Steve Blank on Demystifying the Start-Up Culture

In his remarks yesterday at the closing session of the National Governors Association Annual Meeting, author, successful entrepreneur and educator Steve Blank did a great job of articulating in layman’s terms how the start-up ecosystem in Silicon Valley works, why start-ups are different and require specific expertise, and why embracing start-up culture and expertise is so critical.  I believe Steve's work is going to be a primary driver of innovation at scale for our country. It’s BRILLIANT.  

If you care about start-up/founder culture or start-ups, you should watch his talk in its entirety.  

Steve mentions the importance of researchers who focus not only on world-class research going on inside of their respective academic institutions, but also on the application of their research at scale in the public and private sectors.  Some of my favorite role-model researchers in Cambridge include:  

George Church 
Eric Lander
Bob Langer
Marvin Minsky
Mike Stonebraker

These innovators have done not just one or two start-ups each, but many dozens of start-ups. It's this combination of world-class academic research and commercial innovation that creates exponential value in our economy and in society.  

Here is a quick summary of Steve's talk and some highlights that really hit home with me.

A Quick Summary  

Four lessons: 

• Different types of start-ups
• What a start-up ecosystem looks like
• How to make start-ups fail less
• Can we actually teach what we now know?

Types of start-ups: 

• Lifestyle start-up - small businesses that serve known customers with known products and feed the family
• Scalable start-ups – which are designed to grow big (“We’re going to build a company that will take over the universe!”)
• Buyable start-ups – which have low capital requirements and can be very valuable very quickly
• Large companies that focus on “sustaining innovation.” They innovate on core products but cycle time is compressing, creating pressure for large companies to innovate faster

Important Highlights

Referring to the Nokia Board of Directors’ reaction to the iPhone on day of launch – “It's a toy. Why should we worry about this?” – Steve said: “To a big company, a disruptive innovation always looks like a toy on day 1.”

“The secret history of Silicon Valley” [another great video]

“The first venture capital was an unintended consequence of Sputnik”

“We want the engineering department at Stanford to face outward as well as inward”  

“Recognize that 90% of start-ups fail”

“Failure = Experience. We understand that these are the risks”

“Start-up culture is not just about the great entrepreneurs. It's about the ecosystem. Building this ecosystem is critical in getting any cluster off the ground.”

"Start-ups are not just small versions of big companies" - Steve Blank

“Embrace failure as part of the process”

“95% of start-ups fail because they didn't find customers or markets”

“We now know that start-ups search for something and large companies execute...The difference between search and execution are not just words...it's actually the difference in how we build these things”

“On day one, start-ups just have guesses...A start-up is a faith-based enterprise.. You want to turn the faith into facts as quickly as possible”

“What we now know is that no business plan survives first contact with customers”

“A start-up is a temporary organization”

“A start-up is designed to search for something that is repeatable and scalable”

“In the Customer Development Process, everything you know or think you know is a guess"

“In a start-up, it used to be when you failed you fired the VP of Sales, then fired the VP of Marketing, then the CEO.  We know now that start-ups go from failure to failure…Pivot says that this is going to happen all the time.”

And, I love the fact that he was the only dude not in a suit. Now there’s a lesson in itself :)

Vertica - Remembering the Early Days

I had an awesome visit @ Vertica earlier this week for lunch. Cool new space in Cambridge and so many fantastic new people. Thanks to Colin Mahony for the invite and to all the talented engineers and business people at Vertica for building such an amazing product and a great organization!

Couple of memories that came to life for me during my visit:

Reading the draft of Mike Stonebraker's  "One Size Does Not Fit All" paper and thinking:  "This is the mission of an important new company: to prove that One Size Does Not Fit All in Database Systems."

During my first meetings with the "Vertica professors" - Mike, Dave Dewitt, Mitch Cherniack, Stan Zdonick, Sam Madden and Dan Abadi - thinking "We have an unfair intellectual advantage."  The technical hurdle was set early by this fantastic team.

