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The best way to grow your tech career? Treat it like an app
Software developers and engineers have rarely been in higher demand. Organizations’ need for technical talent is skyrocketing, but the supply is quite limited. As a result, software professionals have the luxury of being very choosy about where they work and usually command big salaries.
In 2020, the U.S. had nearly 1.5 million full-time developers, who earned a median salary of around $110,000, according to the Bureau of Labor Statistics. Over the next 10 years, the federal agency estimates, developer jobs will grow by 22% to 316,000.
But what happens after a developer or engineer lands that sweet gig? Are they able to harness their skills and grow in interesting and challenging new directions? Do they understand what it takes to move up the ladder? Are they merely doing a job or cultivating a rewarding professional life?
To put it bluntly, many developers and engineers stink at managing their own careers.
These are the kinds of questions that have gnawed at me throughout my 25 years in the tech industry. I’ve long noticed that, to put it bluntly, many developers and engineers stink at managing their own careers.
It’s simply not a priority for some. By nature, developers delight in solving complex technical challenges and working hard toward their company’s digital objectives. Care for their own careers may feel unattractively self-promotional or political — even though it’s in fact neither. Charting a career path may feel awkward or they just don’t know how to go about it.
Companies owe it to developers and engineers, and to themselves, to give these key people the tools to understand what it takes to be the best they can be. How else can developers and engineers be assured of continually great experiences while constantly expanding their contributions to their organizations?
Developers delight in solving complex challenges and working hard toward their company’s objectives. Care for their own careers may feel unattractively self-promotional or political — even though it’s in fact neither.
Coaching and mentoring can help, but I think a more formal management system is necessary to get the wind behind the sails of a companywide commitment to making developers and engineers believe that, as the late Andy Grove said, “Your career is your business and you are its CEO.”
That’s why I created a career development model for developers and engineers when I was an Intel Fellow at Intel between 2003 and 2013. This framework has since been put into practice at the three subsequent companies I worked at — Google, VMWare, and, now, Juniper Networks — through training sessions and HR processes.
The model is based on a principle that every developer can relate to: Treat career advancement as you would a software project.
That’s right, by thinking of career development in stages like those used in app production, developers and engineers can gain a holistic view of where they are in their professional lives, where they want to go and the gaps they need to fill.
Step 1: Functional specification
In software development, a team can’t get started until it has a functional specification that describes the app’s requirements and how it is supposed to perform and behave.
Why should a career be any different? In my model, folks begin by assessing the “functionality” expected of someone at their next career level and how they’re demonstrating them (or not). Typically, a person gets promoted to a higher level only when they already demonstrate that they are operating at that level.
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Introducing the Open Cap Table Coalition
On Tuesday, the Open Cap Table Coalition announced its launch through an inaugural Medium post. The goal of this project is to standardize startup capitalization table data as well as make it far more accessible, transparent and portable.
For those unfamiliar with a cap table, it’s a list of who owns your company’s securities, which includes your company shares, options and more. A clear and simple cap table should quickly indicate who owns what and how much of it they own. For a variety of reasons (sometimes inexperience or bad advice) too many equity holders often find companies’ capitalization information to be opaque and not easily accessible.
This is particularly important for the small percentage of startups that survive in the long term, as growth makes for far more complicated cap tables.
A critical part of good startup hygiene is to always have a clean and updated cap table. Since there is no set format and cap tables are generally not out in the open, they are often siloed rather than collaborative.
Cap tables are near and dear to me as someone who has advised hundreds of startups over the past two decades as the founder of an accelerator, a venture partner and a senior adviser at a government-funded startup launchpad. I have been on the shareholder side of the equation as well and can assure you that pretty much nothing destroys trust between shareholders and startups quicker than poor communication, especially around issues such as the current status of the cap table.
A critical part of good startup hygiene is to always have a clean and updated cap table.
