Anatomy of a scalable startup
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I’ve been thinking hard over the last few weeks about what makes a scalable company. This was spurred by several things: revisiting our business plan, meetings with entrepreneurs (#LDN2BRS), and a visit to our nearly-neighbours; Brightpearl.
In fact, the easiest way to look at this is from the perspective of an investor. This is what I came up with:
It’s aspirin, not chocolate cake
The purpose of the company must be to solve a genuine pain, rather than deliver something that is just nice-to-have.
The addressable market has sufficient scale
The product must solve a problem that a significant number of people have. Fiscally, what is the size of the market? What share of that market can a new entrant acquire?
It gets in the way of money
Just as a wind turbine extracts a small amount of movement from the huge movement of wind, a company can extract small amounts of money from a huge number of transactions. The ultimate situation is enabling something that wasn’t possible before i.e. you control a bottle neck.
ARPU vs. COA
In order to scale, the Average Revenue Per User (or customer) is lower than the Cost of Acquisition. This principle is obvious, and it’s possible to estimate these numbers early on. Not doing so is foolish.
The team has the ability to execute
There is a myth that a great idea makes a great startup. In reality though, the success of a company is entirely to do with its ability to execute on its plan.
Competition
Is there any competition? If not, why not? If so, what from the customer’s point of view makes your company superior to the alternatives? What is it about your company that allows you to operate in a different or better way to your competitors?
Productivity hack: Eisenhower matrix
So streak.ly has been going well. I’ve been recording my activities much more consistently. Next step is to make completing irregular tasks more efficient. I came across something called the Eisenhower matrix recently which I think has some real potential.
The idea is that you effectively prioritise your tasks. Here’s the method:
Tasks can be broadly categorised into either important or not important, and urgent or not urgent. Importance is measured by the direct effect that the task has on the objective at hand. Urgency is measured by the immediate need (read “must be completed today”) for the task to be completed.
- If the task falls into the urgent and important category do it now! (There shouldn’t be too many of these)
- If the task falls into the urgent and not important category, delegate it to someone else. (You should spend time on important tasks, not busting your gut to meet arbitrary deadlines for and unimportant tasks)
- If the task falls into the not urgent and important category set aside time to complete the task and put it in your calendar. (this is something I regularly don’t do but should all the time. Most of your tasks should fall into this category)
- If the task falls into the not urgent and not important category get rid of it. (If it’s not important, and not urgent why do it?)
I use remember the milk to manage tasks (which is awesome!). I’m going to be setting up labels for each of these categories to help me monitor how I’m doing with this categorisation. Over and out!
Good habits part 2: I’m now using http://streak.ly #lifehack
Around new year this year I wrote that I would be filling out a weekly “habit card” in my post entitled NY Resolutions UPDATE! #lifehack. The idea was that this year I would commit not to necessarily doing lots of good things (like eating healthier, getting up earlier, and exercising more etc.) but that I would keep a record of how much of each I did.
I made these business cards with little check boxes and ticked off something when I had done it. It worked reasonably well when I remembered to take my week’s card with me, and fill it in at the end of each day. Often however I didn’t.
This lasted 3 months, I’m fitter, healthier, and more aware of what I’m doing than before. However my system didn’t offer much much feedback (i.e. the benefit of filling out the cards isn’t actually profound). On weeks where I ate healthily and exercised I was incentivised to record it, like a little pat on the back. When I had a bad week though I slipped, and sometimes completely forgot to start again the following week. The system was too “chunky”; a week is too long. It was also too “clunky”; you don’t want to have to remember a special little card and a pen wherever you go.
As of today I’m adjusting my approach. I found a tool on the web called streak.ly.
It’s basically the same thing except:
- It’s daily, not weekly.
- It’s web based so I can do it on my iPhone or at my computer, no need to remember cards and a pen.
- It asks you every day “have you completed your tasks?” by email.
- There’s a community there.
- It turns the whole thing into a game. The aim is to get the longest streak of each activity e.g. 10 days in a row.
Bristol ≈ San Francisco. Part 5
Oh, there’s one other thing I forgot and it’s sort of the most obvious one!
Besides Silicon Valley, Bristol and the South West of the UK has the highest density of silicon companies in the world!
Check out this article on the FutureStory website.
I don’t have much personal involvement with what’s going on here but do occasionaly get to talk to David May, CTO of XMOS. Fascinating chap, he seems to have a knack for predicting the future too!
Related Articles
- Why Even Ron Conway Couldn’t Persuade Me To Move To Silicon Valley (techcrunch.com)
Bristol ≈ San Francisco. Part 1
I’m writing this to make me feel better about being in Bristol, rather than San Francisco. I don’t remember who said this but it was wise “You don’t need to be in the Valley, but the Valley needs to be in you.”
However, I still like to think that we have a few things in common (but probably not the important ones).
Exhibit 1: Bridges
The new startup gurus
So I read a lot about the tech scene, probably too much. I think I’m quite heavily influenced by trends which makes me a little too short term-ist. But really running a company I’ve been looking for a psuedo scientific way to do startups for a while. Just as Tim Ferriss created a recipe (ahem) for a fully automated business, I figured there must be something like that for tech startups. A set of guidelines for a modern tech startup (not a business plan) that doesn’t suck.
Now I don’t think that there is anything quite that polished yet, but there are some people who are working on it. These are people that have experience as entrepreneurs, researchers, and investors in an impressive bunch of relatively new companies. They are scientific in their methods and it’s proven to be successful.
So here are my new gurus (and guess where they all live. Yep, silicon valley.):
Steve Blank
He came up with the notion of Customer Development and linked it to lean startup.
