Peter Nixey

A few days ago I received an email from Rob Bishop, the CEO and founder of Magic Pony. The email said that as a shareholder of Magic Pony Ltd. I would shortly be expected to sign a series of documents agreeing to their acquisition by Twitter Inc. Today it was announced that the company was acquired in a deal that TechCrunch’s reported from unconfirmed sources as being worth up to $150,000,000.

The reason I was a Magic Pony stockholder was that three years earlier I’d received an email from Matt Clifford and Alice Bentick asking me to meet for dinner. Alongside Chris Mairs and Chris Wade they invited me to become one of Entrepreneur First’s new, part-time partners. 

Away weekend with Magic Pony’s EF batch (many other great companies contained)

Magic Pony was one of the companies that came out of the EF batch I worked with. Rob and Zehan’s cutting edge work in computer vision and their success in recruiting an incredibly strong team of PhDs meant that today, only two years after the company’s inception, EF will reportedly make over a return of well over a hundred-fold on their initial investment. It is a massive credit to Rob and Zehan that they pulled off the technology and the exit and did both in less than two years since the company’s inception.

EF is similar to YCombinator in taking a small percentage of each business for their capital investment. However their investment model is strategically different and tactically evolved to cope with the limitations of the European market. YCombinator takes pre-formed teams of smart entrepreneurs with pre-existing business ideas and often pre-existing businesses. Matt and Alice at EF recognised though that such a constraint would fatally restrict the ability of Entrepreneur First to attract sufficient talent from the more sparsely-populated European technical scene.

They knew that seed investing would be a numbers game and to get scale they’d have to recruit talent directly and individually from universities and jobs. Their hypothesis was that it was possible to form teams before the founders had either an idea or a founding partnership. Magic Pony was a company formed by two very smart young men from exactly that hypothesis. Neither of them even knew each other before EF. Today their union was so significant that Twitter’s own founder, Jack Dorsey announced their acquisition.

Six years ago, Heroku became first of YCombinator’s $100,000,000+ acquisitions. There had been a few YC acquisitions prior to Heroku but it was the first really big one. Its sale to Salesforce signalled to investors that YCombinator was a very real investor producing very real companies. Heroku’s exit wasn’t an acquihire, there was something real happening here. Investing in YC companies was about more than simply fuelling the ecosystem. Investing in them meant real returns.

And YCombinator’s returns were about to get greater still. At the point Heroku exited, both Dropbox and AirBnB had already been funded by YC and were putting down roots that would come to be worth over $30Bn. Not only that but Patrick and John Collison, fresh out of their first, small YC exit with Auctomatic had only a few months earlier been accepted into YC with Stripe. There were already three Unicorns growing in the stable. 

Heroku’s acquisition rang the bell that woke Silicon Valley’s angels from their slumber and accelerated everything to light speed. Funding rounds went from taking months to weeks or even days. Prices went up and YCombinator’s ability to fund even more companies increased. As more companies went through YC, attracted by the brand and the advice, so more exits happened, yet better founders were attracted and yet more unicorns emerged. Sam Altman now estimates that YC funds a billion dollar company once per 80 companies. Or to put it another way, twice a year.

Magic Pony’s acquisition should be ringing the same bells for investors in Europe. Magic Pony will not be the last exit in this range for EF and I have little doubt that within a few years we will see the fund’s first billion dollar company emerge. I would expect a smart fund to index invest across the whole of the emergent EF portfolio in the same way that Sequoia and A16Z started index investing across YC. Prices are cheap right now and it is still a buyer’s market. 

There will be very big winners from these years. In time to come prices will increase and access will get harder. Companies will expect more from their investors. Right now they will demand only money. In years to come it will be harder for unknown Angels to even get access to the hot deals. Today is the opportunity to become in London what Chris Sacca and Ashton Kutcher became through those early years of YC and make a name as a brand-name Angel.

The companies coming out of EF now will be demanding real, valley-like valuations. And well they might. It takes capital to fuel such high growth. I know investors in London who thought that the Series A valuation of Magic Pony was too high. They stayed out and invested in companies they felt were cheaper. I find that a very strange strategy. Had they invested in Magic Pony’s series A, they would have made a 30x return. They could have invested at over twice the valuation and still made 10x. Staying out of it made them nothing. And had Magic Pony failed they wold have lost the same amount of money whatever the valuation was.

Seed investing in tech is different to seed investing in almost anything else. The returns and the timeframes are just so different. As a seed investor in high tech your job is to optimise for one thing and for one thing only which is being in the winning companies. I only fully internalised this when hearing Ron Conway speak. His point was that when you make 1,000x returns on your winners it only matters that you have 999 or fewer losers. When asked how he felt about frothy valuations he said he wasn’t too fussed. He observed that valuations go up and down with the heat of the market but don’t affect the logic of the investment itself. It never makes sense to stay out of a probable winner simply because the valuation higher than you prefer. Tech is not like property where investing over the market rate means you can never profit. Tech multiples are huge. Making 500x rather than 1,000x is neither here nor there. The only thing that matters is making sure you’re on the mega-ships when they dock.

