Eric Ries

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Pub session leads to Class idea

2:48PM | Wednesday, 25 February

About halfway through the 2014 AngelCube program, Sam Lee and Mark Robinson realised their startup idea wasn’t viable.   So they decided to head to the pub, along with AngelCube co-founder Adrian Stone, and that’s where they came up with the idea for Class, a hotel booking app, which they say is the world’s fastest.   What is Class?   Class is a mystery hotel app combined with traditional hotel loyalty program perks. Users drop a pin in the app general area where they would like to say. A list of hotels, four star and above, appear with as much details about the rooms, without giving away the hotel’s name. Unlike traditional loyalty programs, Class is not tied to any one hotel, meaning users can book a number of hotels, and still receive rewards like free upgrades, dinners and bottles of wine.   “We’re not just going after people who are going after secret hotels, or last minute hotels. We want to convert all the people who book normal hotels transparently too,” Lee says.   “It’s an experience play. We’re targeting frequent travellers, weekenders, or people booking hotels to take their missus to the city for the weekend. They’re not particularly bothered with the brand name as long as its decent quality. As long it’s a fair city price.”   Robinson bristles a bit at “experience play” characterisation. “I love Class because it’s literally hassle free,” he says with a smile.   The power of Mexican beer and banter   Hotels that appear on the app are curated and an algorithm helps narrow down that list by calculating the average city price.   Lee and Robinson, who both moved to Australia from the United Kingdom, met during a “night of taco filled banter”.   “We basically got pissed on Mexican beer and ended up deciding that we both wanted to start something,” Lee says with a laugh.   “Three weeks after we met we flicked an application to AngelCube thinking it was a real wild card.”   About a month after sending their application, Lee and Robinson found themselves sitting across from AngelCube co-founders Stone and Nathan Sampimon pitching their original idea Lift, a fitness app. Lee and Robinson are coy on the details.   “We’re convinced it’s still a good idea, it’s going to get done by somebody,” Lee says.   Sampimon and Stone were not convinced.   “Nathan and Adrian were like ‘love the team, hate the idea’,” Lee says.   So Sampimon and Stone gave them a week to prove the idea, and 24 hours to read Eric Ries’ book The Lean Startup. At the time, Lee was working 6am-12am shifts at Crown Casino, but Sampimon and Stone were unmoved. Lee says their response was simply, ‘If you want it, get it done’.   “So I was under the desk at Crown, reading this lean startup book for the rest of the day,” Lee says.   After a day of multitasking Lee would finish the book, and was able to explain how the concepts in The Lean Startup applied to the startup they were pitching to AngelCube. It was enough to be accepted. Shortly after, they began to realise their fitness app might not work. Lee says it took them a week to disprove the theories behind Lift and realise they needed to go back to the drawing board.     Hitting the airport lounge scene   After “knocking heads” with each other and “hitting the whiteboard a million times”, they settled on developing a hotel booking app. The idea came from Lee and Robinson’s experience as business travellers. Stone agreed to join as co-founder and they got to work.   Robinson, a developer by background, started fleshing out what a Class app might look like, while Lee went in search of customers, specifically business travellers at Melbourne airport. After walking around with a survey at the terminal he realised the best answers were going to come from travellers in the business lounge. So he bought a virgin flexi business ticket to get entry, which he could get a refund for later, and spent the day chatting to people about Class.   “I was subtly pitching to them and it allowed us to get really quality feedback. The great thing is you’ve got a captive audience there. It’s the only place where business travellers sit still,” he says.   Most of Class’ fellow startups in the AngelCube program had some form of traction when they entered AngelCube, but Robinson says Class didn’t really launch until the 12th week of the 13-week program. It’s been in the months following the program’s end that Class has shifted its focus onto user acquisition. That will remain the focus for the months ahead while also making the reward system completely automated. Soon the startup hopes to launch in the United States.   Class’ competitors aren’t trivial. They include travel giant Expedia, which recently purchased Wotif for $700 million and Rocket Internet’s Hotel Quickly. Lee and Robinson are aware of the scale of the challenge, but aren’t discouraged.   “We’re funded essentially. So we’re just working our arse off in terms of proving the concept and getting our app ready to flick to the states. It’s a huge opportunity for us,” Lee says. Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Trevor Owens’ top tips for lean startups

