Wednesday, September 10, 2008

Business of Software 2008 - day one, part two.

Dharmesh Shah
Dharmesh is the founder and Chief Architect of HubSpot - a hosted software service focused on Internet marketing. He's also the author of a very popular blog on software startups. His talk was titled "Software Insights from MIT: Two Years of Graduate School, Boiled Down."
  • Start your business FIRST. The good ideas only come later. It's interesting to me that this idea was repeated by at least three different speakers at the conference.
  • Write a blog, not a business plan.
  • Most startups SHOULD be embarrassed about their first product. If you're not, you waited too long to release it.
  • Get your product out there now. Charge early and charge often.
  • SAAS has much higher costs that traditional software sales. Don't forget to take those into account if you consider doing SAAS.
  • Consider measuring CHI (Customer Hapiness Index). Try to determine which features customers identify as the reason they stay with your product.
  • Parternships: DON'T. If you team up with a 900-pound gorilla, it rarely works to your advantage. If you team up with another small enterprise, you just have twice the number of problems to solve. I'm not sure I totally agree here, but most of the history I've seen would support Dharmesh's view.
  • Don't optimize your business too soon. Sometimes things will change drastically and your optimization will become a problem.
  • Create a Blog before the product. Use it to determine if there is interest there. Get your market risk down while the costs are cheapest.
One of the most interesting comments Dharmesh made was around Google Adwords. He reminded us that Adwords is an auction-based system. As such, you might be paying $1/click for some common phrases last month. However, some crazy new startup that doesn't know better could easily bid that phrase up to $5 before you notice and costs you hundreds (or thousands) of extra dollars you hadn't planned for. You can't control or predict this. Obviously Google doesn't care to protect anybody from this.

Round-Table Discussions
After lunch on day-one, we had a series of round-table discussions with groups of ten people. Everyone chose their topics in advance. I selected the topic "Facebook, Twitter and Web 2.0 - will they survive?" It was a pretty inflamatory title, but I figured it migh result in some interesting conversation.

The conversation really ended up with people sharing ways they have used Facebook, YouTube and Twitter to communicate with customers, recruit new employees, and market themselves. One business uses Twitter to provide up-to-the-minute status reports on the status of their hosted-service systems.

One group in Toronto had a Facebook group they had encouraged their employees to help build and invite people to join. One day they sent an unsolicited notice of a new product offering to this group; by the end of that day a good portion of the group had left. The interesting part was the people who didn't leave.

Others were using YouTube to publish internal videos, promo bits, etc. We've done similar things at GenoLogics, and I don't think this idea is particularly novel.

The consensus however, was that nobody was able to say whether these techniques were effective. Were these methods reaching new people, or people in a new way, that made them more valuable than previous methods? None of us were positive of the answer.

There was also an interesting discussion of just what Twitter is for. How are people using it that differs from merely updating your Facebook status on a frequent basis? Does Twitter enable something unique that Facebook does not? If anyone at the table felt this question was answered, it wasn't clear to me.

Jessica Livingston
Jessica is the author of the book "Founders at Work" and a founding partner of the seed-stage venture firm Y-Combinator.
  • None of the "famous founders" (Wozniak, Flickr, etc) knew what they were doing when they started. Most famous founders ended up becoming famous for an idea very different from what they started with.
  • Many of the greatest ideas were rejected at first. Wozniak tried to sell the original Apple-1 plans to his employer HP, but they weren't interested.
  • Early-stage plans change a lot. Sometimes the official idea gets in the way of the great idea. Flickr and Blogger are great examples of this.
  • Let your users design the product. Startups are flexible enough that they can do this.
  • The best ideas come from personal need.
  • Make something people want and don't give up along the way. I guess that's a lot better than making something everybody hates :-)
  • Perseverance is critical because your initial idea is probably wrong. Lack of determination is the #1 reason for failure in the first six months of a startup.
  • Adapt your idea. Commit fast and fail quick rather than waiver uncertainly.
  • Scratch your own itch and look for a way to expand its market.
I really enjoyed Jessica's presentation. I especially agreed with her suggestion that they best ideas start with a "personal itch" and expand from there.

I've run a shareware business for the past 16 years. These days shareware isn't a common term, but the idea is still alive and strong. During the past 16 years I've had three reasonably successful products (and a few not-so-successful products). I couldn't have quit my job on the basis of my shareware revenue, but some years it was in the five-figure range.

In every case, the products that I was successful at selling started their life with a personal need. I wanted a particular problem solved and found a personal solution that I liked first. Only then did I start taking feedback on how to evolve things. I am convinced that this is the best way to run a software business. It's certainly not the only way to be successful, but I wouldn't start my own business unless it was premised on a personal "itch" first.

Paul Kenny
Paul is a sales trainer from the UK. His purpose was to convince all the non-sales types at the conference why they actually need a sales force. His message in a nutshell: even the best products do not sell themselves everywhere; there will always be potential customers who would benefit from your product but who don't know that yet - this is what sales is for.

When hiring a sales force he gave the following suggestions:
  • Hire attitude first. Don't just hire for experience.
  • Reward things other than just the deal. Offer incentives for adding to the sales funnel, filling out customer profiles, building relationships, etc.

Next post: Day Two.

1 comment:

Dharmesh Shah said...

Thanks for the summary. Very nicely done.

Saves me the trouble of having to type up my notes from the conference -- yours are so much better!