Why Startups are easy, hard and mostly fail

The romance of cycling into a co working space, armed with a skinny latte, tight jeans and hipster looks can draw many to the promise of giving a startup a go.

It could have been precipitated by being chucked out of that corporate job you always hated. Maybe you’ve struggled with an itch you just have to scratch. It might be the allure of untold riches that some startup founders accumulate.

Be forewarned, startups (and I mean a disruptive, scaleable tech startup here, not a Mum and Pop café business or some gardening franchise) are about the riskiest business you can set up.

Setting up your startup is the easy bit.

For some, raising money can be a breeze too. You either have some savings, can go a few months without earning anything or can convince some investors to pop some money in.

Spending that money, well, that’s easy too. We made this mistake when we set up our tech business many years ago. We raised money, quite quickly, and then we spent it. We had an office, some staff, a website… Ta Daaa, we had a startup!

Except we had no business. We had no clients. Well, none that would pay us anything. For a while at least. They were on free trials. And when they did pay, it was small bikkies compared to our monthly costs. Cash crises, sleepless nights and arguments ensued. We almost went under, a few times, but ultimately were saved by our investors, who propped us up (put more money in) while we shaved costs (me and my fellow cofounder took no salary for months) and worked out how to make it work. This was when the business really began.

Disrupting an industry, and the way it has been doing things, is hard. Change happens slowly.

But one thing is central, and never goes away, even when people forget this during the hype and excitement of a new business or disrupter.

You are only going to succeed in business if you find a big problem your customers will pay you to solve.

That’s it.

I have met so many (too many) startup founders who have forgotten this central truth – as I did, when I set out.

Because unless you solve a problem for your customers, they will not pay you, and if they won’t pay you, you haven’t got a business.

Too many founders like to tell me the wonderful features of their app or website, gushing about all the things it can do for its users. Too few tell me what problem they are solving, and how customers will pay them to solve it.

CB Insights have published a report into why startups fail, based on 101 post mortems.

What’s top of the list? No market need. 42% of failures cited this as their number 1 reason for failing.

In other words, the customers were telling them they weren’t going to pay for whatever service was being provided, in sufficient numbers.

The number 2 reason? Running out of cash. Which is the same reason as #1. You need to allocate funds wisely, and be sensible, but overall if you had enough customers willing to pay you to solve their problems, you’d find a way to stay in business.

#3 is “wrong team”. Businesses are run by humans after all, and if they can’t get on, or work together, or have complementary skills, then things can get tougher than otherwise. But you should be able to get rid of the bad people, and hire better ones.

#4 is “being outcompeted”. Someone else beat you to it. Their product is better made or sold or solved the customer problem better (there’s that customer problem again).

#5 was “pricing/costing issues”. Do you offer a free trial, for how long? What packages will then be on offer? How good is your onboarding, and conversion of free to paid? It’s a dark art, and also a science.

Most of these and other reasons are all versions of the same essential issue – not understanding the customer and their problem.

Interestingly, the venture capitalist Bill Gross gave a TED talk in 2015 on this subject. His research showed that the single biggest reason startups succeeded was timing.

Too late, and you’re dead. Too early is better than too late, but it can be hard. Getting the timing right, when the customers and industry are ripe for the disruption you bring, is gold.

Timing, says Gross, is more important than getting the right team together, or the brilliance of your idea, plan or business model, the execution of the strategy or adaptability and resilience.

Rebekah Campbell, Hey You and Posse founder,  writing last week in the Fin Review argued that her startup mistake was raising money in the first place. Don’t raise money at all, she said, but get out there nice and lean, and be close to your customers.

You can argue and debate all this until the cows come home, but in the end, it’s all about the customer. Don’t even think of setting up a startup until you have cracked the big, hairy problem your customers are going to pay you to solve for them.

The rest will then follow naturally.

The full top 20 list is below

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The intolerance of difference

celebrate difference

In a recent post, I argued there was one proven way (borne from research) that dealt with bullying, but it was not easy to do. You had to deal with all 4 sides of bullying behaviour: the bully, the victim, the bully’s acolytes and the majority who carry on with their lives.

I’d now like to step back and discuss what causes bullying behaviour in the first place. What explains persistent and aggressive behaviour against a weaker group by another larger, stronger group?

It’s intolerance of difference, pure and simple.