Looking up at the new duct work from our original server room (at our original office), which Carty Castaldi vented into the conference room because the conf room was so cold and the servers were running so hot ;)

Inspired Duct Work by Carty Castaldi

The thrill I felt the first time that I watched SELECT work on the Vertica DB :)<

Our first Purchase Order. Thanks to Emmanuelle Skala and Tom O'Connell for that one and the many more that followed and made it possible to build such a great product :)

At our first company summer picnic at Mike's place on Lake Winnipesaukee: taking Shilpa's husband Nitin Sonawane for a ride on the JetSki and him being thrown 10 feet in the air going over a wave. I thought he'd never talk to me again. So glad that he didn't get hurt and that he talks to me regularly ;) 

Our first big customer deal with Verizon and then the first repeat purchases by V. Thanks to Derek Schoettle and Rob O'Brien for building such a great telco vertical and for doing deals with integrity from Day One.

Sitting in the basement at Zip's house in Chicago with Stan, Zip and Mike as they jammed Bluegrass music and we all ate Chicago-style pizza until the wee hours.   Thanks to Zip and to everyone at Getco for being such a great early customer and partner.

Relief I felt when Sybase admitted that Vertica did not infringe on their IP :)  Thanks to Mike Hughes and everyone else involved for the truly awesome result.

Getting early offers from a bunch of big companies to buy Vertica and thinking "These guys don't realize how important Big Data is going to be and how great our product is and how incredibly talented our engineering team is."  Thank you to our BOD for resisting the early temptation in spite of tough economic conditions at the time and thanks to Chris Lynch for negotiating such a great deal with HP.  

During lunch on Wednesday, realizing that Vertica's product is truly world-class and has proven that one size does not fit all. Special thanks to every engineer at Vertica, especially Chuck B. : you all ROCK!

I have a much more detailed post in the works, about the early days of Vertica and what I as a founder learned from the experience.  Stay tuned for this post in the next few months.

Founders: Are You Stuck Before You Start?

Where Start-ups Get Stuck – and How to Avoid Going There

Between us, my long-time friend (and fellow blogger) Jim McHugh and I have started a lot of companies. We also advise many other companies and look at even more pitches from start-ups.  A shared observation is that while a few start-ups shine (or at least glimmer) and go on to some success, other start-ups seem stuck before they start.  Why?

Here are our observations on where start-up founders get stuck and our advice on how to prevent Stuck situations, presented Q&A style.  

Q.        Jim, where are the most common places you see founders getting stuck – and why?

In my experience, the two most common causes of becoming stuck are 1) an incomplete or muddled business model (see Stuck in the Fog) and 2) directly related to that, not clearly understanding the specific needs of their customers (see Stuck in a Rut).

Jim McHugh
McHugh & Company

What do I mean by an incomplete business model?  A well-defined business model (i.e., the “guts of the business”) states how the company is organized; what products and services it sells to whom; and how the company “goes to market.” In addition, the whole company clearly understands the associated operational policies, processes and needs (both for the supplier and the customer).

Start-up and early-stage teams become obsessed (as they should) with the product/prototype, the team, and the market potential. However, they sometimes fall short in three important areas.  First, they are naive about all aspects of the business model. Second, they don’t understand – or they have chosen to ignore – the specific linkages of their product to their customer’s product. Third, they have not solved or put in place key components of the business model and assume it will be easy to “finish those later.”

The business model can be pretty straightforward if it is a simple B2C or B2B connection – that is, “we make it, you consume it.” The linkages become more difficult to sort out if the start-up’s product becomes embedded in their customer’s product offerings – for example, as a component. 

One striking example I have seen of an incomplete business model was a food ingredient technology company that had considerable success raising seed money from a group of angels. This company had traction:

●       The technically elegant prototype demonstrated product effectiveness and potential significant benefits to consumers

●       The company had received approval from a key regulatory agency

●       The product was going to revolutionize one segment of the food industry

●       There were positive (but limited) real-world test applications

●       The expected market was huge

Then the company’s traction stalled; they became stuck. How could that happen?  

This revolutionary product was not sold directly to end-user consumers. It was an ingredient that became part of other companies’ product formulations. The industrial and consumer target customers who evaluated the start-up’s product realized they would have to change their end-use product specs, add equipment and processes to their production line, and change their quality control testing procedures. They would also have to change their existing descriptive product information and packaging.

For some customers that would mean altering (for the better?) very successful, stable products that were established with consumers. 

Were the customers prepared to take the market and product risk (with a start-up) and incur the costs and aggravation associated with adopting this new technology? Having a great product was a prerequisite for the big food ingredient companies, but it quickly became apparent to the start-up that many other factors influenced the prospective customers’ decision-making process.