I really like the idea of a cap table being an open corporate record, because the value proposition to the companies is clear. From the time a startup creates a cap table, it’s prone to inaccuracy, friction and mistakes. What this means in practice is that startups may spend money on cap-table-related issues that they should be spending on other things. From a legal process perspective, the law firm that is brought in to help with these issues has to deal with tedious back-end work, so the legal time isn’t high value for either the startup or the law firm.
The value proposition for equity holders is equally clear. All equity holders have a general and legal interest in a company’s capitalization information. They have the right to this information, which they may need for a variety of reasons (including, if things ever get really bad, an aggrieved shareholder action). So making this information clear and easily accessible is a service to equity holders and can also encourage more investment, especially from less experienced investors.
When I imagine what this project could become in the next couple of years, I think back to late 2013, when Y Combinator announced the SAFE (simple agreement for future equity). I think the SAFE is a good analogy here, as no one knew what it was and people wondered if this was a nice-to-have rather than a must-have for startups. But the end result was a dramatic improvement in the early-stage capital-raising process.
While the coalition’s founders include Morgan Stanley’s Shareworks, LTSE Software and Carta, it’s also heavy on Big Law, with Cooley, Goodwin Procter, Wilson Sonsini Goodrich & Rosati, Orrick, Gunderson Dettmer, Latham & Watkins, and Fenwick & West rounding out the group of 10 founding members.
So what’s the real motivation of seven law firms, which together saw revenue of over $10 billion in 2020 to collaborate on an open cap table product for startups? Deal flow.
Big Law has been trying for a couple of decades to build relationships with startups at the stage where it makes no sense for a startup to be dealing with a massive and expensive law firm. Their efforts to build startup programs have often fallen short and received mixed reviews. They have also been far too heavy on the self-serve and too light on the “we’re going to give you our regular Big Law level of services at a small fraction of the costs just in case you make it big and can one day pay our regular fees.” So these firms are trying to separate themselves from the rest of the Big Law pack by building this entrepreneur-friendly tech.
The coalition has already produced its initial version of the open cap table. The real question is whether this is going to be a big deal, as the SAFE was, or whether it’s going to be a vanity solution in search of a real problem. My best guess is that if this coalition gets all the relationships right, doesn’t get greedy and understands that there is a social good component at play here, this could be, reasonably quickly, as impactful as the SAFE was.
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4 key areas SaaS startups must address to scale infrastructure for the enterprise
Startups and SMBs are usually the first to adopt many SaaS products. But as these customers grow in size and complexity — and as you rope in larger organizations — scaling your infrastructure for the enterprise becomes critical for success.
Below are four tips on how to advance your company’s infrastructure to support and grow with your largest customers.
Address your customers’ security and reliability needs
If you’re building SaaS, odds are you’re holding very important customer data. Regardless of what you build, that makes you a threat vector for attacks on your customers. While security is important for all customers, the stakes certainly get higher the larger they grow.
Given the stakes, it’s paramount to build infrastructure, products and processes that address your customers’ growing security and reliability needs. That includes the ethical and moral obligation you have to make sure your systems and practices meet and exceed any claim you make about security and reliability to your customers.
Here are security and reliability requirements large customers typically ask for:
Formal SLAs around uptime: If you’re building SaaS, customers expect it to be available all the time. Large customers using your software for mission-critical applications will expect to see formal SLAs in contracts committing to 99.9% uptime or higher. As you build infrastructure and product layers, you need to be confident in your uptime and be able to measure uptime on a per customer basis so you know if you’re meeting your contractual obligations.
While it’s hard to prioritize asks from your largest customers, you’ll find that their collective feedback will pull your product roadmap in a specific direction.
Real-time status of your platform: Most larger customers will expect to see your platform’s historical uptime and have real-time visibility into events and incidents as they happen. As you mature and specialize, creating this visibility for customers also drives more collaboration between your customer operations and infrastructure teams. This collaboration is valuable to invest in, as it provides insights into how customers are experiencing a particular degradation in your service and allows for you to communicate back what you found so far and what your ETA is.
Backups: As your customers grow, be prepared for expectations around backups — not just in terms of how long it takes to recover the whole application, but also around backup periodicity, location of your backups and data retention (e.g., are you holding on to the data too long?). If you’re building your backup strategy, thinking about future flexibility around backup management will help you stay ahead of these asks.