After being approached by Coca Cola to start my new company, Copyin.com, I had to resign my role at EF. As an alum though I am incredibly proud of what Rob, Zehan and Entrepreneur First itself  have achieved and what they continue to achieve. EF is the single most important force of change in the technology scene in Europe today. I am confident that its presence will ultimately result in billions of pounds of value and thousands of jobs created. These are exciting times and there are fortunes to be made for early investors, entrepreneurs and employees alike. All of the people coming into EF companies right now stand powerfully positioned to become the technorati of years to come. Well done EF, well done Chris Mairs who I know put a huge amount of work into this deal and most of all well done Rob and Zehan and their team. An amazing result all round.

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There’s a a really interesting discussion unfolding right now between Paul Graham and Tim O’Reilly on the Wealth Gap and whether or not economic inequality is really a bad thing per se.  

I used to believe that the argument against wealth inequality was unsubstantiated and largely fuelled by jealousy. I believed (and still do), that economic inequality is a natural consequence of increased economic leverage. If the most successful people are becoming more effective and the least successful remain consistently ineffectual then you get a divergence in wealth. If the baseline is zero and the top line goes up then the two of them diverge.

And it’s not just the rich who become richer. Over the last 50 years the whole world has become a much better place to live. Health, wealth and education are up across the board. That’s happened because our economies are more efficient and more effective. The people who run the businesses that drive those economies have benefitted proportionally. Is it really such an issue if a few people get rich so a lot of people can get wealthier?

I used to think not. Now I’m not so sure. Because what comes with a wealth gap is an empathy gap. And when people lack empathy they treat each other in ways they wouldn’t want to be treated themselves. Often those ways are bad and when you treat someone badly enough they dislike you. If you continue to treat them badly they hate you. And when people hate each other bad things happen.

In order to find out more I tried to read a book on the topic. I didn’t succeed because it annoyed me so much I had to stop reading it. Most of it was arguing that poverty was bad (obvious) and that wealth per se was bad (not true). Most of the arguments against disparity were that things would be better if the poorer had more cash. But, as Paul Graham points out, that is not the same thing as saying that inequality is bad. What it says is that poverty is bad. And that’s something that I don’t think anyone would argue with.

The book was annoying and convinced me of nothing. However I had a lingering, unsubstantiated feeling there was a fundamental danger in the haves moving further from the have-nots. It was actually only only when I watched Neill Blomkamp’s Elysium (an allegorical story of the US/Mexican dichotomy played out in a futuristic, dystopian earth orbited by a utopian, man-made paradise) that I realised what it was and how I’d already seen it play out my own life. When the gap gets too large, empathy dies. And when empathy dies things get very bad.

As a career entrepreneur, most of my adult life has been spent with very low and extremely unpredictable income. I never wanted for anything during childhood but as an adult I’ve put everything I’ve ever had into my businesses and there have been many, many months when the stress of pennilessness rang like tinnitus in my ears. When buying bread and milk spikes your cortisol you’re in a bad place.

Essentials are the least stressful part though. What really hurts is the discretionary spending and what kills you is the forced discretionary spending. Unless you hermit yourself (as I did for three years during my twenties), it’s hard to get away from the social impetus for that spending. When you would walk a mile rather than take a $2 bus ride, buying a round of drinks cuts you like a sword. I wanted to punch a guy in the face when he asked me for a $20, double Talisker. He had a well paid job as an engineer with Nvidia. I had $20,000 on a credit card. How could he not realise the position I was in. How could he not realise that I’d literally spent ten hours walking across the hills of San Francisco to save the money his whisky cost me.

Imagine you ordered a drink and when the bill came it cost you $500. Imagine how sick that would make you feel, how it would ruin your evening. I had so little money at that point that that’s exactly how I felt. It ruined my night and I honestly hated him for it.

And yet eight years later I did basically exactly the same thing myself. I was back in San Francisco. This time I was there as an advisor to the Entrepreneur First cohort. These were all 20-something, first-time, unfunded entrepreneurs. I’d organised for us all to go out to dinner in the Mission. We weren’t at a particularly expensive place but when the bill came, every single one of the fifteen people there wanted to split it item by item. I found it intensely annoying to end the meal in such a tedious way and dismissed it suggesting that we just divide by the number of people.

But then I remembered that each of them was on a stipend of $1,600/month. They had to use that money to fund both both themselves and their companies. Meanwhile I was making $1,000/day contracting. So whether I was up or down on a $30 meal didn’t really matter to me. I didn’t have any empathy with their situation.

Not only that but I also ate and drank more. They were all budgeting, I wasn’t. So I wasn’t just being unsympathetic, in my carelessness I was also getting this crew of scrabbling start-uppers to subsidise my splashy lifestyle. Only, that didn’t occur to me because I didn’t feel the pain of expenditure the same way they did. I forgot the same pain that would have hurt me viscerally seven (or even two) years earlier. Yes, I was That Guy (though I subsequently paid over my share).