Q.        So, what’s your advice for avoiding getting Stuck before you Start?

To be sure, the business model for early-stage companies evolves over time. It gets fine-tuned, even changed.  But fine-tuning is a lot different from having a naive view of the customers’ needs out of the gate.

It’s a cliché, but how many times does “knowing the customer’s needs” have to be said to founders? 

Q.        Any general tips about how to avoid getting stuck?

Yes, it really helps to have the right people on the team who understand and have experience in the industry they are selling into.

Q,        Andy, where are the most common places you see founders getting stuck, and why?

Andy Palmer
Start-Up Specialist 

I see a lot of founders get stuck at the very earliest stages – by being distracted by fundraising.  I’ve said before – over and over again – founders should focus on developing their business first and not worry about fundraising nearly as much as they would probably like.  It’s natural to be nervous when you don’t have any money in the bank.  But it’s a healthy discipline to figure out how you are going to create value for customers who will pay you instead of spending time thinking about how to extract money from venture capitalists or seed investors.  As an angel investor, I’m always looking for people who are mission-driven and focused on their customers, as Jim says, instead of worrying about what potential investors might think.

 Q.        So how can entrepreneurs avoid getting distracted by fundraising? 

Just focus on your business and your customers.  Wake up every morning thinking about how you are going to create value for your customers. Go to sleep at night considering which of your customers you helped that day and how.  Be maniacally focused on your customers’ needs.  It sounds simple – and it is – but executing this when you are starting from scratch – with no product, no credibility, and no people –  is really hard. It requires all your energy and your concentration. 

Q.        Any final tips on how to avoid getting stuck?

Be maniacally focused on your mission, particularly understanding and meeting your customers’ needs. In my experience, the money will follow.

Medio and The Future of Big Data Analytics

Why I Joined the Advisory BoD of Medio Systems

Today, I'm thrilled to announce that I've joined the advisory Board of Directors of Medio Systems.  

Over the past nine months, I've had a chance to work with Brian Lent, Rob Lilleness and many of the other folks on the team at Medio.  I've been approached by dozens of "Big Data" companies over the past two to three years as more people have begun to focus on large-scale database challenges.  Medio is one of the few companies that I've chosen to work with directly because they're creatively tackling some of the most pressing challenges, including: 

• Big Data Analytics in Real Time:  Over the past 10 years I've watched as database systems have become more and more "real time": as data is generated, users expect to see that data and be able to analyze it immediately.  Medio has created a  platform that enables its customers to analyze their data in real time without the daily-latency constraints of traditional data warehouse solutions. Incredibly powerful. 

• Mobile/Tablet Devices: As I sit here writing this blog post, my wife and father-in-law are playing Words with Friends on their respective iPads. Two years ago, my wife told me she would never use an iPad. Now, she's addicted. Mobile/tablet devices matter, and they generate a wealth of Big Data that can help businesses understand and get closer to their customers than ever before. The Medio team has uniquely deep experience with mobile app analytics.

• Democratizing Analytics: As we were building Vertica back in 2005-2010, it became clear to me that once people had figured out how to represent their data more efficiently, the bottleneck would quickly become how to enable regular people (not just database experts or business analysts) to take advantage of the data and use the data plus statistics to ask complex questions and solve cool problems.  Medio's focus has been on empowering business people with the tools necessary to make better business decisions, truly democratizing analytics.  

• Analytics Made Easy: I watched dozens of our customers at Vertica deploy solutions that required them to integrate database technologies with reporting and visualization tools and then tune/tweak those tools and the integrations. This turned out to be a  never-ending problem that distracted them from the actual problems and questions they were trying to analyze. Customers didn't want to be experts at database systems or visualization: what they wanted were tools to help them answer business questions faster and more effectively. Medio has created the infrastructure that enables  customers to focus on asking and getting answers to their questions without worrying about how the underlying technology works.  

• Predictive Capabilities: I strongly believe that analytic systems must have forward-looking/predictive capabilities. Just analyzing history is no longer enough. The next wave of analytic systems will empower users to anticipate what might happen in the future and model the potential impact of decisions they make today, leveraging history as the basis for those models.  Medio CTO Brian Lent has been an early proponent and tireless champion of using information to help support decision-making with predictive capabilities. His vision and the technology the Medio team has created are unique.  

To see for yourself, check out Medio.  This is a company worth watching.