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Dear Sophie: Should we sponsor international hires for H-1B transfers and green cards?
Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.
“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”
Extra Crunch members receive access to weekly “Dear Sophie” columns; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.
Dear Sophie,
My startup is desperately recruiting, and we see a lot of engineering candidates on H-1Bs. They’re looking for H-1B transfers and green cards. What should we do?
— Baffled in the Bay Area
Dear Baffled,
Yes, you should absolutely sponsor international talent for green cards! Listen to my podcast in which I discuss how to hire international professionals who are already in the United States by transferring their H-1B visa and using green cards as a benefit to attract and retain them.
The severe shortage of tech talent currently in the U.S. is prompting professionals to negotiate better compensation packages, and companies are increasingly using green card sponsorship as a benefit to attract and retain international talent.
Green card sponsorship as a benefit
Companies need to offer green card sponsorship to remain competitive. In fact, Envoy’s 2021 Immigration Trends Report found that 74% of employers said they have sponsored an individual for permanent residence (a green card), which is the highest percentage in the six years Envoy has asked this question in its annual survey. Rather than waiting until the last possible moment to sponsor an H-1B visa holder for a green card, 58% of employers say they are starting the process with the employee’s first year at the company on an H-1B visa. Most employers — 96% — said that sourcing international talent is important to their company’s talent acquisition strategy.
Image Credits: Joanna Buniak / Sophie Alcorn (opens in a new window)
Sponsoring international talent for a green card is a way for companies to show they invest in and prioritize their employees and are willing to make a long-term commitment to a prospective employee. Employers can further distinguish themselves by offering to cover expenses for green card applications for a spouse and children, as well as a work permit application for a spouse.
Employers should also consider paying for an employee’s marriage-based green card as a third-party payor, particularly since marriage-based green cards take about one-third of the time and one-third of the investment compared to employment-based green cards. What’s more, most marriage-based green cards are not subject to annual quotas.
H-1B transfers are most common right now
Because most U.S. embassies and consulates abroad remain closed for routine visa processing due to COVID-19, most employers are hiring international talent who are already in the United States on an H-1B sponsored by another employer. In these situations, an employer must file for an H-1B transfer for the prospective employee. Take a look at a previous Dear Sophie column for more details on the H-1B transfer process.
The questions that employers ask me most often about the H-1B transfer process include:
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Why I make everyone in my company be the CEO for a day
Leaders become great not because of their power, but because of their ability to empower others.
It’s no secret that most tech companies tout their culture as “unique” or “open,” but when you take a closer look, it’s often merely surface level. Yes, you may be dog-friendly or offer unlimited beer on tap, but how are you helping your employees become the best versions of themselves? We’re at our best when our employees are at their best, so we do everything in our power to make that a reality.
We’re at our best when our employees are at their best, so we do everything in our power to make that a reality.
After successfully running Vincit in Finland and Switzerland, in 2016 we made the jump to the United States, setting up an office in California. Although we had moved over 5,000 miles to a new country, it was important that our two main KPIs remain the same: Employee happiness and customer satisfaction. We believe that happy employees make clients happy, and happy clients refer you to others. Therefore, it was essential that this positive and prosperous workplace environment followed us to the United States.
So beyond traditional benefits, like full medical coverage, 401k matching and standard office amenities, we tapped into our Finnish roots to build and provide our employees with an uninhibited, supportive workplace. We keep our company culture as transparent as possible and fully believe in the power of empowering our employees. We have no managers and no real role hierarchy. Employees do not have to go through an approval process on anything they are working on.
We encourage our employees to make a trip to Finland to visit our headquarters. Instead of “Lunch & Learn” meetings, we host “Fail & Learn” meetings where employees get to share something that didn’t work and what they learned from it. And once a month, we let an employee become the CEO for a day.
