless…. But it’s Ok, most ideas are worthless.
Now before I get too deep, I’ve seen hundreds of pitches with a wide range of ideas and I’ve signed stacks and stacks of NDA’s to keep someone’s ideas secrets. Want to know the best secret idea I’ve ever heard?
There are none. We’re you listening at the beginning? Ideas are worthless and I’ve never been blown away by an amazing idea. Never! I’ve heard interesting ideas and clever ideas but most of the time amazing ideas are not the exciting part.
If you just think about the ideas behind the world’s most successful companies, the ideas aren’t that exciting.
A phone that doesn’t have any buttons
A car that uses electricity instead of a motor
A new search engine
These ideas by themselves have no value and even if you were able to rewind the clock 20 years, the ideas themselves weren’t worth anything without the entrepenours to drive them.
Nokia had phones without buttons before Apple. There were plenty of electric golf-carts before Tesla, and Google was late to the game as far as search engines go.
It’s the execution that creates value and these companies executed exceptionaly well.
While ideas are worthless, working on your idea is the thing that starts to create value. Some examples of value creation:
A list of potential customers willing to try or buy a finished product
Sales or purchase orders for a product or service
A prototype of the future product
Testimonials from people who have tried the prototype/product
Partners willing to stock or sell the product/service
You don’t have to be an engineer or designer to make progress on an idea, but you need to take action.
The other reason that ideas are worthless is that the idea instantly changes as soon as you start working on it. Once you put a pencil to paper your idea starts to spawn new ideas. Once you have a customer using the product you start to get feedback on the idea and what needs to change about it. Once you try to sell a product you learn all the reasons people don’t want it. It’s this learning/feedback cycle that creates real value because it’s based on real applications, not just theoretical ones.
The execution of the idea is the essence of the idea. Want to make something amazing, take action to make it real.
Startups looking to raise money may not be too picky in terms of where they get it, but finding the right fit for your company is often more than just financing and may reflect some of the differences between angel investors and venture capitalists.
First let’s start off with where Angel Investors and Venture Capital Investors get their money.
Angel Investors are typically individuals – They typically don’t have other decision makers in their investments and they are usually investing their own money. This gives them flexibility in terms of deal terms and it also means that they often don’t have external requirements on how they get their money back.
Venture Capital investors are typically not individuals, but rather companies or firms. They are most typically investing other people’s money in a Fund. VC’s will raise this money from people referred to as Limited Partners or LPs. LP’s are typically writing million-dollar checks and expecting VC’s to invest that money and get a return.
Both Angels and Venture Capitalists look for companies that can grow and be successful but each may look at companies at different stages and be interested in making different types of investments. Because VC’s are investing other people’s money they have general expectations on how long it may take to get their money back and will structure most returns and investments to have liquidity.
Angel investments are typically investing in early stage companies and are most often writing checks between 5-50 thousand with some angel investors going even higher. It’s most typical for angels to invest in the early stages of growth.
Angels and VC’s may take different amounts of interest in the operations of the company too. While Angels will often be available and interested in helping companies VC’s are likely to insist on a board seat. As companies continue to raise funding founders should be aware of balance in the board of directors.
Generally the board and the founder are aligned however if the founder and board disagree it’s possible for the board to fire the CEO so just make sure you consider the long-term direction of your business as you take on investors and board members.
Ultimately both VC’s and Angels want companies to succeed and depending on the stage of your business angels or VC’s may be a better fit for growing your business. Lastly remember that you don’t have to take investment and there are plenty of successful companies that have never raised funding and did it all on their own. There’s no right or wrong so consider the pros and cons of the different paths as you go on your startup journey.
Each year Apple holds it’s WWDC conference giving developers a peek at what’s coming in tech for the next year. This week Apple unveiling iOS 14, the next version of Mac, watch OS, and more.
DubDub is a fantastic event for enthusiasts and entrepnours because it gives us a peek at upcoming trends that we can expect to see over the coming year. There are three trends that I think are particularly interesting…
The first trend is the proliferation of apps.
iOS introduced widgets – they allow more information without opening apps
Organization – if you have many pages of apps you can quickly find them.
App Clips – an easy and lightweight way to install quick use apps like when you need to pay for a parking spot or cafe but don’t need to keep the app around.
Many improvements to Siri making it able to answer more informational questions and perform more tasks. Siri also doesn’t take up the entire screen, making it easier to invoke anytime without loosing context.
All of these features recognize that there are too many apps and bouncing in and out of apps isn’t great. Widgets bring you the information you want without opening an app, the organization makes it easier to find apps, and app clips allow you easy access to app powers without the download and clutter.
The second trend I spotted was around transportation.
Apple introduced features in its map product for bike routes making it easy to see elevation and get bike-friendly directions.
It introduced EV charging routes to give better directions for electric cars that need to charge-up while en-route.
They also introduced digital keys for the upcoming BMW with other cars in the works.
All of these features point to a macro trend around the evolution of transportation away from traditional cars. From bikes to the application of App-Clips for scooter rentals to sharing keys, Apple is painting a future where how we get around is changed.
They also hinted at Augmented Reality with technologies like spatial audio and more detailed perspective maps.
The third trend is really around the evolution of the computer.
Apple announced that they are producing their own computer “Systems on a Chip” or SOCs. This means that the chip that runs your iPhone, iPad and Mac will finally be made on the same architecture and that means that Apps from your iPad will now be able to run on your Mac.
The Apple UI got updated in a number of areas from Siri, Icons and Notifications. There’s been a lot of consolidation and the look and feel of the platforms is starting to align.
The Apple UI for the Mac is starting to look touch-friendly and that’s hinting at a future where Mac’s have touch screens.