Bullies play on the herd mentality, that bond that makes people stick together in a group of sameness. This group pours scorn and blame on a smaller group ‘that looks different’. Perhaps these victims dress different, pray different, eat different, speak different, act different. Some things, or many things, are different about them. And it’s this intrinsic ‘different-ness’ that becomes the reason to pick on them.

We are naturally scared of things we don’t understand. It’s an understandable, human response. Ever since our cave-dwelling days, we have been wired to distrust anyone that comes into our area that is not from our tribe. Safer to assume they will attack us, take our food, our jobs, destroy our neighbourhoods. You tended to live longer that way. Survival of the fittest.

Whether it’s the red-haired chubby 9 year old being picked on by taller, slimmer jocks, or whether it’s Hanson’s ‘Asian invasion’ of the late 90s (or her ‘Muslim invasion’ of the mid 2010s), what is common to all this behaviour is a majority privileged group putting down a smaller ‘different’ group, and blaming them for all their own ills.

What is also common is a complete falsehood with the facts. Asians did not invade Australia, nor are we being swamped by Muslims (less than 2% of the population). And anyway, what is actually wrong with having a nice variety of people and cultures on our country? What a boring, staid place it would be if it were all the same. How insular and sad that country would be. We’d all be missing out on some amazing experiences, many of which we take for granted today, that only came about through immigration and ties between countries (such as open trade).

Of course the two-faced nature of the ‘anti immigration’ debate is that those proposing it are indeed immigrants themselves, in their own generation or not many generations before. They should be more honest in their arguments (but of course they are not) by declaring: ‘I got here first, I like it, and I don’t want anyone else coming in and getting what I enjoy.’

If we only ‘stopped the boats’ (full of fleeing refugees, by their very nature the most downtrodden, weakest people on the planet), or ‘reduced immigration’ or ‘banned head scarves’ then somehow everything would be back to how it was. The implication is that it is too easy to get to our country, and we’re being overrun. A country of 24 million, with a land mass of 7.7 million sq kms, one of the largest countries on the planet.

Quickly you see the same four groups forming – the bullies shout from their safe positions as shock jocks, Alt Right politicians, Senate seats, news opinion pulpits or press columns, while their supporters jeer from the stands (‘Trump tells it like it is!’). Half a million voted in the recent election for Hanson’s party. Suddenly all your issues can be blamed on them, those that look and act different to us, those same people fleeing the horrors of Syria or African war lords. Meanwhile the victims line up for scorn, and have little recourse to a fair hearing. At the same time, the majority sit by, possibly disagreeing but not intervening.

One wonders why we don’t celebrate difference, rather than have a preconditioned aversion or suspicion to it. Multiculturalism brings the world together, creates better understanding and forms ties between peoples. You are less suspicious of people you have met and interacted with. 20,000 Syrian refugees are not going to ruin Australia (or the US for that matter) any more than the Vietnamese boat people did in the 1970s. In fact, many went on to form businesses, not for profits and councils and do great work in our communities. It makes a society richer, more understanding and inclusive. Ultimately, this makes us and the country safer. What puts a country at risk is tribalism, with people bleetingly following their one eyed herd.

In the 1990s I taught at the United World College of SE Asia in Singapore. There were students from 60 different nationalities in the school, over 1500 in all. Over 8 years, I saw no bullying behaviour. Instead, I saw celebration of difference, proudly proclaimed on ‘UN Nights’ and every day with kids just getting on with each other, forming friendships and understanding each other’s cultures. In fact, it was not even an issue. Put different cultures together at an early, formative age and they will have peace, argued Kurt Hahn, the founder of the United World Colleges. They were set up in the 1960s, a few years after the horrors of the Second World War, precisely for this reason. There are now 16 such colleges around the world. None (sadly) in Australia.

I am looking for the politician or leader to celebrate difference.

To plot a different path. To talk about what unites us, rather than play on what naturally can scare us and rub salt on divisions. To talk to our better angels, not our worse demons.

This is not for some trendy tree-hugging bohemian reasons, this is actually for our own (and everyone’s) betterment. A safer future, a surer world, confident in itself, able to stand up to bullies.

Perhaps Canada’s new prime minister, Justin Trudeau, is the best example of this in practice. He personally welcomed the first group of Syrian refugees. When he was asked about the risk of letting in Syrians, he corrected the interviewer, saying ‘They are Canadians, and we will protect them, as we do all Canadians.’