Unsurprisingly, the “CEO of the Day” program is one of our most popular initiatives. The program gives our employee the reins for 24 hours with an unlimited budget. The only requirement? The CEO must make one lasting decision that will help improve the working experience of Vincit employees. Whatever the CEO of the Day decides, the company sticks with. They can purchase something for the company, change a policy, update a tool we use … Really, anything that they come up with can be done.
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Financial firms should leverage machine learning to make anomaly detection easier
Anomaly detection is one of the more difficult and underserved operational areas in the asset-servicing sector of financial institutions. Broadly speaking, a true anomaly is one that deviates from the norm of the expected or the familiar. Anomalies can be the result of incompetence, maliciousness, system errors, accidents or the product of shifts in the underlying structure of day-to-day processes.
For the financial services industry, detecting anomalies is critical, as they may be indicative of illegal activities such as fraud, identity theft, network intrusion, account takeover or money laundering, which may result in undesired outcomes for both the institution and the individual.
There are different ways to address the challenge of anomaly detection, including supervised and unsupervised learning.
Detecting outlier data, or anomalies according to historic data patterns and trends can enrich a financial institution’s operational team by increasing their understanding and preparedness.
The challenge of detecting anomalies
Anomaly detection presents a unique challenge for a variety of reasons. First and foremost, the financial services industry has seen an increase in the volume and complexity of data in recent years. In addition, a large emphasis has been placed on the quality of data, turning it into a way to measure the health of an institution.
To make matters more complicated, anomaly detection requires the prediction of something that has not been seen before or prepared for. The increase in data and the fact that it is constantly changing exacerbates the challenge further.
Leveraging machine learning
There are different ways to address the challenge of anomaly detection, including supervised and unsupervised learning.
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How to prepare for M&A, your most likely exit avenue
Despite the plentiful headlines about mega billion-dollar M&A transactions, record IPOs and the rapid growth of SPACs, small deals will continue to be the most likely exit for the vast majority of tech startups. In the over 30 years I’ve worked on M&A at White & Case, Barclays and my current firm Ascento Capital, I have seen too many startups that are not prepared for an exit via a merger or sale. This article will provide specific recommendations on how to prepare your startup for M&A.
While it is good to strive for a billion-dollar-plus sale, a successful IPO or a SPAC deal, it is practical to prepare your startup for a smaller transaction.
Global M&A hit record highs in the second quarter with a total deal value of $1.5 trillion, but smaller transactions vastly outnumber mega billion-dollar deals. The U.S. saw a total of 16,672 deals in the year ended June 31, but only 583, or 3% of that number, were valued at more than a billion dollars (FactSet). The IPO market is healthy again, but M&A still represents 88% of exits: So far this year, there were 503 IPOs and 5,203 deals, according to the CB Insights Q2 2021 State of Venture Report. After the SEC announced in early April that it was considering new guidance on SPAC IPOs, the rate of new SPAC issuances fell by around 90%.
While it is good to strive for a billion-dollar-plus sale, a successful IPO or a SPAC deal, it is practical to prepare your startup for a smaller transaction.
Here are a few recommendations that will prepare your startup for an M&A exit:
Track M&A in your subsector
Set up an alert on Google News for M&A activity in your subsector. For example, if your startup is in the IoT subsector, search for “IoT acqui” and this will pick up news stories on acquisitions in the IoT space. Save the search so you can go to Google News on a regular basis. Also track your closest competitors on Google News, particularly to see who is selling their company.
Prepare a list of likely acquirers
Prepare a list of the companies or firms most likely to buy your startup. This list should include domestic and international companies, businesses in non-tech industries, private equity firms and their portfolio companies, as well as VC-backed companies. Track these likely acquirers on Google News as well.
Consider executing a parallel track
Consider approaching the top 10 likely acquirers when you are raising the next round of capital. If your startup gets M&A offers and VC term sheets at the same time, this will provide your board of directors choices on the path ahead. Knowing the M&A activity in your startup’s subsector and the 10 most likely acquirers will impress VCs and increase the chances of being funded.