8:33PM | Sunday, 24 August

What Eric Ries brought to lean, Trevor Owens made a machine, or more specifically the world’s leading bootcamp on lean startup methodologies.   The entrepreneurial phenomenon known as Lean Startup Machine (LSM) is heading to Sydney in September for the second time, and this time Owens is making the trip.   Speaking to StartupSmart Owens says that the most common misunderstandings of lean startup – which advocates build, measure, learn – are the most obvious ones, “it’s not about being cheap, nor is it just about startups.”   “Lean is simply an approach to decrease uncertainty,” Owens says. “And a startup refers to releasing something new under conditions of uncertainty.”   Less obvious to many though is how to know if you are testing the right assumptions and which ones to test first, which Owens concedes can be “tough”.   Owens suggest that people aim for their “highest risk assumption” first, and then assess what would be required to test it.   “Essentially you need to aim for the risk that will return the ‘biggest bang for your buck’, that is the test that will give you the highest amount of learning for the least amount of time,” he says.   When running tests the trick is to reduce confirmation bias, says Owens, and this can be done through asking detailed questions.   “All founders have confirmation bias, you can’t really get away from that, but you can make sure that you don’t ask leading questions and you get as much detail as you can,” he says.   “Some confirmation bias is good though, but you need to ask the right questions and not just the ones that will give you the answers that you want.   “You can avoid confirmation bias, by asking a question that would prove you wrong.”   OWENS’ LSM TIPS:   Lean startup methodologies can be implemented by anyone in any size company The first assumption you test should be the one that gives you the most learning in the least amount of time Ask about past behaviour rather than future behaviour Don’t reveal what you are testing Lean works in B2B as well as B2C B2B markets can be broken up into enterprise, medium-sized and small businesses. Enterprise and medium have the most decisions to make, so aim for small (where the person using the software is the decision-maker), and grow from there. StartupSmart is giving one of our Sydney readers a chance to win a ticket to the LSM workshop on September 5-7. Please send us an email with the subject line “LSM ticket” to  [email protected] and tell us in 25 words or less why you’d like to attend. Competition ends Wednesday, 27 August 2014.  Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Three years is an eternity for startups, but we need one more year

7:44AM | Wednesday, 30 July

Most days, it feels like I’ve been working in the lean startup movement for 20 years. The tech startup industry has been through so many massive changes since we first got started, we’ve packed many years of experimental cycles into such a short time. Do you remember what year The Lean Startup by Eric Ries was first published?   However long it’s been, how do we know we’re doing a great job? Before you chuck in your full-time job and begin the startup founder journey, how do you know for sure an accelerator or incubator is going to improve your chances of success?   Since incubators and accelerators are such a recent phenomenon and teaching/practising methodologies that are still changing in response to a rapidly changing industry, I don’t think anybody can yet say with authority what constitutes good practice in the space.   If a poor accelerator program manages to secure an intake of world-class startups that go bananas almost despite the accelerator program, how do we distinguish that from a great accelerator program that makes a significant difference for a cohort of middle-rank startups?   A Second Century Ventures study published recently in VentureBeat found that in the US it was necessary to observe the outcomes of a graduating cohort for four years after graduation from an accelerator before it was possible to draw a conclusion about performance. Only problem is: we don’t have that much data on the Australian accelerators yet.   Startmate is Australia’s earliest accelerator and its first cohort graduated in 2011. AngelCube started in 2011 but didn’t graduate a class until 2012. Pollenizer was founded in 2007 but was more akin to a digital agency with an equity stake until 2011-ish. BlueChilli began offering an accelerator program in late 2012.   I think the best way to improve the performance and ensure the value of incubator and accelerator programs is to encourage transparency and validate and publish data for key metrics. One key metric for accelerators could be the delta in the total capitalisation of the accelerator’s graduating startups over five years. Another might be the return to investors in the accelerator.   Some have called out the “11 millionaires created” stat on the new BlueChilli homepage as a ‘vanity metric’ and asked if, really, those startup founders are just ‘paper millionaires’. Well, of course they’re still paper millionaires — the earliest of them has only been operating their startup for two years. (Some would say being “just” a paper millionaire is a whole lot better than not being a millionaire at all.)   Some have called for industry or government regulation and accreditation, but surely any accreditation or regulation regime would lag the current industry best practice by at least a year and more likely a parliamentary term.   And accreditation would forever be rewarding dogmatic adherence to outmoded methodology. Accelerators learning at the coal face about what’s working would be unable to practice new methodology without risking their accreditation.   I want Australia’s startup accelerators to change, adapt, learn and grow as rapidly as possible. As an investor, startup co-founder and startup advisor, I don’t want our startup education system subject to the operating principles of the industrial era. The reason it feels like we’ve been at this for decades is because our industry learns and grows faster than any other. Rapid learning through early exposure to the marketplace is what defines us.   If Second Century Ventures is correct, we’ll begin to see how well Australia’s startup accelerators have been performing in a year or two. In lean startup terms, an eternity, I know. I’ll be waiting impatiently too…   By the way, The Lean Startup by Eric Ries was first published in 2011!   Alan Jones is chief growth hacker at BlueChilli and teaches lean startup skills. This article originally appeared on the BlueChilli blog.