Let’s use the power of the people to make this happen. Let’s call out those who pander to the lowest common denominators. Love trumps hate.

Company Directors Course – 5. Board effectiveness

CDC - board effectiveness

The final day of the company directors course focussed on board effectiveness –  what is it? how can it be managed? what’s best practice? what are some of the traps? The first half involved long time board recruiter Mike Horabin sharing his vast knowledge and decades of hard won experience. The second half involved us being put into a live case study, where we each in turn acted out as a presenter to the board, an observer of the board, and being a director on the board on a separate agenda item. It was the high point of the week, and a strong conclusion to the proceedings. 

There are so many takeaways from this course, so here are just a few more to add to those already posted about the board’s responsibilities and decision-making, duties and the law, risk and strategy and accounts, solvency and finances

  1. Boards are charged with coming to sound conclusions, concentrating on the proper items in front of them, with concise, well prepared information. They need a good mix of people and skills, have leadership from within (Chair) and provide leadership to the company. Overall, they are there to add value.
  2. Good boards provide calm decisions in times of crisis, are not rushed or panicked.
  3. They are a pool of wisdom, and are there to guide, mentor and assist management.
  4. Individual characteristics of good board members include: integrity and honesty, relevant experience, strategic thinking, good communication skills, wise and battle scarred, inclusive, good team player, adaptable, willing to change their views, courageous enough to ask difficult questions, are independent, decisive and have good instincts.
  5. High performance boards can have tough conversations but still reach decisions and be productive; they respect each other, trust and share in an open environment.
  6. The ‘magnificent 7‘ things a board needs to do are: lead with the right culture, develop the best strategy & pick the best CEO (then these others become easier ->), manage risk, monitor performance, ensure compliance & maintain good shareholder relations.
  7. The chair’s role is crucial – they are elected by the board, their relationship with CEO is pivotal, and they can only continue if they have the backing of the board.
  8. The Board should manage their own secession; most of the time they should try to get a new member on board before the other departs, and then have their position ratified at an AGM; they can come on as casual for a few months beforehand.
  9. Board committees must have clear terms of reference, time frame, its own Chair (good training ground for future chairs) and make recommendations to the main board.
  10. If you don’t agree with the way decisions are going in the main board meeting, by all means meet other board members, but make your points and do a paper to the next meeting if needs be. Talk to the chair; don’t thump tables, and if the decision goes against you, abide by it. Don’t form factions.
  11. Develop a “Matters reserve list” which shows which matters require sign off from Board, with the implication that all else can be handled by the CEO and management. Review this regularly.
  12. A board calendar should outline what needs to be dealt with throughout the year – monthly, quarterly, six-monthly and annually. Board meetings should last 2-3 hours, but can be half days, and in some indigenous organisations might last 2 days.
  13. Culture is crucial and central; it’s not fluffy, it’s hard nosed, but a good corporate culture can lead to so many good outcomes. “Culture is how people in the organisation behave when no one’s watching.”
  14. If Chairs disagree on the direction of the discussion, or how consensus is forming, ask a question. Monitor how bad news gets to the board – is it disguised? embellished? hidden? slow? Ultimately, boards need the bad news quickly.
  15. Papers to the boards are legal documents, as are your notes on them if they are kept and a legal case starts. After that you cannot destroy them, they are evidence. Minutes should be published within 48 hours of each meeting.
  16. Finally, take time to reflect as a board and as individuals, with each other – what can we do better? how did the meetings go? how good were the papers? were our decisions correct/best? have we added enough value? what can be improved?

Overall, the company directors course was a high value 5 days, and brought home the complexity and skill in group decision-making around the board table, how to search for answers, the importance of asking the right/tough questions. It’s made me reflect on how challenging it can be, but how vital it is to do well. It’s made me realise that this is something I want to do, in time, and something where I think I can contribute.

Over the next 3-5 years and beyond organisations are going to be challenged like never before with the rapid changes in technology, cyber security, digital disruption, the sharing economy, robotics, driverless cars, connected devices, the Internet of Things and much more besides. Who knows what jobs will exist for our children in 10 or 20 years time? Probably they have not even been thought of yet. Whole industries will disappear, and new ones will be created. Businesses that cannot stay relevant will fade away. Others will start up.

