Startup DNA: the formula behind successful startups in Silicon Valley (updated May 5, 2017)

STARTUP DNA The formula behind successful startups in Silicon Valley

Most startups fail

A few succeed

Why?

“Successful startups are all alike; every unsuccessful startup is unsuccessful in its own way.” Leo Tolstoy, probably

This talk is about a few traits that make startups successful

I’m Yevgeniy Brikman ybrikman.com

Co-founder of Gruntwork gruntwork.io

PAST LIVES

Author of Hello, Startup hello-startup.net

1. Make excellent mistakes 2. Speed wins 3. Data 4. Distribution 5. Sharing Outline

The road to startup success is paved with failure

Failed projects

Answers Events GitHub Tweets Lead accelerator Many others

Beacon Places Deals Credits Questions Lite Email

Wave Buzz Labs Health Knol Catalog Video Answers

Pivots

Initial idea: Game Neverending (MMO). Pivoted to focus on photo sharing. Acquired by Yahoo for $35M in 2005.

Initial idea: burbn (social network). Pivoted to focus on photo sharing. Acquired by Facebook for $1B in 2012.

Initial idea: Odeo (podcasting). Pivoted to focus on microblogging. IPO in 2013.

Failed companies

Reid Hoffman’s first startup was socialnet.com, a social network for dating. Never heard of it? Exactly.

Went on to become COO of PayPal and co-founder of LinkedIn.

“Startups are like jumping off a cliff and building a plane on the way down.” Reid Hoffman LinkedIn co-founder

Virgin Clothes Virgin Cola Virgin Vision Virgin Vodka Virgin Wine Virgin Jeans Virgin Cars … all failed

But several hundred of Richard Branson’s other companies succeeded!

“I have not failed. I've just found 10,000 ways that won't work.” Thomas Edison

These were not failures. These were experiments.

The goal of an experiment is learning.

“I've come to believe that learning is the essential unit of progress for startups.” Eric Ries

#1 cause of startup failure: “No Market Need.”

The biggest risk is building the wrong thing.

The only way to find the right thing is through experiments.

The experiments can’t take too long, or you run out of money.

That’s why you need to fail fast.

That’s why speed wins.

“Speed Wins.” Steve Kaufer TripAdvisor co-founder

Boyd’s law: speed of iteration beats quality of iteration.

Product development (naïve)

Product development (reality)

In a trial and error world, the one who finds errors faster, wins.

Key idea behind Agile, Lean:

Some of your assumptions are wrong.

The problem is, you don’t know which ones.

“Winners recognize their startup ‘vision’ as a series of untested hypotheses in need of ‘customer proof’.” Steve Blank Bob Dorf

Speed wins recipe:

1. Identify your riskiest, most central assumption. 2. Perform the smallest possible experiment to test the assumption. 3. Repeat.

Minimum Viable Product (MVP)

Some of your assumptions are wrong.

Data can be a good way to find out which ones.

“Anything you need to quantify can be measured in some way that is superior to not measuring it at all.” Douglas W. Hubbard

Server and client metrics

User and site metrics

Code and bug metrics

Use feature toggles and A/B testing

Wrap new features in if- statements. Default is “off”. Group users into buckets. Toggle features for some buckets: A/B testing, ramping (1%, 10%, 100%).

Measure the impact of new features!

Without A/B testing

With A/B testing

Example: same page, different stock photo.

Which one should we use?

Using A/B testing to pick the right image significantly increased clickthroughs

Note: use data to inform your decision-making process, not replace it.

“If we can’t identify a decision that could be affected by a proposed measurement and how it could change those decisions, then the measurement simply has no value.” Douglas W. Hubbard

If you build it, they will come.

If you build distribution into the product, they will come.

The best product doesn’t always win

How many customers do you need to be successful?

(From the Stanford Startup Engineering Course) Company Product Price Customers Coca-Cola Soda $1 1,000,000,000 Unilever Household goods $10 100,000,000 Blizzard Games $100 10,000,000 Leonovo Laptops $1,000 1,000,000 Toyota Cars $10,000 100,000 Oracle Enterprise software $100,000 10,000 Countrywide High-end mortgages $1,000,000 1,000 To make $1 billion in revenue:

Company Product Price Customers Coca-Cola Soda $1 1,000,000,000 Unilever Household goods $10 100,000,000 Blizzard Games $100 10,000,000 Leonovo Laptops $1,000 1,000,000 Toyota Cars $10,000 100,000 Oracle Enterprise software $100,000 10,000 Countrywide High-end mortgages $1,000,000 1,000 Note the “customers” column:

The number of customers you need to reach determines your distribution strategy

Common distribution strategies: 1. Advertising 2. Traditional media 3. Social media 4. Inbound marketing 5. SEO 6. Sales

Print ads, online ads, newspaper ads, billboards, etc.

Potential to reach millions, but you’re battling for attention.

“Half the money I spend on advertising is wasted; the trouble is I don't know which half.” John Wanamaker

Newspapers, TV, magazines, radio, etc.

Massive reach. Can be positive or negative.

Email, Twitter, Facebook, LinkedIn, Pinterest, etc.

Reach depends on the size of your audience.

Personalized content can be very powerful

(My CTR on “you’ve been tagged” emails is 100%.)

LinkedIn’s “Year in Review” email also had a CTR of > 100%.

Potential for virality

Note: viral loops must be built into the product

Attract users with content: blog posts, open source, videos.

The goal is to teach and to build a following

Medium reach, but high conversion rate and low cost

SEO = Search Engine Optimization

Google handles 2 trillion searches per year

You can build a massive business on just a tiny slice of that

TripAdvisor is built around being the top result for most hotels

Need lots of (user generated) content to be successful

Hire a sales team to sell the product

Inside sales: sell in a store or over the phone.

Outside sales: travel to customer site to do a deal.

Small reach, but essential for expensive products.

Silicon Valley companies share (almost) everything

Papers: MapReduce (Google)

Open source: Kafka (LinkedIn)

Hardware: OpenCompute (Facebook)

Companies: Mozilla

Why?

Quality: you do better work when others are looking.

Free labor: free QA, free docs, free bug fixes...

Happiness: something you keep with you your entire career.

Branding: you become an expert by sharing your expertise.

Mastery: the best way to learn is to teach.

That’s why I’m here today:

To share what I’ve learned with all of you.

To learn more, see Hello, Startup hello-startup.net

Questions?

Rocket: manhhai Leo Tolstoy: Wikimedia Biz Stone: Joi Ito Richard Branson: Chatham House Thomas Edison: Louis Bachrach Reid Hoffman: startupofyou Dogfight: Alan Wilson MVP car: Henrik Kinberg Crowd of people: Scott Cresswell Picadilly Circus Ads: Sebastian Bertalan John Wanamaker: Bain News Service Social media: Ibrahim.ID Man using laptop: Negative Space Laptop with Google: Pixabay Handshake: Flazingo Photos Woman coding: Hamza Butt Resume: Flazingo Photos References & image credits

Startup DNA: the formula behind successful startups in Silicon Valley (updated May 5, 2017)

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