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Year: 2012

Being Hyper Local vs. Chasing Big Market

One thing I’ve once again recognized from yesterday’s event was strength of being hyper local.

Amongst 9 startups that pitched on stage, Hong Kong-based ButterBoom caught my eyes. They said it started as a fashion blog site covering celebrity photos, luxury shops and related stories in the region. The service offered by the startup can be particularly useful to those who are traveling and shopping in Hong Kong. At the end of the pitch they talked about their intent to expand business to other cities in Asia.

Being hyper local may sound against fundamental strategy that startup has to always think bigger because the bigger market size startup is aiming, the better chance there is for startup to become a billion dollar company.

To realize this, initial set of questions any investor asks you always includes “What is your market size?” Therefore, you are so tempted to say “Sir, we are looking at XXX million dollar market.” You say this because you want to attract investors by giving impression that your startup will grow like anything and become a billion dollar company in the future.

Unfortunately, reality is completely opposite. Startups aiming at such big market right from the beginning never succeed. If you design your product just for everyone in favor of big market, probably you will face difficulty with attracting people for long time.

Instead, design your product to very specific group of people. Say communication app for people who have their parents needing daycare service but those who are unable to speak or write. Market size may not look big enough initially. However, this kind of service is not easily replaceable by others and people will gladly pay for product as long as it removes their core pain.

While you design your product this way, important thing is that you need to look at something ‘repeatable’ and ‘scalable’ at later stage of startup cycle. By repeatable it means product can be replicated at different location to a slightly different group of people. By scalable it means company can increase size of business by pouring more money into cost factors (e.g. marketing, sales, development.) You can always start your business in small area or with small group of people, copy it to somewhere else and then scale it once your business model is verified.

So the better answer to above question is “Sir, we will become a billion dollar company but we need to start with this niche market because…” Facebook wasn’t designed for everyone initially. It was a website exclusive to students at Harvard. Telsa did not aim at wider audience of business person with model S initially. Instead, it captured enthusiastic fans of electric sport car. These companies repeated what’s already working and scaled it until no other competitor can catch up. Same thing can be applied to any product or service.

Hence, there is nothing wrong with being hyper local. It’s just a matter of how you draw a path from the point where you started to the point where you want to reach.

A Word About Government Grants

I’m writing this post while rehearsing my pitch for Myojo Waraku, Japanese SXSW taking place Sep 8 & 9 in Fukuoka. I’ll be on stage demoing latest product there.

A couple of months ago I asked one of my prospective investors/advisors who live outside Japan whether it’s good or not for early stage startup to participate pitch contest. His answer was basically yes as long as it helps startup gain visibility and attract audiences that it has to talk to: investors and customers.

From time to time we see same kind of contests initiated by government, and in most cases startups are given some sort of grants by government in reward for winning the prize. Only difference is that the former is just one-off event, but the latter is long-lasting event that may span across many months if not years.

This type of government-driven pitch contest or sometimes called ‘collaboration’ can be seen often in countries and cities where they promote themselves as next Israel or next Silicon Valley. People at government believe pouring chunk of public money into startups may foster foundation of whatever next thing they are trying to be.

While it is true that government plays important role as substitute for angels/VCs where there is shortage of venture money (aka risk money) in industry, there is a couple of things you need to be aware when taking money from government.

Among them, one pitfall that is particularly cautious to early stage startup is that everything has to be spec’ed out up front and you need to produce hard evidence at the end of funding period. For those who exercise Lean Startup Methodology it’s obvious that product that’s being spec’ed out prior to hitting market is almost guaranteed to fail.

There is even greater risk for early stage startups taking money from government such that it has to compromise something important, speed. And, speed is sometimes the only advantage over incumbents that startup is trying to compete.

While you are busy talking to other parties participating same pitch contest and preparing whatever materials you need to submit to government, some smart startups may come in and just get market before you actually even start. Not to mention it becomes harder for startup to pivot once you start working with government and it may be too late to pivot if you wait until funding period is over.

At the end of the day, government is not a customer and startups facing customers on a daily basis always win. Facebook, Instagram, AirBnB weren’t born out of government grants (as far as I know.) They might not be successful today if they scarified one of the most important assets at the time, speed.

I’m not completely against a whole idea of government grants helping startup kick-off business. It does help startup up to certain point. But you need to be 100% sure about what you are receiving from it and what you are giving away to it before committing great amount of your time to work with government and other parties associated with it.