The powerful thing about empathy is it stops you from accidentally hurting people. You feel their pain as if it was your own. And that stops them from them hating you. And that’s good for everyone. That guy in the bar hurt me and made me hate him because he didn’t empathise with my situation. I made those young entrepreneurs stressed because I didn’t empathise with theirs. And both those things happened because we were economically removed from each other and lacked empathy.

Empathy doesn’t care about absolutes, it’s only the relative that matters. If you’re all rich or you’re all poor then it’s all cool. It’s only when you’re different that things get screwy. I have a very successful friend who’s CEO of a company that you will have probably heard of. By any normal standards he’s very well paid but many of his friends have sold their companies and made tens of millions. He’s now no longer able to keep up with them and finds himself resenting how much they will spend on a holiday or a meal that leaves him high and dry.

Boo hoo I hear you cry, poor him. It must be so hard living on a decent salary and not able to keep up with centi-millionaires. But unless you’re earning less than $3,650/year then boo hoo, poor you. Because you’re already earning more than 75% of the rest of the world. How does anyone in the UK or the US have any soap box to stand on when 20% of the world lives on less than $365/year? The UK government gives job-seekers $4,200/year in cash alone and that’s aside from housing and healthcare which is of course free. If you live in the UK you made it into the top 25% most wealthy people in the world even before you got out of bed. Well done you. 

But the fact that you’re richer than most of the world doesn’t matter because let’s be honest, what matters is how much you have relative to those around you. 

When you feel the pain of financial stress you feel the pain of financial stress. Is the suicide of the man evicted from his bedsit any less stressful than the suicide of the man who can’t pay his children’s private school fees or the teenager who can’t afford the right trainers? Stress and distress are stress and distress, who are any of us to judge their intensity.

Any of us feeling poor would probably immediately feel better if we were hanging out with the Syrian refugees currently camped out in Calais. We’d be grateful just to have a country to call our own. Small comfort to the financially suicidal in their hour of need though. Were they “rich and entitled” or “poor and needy” as they left this world? It all depends on your perspective.  

The reality is that as long as you’ve locked in the first two levels of Maslow’s hierarchy then it’s hard to say that you’re poor in absolute. But that’s not to say that you’re not poor relative to those around you and that’s not to say that that’s just as distressing.  Fairness and equality is deeply, deeply hardwired. In this incredible experiment it’s shown that even monkeys will demand equal pay for equal work. Hardly surprising then that inequality enrages humans. 

So while I always thought a wealth gap wasn’t a bad thing per se; now I’m not so sure. Maybe, like me at that dinner table, the larger the wealth gap, the less we notice when we take more than our fair share. And the less we notice ourselves doing things that make people hate us. Or hating people for things they never meant to hurt us. If the guy in that bar had been a student, I like to think he’d have never asked me for a $20 drink. If I’d been out to dinner with those entrepreneurs only two years previous I’d have been delighted to itemise the bill. 

I’ve never met a wealthy person that hates the poor but I’m shocked by the number of people I know who hate the wealthy. I never really understand why since none of them have obviously suffered at the hand of the “rich”. But then it doesn’t have to be something obvious to add up. Like the annoying housemate who eats all your ketchup, it just has to be occasional, careless or callous to eventually accumulate into a ball of righteous fury.

So to come back to Paul’s essay I think that his points are right, it’s not the wealth gap per se that’s bad. However I do think that the Empathy Gap is a bad thing. And the Empathy Gap is truly a problem with the distance between the two ends of the spectrum and independent of where either of them are. And for that reason I think a Wealth Gap is probably a bad thing too.

Comments on Hacker News

Most people don’t enjoy pain. If I held your hand over burning candle you’d haul at me to pull it away again. You wouldn’t even need to see or know that it was a candle to react to it. If I crept into your room and held it under your hand as you slept, you’d still instinctively yank your hand away. We are hard-wired to avoid pain.

But while annoying, pain is also useful. If I entirely removed your sense of pain you’d start to suffer some pretty bad wear and tear. Pain is nature’s way of telling us to get out of danger. It’s good at keeping us from socially awkward situations like casually sawing off a finger while chatting to friends over a steak dinner.

Stress has a similar effect on us. It’s a stimulus that causes us to get work done and to get it down fast. We tend to exert it on ourselves and others to create a discomfort that gets things done. Stress is not nice but like pain, it’s a powerful motivator and when used carefully is a useful corrective influence.

Over the years I’ve noticed that experienced and inexperienced founders have very different ways in which they experience stress. Experienced founders feel stress from the things that are causing pain to their company. Inexperienced founders tend feel stress from the things that are causing pain to themselves. Experienced founders have nervous systems that are directly wired into their company’s pain: the company is a voodoo doll for themselves. When the company is hurting, however non-obvious it may be to the rest of the world, the founder hurts too. Inexperienced founders tend to feel only their own pain which is all too often a trailing indicator for that of the company.

A classic place where you see these differences is in the initial product release.

