Archive for May, 2010

Microsoft Founders

Bill Gates & Paul Allen getting ready to make their billions

Thinking of creating a startup? One of the first things you will need to do is select who is coming on this journey with you. You make the decision while everyone is enjoying the thought of fame and fortune, then have to stick with it over years of hard graft, late nights and dwindling bank accounts. It’s not that different from marriage really, and should be taken as seriously.

In many ways it is the most critical decision you make because let’s face it, even if you get your product wrong a great team can find a way through.

The big questions are, how many founders and of what skill sets?
1. The number
If there was a magic number of founders that magic number would be 2. There is considerable power in the bond between two people working towards the same goal, but from different angles. Two people have to settle differences quickly. Much like a marriage, you bring a third person in and all sorts of bad things can happen. With three or more founders you can get politics, lobbying and ganging up.

Think about all the great companies, Microsoft (Bill Gates and Paul Allen), Apple (Steve Wozniak and Steve Jobs), Oracle (Larry Ellison and Lane), Google, HP etc.

There is nothing to say you can’t give shares to a bunch of different people, as long as there are two people running the show.
2. Skills
If there was one right answer that answer would be Development and Sales. One person builds the product and the other sells it. We all know that two introverted technical guys will create an amazing product and fail to sell it. There is always a component of selling or marketing which needs to be done and you need that skill set on board from the start. Why the start? Because people with sales and marketing skills will help you design a product which will be easy to sell. For example a person with online marketing skills will know how to design a product to fit the unique challenges they will eventually encounter.

Once you have that core blend of skills it is worth balancing them with the amount of work that needs to be done. If you have a massive amount of development work to be done, it helps if both of you can code (for example).
Founder Skill Mix

Founder Skill Mix

3. Date First
Most successful marriages start with a successful period of dating. If you last a couple of years you have proved you can work through problems together as a successful team. The same could be said of founders, before Bill and Paul founded Microsoft they were school mates and later close friends. The two Steves who founded Apple were best buddies. They knew they could work together, because they already did.

So look to people you already know and trust. You will be in a better position to judge what they bring to the table, and wither you will be compatible over the long term.
4. Passion
While larger companies run on money, most startups actually run on passion. Passion replaces a regular pay check, an office and a large team. Therefore passion is something you need to forecast and manage as closely as a functioning company watches its cash flow.

You need to pick passionate people with the right skills. Both skills and passion are important. Without skills you won’t create anything worthwhile, without passion you will give up before you succeed.

This ties nicely back into the point about friends making good co-founders. Friends enjoy each others company, they often get passionate about the same things. You may end up enjoying the work just because you are spending time with your friends. The reality is there may not be anything more to enjoy in the first few years of a startup, so grab hold of this. Good founders will keep each other passionate and motivated through the hard times.
In summary

When it comes to co-founders don’t settle for anything less than the right fit. Hopefully this will be a long term relationship, any lingering doubts you have now will destroy the relationship later. Look at people you already know and enjoy spending time with. Make sure as a team you have both sales and development (or service, product sourcing etc) skills.

When you combine that with enthusiasm you have a winning team.

Thinking of starting a small business and considering ideas…read on.

I’ve been misguided enough to work in many Startups, some which have failed and some which have succeeded. Towards the end of last year I did some of consulting work with a tech Incubator which led to a few blogs on startup related subjects, and I can see this continuing. I really believe that success in startups is part luck, but a major part science and process. If you understand the whole process from start to finish, along with all the risks you might encounter, a startup will be more likely to succeed.

Some of the companies I’ve worked with lately were thinking of investing in large product developments. To this end I wrote some blogs around testing your ideas. More recently I’ve noticed people earlier in the process brain storming ideas for their first attempt. If there was a guide to successful startup building, and it had a chapter 1 it might start with an overview of brain storming and what some of the options are. So before quitting your day job to become part of a ‘Get Poor Quick’ scheme read on.

If you are considering options now, soon you will be sitting up late at night putting the first pieces together. Oddly by this stage you have probably already won or lost, all you need to do is spend years of your personal time and a lot of money to find out which one. To mitigate against starting something doomed to failure you need to start your thinking right before committing to anything. Here is the short list of things to understand and consider.

Types of startup businesses

The first thing to understand is the type of business you start now will come with risks later.