Creating Momentum

One common mistake I see amongst first-time entrepreneurs is being trapped with feeling of “not ready” for too long.

This is the state of mindset where you feel like your product isn’t good enough to attract your audience or think you only have one-time shot for major media coverage or press release.

My advice: Forget all that. Just ship your product and start talking to your customers ASAP.

Successful entrepreneur is good at creating momentum around himself that somehow makes people believe this product is a game changer regardless of whether the product is ready or not. He just puts out whatever he has at the moment in front of people and start talking to people to understand what they think about it.

During this process he knowingly creates sets of initial fan base aka. early adaptors who bring another thousands of users in following weeks or months. Perhaps, I must say acquiring early adaptors isn’t good enough these days any more. You will soon realize by talking to prospective investors that you will need to acquire ‘paying’ customers early on. Otherwise, you are not on table to discuss with them.

Unfortunately, founders with technical background aren’t good at this kind of things. It’s still pretty rare that they understand importance of customer development at early stage unless they read books like The Lean Startup or The Startup Owner’s Manual, and exercise what’s written there by themselves.

Particularly, CTO type of person tends to spend too much time talking about things like architecture, framework, scalability, security and so on that don’t matter with acquiring ‘paying’ customers at all. If you are that kind of person, stop doing so. Start focusing on shipping whatever you have right now. I know this because I was once that kind of person.

Second advice to students: Don’t try to learn new way to produce things. If you are engineering student and already know how to code with PHP, don’t spend time to learn Ruby on Rails or Django or Express. Just ship Minimum Viable Product with PHP and verify your idea can turn into actual business. Then, start worrying about technical stuff.

Lastly, Startup Weekend is the best place to learn what I described above from forming team to keeping momentum after the event is over. We plan to have a couple of more Startup Weekend events in our local region and will announce them as date nears.

初めて起業される方にお会いすると、「まだ準備ができていないので」という状態に必要以上に長く留まる方を見かけることがあります。

これは、自分の製品がユーザーを引きつけるのに十分ではない、もしくはニュースサイトやブログで取り上げてもらえるのがこれで最初で最後になるかもしれない、という考えに必要以上にとらわれていることが、1つの要因として挙げられるかもしれません。

もし1つだけアドバイスをさせて頂くなら、「そんなことは全て忘れて、とにかく早く製品を出荷して、顧客と対話しましょう!」となるでしょう。

成功する起業家というのは、初期のファンベース(いわゆるアーリーアダプター)を作るのがうまく、数週間ないしは数ヶ月後に彼らが数千人のユーザーを連れてくることを十分に理解しています。

ちなみに、現在ではこのアーリーアダプターを獲得するだけでは不十分で、実際には「お金を払ってくれる」顧客を真っ先に獲得することが求められることに、特に投資家の方々とお話をすると気づく事になるでしょう。なぜなら、そうしないと投資家の方々との話し合いのテーブルにすらつけないからです。

残念ながら、技術系バックグラウンドのある創業者というのは、この手のことがあまり得意ではなかったりします。今でも、この手のことの重要性をしっかりと理解している人は稀で、それこそ The Lean Startup や The Startup Owner’s Manual のような本を読んで、そこに書かれていることを「自分の手で」実践していないとダメです。

特に CTO 型の人は、アーキテクチャー・フレームワーク・スケーラビリティ・セキュリティといったことに時間を使いすぎる傾向がありますが、これらのことは大切ではあるものの、「お金を払ってくれる」顧客と獲得することには、ほとんど関係ありません。

もし、あなたがその手の人だったら。すぐにストップして、手持ちのものをいち早く出荷することに全力を注ぎましょう!(これが言えるのは、自分も過去にそういう人だったからです。)

2つ目のアドバイス、特に学生さんに向けて。「ものを作る新しい手法を学ぶのはやめましょう。」

もし、あたながエンジニア系の学生ですでに PHP でコードが書けるなら、Ruby on Rail や Django や Express を学ぶために時間を使う必要はありません。それよりも、Minimum Viable Product (必要最低限の機能をもった製品)を出荷して、自分のアイデアが実際にビジネスに成り得るかどうか、いちはやく検証しましょう。技術のあれこれを考えるのは、その後からでも十分です。

最後に、上記のことを実践する最適な場所として Startup Weekend を紹介させてください。チームの作り方から、イベント終了後の「イケイケ感」を維持する方法まで、おそらく全てを経験できます。

いま、追加のイベントを各リージョンで検討中とのことなので、日時が決り次第、アナウンスされると思います。

New Coworkify, New Vision

We released new web app as public beta yesterday.

