How to build a successful start-up
I started this series a late last year with the 1st blog on Generate an idea (but remember that it’s worthless) followed by In-depth observe (not interview) 5-10 potential customers, including 2-3 “extreme users” and then Document your Plan A and Identify the riskiest parts of your plan and most recently Systematically test your plan. I have copied the intro to the series directly below and you will then find part 6: “Get to Release 1.0” – the subject of this post
Original intro to the series:
The goal of a founder who wants to create a big company is to find product/market fit in a large market – one that is at least £0.5B/$0.75B in size. Much smaller than that and a venture investors won’t be confident that he or she will get 10x on their investment (and note that it doesn’t matter at which stage you’re working, as if an early stage investor like us, we need to believe that we will be able to sell you onto a Series A/B investor who also has to believe he or she can get 10x and so on). It’s not right all the time, but it’s a rule of thumb.
The Lean methodology, thought up by Eric Ries and then evolved by many others, is the best way to work through the early stages to product/market fit.
We like Running Lean by Ash Maurya for a clear outline of what this entails.
What Ash excludes from his thinking is in-depth customer observations, as developed by IDEO, the design firm founded by David Kelley in Palo Alto, right next door to Stanford University, my alma mater, and a clear definition of “strategy” for the start-up.
(Overly) Simply put, we think a founder needs to take the following steps:
- Generate an idea (but remember that it’s worthless)
- In-depth observe (not interview) 5-10 potential customers, including 2-3 “extreme users”
- Document your Plan A
- Identify the riskiest parts of your plan
- Systematically test your plan
- Get to Release 1.0 – the subject of this post
- Reach product/market fit
- Define your strategy (Goals, Scope, Competitive Advantage, Logic)
I will write a bare-bones explanation for each of these 9 steps with as many links and references as I can so you can read better writers’ thoughts on the subject.
And please note that at some point on this journey you need to find a co-founder. It’s pretty rare for a solo founder to manage it all on his or her own. It happens, but it’s rare. I’ll write about that as an additional point 10:
10. How to do the co-founder thing
And the last thing that you absolutely need is a great culture.
11. What is a great culture?
Here we go:
6. Get to Release 1.0:
Deliver on your unique value proposition – and make sure your activation flow demonstrates clearly the UVP at every stage
Organise and decide around LEARNINGS from COHORTS
Measure what customers DO – no surveys or focus groups
Communicate lessons learned throughout the organisation constantly
This is all based upon a MINIMUM VIABLE product
- Focus on the number 1 (and maybe 2 & 3 but not more) problem (don’t kill your company by suffering from “everythingitis”, David Cohen’s term for startups that add too many unnecessary features)
- You know it’s a number 1 problem if, when you threaten to take it away from your customers, they scream at you
- Digest the concept of deflationary economics as espoused by Clay Christensen in the Innovator’s Dilemma and here summarized by Mark Suster. Simply put, a cheaper simpler product that solves a key pain for a user can certainly out-compete a larger more expensive and more sophisticated product (Amazon’s not a bad example in retail and nor is LinkedIn in the recruitment world and, in our portfolio, SwiftShift is doing this for workforce management and Raising IT is doing this for Charities)
- Clay Christensen’s definition: “An innovation that is disruptive allows a whole new population of consumers access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill.”
- Don’t add extra features – just get it out there; ignore “nice to haves”
- Focus on learning, not optimization
- Charge from day 1, but accept that you may have to collect on day 30
- Remember, you can’t manage what you don’t measure (and make sure you’re measuring the right data and that obsessing over data is part of your culture). Dave McClure tells you to focus on these 5 key (Pirate) metrics:
- Acquisition – how are users coming to your site through various channels?
- Activation – are users happy with their 1st experience?
- Retention – are users coming back?
- Referral – are users telling others?
- Revenue – are users spending money or allowing you to monetize in some way?
- Deploy continuously – shorten the release cycle and have a bias towards action and focus only on stuff that you think will really move the needle
- Make sure your landing page kicks ass – you have 8 seconds to grab your viewers attention. 8 SECONDS
Every moment you’re working on something without it being in the public arena, it’s actually dying, deprived of the oxygen of the real world. It’s even worse because development doesn’t happen in a vacuum….By shipping early and often you have the unique competitive advantage of getting useful feedback on your product.
Real artists ship. (Steve Jobs)
Blame nobody. Expect nothing. Do something. Bill Parcells 
And remember to OBSERVE YOUR CUSTOMERS using your MVP and nurture the stuff they love, fix the stuff they hate and ignore the rest.
And remember to Measure actionable metrics by cohort – metrics that tie specific and repeatable actions to observed results and to customers who enter your funnel in a particular time-period – as opposed to measuring cumulative vanity metrics over a long time period like page views since launch, which doesn’t tell you anything about your real progress over time.
Eric Ries talks about the three A’s of metrics: ACTIONABLE, ACCESSIBLE, AUDITABLE:
ACTIONABLE – metrics that tie specific and repeatable actions to observed results
ACCESSIBLE – simple reports spit out the metrics at the click of a button
AUDITABLE – you are able to get behind the numbers
Blog 7 of 11 in this series will be about reaching product/market fit.
 Dave McClure in Do More Faster by Cohen/Feld; Wiley. Page 184
 Matt Mullenweg in Do More Faster by Cohen/Feld; Wiley. Page 21
 Steve Jobs quoted by Matt Mullenweg. Ibid
 Bill Parcells in Do More Faster by Cohen/Feld; Wiley. Page 167