John-Rhys, a fresh-faced young founder from Swansea is building a new SaaS CRM system. John-Rhys used to work at an agency. He loves building software but he’s sick of building software for clients that won’t invest fully in design and he wants this CRM to be gorgeous. He knows exactly what he thinks the market wants and plans to make sure they’re perfect before releasing them. It takes him eighteen months to get the first version and it’s pretty stressful making sure that everything’s as attractive as he’d like. Eventually though he puts up the registration form and convinces TechCrunch to do the cover story. Sadly the product fails eight months later because customers wouldn’t use it without email integration and they ran out of cash before they could complete that.

Hannah, the founder of an ad-tech company based in East London, has done a couple of startups before. She’s built plenty of product over the years and her experience has been that excellence is simply what comes from repeated rounds of customer testing. She can’t wait to get the first feedback from her customers because she’s not entirely sure which features they should double down on and which they should cut. She also knows that given they have only eighteen month of runway, they will need to start fundraising in twelve. To be ready for that she needs at least eight-months of customer engagement. The four months before their first release is a pretty stressful period because there’s a lot to do and she breathes a sigh of relief when the first customer support tickets start rolling in. Eight months later she has five paying clients on the platform and confidently begins her Series A fundraising.

Both founders were stressed but while Hannah’s stress prompted her to get the product out and into users’ hands, John-Rhys’ stress caused him to lose a massive eighteen months before launching. It also meant he invested too deeply in aesthetic design instead of testing the product with users and discovering how critical email integration was while they still had cash to build it.

Hannah’s stress came from things that were painful to her company, John-Rhys’ stress came from things that were painful to him. John-Rhys simply wasn’t attuned to what was hurting his company.

It’s not easy to feel the pain of a company. Company’s are not human-like creatures you can easily empathise with. You can’t even anthropomorphise a face on them so how on earth do you empathise with them?

One technique for feeling your company’s pain is having a good picture of what a healthy, well-adjusted company should look like. And that means planning. Plan for and visualise what success should look like. Look at where you need to be by your next funding round or milestone and work backwards to see where that puts you today. Find companies that are similar to yours and see what their trajectories were. What are the metrics, the hires and the partnerships that it will take you to get there. What’s the lead time to get those? The clearer you can visualise where you need to be, the more you can feel the discomfort of not being there. No plan survives first contact with the enemy but failing to plan is planning to fail. It’s only once you have some sort of a plan that you can feel the pain that comes from knowing you’re not sticking to it.

Startups are inherently stressful places. Founders tend to consciously and subconsciously generate stress in order to spur themselves onward. I think it’s hard to get away from that - it creates the discomfort that forces you to do a lot quickly. Make sure that the stress creates an impetus to do what’s  best for the company though and not merely from what is best for yourself. Wire yourself into the nervous system of your company. Use the stress to to pull your hand back out of the candle. Also you possibly shouldn’t let me into your room at night.

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Everyone knows the importance of hiring well. Everyone knows that the people they hire will set the culture and the prospects of the company. Anyone who has ever worked in a company has seen that the characteristics of that company are the manifestation of the team that works there. The kindness, diligence, discipline and efficacy of the company all flow from the corresponding characteristics of the team that operates it.

Great people beget great people. However many entrepreneurs fail to grasp the corollary to that. They fail to realise that their strengths are the strengths of their company. And so are their weaknesses. Their work ethic, their skill set, their interests and their values will be the same skill set, interest and values that will manifest throughout the company. What the founders are the company will become.

It wasn’t until I was working to sell my first company that I really grasped the significance of this. I started to see that great engineers produced great engineering companies and that dreamers produced companies that never quite delivered on those dreams. And I also realised something very sobering. I realised that I didn’t have the DNA to build the type of company I wanted. At that point in time, my characteristics didn’t contain the characteristics of the company I wanted to build.

I think that my younger self thought I might find such characteristics in the people I hired (actually a younger me thought that he already had those characteristics). However Joseph Smarr, an amazing engineer once said to me that “it easy to hire down but very hard to hire up”. And so I realised that while I might get lucky, I should assume that my best characteristics would also be my limiting characteristics. They were both the best and the worst in those that I should expect to be able to hire.

At the time I was a saviour-driven entrepreneur. I believed in the saviour-feature, the saviour launch, the saviour investor, the saviour meeting. Many entrepreneurs think that way. Films teach us to believe that that’s how it happens. They start off with enthusiasm and gusto, have a serious setback a third of the way through that causes us to sit back and re-evaluate. Then, following an eye-of-the-tiger training-montage we go on to snatch the final prize in a flood of glory, Hans Zimmer orchestrals and wingman soundbites.

That’s not how real life works though and I was still to learn how destructive such a saviour outlook actually was. I was still to develop the stamina and focus it takes to do the many small and boring things that will never feature in any montage but on which a company is built. I was still to become the entrepreneur that was capable of leading the company that I actually wanted to build. I was still to become someone that *I* would aspire to work with.

