Three lessons I learned from Startup Weekend (Kuwait)

Last week, the third version of Startup Weekend Kuwait took place at The VIVA Coded Academy. The whole weekend was exhilarating and intense! Over 120 people participated, forming 21 full teams that built MVP’s, put together business cases, and presented in front of the judges and audience after 54 hours of non-stop work. The turnout, energy, and resounding success of the event showed how far the startup scene had come in Kuwait over the past 18 months!

It’s always amazing to see how real life situations and decision making play out in teams over the course of the Weekend. Mobile or Web? Focus on marketing or building the product? Subscription Vs Freemium? Designs Vs Functionality? I saw every team dealing and struggling with these decisions, as would a real startup in “the real world”.

Along the same lines, as an organizer and observer during Startup Weekend, I learned a thing or two (or three) about what it ultimately takes to be build a successful startup:

Lesson one: It’s (mostly) about the team, not the idea

One of the participants, called Mohammad, was looking for a team to join late in the first day. Most teams had already formed, but I knew Mohammad personally, and knew that his marketing and event management background made him him a valuable member to any team. As I was walking around with him trying to find a team, I was surprised that several teams declined his offer to join them. Eventually, we found a team that had only two members who I knew to be talented and driven, just like Mohammad. He like their idea and they recognized the value they brought to them (both of them were coders/ designers). They formed a small but strong and balanced team of three.

Their initial idea was ambitious, but they pivoted to something entirely and extremely different. It wasn’t as ambitious, and I personally thought there were at least 4 or 5 more exciting ideas in the competition. I didn’t like their chances. But, lo and behold, Mohammad’s team won first place. Their idea, Mukancom, is a platform to find co-working space in Kuwait. Arwa and Shahd, Mohammad’s team mates, did a stellar job building an MVP. But, going by the judges score cards, what really set them apart was Mohammad’s final presentation. There might have been better ideas out there, but Mukancom’s overall execution and presentation was superb, and their team was strong on all fronts, and that made all the difference. (There’s another lesson here about pivoting too).

 

Lesson two: It’s not about the money, money, money

One of the things that caught my attention was the participant’s seemingly lack of interest in the cash prize. Over 210 people had signed up as participants before we had event announced the money reward. I made the announcement on stage during the event, and I distinctly remember listing the non-cash prizes first (free co-working space at Sirdab Lab, free UX consultation from Catalyst) and leaving the cash prize at the end, anticipating it would get the biggest cheer. That wasn’t the case. The non-cash prizes got a lot more noise and excitement than the cash prize announcement.

In fact, not once during the Weekend did I hear people talking about the cash prize. I got asked a few times about the non-cash prizes. It seemed that no one really cared about the money at the end of it all. And yet here there were, 21 teams working 54 hours straight without much regard for the possibility of monetary reward.

You often hear successful people say something like “Don’t start a business for the money” or “At the end of the day, it’s not about the money” but those sayings often get dismissed as idealistic mantras reserved for the already rich and successful. But the lesson I learned here is that passion, competition, and the desire to build something worthwhile are far bigger motivators than money. (I’m happy to report that the top 5 teams have all continued working on their startups after the event!)

 

Lesson three: The true value of having a co-founder

In Startup Weekend, most dropouts occur late in the second day. It’s around that time when participants start feeling exhausted, and the finish line is oh-so-far without any guarantee of success. Our lead organizer tells me the following story: two participants from the same approached him around midnight on the second day. One of them, the “CEO” of the team (she came up with the startup idea), told him she wanted to quit. She was mentally drained and didn’t think her team had a chance of winning, so she wanted to pack up and go home.  But her teammate (the co-founder) insisted she stays. She was asking the organizer to convince the CEO not to give up. She was begging her friend to see it through until the final presentations, for the sake of the team, because she knew that if the CEO quit, the rest of the team would too. The CEO, quite literally with tears in her eyes, decided to soldier on.

That team ended up winning second place, and were in close contention for first place.