Earlier this year Apple’s new iPad proclaimed that the new computer is your iPad and with the mature Mac operating system making the shift, this could become very true.
Additional focus on virtualization and compatibility technology imply that more cross iPad/Mac/Phone work is in-play and we’re likely to see iPad apps on the Mac and perhaps the inverse too.
What else? There were a lot of features in iMessage for replies and animoji making iMessage almost like a twitter/slack client. The iPad introduced many features for pencil based interactions and there are a lot of subtle UI tweaks and improvements and I’m sure a ton under the covers.
Companies that want to get ahead should look to see if they can lean into some of the future trends. Being an early adopter of a new technology can give startups a distinct advantage.
So iOS 14 looks like a nice update, it doesn’t feel major but there are lots of little improvements throughout. App Clips are particularly interesting and I think it will aid in on-the-spot discovery.
Widgets are cute but I’ve never found widgets particularly useful. I think it’s a nice progression and a good departure from the grid we’ve had for the last decade. It’s also nice that this functionality isn’t buried in the today view.
Lastly, I do think that the migration of Mac to a common architecture will be a key change for the next decade of Apple. We can expect more shared features and more touch capabilities on the Mac. I think we’ll also see more powerful apps move to the iPad as a result. Xcode, FinalCut, Office, Photoshop and more are likely to become full-featured apps providing a consistent experience across touch, pen and computer.
When you’re starting a company you may get lost in the alphabet soup of metrics of things you can be measuring CAC, LTV, ARR, Churn, and many others. Company metrics matter but focusing on the wrong metrics at the wrong stage of growth can lead you down the wrong path.
I’m going to go over three things:
Common startup metrics and basics
Pirate Metrics and the AARRR framework
Early metrics vs. Later stage startup metrics
There are a lot of startup metrics that are used and they often use TLA’s or Three Letter Acronyms. These can be confusing for first time entrepreneurs but they are all trying to measure how you’re engaging with customers. Investors like these metrics because they create a common framework for discussing companies across company size and across different industries and even comparing yourself to public companies.
The most common metrics allow you to track customers through sales funnel. Visitors come into your sales funnel on one end and if you’ve done your job right, they become customers on the other end. Obviously not everyone who comes to your website becomes a customer and this is called your conversion rate.
Now there are a lot of ways to get people to even visit your company or website in the first place. A common way is to spend money on advertising or promotions. If you run ads or promotions you can figure out your Customer Acquisition Cost or CAC. The CAC is how much you have to spend to get someone all the way through your sales funnel.
Once a customer is through your sales funnel they are likely to pay for your product or service. Some purchases are one-time purchases but for many businesses, especially in software you’re likely to get paid either monthly or annually. If you add up your recurring revenue on a monthly basis you’ll get your Monthly Recurring Revenue or MRR. As your startup grows and matures you’ll also be looking at your Annual Recurring Revenue or ARR… and if you project that forward to the duration of a typical customer you can calculate the LTV or “Lifetime Value” of a customer.
So great… You’ve gotten someone to sign-up for your product or service. Now the key is how you’re going to keep them engaged. This is what’s often called Churn. The Churn of a startup is what percentage of their customers quit the service over the last 12 months. As an example, Netflix is estimated to have a 9% churn rate. That means that 91% of customers from last year are still customers today. Every startup can start to calculate the churn rate and this is a good indicator of how much people like your startup or service. If you have a really low Churn rate people are likely to stick around… and spending more money on Customer Acquisition is likely to make you more money in return. However if your Churn rate is really High and people sign-up but then abandon, this is what’s called a Leaky Bucket. You’re getting customers through your funnel but you’re not keeping them around.
A good way to think about this is using Pirate Startup Metrics.
AARRR Framework – pirate metrics for startups
Dave McClure came up with the idea of Pirate Metrics and it’s just a framework to think about that sales funnel in a little bit depth.
It’s called Pirate Metrics because it spells the word AARRR. Let’s go through the letters…
Acquisition – getting people into your startup funnel. You want to explore many channels and figure out what works.
Activation – Ok you got someone to sign-up but are they using the service? Did you onboard them and get them to do something that will create value?
Retention – Do they come back? Are people coming back to your service? Do they sign-up and then forget about it or are they using the product or service on a regular basis?
Referral – Do they like the service enough to tell others? If each person who uses your service refers others this gives you a viral coefficient. And if you know your CAC (customer acquisition cost) you can even incentivize these referrals.
Revenue – Revenue, can you make money from your fanbase?
Using the AARRR framework makes it easy to remember the sales funnel and it can help you prioritize some of the metrics that you should be tracking. Each of these metrics is important but each has a time and a place in the life of your startup.
Early metrics vs. Later stage startup metrics
In the early stages of a startup it’s important to find “Product Market Fit” this tends to put a higher focus on Retention and Revenue. Your startup may not be super-efficient at either finding customers or activating them and you may find that you need to hand-hold initial customers through onboarding and setup.
But once you have customers are sticking around and using the service repeatedly then it’s important to start automating more of the funnel.
As your business gets more sophisticated you can track more complex metrics but don’t overcomplicate things too early. It doesn’t make sense to optimize some of the more complex metrics if you can’t figure out the basics.
When it comes to metrics, it’s important that your team knows what’s important. Pick ONE core metric that you want to track as your North Star and make sure that everyone on the team knows what that metric is. Creating team visibility on that metric helps everyone focus and make progress. Your one metric can change over time, just make sure your team knows what matters.
Startup metrics help you grow and focus on the right elements to ensure your startup isn’t just surviving but thriving. A full spectrum view of your own metrics gives you a birds eye view, and a narrow focus for your team allows for alignment and team progress.