How To Make It as a
First-Time Entrepreneur

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One of the hardest decisions you have to make, as an entrepreneur, is deciding when to give up on your current struggling project. It’s made especially difficult because you always seem to have an exciting new idea rattling in the back of your head.

The difficulty of the decision is further exacerbated by:

• Conflicting accounts from previous startups. On the one hand, you hear about how AirBnB struggled for years before finally making it. But, then you also hear how the founders behind Stickybits, after struggling for almost a year, dropped the project and built Turntable.fm.
• Sunk cost. You’ve spent so much time on your current project, can you really walk away now? Do you want to tell your friends and family that you’re, yet again, starting on a new project? Do you want to admit you “failed” again?
• New ideas seem better than they are. Your new idea is in the “informed pessimism” stage. It probably has all sorts of complications you haven’t thought about.

What if you quit right before your startup was about to take off? What if that other idea in your head is your Turntable.fm?

You Need a Framework

With such an emotional decision, it’s best to try to be as systematic and rational about it as possible.

The key to making this decision comes down to: (1) quickly iterating the product based on learnings and (2) consistently measuring each iteration based on a defined success metric.

Since things like frameworks work better with examples, I’m going to imagine I had the idea for TaskRabbit, the app where you can post tasks for people to do at a price, and that I was just getting started with the idea and struggling.

Defining a Success Metric

There are many possible success metrics and it depends on your business.

One of the more popular generic success metrics is the net promoter score. Basically, the score tells you how likely your users are to recommend your app. If the majority of your users aren’t “promoters”, you’re not going to make it. For more on this metric, see Eric Ries’s excellent post.

Here’s the net promoter score of some well-known apps:

But, you can use almost any metric like:

• Conversion rate of people who, after clicking on a facebook ad, create an account after demo-ing your product
• Percentage of people that invite friends on your “invite” friend step after they’ve used your product
• Percentage of people that return to the site a week after signing up
• If you are selling something to consumers or businesses, then your success metric is percentage of people who agree to pay for the product

For my fictitious case study (TaskRabbit), I would go to craigslist and find people asking for help and tell them they should put their request on my new site TaskRabbit. My success metric would be the percentage of people who added the task and perhaps, after putting the task up, I would give them a net promoter score survey.

With my success metric defined, I’d be ready to start iterating.

Why You Need to Iterate

Where some entrepreneurs stumble is they are never willing to iterate their product. They have an idea for the product, they put it out, people don’t like it and they throw in the towel. It’s incredibly hard to get it right the first time. You have to iterate.

Other entrepreneurs believe their product will magically work after a while. Unless they are iterating, it’s very unlikely it’s just going to magically take off. You have to iterate, you have to do so quickly, and you have to make sure the iterations are significant.

The changes you need to make must address the fact that your project must not be delivering enough value to the user at the cost you are requesting of them. For example, your emails aren’t valuable enough for them to bother opening. They don’t like it enough to recommend to their friends. They didn’t like it enough to take time out of their day to check it again a week later. In my fictitious TaskRabbit case, it could be that just a few people on craigslist are actually putting up their tasks on TaskRabbit and my net promoter score is negative.

At this point, people will tend to think they have a marketing problem. Not enough people know about it. But, it’s almost certainly that you have a product problem.

Iterating

Before you go trying to fix your product, you should diligently note down where you currently rank your chosen success metrics. You need to make sure you get a big enough sample size to make sure your stats are accurate which can be hard to do by just talking to people in person.

Once you’ve noted your metrics, your goal is to find out why you have a product problem. You need to dig deep into the user psyche and pull out that reason.

You can give people online surveys to take, you can pay people $10 to get on the phone with you and, even better, you can bring in people to talk to you in person (via craigslist, buy their coffee at starbucks, etc.).

In my fictitious case, I finally muster up the courage to find out why TaskRabbit isn’t working. It turns out that potential users don’t trust the people who will be doing the tasks.

So, you go back to your apartment, implement a fix to the problem and release it again.

Compare Success Metrics for Each Iteration

Whatever methodology you used previously, you should do it again with new users and measure where your new product ranks on your chosen success metric.

You may find that your success metric is hugely improved and the product is taking off.