This is the result of our effort listening to feedback from our own users for months. In this web app you’ll that notice lots of features used to be there are no longer available. Part of this change is due to our re-focus to a bigger issue that businesses and governments are facing with excess of unused workspaces they own.

Coworkify is now an infrastructure to help these businesses and governments get the most out of these existing assets. Hence, we are more than just a coworking space listing service.

To talk about implication of this new web app and how it complements existing mobile apps, we must also talk about upcoming “wish list” feature that we plan to release in the near future.

A “wish list” is the place where users can vote for workspaces they wish to unlock. By having enough number of votes we believe it will be easier for businesses and governments to think about opening up their spaces since there is known demand up-front.

We understand this is a whole new thinking and requires some amount of education to venue owners. However, it will give huge impact to industry if it works.

We welcome any comments and feedback from people. Thank you.

新ウェブアプリをパブリックベータ版として昨日リリースしました。

今回のリリースは、ユーザーから数ヶ月にわたって得られたフィードバックの成果となります。これまで存在していた幾つかの機能が、なくなっていることに気づかれるかと思います。これは、企業や行政が所有する有効活用されていないスペースという、より大きな問題へフォーカスし直したことによるものです。

Coworkify は、企業や行政が既存資産を十分に有効活用できるようにするためのインフラを目指します。従って、これまでのコワーキングスペース検索サービス以上の存在になりたいと考えています。

今回の新アプリの影響と、既存のモバイルアプリへの関連性を説明するために、今後リリース予定の “wish list” 機能について触れておかねばなりません。

“wish list” は、ユーザーが unlock (解放) したいスペースを登録・共有し、投票する場所になります。ユーザーから十分な投票を集めることで、企業や行政は、自身が所有するスペースの解放に対するニーズを事前に知ることができます。

これは、全く新しい考え方で、スペースの所有者の方々に、この新しい考え方をご理解頂くのに少し時間がかかるかもしれません。しかし、この考え方が受け入れられれば、Coworkify は世の中に対してとても大きなインパクトを与えることができると考えています。

みなさまのご意見・ご感想をお待ちしております。

Failure: The F-Word Silicon Valley Loves And Hates

This is my response to this article posted on NPR. Here is my favorite quote from Janice Fraser, founder and CEO of LUXr, a product design firm for startups.

The worst moment is when you have to tell your staff. You have these people who, beyond reason, have put their trust in you. And you have to look them in the eye and say, ‘I’m sorry, this isn’t going to work.’ It’s always when the money’s running out … because you keep going until the money runs out. At the end, it’s just you and one or two other people, filing papers with the state and packing up the boxes. And that is not fun.

I’ve also been there once. It was the worst moment not just in my entrepreneurial career but in my entire life. However, human being is a creature that keeps learning whether you like it or not. I personally learned a lot from my own failure too. I mean, I had to.

Superior ecosystem of startup can be built with experienced entrepreneurs: those who succeeded and failed. If any region outside Silicon Valley were to replicate its success, it must have those who failed because they are the ones most likely succeed next and give down-to-earth advices to first time entrepreneurs.

Bringing a conference like FailCon to the region is necessary ingredient to build the ecosystem and I really encourage people to support idea of sharing their experiences. For those who have seen FailCon watch one of these YouTube clips.

How to Launch Your Product While Working at Company

So we’ve just shipped our first Android app followed by iPhone app.

I’m using a word “we” here because it’s work done by a team. However, truth is I wrote every piece of code by myself alone including UI and graphics. How did I do that while having full-time job? How did I manage to launch MVP (Minimum Viable Product) in short period of time? Well, here are few tips.

1) Spend two hours on coding before you go to work.
2) Test your app before you go to sleep.
3) Show what you have done during weekdays to your friend on Friday.
(Hence, you will receive some feedback by Monday morning if you are lucky.)

That’s all. Too simple and easy? Then try it for yourself. You will soon discover that two hours everyday add up to ten hours by Friday, which is almost equivalent to one full working day. Then you have another two full working days on weekend.

If you keep this behavior repeatedly and regularly, you are almost guaranteed at least three days a week to work on your product without scarifying your day job. Oh, there is one important message to those entrepreneurs out there looking for technical co-founder. Perhaps, this is considered as step zero.

0) Learn how to code.

I often see people building their product after they go home and working until midnight. That kind of behavior only works for night owls, and I usually don’t recommend it. Your brain is most awake in the morning so use it when it’s at the peak. Moreover, working until midnight isn’t good work-life balance at all.