I would like to be the ‘digital guy’ who sits on various Boards, thinks strategically, and assists organisations make the transition from old way of doing things to the new. It’s exciting, and challenging, and something where I can probably add value. What can you add value on? Are boards something you might be interested in? If so, I highly recommend the AICD company directors course.

… and now I have to do my exams and pass this thing!

The shift to mobile {slidedeck}

A few weeks ago I presented at the inaugural BigTech13 conference in Perth; topic was ‘mobile and its effects on business’.

I spoke about the shift from print to online, and then within that shift is the shift to mobile (and within that will next be the shift to wearables). The thing about these changes are they are slow and inexorable, but if you ignore them (and they can easily be ignored) it only gets more expensive to fix them later. And if totally ignored, they could spell the end of your business.

In my Dad’s case, his brain tumour (thankfully benign) is a story I tell to show how no one saw (including me) that Dad was getting worse, as the blasted thing was growing inside him for 5 years. It was the size of a golf ball by the time they got it out.  I start the talk with another favourite Dad story, some 50 years earlier just before D-Day. He was horribly lost leading a convoy down a small country road. The only way to turn the convoy around and get back on track was to use a field to U-turn them all inside. Sometimes managers prefer to carry on in the wrong direction. It takes a brave one to admit they are wrong, and often lateral thinking is required to come up with an answer to shift the organisation.

Prezi version of the talk: http://prezi.com/6_sqr8plxaht/the-shift-to-mobile/

RE BarCamp Perth

Panorama of one of the REBC discussion sessions
[tweetmeme source=”ChazGunningham” only_single=false]Last year I attended Perth’s first ever ‘RE BarCamp‘, which is a novel way for real estate people to learn more about their craft from from others working in their industry.

It is novel in many ways:

– it works best if attendees actively share their experiences and are willing to (potentially) give away their secrets and best tips
Topics for discussion– there are no paid speakers or presenters, the discussion can flow back and forth according to who is there
– there are three or four discussions going on at any one time and participants are actively encouraged to move between them if they want to, or even hold their own discussions on their own in some corner of the room
– the topics for the day are decided on by the participants as they turn up in the morning – people are asked to write down what they would be willing to share and/or what they would like to learn more about
– sponsors are asked to help pay for the event, pay for the venue, drinks, lunch, lanyards, etc by paying the various providers directly
– sponsors are important and are given appropriate thanks on the day, but they do not get speaking rights
– the “two foot rule” holds, that is, if anyone gets on their high horse and starts dominating, or even selling their wares, participants are encouraged to get on their two feet and walk away
– the event is usually free for participants, or offered at a very low nominal cost
– the event is organised beforehand by unpaid volunteers

In this way, the RE BarCamp (“real estate BarCamp”) is unlike any conference you may have attended before. In every way the expertise is “in the room”, and so the more you put into it on the day, the more you (and everyone) will get out of it. It’s been described as an “unconference”.

The idea came from the tech industry, where programmers get together in bars to share code and work together on solving common problems. Five years ago, some real estate agents in San Francisco brought the concept over to their industry to hold the first REBarCamp. I was fortunate to attend their fourth one in that fair city in mid 2011, where the exchange of information among participants was electric. There are now REBarCamps held regularly all over the States and, indeed, the world. The first one in Australia was held in Sydney in the middle of last year, with Perth being the second one in the country. There has since been one held in Brisbane.

So it’s on again in Perth, this year on October 19th at the Balmoral Hotel in East Vic Park. I applaud Peter Fletcher and all the volunteers who are pitching together to get this going again. I urge all open-minded real estate professionals to book for the event; to go along with an open mind, contribute generously in the spirit of “the more I give, the more I will get back” or “what goes around comes around”.

BANNED – ‘Because we’ve always done it like that’

One of the silliest things people say when asked why things are done in a certain way: “Because we’ve always done it like that.” This is NEVER the answer, and always stifles creative thinking.

Ban it from your workplace! Not just $1 in the cookie jar, ban people from saying it. Ever. Shift their thinking towards the new. Look at things afresh. See how they might be. Not how they are. Don’t concentrate on the job getting people to change. Think about how greater things can be.

If in doubt, read this. And then this. And never utter it again. Full stop!

Ooowww… I feel better now that’s out of my system 🙂