1. Services businesses

A service business is one where your staff provide a service to customers in order to earn revenue. Consulting, software development, accounting, legal and graphic arts all fall into this category.

Starting a service business carries some difficulties both early on and later.

1. They are difficult to scale. You will need to employ more and more staff to make money.

2. They are sales driven, which means you need sales people early on. So if you’re not a sales person yourself you will need to employ some.

3. Revenue tends to surge and sag, which is dangerous when you have staff.

I’ve owned a couple of service businesses and worked in many more. The formula for success is to start with an opportunity. For example you are contracting directly to a company and they suddenly need more contractors of your skill set, you have several other friends who could fit the role. Now you have the opportunity to create a Consulting Company and contract them in. Sounds hokey I know but I could name 10 companies who started exactly like this who now have hundreds of employees. You start with a key account then use your reputation and contacts to get other customers. Having the key account before you start is important. I really advise against trying to start a service company without an opportunity, it is just too hard.

2. Product

The second type of business is one which sells a product to customers. The advantage of this is the ability to scale the business without adding staff (to the same extent as a service business). These work nicely as startups because you can keep your costs down, running the business from home after hours. The upside (dream) here is that you create a product then sell it to millions of people over the internet, earning money passively.

The difficulty here is the risk of putting a lot of time into developing a product/business before you go out and sell it. Needless to say a product business is the lottery ticket, lots of risk, lots of upside. More difficult to start than a service business but with much more potential.

3. Hybrids

A lot of product businesses start when a service business packages something up and sells it. The advantage here is that the product adds stable profit to a service business.

There are products that also require face to face sales and require work to implement. This really limits your reach compared to a purely product business with an online channel. Any attempt to go large is going to require reseller channels or many offices.

As you can see the Hybrids contain advantages and disadvantages from each camp.

Finding your Idea

So baring that in mind, what to pick? Well that depends on your skills and the opportunities in-front of you. When you talk to owners of successful tech companies they have a propensity of making their journey sound like a grand plan, carried off perfectly. Most of the time this is not the case, there is always a bit of luck, an opportunity and good timing (right place, right time). The art for you is being able to recognize when you are standing at one of these points.

The good stuff happens at 90 degrees from your focal point….

As a general rule watch for unfilled customer needs in areas you can deliver to. Don’t start something prematurely, watch, wait and discuss. Keep mindful of what is happening on your periphery. I often see large companies as being good starting points for small companies. People often meet and work with large numbers of like minded individuals, discuss ideas and build virtual teams who later go on to start things.

Your talents and skills

A good place to look for business ideas is your talents and skills. What can you successfully compete at? If you where a company what would make it great? These may be a place to start:

– Hobbies / interests

– What do you know more about than others (are better than at)?

– How do you earn your money?

– What could you build that would be world class in a particular market?

– What are your friends great at?

– What have you built or done for other people which is successful?

To illustrate how you can combine the points above (needs, your skills and an opportunity). I worked as a development manager. My skills were in running profitable development teams. I saw a need in that there were no tools on the market to allow me to track pipeline and current jobs, schedule people and manage progress. It also played to my other skill which is developing software. So I spent my weekends and evenings writing an application. Key to this was an underlying opportunity. The opportunity was that as part of my role I interfaced with many other resource teams who also needed the software. You can guess the rest, before long I had an online application and a key customer using the software in 15 different departments.

Next Step – Check your market

Once you have arrived at a short list of ideas you are ready to test each for a potential market. Up to this point you can come up with many wild and convincing ideas. At this stage in the successful startup process you research the market for each idea to determine the customer volumes you might find.

Step 1. Will your product work online (checking there is an audience and estimating revenue)

After you have researched and concluded there is a lucrative market for your product a smart entrepreneur tests those assumptions.

Step 2. Market test your idea online

After you have identified your biggest risk (probably marketing) and tested it online you have proved there is an audience for your product or service.


In summary you have:

1. Selected the sort of business you are suited for, understood the upside and risks

2. Waited for an opportunity or need to present itself

3. Picked something suited to your skill sets and expertise

4. Checked there are customers online and enough revenue

5. Tested your assumptions, building an audience who are now waiting for your product

Congrats…You are now ready to start a tech businesses, knowing that you did the first step right. The next step is picking the right team. (Blog coming soon)