It goes to show that, above all else, the greatest benefit of having a co-founder is having someone to lean on when you’re ready to give up. In the emotional roller coaster that is a startup, co-founders must take it in turns to support each other through the tough times.

 

I can’t wait for next year’s Startup Weekend, where I’m sure the ideas will be even bigger and better!

 

 

 

 

 

“Square” and What Makes a Startup Investible

3.5 minute read

If you are unfamiliar with the world of Venture Capital and startup financing, the tech news headlines you read a couple of weeks ago (on October 5 specifically) would have left you scratching your head in puzzlement. The headlines read something like: “Square Raises $150m at a $6b Valuation (Despite Recording a Loss of $100m)”. It’s the part in parentheses that causes the confusion.

The actual amount raised is reported to be somewhere in the range of $100m to $150m, but that’s irrelevant. What’s relevant here is how Square, the mobile payment processor, was able to convince investors to put that much money at such a high valuation despite losing $100m in 2013. This becomes even more puzzling when one takes into consideration that Square’s valuation was set at $5b in late 2013, before the losses were reported. Subsequently, the payment giant was able to increase its valuation for this round (1 year after the $5b round) despite leaking all that cash.

In fact, most startups get financed despite reporting losses.

So, back to Square and all the confusion behind their latest round of funding. The short explanation is that VC’s tend to look at two main criteria when deciding if a startup is worth the high risk of an early investment:

  1. Growth. If “Location, location, location” is the cardinal rule of retail, “Growth, growth, growth” is its startup counterpart. Take a look at Square’s hyper-growth up until March, ’13.*
Square payment processing growth until March 13

Square payment processing growth until March 13

Today, Square’s growth has “slowed” down in relative terms. However, in the last year, Square’s processing rate has multiplied 6-7 times. The company expects to process $30b in payments in the next 12 months.

Most startups, like Square, lose money because they are financing growth. That could mean hiring, acquisitions, product development, or/ and research. Square has been doing pretty much all of the above. Investors will be happy to keep pouring money in as long as growth persists because they understand that at one point the company can capitalize on its investment in growth (in other words, start reaping the rewords). A highly “uninvestable” startup would be one that burns through cash without recording any real growth, probably because of a lack of product-market fit (it’s that reason 95% of the time, despite what some founders might argue).

 

  1. Operational profitability. Growth is pointless if the company can’t ultimately turn a profit. Thus, a startup has to prove that its current (or proposed) core revenue model can be profitable. In Square’s case, the subject has been debated since day one. However, recently Square has made it clear that it makes money on every transaction- around a very healthy 33% gross profit. How much remains from the 33% once other costs are subtracted is an issue of operational efficiency, not profitability. As such, if the company chooses, it can wipe away that 33% margin with heavy investments in growth, and drive net profit towards the negative.

An understanding of these two factors provides a more accurate interpretation of Square’s financial health; namely, that the $100m net loss is a reflection of continued investment in growth, not lack of profitability. Some would argue that the valuation and burn rate of Square have exceeded required growth rate, and as such have turned the company into a black hole for cash. That argument is plausible, but does not contradict the growth investment analysis proposed in this post.

When weighing up an investment, a VC will also take into consideration the possibility of monopoly , product range, market size, and competition. In addition, a certain class of VC’s look at different criteria from what was aforementioned because their strategy revolves around “flipping” a startup and exiting before any profits are made. These topics will be covered in later posts.

 

Slice of Advice

Focus on creating a product that has market fit in order to drive growth and profitability; only then will your startup be investible.

 

 

* http://wallstreetflaneur.com/the-mobile-payment-threat-whos-to-fear/#axzz3GhEJUZ4S

Customer Feedback is Oxygen

The customer might not always be right, but the customer is always worth listening to.

 

Kevin Systrom, co-founder of Instagram, attributes the success of the photo sharing application to one simple factor: listening to customer feedback.

