I was lucky yesterday to be able to attend two really good seminars:
- “Setting Up a Tech Business in Dunedin” by Jason Leong from PocketSmith, and
- “Competitive Advantage or Point of Difference: Getting into the Market” by Colin Brown from TracMap.
PocketSmith is an SaaS web application that allows an individual to manage and forecast one’s own personal finances. TracMap is a navigation device mounted on a farm truck for tractor (quad-bike, plane and helicopter) to help conducting accurate agricultural tasks: precision agriculture (e.g. spraying fertilizers, setting up watering stations, etc).
PocketSmith: small (3-people) and young (10 months old) Internet-based start-up. TracMap: mature (4 years old) and rather successful (domination on NZ market and spreading worldwide) company. Both talks were about the same topic: how to boot strap your own business, what is required, what phases the business will go through, and how to pass the start-up phase and get a consistent cash-flow going. There were lots of similarities in the talks. The common themes were:
- Try to “sell” as early as possible.
Articulate your idea, create a mock-up demo of your product, and try to sell. Try to sell even if you do not have anything to sell yet. Try selling before you are ready to make the real sales.
In the PocketSmith case, they have built a very rudimentary prototype and started spreading the news four weeks into the development. They’ve made all their family members to use the prototype, they worked through social media to acquire beta testers, they have exploited all possible social media tactics to spread an information about themselves as wide as possible, etc.
In the TracMap case, the brochures, demonstrations and pre-ordering system has been in place long before the initial 50 modules where ready for shipping (which got delayed substantially and there were major hiccups along the way). Emails, personal meetings and phone calls have been used.
The main driver and motivation for pre-selling is basically market research. Getting to know the customers you think WILL buy your product. Getting to know your potential customers, that you may not even know about. Getting to know what exactly the customers need, and why and what they will pay for. In the case of TracMap, the very early pre-sell stage clearly indicated to Colin that his original idea of GPS tractor tracking will not sell. They needed to modify it. The pain was not where they have originally thought it was. And they’ve redesigned accordingly.
- Solution is not a Technology.
The speakers on both seminars clearly distinguished between a technology and a solution. A solution is not a technology. A solution is something that user is happy to use and pay for, because it solves a particular problem (the usual metaphor of pain). Technology is a component of a solution. A solution consists of some technology (which can be replaced) plus everything else that makes a solution usable for a user.
- Team is the fundamental element.
Form a team that you can rely on, that you can base your trust in. Colin used a bus metaphor: make sure that everyone in the bus is on appropriate seat. And make sure that people that do not fit in are not in the bus. It was stressed that the team should have diverse personalities and diverse skill sets. There should be a visionary/explorer, a developer, a person that makes sure things are completed, and a person that bridges the users, the market, and the company together. Usually, everyone can play different roles, but only ONE role should be dominating a single person in a start-up. Focus.
- Have a great vision. But more importantly, have a narrow focus on details.
It is important to have a good long-term vision for any undertaking. It is as important to have a clear day-to-day focus and plan of what is being executed, when, and why.
- Funding models.
In both companies the initial funding and bootstrapping came from the founders themselves. In other words, they are both self-funded. PocketSmith team funds the development (basically by working for free) and covers the initial equipment and Internet bills. No VC involvement at all. “It would basically slow us down”. “If we had money, we’d probably start spending money unwisely”. TracMap was also funded through personal loans and personal savings. Colin had to sell the house to get enough funds to take the idea off the ground.
- Luck will always play a part
In any start-up there is always an inherent element of risk. And as it often happens, luck often dictates a total fiasco or success of any undertaking. Both companies pointed out some single events that made a significant impact on their undertakings. In case of PocketSmith, it was an article in lifehacker.com. In case of TracMap the success was based on two events: the initial engagement with a Computer Science postgraduate student, and the contract for cases and screens with Navman.
Despite gross similarities, there are some aspects that sets these two companies in slightly different realms. There were some apparent differences, which I’ll try to summarise briefly below:
Patents and innovation
- TracMap: you need to OWN the solution. If there is a pain to which you are providing a solution for, you need to ensure that you OWN that solution. Patenting is good. Lock the solution and own it. Then you can build a business around it. If you cannot LOCK your solution, do not start building your business.
- PocketSmith: Patenting for software-based solutions is really difficult. We are too small to enforce patents. We will continue to innovate, and through building the community we will differentiate ourselves from the competitors. It is the 4800 current users that set us apart from other companies. The differentiation is in the actual persistent relationship with your customers. Innovation and moving targets are inevitable.
- TracMap: “Everything that can potentially go wrong, will go wrong. Be prepared. Have plenty of buffer.”
- PocketSmith: “Everything that can go well and go beyond your expectations, will go well.”
Final remarks and summary:
by Colin (TracMap):
- Own a solution to pain
- Form a team
- Always have a buffer
by Jason (PocketSmith)
- Find time, sit down and implement your idea. With software companies the barriers to entry are so low that EVERYONE can do that.
- Find people that share your vision and your idea. Start working together with them.
- Be agile. Use agile methods. Scrum methodology.
- Business plan is a QUESTION. It is not a BLUEPRINT. Share what you have with as many people as you can. Gather their feedback. Adjust accordingly. Build your business model and cash-flow based on what your market research provides. Build the strategy as you move along.
Note: All that I’ve wrote above is my own interpretation of the two seminars. If you’ve participated and want to add or clarify some of the elements, please let me know. Thanks!