All posts tagged revenue

Cross-Post: Early stage companies don’t need money, they need customers

I didn’t have time this week to write a full post, so I wanted to share a great article by Jesse Rodgers, co-founder of TribeHR and former director of VeloCity. One of my biggest issues with the startup world is how raising funding is often celebrated more than obtaining customers and/or revenue. It’s an under-discussed topic and it’s great to see someone taking it on. (Reposted with permission).

The popular belief in Canada is that the tech startup world has been fairly light on investment dollars relative to other industries in Canada. Because there is such a disparity in seed or angel round investment size in Canada vs the US people tend to point to that as a reason people go south. The perceived result of the funding problem (and likely the weather) is that there are 350 000 Canadians in the Valley. No one can argue the talent to build global calibre tech companies exists in Canada (or at least has Canadian passports) but you can certainly argue Canada lacks that certain something to keep them here.

Five years ago Paul Graham observed that the total cost to get a tech startup started had dropped dramatically and will continue to do so.

So my first prediction about the future of web startups is pretty straightforward: there will be a lot of them. When starting a startup was expensive, you had to get the permission of investors to do it. Now the only threshold is courage. – Paul Graham, 2007

There is a lot of attention around getting young people money but does that help them? Does that keep them in Canada? I would argue that the ones that do need and can use capital don’t pull up stakes and leave town for the investment. They leave town (or the country) because they are missing something more valuable than money — customers, mentorship that helps them get customers, and a network of peers.

Know thy stage

The problem with comparing funding deal levels in Canada and the US is that it ignores the stage the company is in relative to the stage of US startups raising money for the first time. The Startup Genome report 01 and the Startup Genome Compass offers startups an excellent way to measure themselves against a benchmark of over 3 000 startups. In the report there is a table (shown below) that gives you some overall averages for all startups.

From the Startup Genome Report 01.

In last seven years of being involved in the Canadian startup community (mostly in Waterloo) and in the last three years leading what is arguably the best student focused incubator in Canada while founding my own startup. I saw dozens of companies peek into the Discovery phase, a few move on through to the Validation phase.

What I have seen happen before the discovery phase:

  • Talk of raising money is used to pull in a large group of talent.
  • Focus is not on customers, it is on technology or raising money.
  • There is little help by way of mentorship that takes the time to understand the dynamic of the group.
  • Mentors focus on finding a way to get them money so they can work full time.
What founders fail to do:
  • Define the problem.
  • Find out what people are looking for.
  • What else do they need in a system?
  • Determine what they might pay for it by getting them to pay for it and talking to our customers.
  • Measure, iterate, repeat.

Startups need to focus more on customer acquisition and growth in Canada, enough talk about raising money

There are so many business plan and pitch competitions one could make a career out of attending them. This gives a false sense of success because the ‘winner’ is determined on a lot of factors except their ability to actually get customers. The game becomes about (and has been it feels like) how to put together a report on an idea (business plan) and present in a way that makes you look confident.

The game is really about getting lots of people to give you their money because you provide value to them. What makes you better than others is that you are chasing a much bigger problem that will provide value to a full percentage of the world’s population. Bonus points if you change the world.

My Goals for 2012

New Years Fireworks in Santiago

New Years Fireworks in Santiago

This isn’t going to be a “2011 Year in Review” or “My Predications for 2012″ piece. It’s just going to be me laying out my goals for this year. I figure if I can get them a) documented and b) public I’ll be forced to achieve them. Accountability at it’s finest. So without further ado, here’s 3 business goals and 3 personal goals.

Business Goals

I started GooseChase almost a year ago now. We’ve had some awesome successes, but also some misses. This is the year we need to turn up the heat on it and push aggressively. Since goals are only useful if they are measurable, here’s three specific goals that I have for the business this year:

  1. Post as least once a week on the GooseChase Blog: This is one area that was a big miss for me in 2011. I only posted a handful of times and what I did do was very scattered and all over the place. Consistency is my biggest struggle so I’m setting Thursdays as GooseChase blog day this year.
  2. Measure the impact of everything against our key metrics: Far too many decisions were made this year by gut feeling. Our biggest key metric is the cost of customer acquisition versus their lifetime value and we haven’t done a very good job tracking that. To make more informed decisions I will be using KISSmetrics, Optimizely and Crazy Egg for our website, Flurry for our apps and Vidyard for video (when we get ours up and running). Using these products, my goal is to measure the impact of every feature, tweak, etc against our key metrics.
  3. Revenue of $500K+: I’m sure putting this out there on the interwebs is a big no-no. I don’t care. The way I see it is if we get $500K, we’ve proven that our early successes scale. And when our early successes scale, we have a great chance of aggressively growing the business. You hear a lot about product/market fit, but I propose that this is our business model fit. (Note: There are some more specific numbers that make up the $500K which I’ll actually be tracking throughout the year since just setting a target number by itself is essentially wishful thinking.)

Personal Goals

Over the last 365 days, I graduated from university, started a company, obtained my first customers, started blogging, began learning Spanish and moved to Chile. Where last year was very much a year of first’s for me, I see this as a year of skill improvement. This year I want to become more of a maker. With that in mind, here are three personal goals for 2012:

  1. Blog weekly here: I’m cheating a little bit since I already put this in for Business Goals, but there’s something freeing about being able to write about whatever you want. To force myself to be consistent, I’m going to start by blogging every Tuesday and scale up the frequency from there.
  2. Become conversationally fluent in Spanish: Since moving to Chile 2 months ago, my Spanish has improved drastically (from none to some). I’m still nowhere near fluent, but I can now go to a restaurant and order without getting too confused. So before I leave Chile in May, I’m setting a goal to be able to converse for at least a minute in only Spanish. It can be ugly, it can be terribly conjugated, but as long as both parties understand everything, I’m calling that a success.
  3. Take a photo each day: I see this as a great exercise to develop my eye for what is visually appealing. I’ve recently started teaching myself front-end design and one of my big struggles is creating stuff from scratch that actually looks good. There’s obviously many ways to develop your eye, but this seems a fun way. It also forces me to pay attention to my surroundings and appreciate what’s around me. Of course having a bunch of photos that show where you’ve been and what you’ve seen is pretty cool as well.

I really, really want to accomplish these goals. They are challenging, but attainable. So I’m putting a request out there. If anyone sees me not following through on these, call me out. Chirp me. Do whatever you want, but make sure I get the message. So for everyone who will call me out, in advance, I thank you!

You can see how I do by following me on Twitter here.