 

Before Instagram, there was Burbn, a “check-in service” application. It was a slightly different version of Foursquare, but with the ability to upload and share photos live from a location. While working on Burbn, Systrom was relentless about talking to users and drawing feedback in order to understand the value and “best use” scenario for their customer base. The extensive qualitative and quantitative feedback analysis conducted by the Burbn team lead them to discover a curious pattern: most users of the application seemed to use it in order to share photos, rather than “check in” and share their location.

 

Armed with this information, Systrom “left the building” in order to grab real commentary from actual users in order to understand how the application can better serve as a photo sharing service. After numerous customer interviews and analysis, Systrom came to a conclusion that would become the basis to Instagram’s success and hyper growth:

 

People wanted to share photos quickly from their smartphone, but photos taken on mobile simply didn’t look beautiful.

 

Hence, the infamous photo filters were born. Keep in mind, at that time (2009), smartphone cameras took poor quality photos that rarely looked good. The “filters” solved this problem, and allowed users to share beautiful photos instantly from their mobile.

 

Eventually, Burbn became Instagram, which recorded 25 thousand users in its first day of release.

 

In retrospect, what Systrom and his team discovered might seem obvious. However, only with an incessant approach to soliciting and analyzing customer feedback could the Instagram/ Burbn team have realized how widespread the problem was. Customer comments also put the Instagram team on the right track to building a feature set that tackled actual problems faced by their users.

 

Customer feedback is oxygen. It breathes life into a dying startup, and can help the startup ignite into a fire of hyper growth.

 

Slice of Advice

In order to build something that people want and use, you have to listen to those people. Don’t lock yourself in the office and assume you have an intuitive understanding of who your customers are and what they want. Leave the building, and listen carefully to comments from real users. It’s the only way you’ll build something worth anything to anyone.

How Company Culture Can Take Your Startup To New Heights

You’ve heard it a million times: a good company culture is key to the success of a startup. But what does that even mean? Sure, the free snacks, ping pong tables, and company-sponsored kickball teams are a nice perk, but is that the main benefit of a startup culture? I’m going to argue no, but feel free to challenge me on that at the end of this.

Company Culture Defined

Lets start by defining company culture. I’ve seen many people try to define company culture, but the best definition I have seen is from Entrepreneur magazine and it states that “company culture is a blend of the values, beliefs, taboos, symbols, rituals, and myths that a company develops over time.” Put plainly, its how the people at a company think, act, and feel.

Sure the perks are nice, but what if company culture led to something bigger? What if a great company culture helped people solve big problems? I work at a startup where this is happening every day. FindTheBest is a Santa Barbara Internet startup that equips people with the best information and research tools to enable people to think like experts and make confident decisions. We have the tangible perks of free snacks, ping pong tables, and cross fit at lunch, but the intangible perks are much bigger. The fact that our team is able to work together to solve big problems is the greatest aspect of our company culture.

Company Culture Helps People Solve Big Problems

Our team members are always ready to test, fail, learn, test, fail, learn, test, succeed, scale. In order to go through this process as efficiently and effectively as possible, our team works together at every step of the process. Every single day, people talk to people from other teams. The product team talks to business development who talks to marketing who talks to engineering. At FindTheBest, we sit in one big open room – there are no desks, and no barriers to finding whoever it is that you want to talk to. This physically open culture is just one of the ways that we facilitate our team members to be open with each other and collaborate on a regular basis.

If you want your startup to have a highly collaborative culture, you have to start at the beginning and hire people that are willing to collaborate and have a proven track record of success. You want to look at what university they went to and what they were involved in while they were there. You want to look at what companies they have worked at in the past and what success they have had there. It’s easy to think that people will adapt to the culture once they arrive, but that isn’t always the case, so take time when hiring new team members and make sure you find the best fit for your organization.

A good company culture is important on many fronts. It keeps your employees happy, attracts potential hires, and helps solve big problems. It’s important to remember that it’s not all about the free snacks and game tables. It’s about creating a company culture that facilitates open communication and collaboration.

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