XNV - The Exponential Ventures

Speaking at CEO National Conference 2013 – Technology and Startups

Adriano Marques

Last Friday (November 1st) I spoke at the CEO National Conference about how to properly leverage technology in a startup. The event happened at the McCormick Place, and it was pretty fun! I recorded my presentation, and created a quick video with the slides and the Q&A session at the end. Along with the video below, you’ll find an abridged version of that presentation, in case you don’t have the time to watch it.

Technology and Startups

Leveraging it the right way

The Natural Man, or woman, have some interestingly predictable behaviors. There is actually a whole set of them when it comes to startups that will more often than not lead to monumental failure.

He or She, will have this moment in life when he realizes that he just managed to connect the dots in a way that nobody else have ever done, and he is got the whole solution to solve humanity’s greatest challenges and become a billionaire in the process.

What is his first reaction? Call it my precious, and go taylor a NDA to have people sign just to hear the name of his idea. Then, they don’t want to share their hypothetical future wealth, and don’t seek a partner to help found the company. Then, they spend more time fiddling with the specification of the iMacs they’re going to buy than in figuring what kind of job their customers want solved. Spend some 6 months drafting a Business Plan that looks more like a doctoral thesis, then another 6 months seeking investment. Then, they think that nobody is as good as they are, and they have to reinvent and develop in house their own book keeping software, social network and other services or products that are out there to use for free or at a reasonable cost.

Then, they’re so sure that their product will go viral, that they oversize everything spending at least 20 times the amount of time and effort to bring their product to market. The homepage must support 1 million hits per second, they say. Oh, and that’s for the MVP by the way. We’re going to be the next Facebook!

Finally, if they still have any money left by then, they’ll likely still going to launch a buggy product just to show some traction for a second round of investment. Which is when, by the way, that they begin thinking of possible revenue models that could fit their original idea.

I have to admit that I have once been considered a culprit for most of the sins I just presented. After all I am human too.

So, my goal is to show you some of what I have learned in the process but with some focus on mistakes we often commit that are related to technology.

The first sin goes to the whole NDA circus. Forget that when you’re talking to investors or making connections to leverage your idea. You’re certainly not the first person to think of that idea and likely not the first to go out there to try to get it started. But, you are the only one that can execute your idea in your own way. Isn’t that more valuable? Isn’t it more valuable to invest that time in distinguishing yourself even further from your future competition? Why not make it your first distinguishing action to not come up with an NDA to anyone you talk your idea to? That will sure show some confidence, at least.

The second sin goes for the business thesis. Some people call it a business plan, but to me it looks more like a business thesis. But a thesis only in size, because more often than not it lacks the scientific validation that all ideas need to be regarded as a business: actual paying customers. Don’t get me wrong here: planning your business, potential revenue and costs is always important. But these plans are more like a rough guide than the real thing, and it has the incredible power to lure you far and away from reality. If you want to plan your business, lay down the business model and how you plan to make money with it, implement a Minimal Viable Product and go test it with your customers. That is when you’ll learn whether there is demand, and if there is demand whether people are really willing to pick their wallet to have their problem solved. This is when you’ll have the real thing. Before that, it is just like plain science fiction: sometimes you see some truthful facts, but that doesn’t take the fiction out of the genre.

Sorry, this have nothing to do with technology yet, but I really had to get this off my chest.

Ok, I promise to talk about technology now.