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Data-driven iteration helped China’s Genki Forest become a $6B beverage giant in 5 years
China’s e-commerce and industrial ecosystem is as different from the Western world as its culture. The country took decades to earn its reputation as the Factory of the World, but it now boasts a supply chain and manufacturing ability that few countries can match.
Creative use of the country’s networked manufacturing and logistics hubs make mass production both cheap and easy. Clothing, electronics, toys, automobiles, musical instruments, furniture — you name it and you’ll find a manufacturer in China who can turn your intangible concept into mass-manufacturable reality in mere days. And they’ll do it for cheaper than anywhere else in the world.
It was just a matter of time until an intrepid Chinese entrepreneur with a tech background decided to take on Coca-Cola and PepsiCo.
China is also home to one of the world’s largest e-commerce and tech ecosystems. Hundreds of startups dot the landscape, and the amount of money being raised and spent on innovating around the country’s industrial heft is mind-boggling.
So it was just a matter of time until an intrepid Chinese entrepreneur with a tech background decided to take on Coca-Cola and PepsiCo. The tech revolution hasn’t yet affected the bottled beverage industry quite as much as it has others. Incumbent giants therefore could lose a sizable chunk of market share if a company could just manage to weave together China’s manufacturing proficiency and agility with the modern tech startup philosophy of “moving fast and breaking stuff.”
Genki Forest, a Chinese direct-to-consumer (D2C) bottled beverage startup, is one such contender. A philosophy centered around iteration informed by data, quick turnarounds and a laser focus on taking advantage of China’s huge e-commerce ecosystem has helped this company’s revenues rise rapidly since it started five years ago. Its sugar-free sodas, milk teas and energy drinks sell in 40 countries and generated revenue of about $450 million in 2020. The company aims to reach $1.2 billion this year.
If anything, Genki Forest’s valuation has shot up even faster. It recently completed its fourth VC round that values it at a whopping $6 billion, triple the price it fetched a year earlier, and it has so far raised at least half a billion dollars.
It’s striking how closely Genki Forest’s operations resemble that of a tech startup. So we thought we should take a closer look and see what this company’s graph can tell us about the new wave of Chinese D2C entrepreneurship looking to take over the globe.
Finding a bigger wave to ride
The bottled beverage industry wasn’t what Genki Forest’s founder, Binsen Tang, initially set out to tackle. His first startup was a successful casual, mostly mobile gaming outfit known as ELEX Technology. It was nowhere near record-breaking, though — some 50 million users logged on to a few popular games in over 40 countries worldwide, including one of the first versions of Happy Farm, a predecessor to Zynga’s Farmville. But Tang wasn’t satisfied and eventually sold ELEX Technology to a publicly listed company for about $400 million in 2014.
Tang would walk away with a few important lessons. He’d learned by now that Chinese products were already competitive globally, whether people realized it or not, and that and geographic arbitrage was real, Happy Farm being the perfect example of this. Lastly, he now knew that it was far more important to choose the right “racetrack” (as Chinese investors and entrepreneurs like to put it) than to have a great product.
Picking the right race to win was perhaps the most important takeaway. It’s also an idea that sets Chinese entrepreneurs apart from their Western counterparts — the most worthwhile endeavors are in identifying the largest and most rewarding market at hand, regardless of one’s previous expertise. It was what led Zhang Yiming to create ByteDance, and Lei Jun to found Xiaomi.
That very philosophy led Tang to build Genki Forest. After selling ELEX Technology, Tang didn’t go back to the business that netted him his first pot of gold. As much as he had benefited from the rise of the mobile internet, he thought there was a far bigger opportunity building a consumer brand and applying the lessons he learned from programming to the manufacture of tangible products.
He soon set up his own investment fund, Challenjers Capital, convinced that the next big tech opportunity in China was in tech’s application to everyday consumer products. He soon began to invest in everything from ramen and hotpots to bottled beverages.
China’s quickly expanding e-commerce ecosystem and the plethora of D2C businesses flourishing on Alibaba and JD.com would also influence his decision to sell directly to his target audience rather than take the traditional route. But to truly understand his motivations, we need to take a look at the extremely unique D2C environment in China and how it has changed over the years.
