Actionable Metrics: The art of not deluding yourself
The journey of entrepreneurship is about constantly avoiding your inherent ability to delude yourself. The may sound funny, but it’s true. Humans are very good at post-event justification and in a start-up, that’s dangerous.
The Lean Startup talks about the difference between Vanity Metrics and Actionable Metrics. This is possibly the single most important lesson you need to take into a business. Any business.
There was a beautiful (and embarrassing) moment after I read that book, looked at my management reports that I’d be sending and obsessing over for the first year and half of the startup – and swiftly realising they were all vanity metrics. Downloads. Registered Users. Unique Users. Total Reviews. Total Ratings.
Vanity Metrics are great for the warm and fuzzy. They’re usually cumulative and therefore pretty much always go up and towards the right. They make you feel proud, they pump you up – and they’re pretty much useless for making decisions about your business.
Get to revenue as quickly as humanly possible
It’s sounds silly, doesn’t it? Like something every entrepreneur should know. Fail fast: the ultimate cliché. But you’d be amazed how easy it is to sidetrack the importance of revenue in the Silicon Valley “business model comes second” world we live in.
I only read The Lean Startup (Eric Ries) two years into the Real Time Wine journey. That was a great pity. Amongst other clever things the book covers – it PREACHES the fact that you need to get to revenue before anything else. R1 in the bank account is the beginning of you validating your assumptions, testing your products and proving your business model. We failed too slowly to test our revenue models, partly because our original plan relied on the enterprise sales cycle and partly because we didn’t build a revenue model into Phase 1 of development.
Failing fast, if you can do it properly, is absolutely liberating – because it leaves you with enough time to pivot. Failing slowly is like cancer. You know in your heart that it’s inevitable, but you hang on in order to “tick the boxes”. By the time the boxes have been ticked, you’re out of runway.
I had four business models at Real Time Wine that gloriously failed. It’s interesting to look back at them and try understand why they failed. If you can figure this out quickly, you can build a model that works. That’s what a start-up is all about.
Timing is everything
Here we are back at “Timing”. During the Real Time Wine journey, my investors and I presided over three failed acquisition/merger opportunities. I say acquisition/merger because in reality, no-one buys a one man team unless the product has really shot it out of the park in terms of revenue and traction. But there are plenty of opportunities to fold that product into another stable, use it as a framework for a round of funding and crack on together with a bigger proposition.
There’s not much you can do about timing – it’s the large “luck” portion of starting a business. Just keep having conversations – as many of them as possible. Be brave. I’m certainly going to be using the phrase “we should look at working together” a lot more in the next phase of my career.
Point your start-up internationally. Even if you can’t
“The app just isn’t of First World quality – compare it to a native app and we’ll always lose,” I said.
“South Africa is a great test market, let’s find a bed of revenue here and then point internationally when we have the funds and flexibility to compete,” I said.
“Vivino just did a round for R120 million. There’s no point competing, we don’t have the firepower. They’ll out-AdWords us in seconds,” I said.
Those facts were all right. But they were bullshit excuses.
The Internet works on sub-cultures and sub-currents. And successful (mega-successful) consumer orientated product startups by luck or design, manage to hit one of these. You can’t hope to catch a current if you aren’t out there.
Unless you have a very South African specific idea – point internationally. Be available internationally. Be usable internationally – even if you don’t focus on it in the beginning. If this scares you, try your hand at a B2B product first, we’re still learning how to THINK BIG in this country. Or at least I am.
The power of influencers
Possibly the greatest thing to come out of Real Time Wine – and the part which will hopefully survive through our passion project, Incogvino – are the SuperFANS.
I call them the Dinner Table Influencers. Sure, there are bloggers and Tweeters. But the real find has been those people who hold actual social sway. The people who’s friends turn to them with a wine and go “is this good?” They’re the true fans. And long may they live on.
Know your early adopters. Know your product influencers. Put your hands around them, love them, hug them and give them stuff. They’re the ticket to great things.
Don’t worry about being copied
I hear this a lot when I talk to entrepreneurs. Sign this NDA. I can’t tell you what we’re up to – it’s too good. I don’t want to release the product till this is perfect, otherwise someone is going to copy us.
All rubbish. And usually, in my opinion, this language is a terrible sign to potential investors.
US and European startups PLAN to get copied. Their original strategy docs usually have reaction plans for when it occurs. They take it as a sign of market validation.
We were copied within about 6-10 months of launch. In some ways, we were copied pixel for pixel. I got pissed off. I know Prezence was livid (agencies still come from the culture of creative – where stealing ideas is criminal, not the culture of product – where borrowing ideas, even in little bits, is how it’s done).
Be tidy. Just in case that deal comes through…
Over the course of the startup, I spent close on R150k on a combination of lawyers, accountants and “managing the books” (a hefty slice of total funding raised). I remember having a big fight with AngelHub about this, because both the lawyers and accountants (and the quality of them) were their idea. “Do this properly,” they said, “keep all your financial stuff clean as a whistle, it’ll keep your investors happy.”
I still think I spent too much – but that’s because I failed. If I had succeeded that number would have faded into obscurity and I would have thanked my lucky socks I had done it right.
During one of the merger deal discussions, we started to open up company books to each other – and the other company was in a complete mess. It was kind of nice to be the small upstart that had a professional set of books that didn’t need any rush work.
Deals are hard enough. Why would you want to add complexity and barriers-to-success by having a messy set of accounts and a shoebox-full of till slips? You don’t want to do that.
CONCLUSION The messy and joyful art of getting your Street MBA
The “Street MBA”. Borrowed this phrase from a friend, Andy Volk, who I’m sure borrowed it from someone else. It’s such a good phrase – one that I hope replaces “serial entrepreneur” and “entrepreneur enthusiast” – some great new vomit words the Internet has brought into our lives.
The Street MBA is a lesson in business, a lesson in stress, customers, friendships, partnerships, revenue and product. A Street MBA teaches you how to recover from being punched in the gut daily. As I write this, I’m smiling. Which is a far cry from the miserable sod I’ve been during the slow death of Real Time Wine. That’s because it’s ok. I’d do it again. In a while.
You can read more about Andy’s insights into the South African start-up industry at www.andyhadfield.com.[Image – Shutterstock]