More likely, you’ll find that your success metric improved a little bit, stayed flat, or depressingly gone down.

Regardless, you need to get in touch with these new users and find out why they still don’t really want/need your product. You may find that you didn’t actually solve the problem you thought you were solving.

In the TaskRabbit example, I could have added a small bio next to TaskRabbits to make them seem more trustworthy. But, if the metrics didn’t improve, then I was wrong. I either didn’t actually address their concerns or there were other concerns that I didn’t know about. So, I could do something more dramatic like stating that all TaskRabbits have undergone a thorough background check.

Back to your apartment to iterate again.

Target States

With your various iterations, you’re trying to get to two potential states:

• Success metric takes off. Your product will take off along with it. For net promoter score, it becomes positive.
• Your success metric improvement stalls. You’ve iterated several times and, while they slightly improved your metrics, it hasn’t been enough. You’ve also run out of ideas on how to continue iterating. It may be that people don’t really have the problem you’re trying to solve. Or, the way you’re solving the problem is too demanding on the user and you don’t know how to make it easier for them.

It’s Okay to Start Something New

Hopefully your various iterations will take your project to where it needs to be to take off with your audience.

However, if you are iterating, your metrics aren’t improving and you’ve run out of ideas on how to address your users’s concerns about the product, it’s okay to throw in the towel and start working on a new project. You’ll have learned a tremendous amount from your first go around and will be in a much better position to make your next idea successful.

See discussion on Hacker News.

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How do you know if your startup idea is the next next big thing?

It’s easy. It isn’t.

Most Great Companies Started With Bad Ideas

Most great companies started off with very different ideas that were either not very good or impractical. Very rarely does a startup actually start with the idea that makes them the next big thing.

Here are just a few examples of successful companies that had very different and troubled initial ideas:

• Initial idea: Allow groups of people to band together to accomplish a goal called ThePoint
  • Eventually: Groupon
• Initial idea: HTML5 supported location-based service
  • Eventually: Instagram
• Initial idea: Web-based massively multiplayer online game called Game Neverending
  • Eventually: Flickr
• Initial idea: Compare two people’s pictures and rate which one was more attractive
  • Eventually: Facebook
• Initial idea: People to share photos and get grouped based on locations in an app called Color
  • Eventually: To be determined

At Yipit, our initial idea was a local search site focused on furniture in New York. Today, we are the leading aggregator of daily deals like Groupon, LivingSocial and the 485 others.

What Does This Mean For You?

When you stop expecting that your startup idea has to be the next big thing, you can draw some valuable conclusions:

• Stop waiting for the perfect idea. The perfect idea isn’t coming. You just have to pick a problem you are passionate about and start working on it. Over time, you will evolve your startup into the next big thing
• Your idea isn’t the real value, it’s you. The value lies in your ability to learn from potential customers, iterate based on those learnings. Those iterations will determine whether or not your startup will be successful, not the initial idea
• Don’t worry that your first idea will fall flat. It falls flat for almost everyone. Your idea is based on so many assumptions, it’s bound to be full of issues. Figure out what’s wrong and fix it.
• Get your prototype out there as soon as you can. Don’t spend six months releasing your first prototype. It’s going to fall flat. Instead, get a prototype into the hands of your potential customers as soon as you can. You need to learn as quickly as possible what’s wrong with the idea so you can fix it.
• Don’t write a business plan. Within a month, your business plan will be irrelevant. Instead of spending that time writing a business plan, spend it getting your prototype into customers hands.

Your initial startup idea isn’t the next big thing and that’s okay. Just get out there and start working on a big problem that you’re passionate about and you may eventually turn it into the next big thing.

The good news is that it’s easier than you think to get 1,000 people to try your site.

The bad news is that it’s really hard to get those people to turn into users, users that create an account, users that come back repeatedly and users that tell their friends about your site.

This post is about how to get 1,000 people to try your site so you can find out what isn’t working, iterate and keep trying to build a site that people, other than your mom, actually come back to. I’ll write a future post on how to retain those users.

Get Yourself a Domain Name and a Splash Page

You should set up your splash page today. Not tomorrow, today. In terms of the domain name, it’s okay if you don’t love your domain name; you can change it later though it’s always easier to pick a good one from the start.