The third sin is to not go find a partner that complements him. Some say that the perfect match is made of the engineer and a sales and marketing expert. I have to agree with that concept, since the company really won’t go much far without any one of these skills in the team. So, if you’re not an engineer, go find a partner who is. If you can’t find a partner, go find a friend or someone who is willing to give you some free or cheap consultation anytime you need to make a decision. If, at the other hand you are the engineer, but don’t have much social, sales, and or marketing skills, you better follow the same advice and find a partner that can complement your skills. When it comes to technology, there is a whole lot that can go wrong if you make the wrong decisions. And being tech savvy doesn’t count here. I have helped at least 2 other startups that anyone here would call their CEOs geeks, but at the end of the day they were not engineers and often made decisions that led to serious compromises in their products. Even engineers will sometimes make wrong decisions. There is a great comparison that could be made to better understand my claim. I really like to compare software engineers with architects. I know a lot about architecture, because my father is an architect and I happen to talk a lot about it with him. But most people know how a house is built. It is, in reality, much easier to grasp architecture than software engineering simply because architecture deals with tangible materials: wood, stone, bricks, concrete, etc. We all know, for example that in order to make concrete, you must mix water, cement, sand, and crushed stone. But that doesn’t qualify us as an architect. The architect knows what are the right percentages of each of these components to make concrete that meets various different requirements in a construction. Same happens with a software engineer. You may know a lot about all of those cool technologies we use to develop software, but it will be extremely hard for you to tell whether any combination work well together for that specific task. Odds are, that although you are tech savvy and you can contribute a lot with ideas and overviewing the development of your product, you won’t be as good to make decisions and steer the development in the right direction.

The forth sin is trying to find investment before getting an MVP launched. The MVP will help you answer lots of questions you couldn’t answer any other way, and those answers will almost certainly significantly change your original business model. Also, that will help you answer some important technological questions about your business, and might give you a good hint about how scalable it must be. Sometimes, the MVP will even tell you whether you made a good choice with the technologies you picked, and if you didn’t, then you’ll know why it wasn’t a good choice and you’ll know what you need to look for on other technologies to meet your demand. But hey, that was an MVP! You have not spent as much time developing it as you would with version 1.0 of your product, and for that reason you wouldn’t have wasted a lot of time and money to change direction then.

The fifth sin is to try to develop everything related to your business from scratch. In your startup, you should develop only the things which makes your business unique, that will give you an edge over your competition, or that will generate revenue. I’ve seen entrepreneurs that developed their own databases because none of the database servers available on the market suited their need. I’m sorry to this break this up to you, but unless you’re Google – who designed BigTable – or Facebook – who designed Cassandra, chances are that you don’t need a whole new database to meet your needs. Heck, even them didn’t develop their own database until later in their life when they really scaled and found the bottlenecks that let them to develop their own databases. I’ve also seen some other entrepreneurs claiming that they develop everything in house to avoid relying on vendors. Oh boy. They don’t want to rely on vendors, but they haven’t managed to get their first customer to spend their cash on their product or service yet. You already know how this is going to end, but watch out. We’re all humans, and these are natural human responses to business challenges. relying on vendors is often a pain, and may impact your business if they go out of business, suddenly pull support, or increase their prices. If you don’t watch carefully, you’ll find yourself making the same kind of decisions on your next startup. For that reason, you should always remember that you should develop in your business only the things that makes your business unique, that will give you an edge over competition, or that will generate revenue.

The sixth sin is to think you’ll go viral. You just won’t, don’t worry. What you really need to think is that you need your product out there as a MVP to help you figure demand and answer other questions you may have. You may then find that there is a high demand to your product, and that my become a real requirement for your product, but until that doesn’t happen, do not waste your time making your product more scalable. Use the standard technologies and procedures and you’ll be much better off to launch early, get feedback early, and start off on your real product early.

The seventh sin is to launch a software that you never used. Well, I don’t see any other explanation to those websites that launch to figure a few days later that their registration page was broken just because the fiftieth person who tried to use it was kind enough to take the time to send you an email to let you know about the issue. You need to use your product. not only to find bugs, but to learn how to use it, to find usability flaws, to gain ideas on how to improve it, to learn what are the pains of your system for your customers.

All of the remarkable products I have ever used, being it digital or material goods, have clearly been used extensively by those who produced it. Just recently I bought this phone, the Moto X. I’m in love with it, by the way. A few weeks ago, right after I bought mine I was leaving church and at the parking lot a friend passed by me talking with one of these. Well, I always knew she worked at Motorola so that didn’t catch my imagination then. It was later when I arrived home, and while talking to my wife I mentioned that our friend had a Moto X too. That’s when my wife said: Yup. And she designed that phone too.