Plus, I recommend you work out at least once or twice a week just to keep yourself refreshed.

Importance of Social Capital

Hugh Mason, co-founder of Singapore based startup accelerator JFDI.Asia, recently posted a wrap-up article of the accelerator’s 100 days bootcamp program. In the article he concluded his experience going through the first batch as the following, which I particularly wanted to quote.

Meng and I talk often about building the social capital – relationships, shared insights and know-how – that will create a vibrant, sustainable start-up ecosystem here in Asia. That’s our ambition. We will have succeeded when some of our start-ups founders become funders for the next generation. We hope that will happen in the next 3-5 years.

One thing I’m beginning to see often in these years is tendency many aspiring entrepreneurs, especially tech oriented folks in younger generation, seem to underestimate importance of social capital. They think shipping MVP and getting feedback from users is the fastest way to get funded and gain tractions.

In rare cases that kind of thinking works, but in reality it does not. Getting funded is not something you can achieve by making 1000+ online friends and poking them though Facebook, LinkedIn, and AngelList. Likewise, gaining traction does not equal to sending random press release and being featured on TechCrunch either.

First step of fund raising always starts with reaching out to prospective investors who share same vision followed by understanding personality of each investor as human being. From investor’s perspective this step is exactly the same. They do not make investment in your startup unless they fully understand your background, personality, and most importantly long term vision. This exact process is called building the social capital a.k.a. getting to know each other ‘offline.’

My most recent startup Coworkify was born out of my own necessity and I’m certain large portion of future workforce will become independent workers or fulltime employees working outside office environment. However, at the same I understand this is not type of investment opportunity every investor finds it interesting. Hence, building the social capital in my case requires lots of efforts, but definitely it’s worth doing it and I enjoy doing it a lot.

Startup is choice of lifestyle, certainly not way to make money. I don’t blame on people creating whatever version of Instagram, Pinterest or Etsy in niche segment. Chances are you won’t succeed by doing so. But even if you do succeed, make sure you have built both monetary capital as well as social capital along the course of your startup life because the former is temporary asset but the latter is life-long asset.

I suggested that you start building your own social capital if you haven’t done so. Do it globally so that your asset will become international by default. Tweeting and blogging in English might be a good starting point.

DEMO Asia 2012 Afterthought

It’s been almost two weeks since I flew to Singapore. It was nothing but stunning experience to me as a first time visitor to the country.

After talking to many people who are local VCs, media folks, aspiring entrepreneurs, and startup lovers, I have gained quite amount of knowledge about startup scene in Singapore as well as SE Asia in general. Here is my quick summery.

1) Singapore is definitely a booming place but not quite there yet

Despite the fact I’ve seen enormous number of buildings being under construction in the city-state, startup culture there seems to be just started recently. Majority of people are there for established companies, mostly in finance related business.

2) Better place for securing angel/seed funding

Singapore is a far better place than in my hometown and possibly other parts of countries in SE Asia if you are up to angel/seed fund raising. There are relatively plenty of those funding available from both private and public sectors. A governmental institution like IDA has its own funding available to foreign startups.

3) Slight difficulty of securing post-seed funding

However, what I observed is a bit shortage of post-seed funding. Almost all startups are required to go global as quickly as possible if they are about to do next round of fund raising or look for further growth outside Singapore. I found it particularly true to software/IT related startups. Maybe one reasons is that there isn’t simply sufficient domestic market for consumer web services unless you are selling hardware that is designed for SE Asia market.

All VCs will expect startup to show that it can survive in global market. Otherwise, no post-seed funding available to the company. This was slightly different situation from Japan where software/IT startups can still aim at IPO just by doing business in domestic market only.

4) People’s mindset and resource availability

One of the biggest advantages of people in Singapore have is English speaking capability. This alone makes people there a whole lot more competitive in any industry than people in other countries of SE Asia. I must accept Japan is quite behind in this perspective.

However, I found it a little difficult to find the people with startup mindset who are willing to jump out from large entreprises and start new things at their own risks. Also, what’s even harder is availability of resources necessary for doing business as startup. Web developers and UI designers with proven track records are most difficult to find.

Of course, these people can go through extensive training or OJT by woking with experienced ones from Valley, but it might take some time. These resources can be outsourced to surrounding countries, but again they might not be up to the mark. Maybe this situation will soon change in the future.