Once you get your domain name, you should use a service like unbounce to create a simple splash page. You don’t need a programming background to create this page.

The goal of the splash page is to collect email addresses from visitors. How do you do that? The splash page tells a user very clearly what problem your site will solve for them. If the user submit their email address, you’ll give them early access to the site when it’s ready. For Yipit, the splash page said: “Get All the Best Daily Deals in Your City”. For Tumblr, it’s “The Easiest Way To Blog”.

Those email addresses become your early test users. When your prototype is ready to be tested, you’ll email a portion of these users and get them to test-drive your prototype. You’ll iterate and invite more users from your list till the product works.

Now, how do you get people to visit your splash page?

How To Drive People to Your Splash Page

There is no shortage of ways to get people to your splash page. The following are things we at Yipit did and things we’ve seen our friends do:

• Add Link to Your Email Signature. Seems obvious, but most people don’t do this. You should have your value proposition at the bottom of your email with a link to your splash page. For us, it was: “Get All the Best Daily Deals in Your City: http://yipit.com”
• Add Link to All Your Web Profiles. Add a link to your splash page on your Facebook, Linkedin, Twitter and every other account you have. Now you might see why it helps to be a high profile social media user.
• Create a Demo Video. Even if your prototype isn’t ready, create a demo video of what your prototype will be doing. Dropbox did this and their video appeared at the top of Digg giving them 100,000 email addresses wanting access to their site. You can also add this video to your splash page to help increase conversion of people submitting their email addresses
• Be Full Entrepreneur. When I went to tech events, friend’s drinks, family gatherings, I would pitch everyone on Yipit. Painful, yes. But, it got me good at pitching Yipit and those people would go home and sign-up to check it out.
• TechCrunch and other tech blogs. It will be hard to get press for your site if you can’t give the blogger a prototype to use. But, if you do have a working prototype, this the easiest way to get people to your splash page. For all three of our projects, 140it.com, UnHub.com and Yipit.com, we were able to get TechCrunch to write about us just by submitting it to through their news submission form. If you can give the bloggers some beta codes for their readers, that makes it more likely they’ll write about your site. Just make sure you’re ready for it. If you have a very good demo video, they might be willing to write about you without the prototype.
• HackerNews. HackerNews is a great community of entrepreneurs who are willing to give you good advice on your startup. You need to have a working prototype and let them look at the site directly, though. Here’s some great advice on how to submit to HackerNews.
• Facebook Ads and Google Adwords. This is actually really hard and often pretty expensive. We were never able to really pull this off despite several attempts.
• Start a company blog. The blog should be focused on providing helpful advice on the problem you are helping consumers solve. Kissmetrics, a startup focused on helping websites with analytics, runs an excellent blog on helping startups think through user acquisition. This strategy involves a lot of work so only do it if you have a really good idea for the content you want to create and think that users will appreciate it.

Some final tips and notes:

• Your list will get stale. The longer you wait to invite people to your prototype, the smaller the percentage that will respond to your invite email. You can try to keep the list active by sending them occasional updates on the product.
• I recommend you give the users a survey after they submit their email address where you collect information from them regarding what they are hoping your site will accomplish for them. I have heard good things about surveymonkey
• Encourage users to tweet, share on facebook, or email your site to their friends. One way people have done this successfully is to promise the user earlier access to the prototype if they invite 3 friends.

Now that you know how to get people to your site, I’ll write a future post on what you need to do to make sure those 1,000 people actually stay on your site.

If you have employed any other techniques that have worked well, comment below and I’ll add them to the list.

Traffic Bumps via Chartbeat

Last Saturday, we woke up to a surprising alert from Chartbeat, we had a new record for most active visitors on our site Yipit.

It turns out that CNN had run a two minute segment profiling Yipit. By Sunday, they had aired the segment four times and we easily had our best ever two-day stretch across all key metrics including user sign-ups.

Did we get it because we had raised money, crossed 100,000 users or hired an expensive PR firm? No. The following is how it happened.

(If you’re having trouble with the video, try refreshing the page)

Listening to Our Customers

Yipit’s primary product is to aggregate the best daily deals in your city (Groupon, LivingSocial, BuyWithMe, Yelp, Scoop St and 160+ others) and email the best ones to you based on preferences you set.