I happened to be in Dropbox’s office when they went to pitch for Techcrunch 50. It was a high-visibility conference and if it had been me up there pitching I would have been prepping for the two days before, practicing and changing it up hour by hour. If ever there was a saviour moment to savour it was pitching for the finale of a big conference.

Drew and Arash, the Dropbox founders, did none of that. They spent the morning programming, they went to the pitch, fumbled it, took second place and then came straight back to the office to carry on working. Dropbox did nothing but work relentlessly, day-in, day-out on making the product perfect. Drew and Arash aren’t splashy people, they’re engineers and so they created an unsplashy company full of engineers. Their DNA replicated itself out and throughout their company.

Virgin, by contrast is a very splashy and flashy company. It’s sexy, adventurous and edgy just like Richard Branson. Zappos is a caring, community-driven company focussed on metrics, efficacy and culture building just like its founder, Tony Hsieh. These companies may be outliers and reflect extreme personalities but when you get close to most companies you see the strengths and values of the core team replicated out throughout the rest of the organisation.

It’s important to remember this as you build your company. However it’s critical to remember this when you conceive your company. It’s critical to ensure that what you expect to be special in your company is also what is special in you. Because if you create a company that’s critically dependent on engineering and your founding team doesn’t include engineers then you will have a very very hard time. Equally if you create a company like Jordan Belafort’s Stratton Oakmont and your team doesn’t include a ruthless, frothing-at-the-mouth-sales guy you probably aren’t going to sell a lot of penny shares.

But while Seb, the founder, wasn’t an engineer, he was a salesman. And for the first year he and his partner would each make 200 phone calls a day to builders, plumbers and electricians asking if they wanted a website. With a 0.5% conversion rate their job was the envy of no-one. But bit by bit they built up customers and wired the websites together using Wordpress. Today the company is doubling in size every few months and has a highly refined sales pipeline, lead identification process and customer on-boarding. The company grew because it played to the strengths of the founder. Those strengths were sales, not technology and they’ve built a strong business off the back of it. They use technology heavily and they’re now deepening their investment into it but that’s not what they’re really about, that’s not what differentiates them from their competitors.

So when you decide what company you want to build and what its unique differentiators will be, make sure that you already have those. Be loyal to what you’re unusually strong at and your company will reflect that strength. If you don’t have a particular strength (say engineering) then that doesn’t mean that your company won’t have an engineering component to it - just that you shouldn’t expect it to be the company’s key differentiator.

Play to your strengths. You are what your company will become. Make the most of your strengths and your business will do the same.

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I am a founder advisor to a company called RotaGeek. RotaGeek schedules staff for companies like O2 i.e. it makes sure the right people are in the right retail outlets at the right time of day.

The company launched four months ago and with only three employees, already has £150,000 in annual recurring revenue. Based on the current inbound leads alone it looks like it’s going to have £1M in recurring revenue by the end of next year.

This is the real deal. I’ve been doing startups for ten years and never seen anything like this.

Chris, the founder, is a badass but totally run off his feet right now and needs someone very capable and bright to complement the work he’s doing. She or he needs to be Chris’ “right hand person” and will end up holding a very significant position in the company and doing many things. The company is a different place every week and this role will be very different in five months time.

We are looking for someone who is very smart, has a track record of doing hard things that demonstrate their ability to consistently work and achieve and who is able to write and present extremely well. The role will involve everything from working through UX and analytics in improving the signup flow to going out to present RotaGeek at pitch events to handholding multinationals through their onboarding process.

If you’re smart, hard working and have ever approached a startup suggesting that you might be good for “biz-dev or marketing” then this may be for you. However you need to apply soon: we want to appoint this person yesterday.

If you are that person or you know that person, please tell them to get in touch with Chris directly: chris at rotageek dot com.

Your application should include evidence showing us how you’re smart and evidence that you’ve done hard things (whatever those hard things may be). Also include any public profiles - LinkedIn, Twitter, Blog etc.

Mail us.
- Peter

Which while completely orthogonal to anything else I write about is kind of cool :)

Jessica Livingstone recently wrote a very good article for the WSJ on Why Startups Need to Focus on Sales not Marketing. Her point was that early companies do much better by making their products work really well for a defined audience than by distracting themselves with high-scale but low-fit marketing.

Only a few days earlier I had been enthusiastically advocating exactly the opposite advice to the team at Entrepreneur First. I feel that startups should pay extremely close attention to marketing and do so as an ongoing discipline. I think that one of the biggest dangers to early stage startups is getting into a local market-minima and that marketing is an essential tool to help avoid that.

One of the team, Alex, wrote to me to ask whether the two points were at odds with each other and if not why I would stand by my original statement. I don’t and I do. Here is why.

It is very important to focus on making a product work really well for clearly identified customers. It’s painful and takes longer than you expect. But it also forces you to make software that is genuinely useful. As Jessica points out, marketing is painless and shields you from the cold reality (and insight) of rejection. A depth-first approach also tends to correlate with successful products. Or as Paul Buchheit says, “it’s better to make a few people really happy than to make a lot of people semi-happy”. Worth noting that this isn’t the same thing as causation but for those of us who value building beautiful product, encouraging nonetheless.

