Instigator Blog

I started my first company in 1996. A couple years later that company morphed from a service business (offering web design and development services) into a product business with the launch of our web-based project management application. Those were the early years of Software-as-a-Service (SaaS). In fact, we were referred to as an ASP (Application Service Provider) back then, and the biggest hot button issues were the fact that implementing web-based / hosted solutions was extremely new, security, and SLAs (Service Level Agreements.)

Truth be told, those were the early days of Enterprise 2.0.

Nowadays, very few companies are worried about hosting mission critical applications outside of their own networks. Security is less of a concern, because companies are generally comfortable with Web security. And SLAs still exist, but they’re not the predominant issue. Most companies understand that web-based / hosted applications stay up fairly well, but nothing is perfect.

But even with many of the biggest issues resolved over the last 10 years, companies are still not adopting Enterprise 2.0 at the pace you would expect. And many Enterprise 2.0 startups can’t get the traction they need.

So what’s up?

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Paul Graham is well-known in the startup world for his past successes and most recently, the launch of Y Combinator. Y Combinator continues to garner a ton of attention, from a combination of the sheer volume in startups being launched through the program, the successful exits, and the way in which they’re shaking up the venture capital industry.

I’m a big fan of Y Combinator. I wish I could have gone through the experience. From the outside looking in, I see an insanely talented and dedicated group of people running the operation, who are working with a slew of bright, young, hungry entrepreneurs. I’ve met several Y Combinator folks and have been impressed with all of them.

I think Canada needs a similar model, although for a whole host of reasons, it can’t be quite the same. But that’s a topic of discussion for another time.

Paul Graham recently published his Fundraising Survival Guide, and I wanted to take a few moments to go through some of his key points and add my own thoughts and experiences to the mix.

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I’ve got two critically important articles to point your attention to today - on startup communities and startup failure.

1. Jevon MacDonald talks about how startups can save venture capital (in Canada). He includes a great presentation that he’s given in a few places about how startup communities can work more effectively to get great startups off the ground.

   My take, without turning this into a blog post of its own, is that the early, but growing startup communities across Canada need to do a much better job of policing their own and touting their own. This is something that I have yet to see addressed effectively by anyone. Somehow, as a community, we need to be able to get together, vet ideas, provide honest feedback and bring new teams together with new ideas, where old teams and old ideas have failed. If we don’t take a hard look at our own “house” (i.e. the collection of startups we’re launching), and be honest with each other when things aren’t working (and celebrate that failure), then we do ourselves a disservice. Once we - as a startup community - are truly creating great startups, pumping out great teams with great ideas, mashing up people and ideas in new ways, and proving that we can raise the bar on the quality of the community, I guarantee you the funding will follow quite aggressively.

2. Roger Ehrenberg writes a very detailed and honest post-mortem on Monitor110, a startup he was involved with from an early stage. They raised around $20M dollars, but couldn’t get where they needed to go. What’s most important about Roger’s thoughts is the fact that he’s completely honest and open. He includes a list of critical mistakes he made, many of which we’ve all seen from within our own startups. You can be sure that Roger has taken those mistakes to heart and significantly improved his outcomes in other businesses he’s involved with.

   Post-mortems like this are hard to do. It reminds me of Phil Chrun’s own deconstruction of his failed startup, MyCarpoolStation. It was open, raw and real. If you can’t learn from Roger’s mistakes and Phil’s mistakes, you’re in big trouble, cause you’re not learning at all.

Startup communities work when they’re honest and mature. We shouldn’t go around publicly bashing one another, there’s no value in that, but privately we have to be able to look at things with an honest eye. I don’t like the thought of negatively impacting a young team of entrepreneurs by providing real criticism - the worry is that they abandon their goals of being startup entrepreneurs - but if we can’t provide that criticism, step up with our own honest stories of failure, and then find active solutions to building great startups with the pool of people and ideas we have, we can’t succeed as a startup community.

In a “me too” world of easy-to-build and low cost startups, it’s becoming harder and harder to differentiate yourself from the competition. Just think about your potential customers and all the “stuff” they’re getting bombarded with on a regular basis. You might have invented a better mousetrap, but getting that message across isn’t easy.

And one of the areas where companies (startups and non-startups) continue to fall flat on their faces is customer service and support. It’s amazing to me that so few companies do a great job when it comes to treating customers well and responding to them in a timely and professional manner. To me, that’s basic. It should be a given. But it’s not.

You should look at those continued missteps in customer support as a huge opportunity.

Every company needs to differentiate itself in a crowded market — and one way of doing that is through great customer service.

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A few people have told me that pitching the “first mover advantage” for a startup isn’t always the best thing. Being first doesn’t guarantee success. If anything, being first is fraught with more peril; since you don’t have anyone to copy or compare to. And, depending on how innovative your product offering, you might be too early for VCs to get it too, making raising money even harder. Often, when a space heats up, after the first few companies have gone in and made their mark, is when you’ll see even more money pour into it.

Don Dodge just posted a reprint of an article he wrote a few years ago: First Mover vs. Fast Follower - Who Wins?

The article is just as relevant today (if not more so). Startups are launching faster than ever and require less capital than they used to — at least in the Web 2.0 world — and that means more opportunity for first movers, but even more opportunity for fast followers. And I think we’ll look at the next 5 years or so in the Web 2.0 world as the “me too” years; when fast followers took over from the first movers in a whole bunch of areas.

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