Since launching Yipit in February, we’ve had a policy to reach out to users that unsubscribe to collect feedback. We send them an email explaining that we’re a startup and offer them a $10 amazon gift card to get on the phone with us for 10 minutes and explain what happened.

I know that sounds like a lot of work, but we actually use a virtual assistant to handle the entire process of setting up the call. We just have to do the calls and everyone on the team does the calls.

In June, we got an unsubscribe from someone with a gmail address. We reached out to him and he explained via email that he had unsubscribed because he lived in Connecticut and didn’t think he would be able to use the New York deals we were recommending. But, he also explained that he was an executive producer for CNN’s Money Unit and wanted to set up a call with us.

Customer Development Process Got Us Profiled

It turns out that he was really impressed with two aspects of how we were running Yipit:

• We were reaching out to our unsatisfied customers to get their feedback on how to make Yipit better
• We had pivoted from an overall deals and coupon aggregation service to just focusing on daily deals based  in part on those user feedback calls

After the call, he said they wanted to feature us on a series called “The Turnaround” that focuses on a business that makes a change that leads to more success. As he was telling us about the series, I was thinking to myself that the series really celebrated successful pivots, a key tenet of the customer development process popularized by Steve Blank and Eric Ries. We were getting profiled because we were following the customer development process!

Were We Just Lucky?

Clearly we had been very fortunate that one of the users that unsubscribed happened to be an executive producer at CNN. But, maybe we weren’t as lucky as it seems.

Isn’t the job of journalists to try out new services and report on them to their readers? I would expect that your earliest customers consists of not only early adopters but also a handful of influential tech journalists, magazines editors and executive producers.

In other words, aside from the many benefits of getting feedback from your early customers, yet another reason to talk to customers is an opportunity to have more meaningful conversations about your startup with the journalists who are trying it out. If you have good and meaningful conversations with them, they will probably be more likely to tell their audience about you.

It’s hard to argue against going through the Customer Development Process (CDP) when building your startup. It just makes sense and experienced entrepreneurs are really excited about it. If you want to learn more, I recommend starting with Steve Blank’s Four Steps to Epiphany and Eric Reis’s Lessons Learned blog.

But, despite reading the books, the blogs, going to the meetups and truly believing in CDP, most of us don’t do it and our startups fail. We come up with some practical excuses:

• We don’t have the time for it.
• I already know what our customers want.
• We can’t convince customers to meet with us without a real prototype.
• We’re not ready yet.

These are BS reasons. The real reason is we’re afraid. We don’t want to grab someone from craigslist and have them tell us our idea is dumb. We don’t want a potential customer at a big company to laugh at our idea. We quit our job for the idea. We have risked our savings. Our professional credibility is on the line. We’ve convinced people to be part of our team.  Their livelihoods and their families are counting on us. What if people tell us they don’t like our idea? I’m not sure we can handle that kind of feedback/rejection.

So, what do we do?  We close our eyes, build the product and launch it. Hopefully, when we finally open our eyes, we find people using it. Most of the time, people aren’t using it and we’re in big trouble. It’s reckless and not fair to our team, our investors and our family.

How do we overcome that fear? We have to convince ourselves of two critical points (the most experienced entrepreneurs have successfully done this):

• Our initial idea isn’t worth much. If our initial idea isn’t worth much, where’s the value?  The value is in the team. More specifically, the value lies in our ability to continually adjust that initial idea based on feedback from potential customers and morph it into something that people need. If we’re not doing that, we’re not creating value and our startups are relying on luck to succeed.

• Changing our idea isn’t inconsistent, it’s smart. Our society rewards people for being consistent.  When people aren’t consistent, our society punishes them (e.g., politicians get negatively labeled as “flip flops” for being inconsistent). In the startup world, we don’t have to be consistent.  We should be willing to dramatically change our views based on what we learn. We have to overcome that instinctual urge to remain consistent.

So, lets stop coming up with excuses for why we aren’t meeting with customers.  Face our fears and get out there and start learning what’s wrong with our ideas and figuring out how to fix it.

(photo via Scott Ableman)