However in the product-focussed, early-stage (pre YC) teams that I see, the real risk is not that they waste time or money on marketing. The real risk is that they end up optimising for the few users who are most easily accessible to them. Instead of exploring the wider market, these teams relentlessly iterate their product for a small number of friends, family and customers who don’t necessarily even want their product. They just happen to be accessible users.

The real risk for a product team isn’t failing to make good product, it’s failing to find a market that wants it http://t.co/4fdvhuNP9f

— Peter Nixey (@peternixey)

June 9, 2014

Marketing is traditionally a tool to help companies scale sales. It allows them to reach out to a lot of people and either sell them directly or soften the ground for a purchase later on.

That scalable outreach is super important to startups too; not as a sales tool but as an exploration tool. Marketing is a way for startups to quickly gauge demand for their product across one or more marketplaces. It’s a way for startups to explore the territory and find their beach heads. In more mature companies, marketers complement the sales team. In early startups they should be cartographers, and complement the product team. Before you can make something work perfectly for an individual customer you need to find the individual customer to perfect it for.

Marketing in early startups is super important. Not for growth but for exploration. Marketing is a startup’s sonar http://t.co/B1K2FbogiI

— Peter Nixey (@peternixey)

June 10, 2014

“Startup marketing” does not mean thousands of dollars spent on adwords budgets or expensive trade show stands either. Startups are inherently interesting and should get involved in the communities they’re designed to service. If you’re a developer and your community is Hacker News then you have it easy. Companies like Stripe and statuspage.io absolutely nailed their HN marketing. If your target market is Mums then get stuck into Mumsnet, if it’s teaching then get stuck into the teaching community. Some of these communities are in forums, some are on Twitter some are probably just physical. Any which way though your primary marketing is simply Getting Involved. It won’t get you all the way but the relative ROI is huge.

One of the companies I advise, Rotageek, provides excellent scheduling software for organising staff schedules. The team spent years honing the product and making it right for the NHS here in the UK. One of the founders, Chris, worked in emergency medicine and saw the pain and cost of manually organising staff. Being an entrepreneurial sort, he teamed up with a friend to create a piece of software to address that. He knew the problem intimately and worked hand in glove with the NHS, evolving the product and optimising it for their needs until one day he realised they just weren’t going to pay for it. They would happily string him along and may eventually, possibly have bought but that point would have been long after the company finally ran out of runway.

However the moment that Rotageek switched from optimising the product for the NHS to casting their net out wider, they started to find companies who really were hungry for the software and more than willing to pay. The team is now scaling for a huge rollout and all because they started marketing the product widely enough to find people who really wanted it. Even now they still only have a relatively small market sampling. While retailers are extremely receptive to Rotageek, they may not end up being the best market for the company either. Without reaching out to new markets and without casting their nets wider, the company will never discover that.

One of the hardest and also the most useful things I’ve ever done was door-to-door book sales in West Virginia. I did it with a friend as a summer job at University. We learned a huge amount about selling and how to sell. The sales scripts and the sales school were both brilliantly designed but despite all the technique, the scripts and the schooling, one simple lesson was hammered home again and again: “The quickest way to convert a disinterested customer into an interested one is knock on five new doors”. The point was that finding the people who really want to buy from you is more lucrative than obsessing over those who don’t. To find that customer, the one that’s really hungry for you, you need to first of all knock on a lot of doors.

Most teams focus on Product Search & optimising product. Just as important is Market Search & finding optimal market http://t.co/B1K2FbogiI

— Peter Nixey (@peternixey)

June 9, 2014

You should absolutely go deep and optimise for your target market be careful not to optimise prematurely. There is someone for everyone on the internet. You can find people who are willing to eat you and even people who are willing to be eaten. When you find those customers who really want to you (hopefully not for dinner) then follow Jessica’s advice: go deep and deliver exactly what they want. Until then though, remember Annie Lennox’s advice and that “everybody’s looking for something”… “Hold your head up, keep your head up, movin’ on”.

Comments on Hacker News

As with my previous post this is taken from an email I sent round to our team today

I’ve spoken about this with all of you individually now but I’d like to get it down and into Copyin too.

Up until recently we’ve been using “2-week plans” to give us each a longer horizon on the work we’re doing. Those have been combined with weekly “Plans, Progress and Problems” reports to give us a way to plot and chart our progress.

As an early startup, we operate on such a tactical, day-to-day basis that the two week plans were originally a useful way to help orient ourselves with where we each wanted to go in the “longer” term. However once we introduced weekly PPPs they started to feel redundant. The two week plan was turning into just twice a PPP and not adding any value to us.

The PPPs do an excellent job of making sure we’re moving forward they don’t really do a lot to check that we’re going in the right direction. Which is where Objectives, Goals and Strategies come in.

Objectives goals and strategies are a way of determining the exact value-add that we want to commit to (objective), how we plan to deliver the value add (strategy) and whether we succeeded in doing so (goal).