Startup mythbusting: The seven biggest startup myths

7:09AM | Thursday, 3 July

I’d like to share with you some of the major myths I’ve been fighting against in the past five years. Most of them rely on some solid academic observations (and others are just from me). Please share these around to make the entrepreneurial world a better one!   1. A startup is not a smaller version of a large company   Steve Blank’s statement is an important one as it opens the door to rethinking our academic teaching methodologies. While startups are earlier versions of large corporations, they do not behave the same way and they are not achieving the same function: startups are about searching business models while large corporations are about surviving as a leader. Read his book if you have not already (co-written with Bob Dorf).   2. Startups mainly fail because of team issues    Noam Wasserman, who famously wrote The Founder’s Dilemmas, addressed the main reason why 65% of VC-backed startups failed. Resolving issues within startups’ core teams is more important than finding customers. If you’d like your venture to survive, be sure to focus on finding the right co-founders.   3. Less than 5% of high growth companies were VC backed    Amar Bhide in his classic (and very dense) The Origin and Evolution of New Businesses studied that almost none (less than 5%) of the Inc. 500 took VC funding: “More than 80% of the Inc. founders I studied boot­strapped their ventures with modest funds derived from personal savings, credit cards, second mortages, and so on; the median start­up capital was about $10,000. Only 5% raised their initial equity from professional VC.”   4. Accelerators and VC don’t work   Jared Konczal, who works at the Kauffman Foundation, wrote this important blog post analysing some of the existing (yet rare) accelerators’ data. In a time when everyone is praising and launching accelerators, it might be a good thing to remind policymakers and VPs of large corporations that if you exclude Y-Combinator, startup accelerators are not doing an excellent job at creating startups! The same goes for venture funds making less money than they are spending on startups (this Kauffman paper).   5. Business plans are dead   I pitched this one with Marc a while ago (2009), and most of the people would boo at us. This is a direct result of the same observations made by Eric Ries: startups are search engines dealing with the extreme unknown environment.   While business plans make sense for restaurants, your startup business plan will be as good as following the directions given by a blind chimpanzee. Or like Steve Blank puts it: “No business plan survives first contact with customers.”   6. Mentors are like mushrooms   Let’s face it, “mentors” might be the most over-used word after “entrepreneurs” in our little startup world. Who here is not already a mentor? However, like with mushrooms, be careful: some are good but most of them are trippy or even worse — toxic.   A real mentor is someone who has done and achieved what you’d like to become. Most of the greatest mentors rarely provide advice, yet they’d ask the right challenging questions and hopefully open their amazing connections if they end up liking you (again it is not about your startup!)   7. New businesses are declining     Robert E. Litan (formerly director of research at the Kauffman Foundation) recently co-wrote this paper. To keep it simple, he explained that never before in America have we seen such a low level of new business creation across all industries. Worse, when people lose their jobs it takes them forever to relocate.   Meanwhile you hear and see hundreds of stories about new startups and a booming new economy! Remember, this is the side-effect of VCs distorting the field of reality: if we want our economy to grow (especially in Europe and America) we need to go mainstream and share the lessons learned by the tech startups with every type of business!   Franck Nouyigat is a Re|corp Entrepreneur and co-founder Startup Weekend |board member at up.co.    This post is republished with permission and originally appeared on Medium

Seven top tips to help make your business ‘lucky’

3:32AM | Wednesday, 13 March

In my last blog I wrote about the need to remain relevant. This week I want to talk about how smart businesses use the market to evolve their business model or do what is commonly referred to as a “pivot”.

A Taskmaster Christmas carol

12:42PM | Wednesday, 19 December

Back at the Taskmaster Ranch, Old Taskmaster is dozing off in the lounge chair in front of a warm fireplace.

Thinking of starting up? Here’s a New Year’s resolution for you

12:42AM | Tuesday, 18 December

Here you go again.

Lean start-up model gives ‘permission to give up very fast’, US investor claims

3:59AM | Monday, 11 March

Famed US venture capitalist Marc Andreessen has taken aim at the ‘lean’ start-up model, claiming that it overlooks the importance of sales and marketing and gives entrepreneurs “permission to give up very fast”.

Five start-up lessons from the Young Rich List

9:16PM | Thursday, 27 September

This year’s BRW Young Rich List may be striking due to the dip in overall wealth of the top 100, including a $700 million plummet by mining mogul Nathan Tinker, but there are encouraging signs for start-ups.

Shopify launches $200,000 Build-A-Business competition

7:49AM | Wednesday, 11 July

Shopify has launched its annual Build-A-Business competition, offering $200,000 to winners, with Australian entrepreneurs expected to fare well following last year’s stellar performance.

Eric Ries pays Pollenizer a visit – five things you can learn

4:21AM | Monday, 16 April

Team members at Sydney-based tech incubator Pollenizer have outlined lessons learnt from start-up guru Eric Ries, who visited Pollenizer earlier this month as part of a trip to Australia.

Five reasons to start-up in 2012 – and five reasons to think twice

3:51AM | Friday, 15 March

Figures released this week by the Australian Bureau of Statistics illustrate what many budding entrepreneurs have long suspected – conditions aren’t all rosy for new businesses.

NewME Accelerator scores sponsorship from major VC

3:07AM | Monday, 11 March

US-based start-up program NewME Accelerator has secured venture capital firm Andreessen Horowitz as a sponsor, joining the likes of Google, HP and social networking site Tagged.

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