What’s different about Chinese D2C?
“China doesn’t need any more good platforms,” Tang told his team in an internal email in 2015, “but it does need good products.” Tang was talking about how the age of building infrastructure for e-commerce in China was largely over; it was now time to create brands that could take advantage of the advanced distribution network that had been laid out.
Other investors noticed as well. Albus Yu, principal at China Growth Capital, told me that his fund had stopped making investments in independent consumer-facing platforms or marketplaces for a while. “2014 might have been the last year it was economically feasible to start such a business due to the soaring cost of acquiring customers and the strength of incumbents,” he said.
Indeed, 2015 was the year when CACs began to exceed or at least rival ARPUs for Alibaba and JD.com.
In China, that distribution network was present across the digital and physical worlds. Online, there was immense market power concentrated in the hands of just two players: Alibaba and JD.com, which used to have, and still maintain, 80% or above in market share.
In fact, the dominance of Alibaba, in particular, was so overwhelming that for years, VCs invested not in D2C, but in “Taobao brands,” since that was the only channel one needed to conquer in order to make it.
Customer acquisition was therefore straightforward — throw everything into advertising on Alibaba’s Tmall platform, especially during its annual flagship shopping festival, Singles’ Day. Even today, garnering a top spot in one of the category leaderboards remains a surefire way to build brand awareness, investor interest, as well as sales records.
Physically, the Chinese market also differs greatly from much of the developed West. Years of heavy investment in logistics by the private sector, accelerated by government support and infrastructure buildout, means that delivery costs have come down significantly over the years, even dipping below $0.40 per package wholesale as of this year. Innovations such as return insurance have also sped up customer adoption.
By 2016, China was shipping 30 billion packages a year, already accounting for 44% of global shipments. That number has been doubling every three years and is expected to exceed 100 billion this year. And the low cost of delivery is one of the biggest reasons for China’s outsized e-commerce market — the largest globally and estimated to reach $2.8 trillion in 2021, more than triple that of the No. 2, the U.S.
Express parcels sit stacked at a logistic base of e-commerce giant Suning before the 618 Shopping Festival. Image Credits: VCG
Present-day China also presents another edge: Proximity to an advanced, flexible manufacturing network and supply chain for the vast majority of consumer products, and the ability to outsource almost everything to them.
The original equipment manufacturers of years past have long since evolved into original design manufacturers. An expected consequence of being “the Factory of the World” for so many years, making goods for some of the best brands in the world, is that some of the knowledge was bound to transfer.
It may be difficult for outsiders to understand just how strong China’s networked manufacturing hubs are these days. What used to take weeks now takes mere days, the lead times shortened drastically by software, robots and other advancements. For example, Chinese cross-border ultra-fast-fashion company Shein has compressed design-to-ship timelines to as little as seven days.
And it’s definitely not just for making crop tops. The turnaround can be astonishingly fast even when manufacturing completely unfamiliar goods, such as when electric vehicle maker BYD turned its factory into the world’s largest face mask plant in just two weeks when the COVID-19 pandemic struck last year.
Companies leverage this manufacturing flexibility and agility for more than just speed. Chinese cosmetics upstart Perfect Diary uses it to launch twice as many SKUs as foreign competitors. In addition, the quick turnaround allows agile brands to take advantage of that most ephemeral of IP, memes.
It’s not to say that the Chinese supply chain is inaccessible to foreign entrepreneurs. Best-selling mattress maker Zinus, for example, is founded by a South Korean, but its products are manufactured in China and sold mostly on Amazon to U.S. customers.
It’s just that very few non-Chinese companies have figured out how to tap as deeply into the supply chain as this new crop of Chinese D2C brands, which can require years of working not just alongside but physically inside the factories, building trust and know-how. Shein, for example, watches carefully what other brands are making by staying close to the factories.
The China opportunity
Before global sensations such as TikTok weakened the mantra, “copy to China” used to be a dominant characterization of Chinese startups. In December 2015, when Tang registered the Genki Forest trademark, that was still very much a relevant strategy.