Objectives

The qualitative outcome we want to achieve e.g.

• make sure that people stay active on Brojure
• increase the number of people being exposed to Brojure
• make the editor easier to use

Goals

These are the hard numbers that determine whether we have actually met our objectives. They’re a way of making our objectives achievable and failable.

(examples of goals that relate to the above objectives)

• increase the proportion of new users who create a 3rd Brojure from 1% to 20%
• increase traffic to the site from 500 uniques a week to 5,000 uniques per week
• reduce the time it takes to create a Brojure (with known content) from 15 minutes to 5 minutes

NOTE - these should be achievable (not ridiculous) and also failable (you should be able to tell whether you actually achieved them. e.g. “make editor better” is not failable)

Strategies

These are the ways in which we are going to delivery our goals.

Note that the strategies are the ways in which we achieve our goals. They are not the goal itself. Failing to recognise this distinction is why many people and companies remain busy without really achieving anything. They assume that the work is the goal. Working is not the goal, it is merely a means to achieving the goal.

Let’s look at possible strategies for achieving the goals we set above:

Possible strategies for increasing # users who create 3rd Brojure from 1% to 20%

• after each Brojure send them an email with a trick they can use for a new Brojure and a prompt to start the next one
• pick a vertical and funnel users through 3 particular uses of Brojure for them e.g. for a restauranteur encourage them to produce: 1 Brojure for their menu, 1 Brojure for Private Events, 1 Brojure for the restaurant’s history (sounds like a crappy strategy to me but it is at least an example of one!)
• add a “to do list” in the editor encouraging users to “complete their to-dos” one of which is making 3 Brojures
• allow people to copy Brojures and tweak them for someone new

Possible strategies for increasing traffic to site

• guest blog on other people’s publications
• buy google adwords (needs further constraints to ensure that the strategy is economically viable)
• make identifiable improvements to SEO
• get guerrilla and go into communities to spread the word

Possible strategies for decreasing time it takes to make Brojures

• fix image upload bug
• allow people to copy an existing Brojure to create a new Brojure
• pre-load Brojures with content
• allow people to save content snippets that can be injected into new Brojures
• add more Javascript interaction to the editor to literally increase editing speed

What Objectives, Goals and Strategies actually do for us

The idea is that each month we will decide on our actual objectives. This is one of the most important parts of the process. It’s very easy to just churn through work without moving forward and so before we decide what we’re going to do we first decide what we want to achieve. Product is one place that can benefit hugely from this part of the process. It’s incredibly easy to queue up lots of features without any of them actually impacting us and end up with a set of features for the sake of features.

Once we’ve done that we then get honest with ourselves and ask what will tell us whether we achieved that outcome. We set our goals.

Finally we look at the strategies we’re going to use for achieving those goals. How will we execute?

OGSs will be set at the start of each month

The Objectives will become something that will require solid teamwork from us. If we take an objective like “increase Brojure completion rate” then it may require Dash to create an email strategy, Peter to implement changes in the editor and Tomas to design them. Similarly “Increase the number of people engaging” may mean Ollie has to do do more phone calls but that Dash needs to create a new sign-up email type and that Tomas needs to tweak the landing page design.

This is nice in that it begets collaboration which is fun. However it could also go badly wrong. If we choose goals badly they will be dependent on multiple people and we could fail on all OGSs simply because a critical member of the chain was not able to give their support to all of the strategies they were required for. If Dash is on the hook to do an email component for every other person’s strategy then he could end up over-committed. If he’s overcommitted then he won’t succeed and everyone fails. Whose fault was this though? Who can correct it when it becomes clear that it’s starting to happen? Not Dash’s because he was over-committed, not everyone else’s because it was Dash who failed to deliver. This is NOT a situation we want to find ourself in (or put Dash in).

If people can’t independently deliver their goals then they get demotivated & tasks sink to the lowest common blocker http://t.co/CM9l5aSzoD

— Peter Nixey (@peternixey)

June 5, 2014

Goals should hold individual people (or teams but at our scale it will mostly be people) responsible for delivering and should afford them the autonomy and resources to do so.

Objectives will be set company wide, goals will be individual

For this reason we will decide on company wide objectives but each goal will relate to a particular individual. We will choose goals such that individuals can execute on them, can take credit for them and can can be held responsible for them.

There is one exception to this in that Tomas and I have discussed this and because his design work is currently so strongly coupled with my dev work we will work as a unit on product. I’ll go on the hook for both of us :)

Any questions, concerns, objections just hit me up or reply to this email.

Thanks team,
Peter

This is taken from an email that I sent out to our team earlier today.

Some jobs in life come to you - answering phones, answering emails, responding to requests. They turn up and you process them. As long as you spend the day processing them then you’ve done your work. These tasks keep us in place, they stop our businesses unravelling, they maintain our status quo. If we already have a company, a revenue stream and a business model then that is exactly what we want. If we do not then it is exactly what we do not want.