5) Lots of possibilities

Last but not least is the fact that Singapore is definitely aiming at IT industry as next growth engine of the country. This is why DEMO Asia took place in Singapore as its first franchise in SE Asia. Also, the country is extremely open to foreign people and foreign businesses willing to do business there. Its diverse culture is plus if you want to create a team consisting of international people.

Having said all of this, I see LOTS of possibilities in Singapore in the near future. Hence, I plan to visit there a couple of more times. Hopefully, I wish myself being in a position doing something with that exciting country. At the end of the day, I really liked people living in or based out of Singapore.

Difference Between Co-founder and Founding Member

This is my definition. Co-founder is someone who can understand your vision and give well-thought-out opinions that sometimes conflict with yours but help the startup differentiate itself from others in many ways.

On the other hand, a founding member is much more like operator who only believes in a vision thrown by the founder(s) and executes the tasks that are only relevant to his/her professional field.

The first thing you as entrepreneur have to do before formulating a startup is to find co-founders, not founding members. If you think you already have co-founders, think of above criteria and ask yourself a question “Do I really have a co-founder?”

If you find yourself making all strategic decisions alone or finding your prospective partners being not up to the mark where you cannot get the level of feedback you were expecting, you don’t have a real co-founder.

Your prospective partners might be able to give you lots of ideas and opinions, but these are so instant that you already thought of once or already have the answers.

I wouldn’t say it’s easy to find a co-founder who has ready-made ability to excel your level of thinking. However, I believe this is super important and very critical to the company’s success in the future.

What if you find yourself having only founding members? There are three ways to solve this. 1) Educate your founding members to become co-founders. 2) Look for someone else. 3) Dismiss your startup and start with other idea that is easier for people to understand.

At my recent startup I’m not following the latter two approaches yet. Instead, I’m sharing with my team members lots of information, sometimes too much, that I find useful on a daily basis. These information include updates from the competitors, new startups doing similar things, investor’s comment on industry trends, etc.

Someone might argue that giving too much information only introduces a chaos or creates an impression of the founder being not able to decide anything. I think that’s wrong because the environment surrounding a startup changes constantly and people in startup have to adjust them to new environment very quickly by consuming whatever information relevant to them. Otherwise, they will lose.

Startup Weekend is a great place to meet aspiring entrepreneurs and passionate people with startup mindset. Perhaps, at the same you have to realize that not all of them are qualified to be real co-founders especially at the moment you meet them for the first time.

Whether or not they can become real co-founder is completely up to you.

How to Practice Your Pitch

TechStars published few days ago a great post about practicing your pitch to the prospective investors. Here is a quick summary of what I learnt from Next Big Sound’s pitch.

  1. Show that you have industry experience.
    Co-founder & CEO Alex White worked at Universal Records, the world’s biggest music company.
  2. Show that you experienced the same problem.
    Alex showed his frustration by putting hands on his head.
  3. A bit humor.
    “# of girls in backstage” made the audience laugh a bit.
  4. Start demo after 1 minute.
    No more talking. Jump into to actual product demo.
  5. Talk about the problem details.
    Alex showed his product can produce better result than $4,000 worth industry report, which brings a bit ‘wow’ factor to his pitch.
  6. Talk about your vision not just your product.
  7. Don’t talk about the features you are going to implement in the future.
    While there are many startups talking about their future milestones, Alex did not mention the things he is going to do when his startup gets some investment in the future.
  8. Show that you are targeting a big market.
    “It’s going to be difficult for the record labels to business without us (Next Big Sound)” gives the audience a very strong impression that they are following a big market and going to be the game changer.
  9. Don’t talk about your competitors.
    Simply investors are not interested in hearing the name of your competitors. They are interested in how you differentiated yourself from others.
  10. Introduce your team members (with a bit humor)
    “It’s cheap to keep us alive” = “We don’t need lots of investment to make this happen.” is excellent way of introducing your team members while giving an impression that you understand a ramen noodle startup model.
  11. Show your customers.
    Needless to say, this is the best way to gain your credibility.

Also interesting is that according to TechStars CEO David Cohen, Next Big Sound had a different product idea when they joined the program. This is another indication that TechStars is making the investment in people (I say people, not a single person) but not in ideas. I believe this is true to the most accelerator programs such as Y Combinator and 500 Startups.

Lastly, huge congrats to the folks at Next Big Sound who secured $1M seed funding after this pitch and the following $6.5M series A funding in January.

http://www.youtube.com/watch?v=RAKJcWYAvW4