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Pro tips from the team behind Kickstarter’s most funded app
Here at memoryOS, we have a saying we repeat often: “Most of the Kickstarter happens before the actual Kickstarter.”
Preparation is the key. But even if you understand that most of the work is done in advance, you should still prepare yourself for some sleepless nights after the launch date. The usual startup mantra will apply to your crowdfunding campaign just as well: Measure, analyze and adjust along the way.
As you may know, crowdfunding fits some B2C products better than it does others. So to give you our product context here, memoryOS is a gamified app that teaches memorization skills with the help of virtual mind palaces and interactive microlessons taught by our co-founder, two-time World Memory Champion, Jonas von Essen.
Image Credits: memoryOS (opens in a new window)
Before becoming the most funded app on Kickstarter and getting it 6,400% funded (and carrying it further to the Indiegogo platform right after), we spent countless hours researching down the rabbit hole of crowdfunding tips and tricks. We also had calls with several top-tier crowdfunding project creators who were kind enough to answer our questions and share bits of knowledge from their experience.
We’re sharing our approach (and secrets) to building a successful crowdfunding campaign because we know just how tough it can be to launch your own product. So here is a complete 10-step guide:
Find a unique idea
You should have a unique idea for a product that would solve at least one problem for your target audience. The proven approach is to set two major hypotheses right at the start and then work on getting them tested:
- Does your product work and solve the problem as intended, and is it better than what’s out there? This is usually referred to as the “proof of concept” stage.
- Are there enough people who are willing to pay for your product for you to build a sustainable business?
You will need to build a base prototype to test the first hypothesis and, if it works, you can then work on turning it into an MVP or a short demo version for your future commercial product. You can then get people to test it for free and prepay for the full version.
Getting people to actually back their interest with their wallet means you already have customers, not merely enthusiasts, and it significantly increases the chances of a successful project.
Yes, it’s important that you get people to pay a minimum reservation deposit at this point and receive their commitment to pay the remaining amount for the full product later on. Getting people to actually back their interest with their wallet means you already have customers, not merely enthusiasts, and it significantly increases the chances of a successful project.
Get user feedback
As soon as you have something to test, conduct short surveys to better understand your customers by gathering and analyzing the reasons why and for what purpose(s) they would want your product.
Here at memoryOS, we called the first couple thousand of our leads and had many insightful conversations to help us connect to our audience on a more personal and emotional level.
Once you have a demo or prototype for the users to test, make sure to add a feedback form right at the end of their experience (or gather feedback using Google Forms for surveys, or via email inquiries).
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These simple metrics will tell you if your startup is ready to scale
Finding go-to-market fit (GTM) is a pivotal moment for a startup. It means you’ve found a repeatable formula for finding and winning lead that can be written into a repeatable GTM playbook. But before you scale up your sales and marketing, you should check the metrics to make sure you’re ready.
So, how do you know when your startup is ready to scale? I’ll help you answer this using numbers you can calculate on a napkin.
You have to consider three metrics — gross churn rate, the magic number and gross margin. With these, you can measure the health and profitability of your business. By combining them into a simple equation, you can get your LTV:CAC ratio (long-term customer value to customer acquisition cost), which is a measure of your business’ long-term financial outlook. If the LTV:CAC is over 3, you’re ready to scale.
Whatever your particular business, it’s worth spending some time with these metrics to find realistic targets that will push LTV:CAC over 3. Otherwise, you might be in danger of running off a cliff.
Let’s unpack the three basic metrics:
Gross churn rate (GCR) is a measure of product-market fit (PMF). GCR is the percentage of recurring revenue lost from customers that didn’t renew. It answers the question: Do your customers stay with you? If your customers don’t stick with you, you haven’t found PMF.
GCR = Lost monthly recurring revenue / Total MRR.
Example: At the beginning of March, the company brought in $60,000 in MRR. By the end of the month, $15,000 worth of contracts didn’t renew.
GCR = $15,000 / $60,000 = 0.25, or 25% GCR.
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