You could argue that it is easy to use a phone that your company provided you for free or cheap, but when you use this phone’s features you soon figure that it was designed out of the pains all of us have while using the phone features. When I pick it up to look the hour, it turns on automatically. I don’t need to press anything. When I shake it twice, it opens up the camera and I can take a picture in about 2 seconds. If I want to do a voice command, I don’t need to unlock my phone, press a button and talk to Siri. I just say it and it works like a charm. There is no way they could have come with these innovations without extensively eating of their own dog food and paying close attention to all the pains and limitations of their product. And, I have to say, you are not different. If you don’t use of your product or the product you endorse, then there is something really wrong with it.

And the eighth sin is to think revenue will magically find its way to your startups’s bank. If you don’t start from day one with a revenue model, you may burn some bridges in your product development that will prevent you in the future from making more money. Your business is about making money, right? If it is, the your product must be designed with that in mind, and this will affect the technologies you use too. You’d be impressed with the various restrictions that exist to making and receiving payments abroad, for example. Do not overlook these details, and think of revenue early in the process. I can too point a handful of companies that were successful without starting with a revenue model as much as I can point a handful good race drivers like Ayrton Senna and a handful good soccer players like Pelé, but chances are that you’re not one of those rare cases. If you are, rest assured that it won’t hurt to think of revenue early in the process.

Some final thoughts on technology and startups. I just listed some of the common sins, but there is a lot more to startups and proper use of technology that you must know.

The first one is the KISS principle – Keep It Simple, Stupid, or the other variation that I like better Keep It Stupid Simple. Simplicity is the ultimate sophistication, and when it comes to technology if you don’t keep it simple, you rarely take off. Do not over engineer, do not adopt technologies that you are unsure whether you fully need them, and always opt for solutions that deliver the simplest and fastest results, not the ones that are fancier or most talked about. Analyze the facts though. It isn’t because a technology is trending that you will need it, but it may happen that the trending technology have exactly what you need.

When it comes to software development, you certainly want a flexible and agile development strategy. There are several fancy strategies out there, and each one of them will suit a team and project differently. You definitely want to be lean and agile, using something similar to SCRUM to lead your development team, but beware that you’re dealing with people and all strategies will need a tweak to better adapt the culture and practices of your team. And that is ok. You don’t need to follow SCRUM methodology to its paragraph and verse if it is making you less agile, or if your team is not responding well to some of its aspects. Think of Agile, and be creative.

Take pride in your hiring process. You definitely want to hire the best developers. It takes training and time to get an engineer up to speed with your business model and your current code base. Firing and hiring will delay your schedule significantly. But also, be ready to fire if a team player is not pulling his weight.

Choose wisely on when to pay attention to customer feedback. It is very important to get feedback from your customers, but beware that customers rarely know what they really want. You can easily get side tracked and bogged down if you try to implement all suggestions or demands of your customers. You need to be laser focused, but ready to adapt your focus if a change will really make your product more attractive to a wider range of customers or if the change will bring more revenue. Understand that not only it will take time, but every single new technology you add to your company will demand maintenance, upgrades, and backups. They may become a security issue, and even cause bottlenecks or create single points of failures. You don’t want that to happen, and for that reason you must be very zealous on what suggestions from your customers you will pursue so that you don’t find yourself with an albatross that is hard and cumbersome to maintain in a year or two.

I’ll close by going back quickly to elaborate better on a topic I mentioned at the beginning. I said that you don’t want to develop things from scratch in your company. You certainly don’t, and I’d say that you should even try not to develop anything if possible. If you can find ready to use products that if coupled together nicely and wrapped up with your brand can deliver the product or service that your business model is set to deliver, then you’ve found gold. Even if it is just for the MVP it will go a long way towards getting your startup launched faster. Do your homework, and you’ll be astonished with the vast amount of technologies out there that were developed to solve almost all of the problems you can think of. And if you can put as many of them together as possible, you’ll get your idea out in no time. While you do that, look for free, open source, or cheap solutions first. You’re starting, you need to maintain a tight grip on your budget and the least money you spend to launch your idea will allow you to hold stronger and longer before you break even.

Starting a business is not easy, but it is fun and a worth experience. I didn’t know anything about this in my first endeavors and had to learn it the hard way. Hope that will give you some guidelines to start with the right foot!


News, lessons, and content from our companies and projects.

Stay In The Loop!

Receive updates and news about XNV and our child companies. Don't worry, we don't SPAM. Ever.