In a big company, your job is to maintain the status quo. If all eBay does for the next decade is continue to be the top online marketplace and make 9% profit off all transactions they will have succeeded. Most of that work is reactive - keep competitors at bay, acquire them when they get too feisty, make sure systems don’t go down: as a friend from eBay once told me: “the main thing people care about here is making sure we don’t fuck it all up”.

However if, over the next 10 years, all our little startup does is to keep 100 users on the system with one super-user and and ten more somewhat engaged, then we will have failed spectacularly. We don’t yet have the luxury of having anything to fuck up. We dream of the day when our fuck-ups have consequences. Our fuck-ups go sadly unnoticed.

Big companies fear change because it usually means something’s gone wrong. Startups are entirely the opposite. If startups are not changing then they are dying. Everything we do is about changing numbers not maintaining them, everything is about building product, growing users, building momentum, increasing engagement. None of those things are about maintaining the status quo, none of them are about not screwing up; all of them are about gaining new ground.

We do not fail in unsuccessful attempts to take new ground, we fail in not making those attempts in the first place.

Reactive tasks are about maintaining your current position, they are about not losing ground, they are low risk. You know they’re feasible because you already hold that position, you know what the ground feels like under your feet. You know that you can probably complete that task without failing. Pro-active tasks are quite the opposite. They require taking new ground and taking ground that you’re not sure can even be taken.

“in a startup, absolutely nothing happens unless you make it happen” - @pmarca http://t.co/v2TbP8yoX2

— Peter Nixey (@peternixey)

May 15, 2014

Being proactive and making this happen is hard and comes hand in hand with failure. It means going out on a limb, doing jobs that risk not having any worthy outcome, doing things that may just fail to work altogether. It also requires being wrong and ideally being wrong 50% of the time.

Most of what a startup does is exploration and testing. Our goal is to find a repeatable scalable business model, our job is the search for that. We are literally discovering what works and what we can successfully repeat. We are figuring out what product our users want, who wants it most and how we can reach them. Once we have tested that then we can repeat it but first we must test it.

Information theory tells us that the optimal testing strategy yields positive outcomes 50% of the time. If on average you’re right more than that then you waited too late to test, less than that and you tested too early. The goal of testing is not to prove that you are right it is to see *if* you are right.

But optimising to be right 50% of the time means optimising to be wrong 50% of the time and that is 100% more of the time than most people can handle.

It’s easy to respond to an email, you cannot fail. It’s there, it’s asking you to respond to it, you already know there’s an audience waiting to read it you can’t go wrong. It’s far harder to risk the rejection that comes with cold calling a customer who may not want to hear from you. Far harder to report the 0% clickthrough rate from your latest, experimental email campaign or that the blog post you spent a day writing only ended up with 10 visits.

But these are the jobs that actually move us forward. These are the jobs which, while infused with risk, are also laced with sparkly rewards. These are the crazy email campaigns that may yield a 50% clickthrough rate, the blog post that happens to resonate and generates 60,000 visitors. These are the alpha-team tasks that parachute you into new ground and from which all of the reactive tasks subsequently unfold.

These jobs are proactive not reactive. It is the outcome of these jobs that form the anecdotes we tell people at parties, they are what go into our investor decks, they are what we feed the press in interviews. These are the forays that build our company.

So - as you put jobs into your daily to-do list, ask yourself: “is this proactive or reactive”? If it’s the former and it’s “tangible, fail-able and do-able" then it’s probably an excellent task. If it’s not then perhaps it really does need to happen but also ask yourself whether there is another way that you to spend that time that really moves the company forward. Because maintaining the status quo means maintaining a non-existent business. We are about change.

Comments on Hacker News

I love this early interview with Mark Zuckerberg. I remember seeing it when it came out in 2005 and being impressed, even then, with how humble and pragmatic the vision for the service was.

The company is early enough that it’s still college-only and called The Facebook. It’s so small that you can see Dustin Moskovitz doing a kegstand in the background without any PRs diving in to tackle him out of the shot.

The thing I really love about the video though is Mark’s total focus on product (The Facebook) and service, and his utterly pragmatic view for how it can potentially evolve.

When asked, “Where are you taking Facebook?” he gives the following answer:

“There doesn’t necessarily have to be something more, a lot of people are focussed on taking over the world, doing the biggest thing, getting the most users.

I think that part of making a difference and doing something cool is focussing intensely. There’s a level of service that we could provide when we were just at Harvard that we can’t provide for all of the colleges and there’s a level of service we can provide as a college network that we couldn’t provide if we went to other types of things.

So I really want to see everyone focus on college and create a really cool college directory product that’s very relevant for students and has a lot of information that people care about when they’re in college. I don’t know what that is and it’s not everything that’s on The Facebook now”.

“There doesn’t necessarily have to be more, I want to focus on college & create a directory prod. that’s relevant for students” Zuck 2005(!)

— Peter Nixey (@peternixey)

May 6, 2014

A more powerful and succinct endorsement for PG’s advice that founders should make something people want, do things that don’t scale and offer surprisingly good customer service would probably be hard to come by.

Here’s the video: