Don’t build a startup, grow an audience
“Don’t be afraid to change the model.” — Reed Hastings
What I got wrong about Startup Growth
Consider a successful startup: let’s say AirBnB. As a novice, I would look at their website, their mobile app, and their business model (a marketplace), then come up with an “innovative” entrepreneurial idea and sell it as: “The AirBnB of <whatever industry sounds hot and interesting>.”
But if you actually watch the real history of AirBnB, you’ll notice they were more interested in:
- Paying their own rent than building a startup.
- Selling cereal boxes than adding payments to their website.
- Taking photos of their existing customer’s apartments than finding new customers.
- Looking for the next “hot” convention instead of increasing their Monthly Recurring Revenue (MRR).
Actually, this story, a fable if you prefer, is only an extension to the legendary essay by Paul Graham, do things that don’t scale: “The most common unscalable thing founders have to do at the start is to recruit users manually.”
You see, most of us think of growth as linear as when going from one place to another and we progressively get closer to our goal. But that is not at all how startups operate, AirBnB had to transform itself multiple times before getting to be what we recognize today: the leading marketplace for vacation rental.
“Startups are more similar to caterpillars turning into butterflies than babies turning into young adults.“
Please note, that this does not happen only during the early stages of a startup but also when doing “quantum growth leaps” for an example of this I recommend the great video-exposition by Gustaf Alströmer that details how internationalization and mobile-first design were the key drivers that turned Facebook into the global social media conglomerate it is today.
In short, what I did not understand about Startup Growth is that it has nothing to do with growth itself, it’s all about transformation.
Chapter 1: Failure
I wish there exists a better word to describe me ten years ago, but there is no: I was a “fool”. To prove it here are three samples from my first venture:
- Dropped from college “to honor” Steve Jobs, I was touched, inspired, and fooled by his Stanford Commencement Speech.
- While learning Machine Learning I doomed Economics and its close cousin Econometrics as glorified Linear Regression.
- One week I managed to accurately predict the spread lines of 15 out of 16 matches in the NFL, and still managed to lose money!
That’s basically where I was: I saw sports bets as financial markets, with increasingly rapid returns that could be described as “highly volatile” and “high risk” assets. I thought that if I could apply novel financial and economic techniques paired with AI algorithms to predict the outcomes and grow a business.
Now, the insight was not entirely wrong, I even managed to earn 10X returns for a particular year. After my eventual failure, I blamed the “emotional triggers” behind making a decision. Instead of finding a way to perfect the decision-making process I tried to automate it and outsource it to an algorithm.
Don’t start companies based on technical Innovation
While studying Machine Learning at Stanford with Andrew Ng, I truly believed I had a number of unfair advantages to succeed in predicting sports outcomes, to number a few of them:
- The field of Machine Learning was really innovative back then, and its findings were not fully widespread.
- Sports bets were in a “blind spot” where no major tech or finance firms would be willing to go.
- My approach was a “clever mix” between economics and tech, sufficiently distant fields to have a novel approach.
- I was a sports enthusiast and could spot correlations and draw hypotheses not obvious from a pure data perspective.
- I was satisfied with the benchmark of my models against other Stanford projects.
This model based on technological innovation was inspired by how Google became Google: I saw it as outstanding innovations in algorithms to search the web. My attempts, however, followed a different path: after years of developing fancy unreliable reinforcement learning models I had nothing to show off. I was fortunate, though, that with the advent of Deep Learning it was evident there was no way to compete in the field of Artificial Intelligence with the vast resources a tech giant had at their disposal.
I was not alone in my failure: there are notable examples of why trying to build a company based purely on technological innovation is futile, my favorite: Theranos. In retrospect, I attribute the success of Google not only to the innovative “PageRank” algorithm but also to its innovative UX, high-margin business model, exceptional recruitment, and the fact that Sergey and Larry are exceptional persons themselves, not only brilliant PhDs.
While there are plenty of startups that follow this tech-innovation-driven model as Boom, the supersonic plane company, or many others in the BioTech industry. Now, I prefer to take it one step at a time.
“You wanna show the world, but no one knows your name yet” — Jordin Sparks
Chapter 2: Apprenticeship
10X Growth is not something to look forward to
Hooked to the startup ethos, I did some freelancing and joined as an early engineer to other startups, looking to learn and have a better shot next time. During that time, I was fortunate to accumulate plenty of knowledge and experiences about what a startup looks like. An experience I treasure until this day is that time when I realized what “exponential growth” truly meant.
When you read about double-digit weekly growth rates it will probably be described in a romantic tone, a nirvana-like experience: the satisfaction of having found success, the feeling of accomplishment, certainty that you are doing well, have a good product, and eventually, you’ll become a millionaire. To me, they are wrong! Let me tell you how 10X growth looked to me:
Imagine you have a business, and every given month you have a good sales day. You are happy you made a profit, and are well-off for the next month. Now imagine yourself one-year later: a single customer is demanding a “special deal” to make purchase 10 times the amount of your best day only one year before, however, it's not only one customer, you are dealing with three of them each one requiring special accommodations to make the purchase. Desperate, you look upstairs, face the owner, and explain to him we can’t go through this, we are not prepared, we are making a mistake. Except that you do not say it, you yell it! Everyone is busy, there is no data to back those decisions, no certainty, and know that a single error can cost the business survival.
10 Lessons learned as an Early Startup Hire
While I’m not planning to share a story behind each of the 10 takeaways during my tenure as an early employee. I can say that those years provided invaluable experience, good and fun times, and it’s a highly recommended path for anyone looking to be an entrepreneur. I share the main lessons learned as a Software Engineer:
- Rigorously measure Software and Product development progress, there is a whole industry around it.
- Good marketers add more value than software engineers, their contributions are vital to the company’s revenue.
- Investors are nice, smart, empowering individuals, however, being generous is not part of their job.
- Having a solid, coherent, sustainable business model is an uncanny advantage, invest in it as much as you do in your product.
- For software engineers, the technology you work with is far more correlated to your future earning potential than the startup’s success.
- Building a product or adding new features is mostly a fun activity, but before doing it think: am I willing to maintain this source code?
- Pick your first customers wisely, success is as dependant on them as it is on the quality of the team.
- Experts know a lot more than you, yet, they still know so little themselves.
- Plan, document, and diagram before you drop your code, after all, you are an engineer: is better to imagine you are building a bridge than an app.
- It’s amazing what a small team of highly- motivated, committed individuals can do by themselves: they can take a whole industry by surprise!
Chapter 3: Luck
"Every lucky break begins with a leap of faith."
My Leap of Faith
I quitted my job at the possibility of joining an overseas startup, it was a unique stage in my life: everything around stayed still as if I was pushed to make a decision, to take ownership of my life. I was lucky, I got the job and while gathering the paperwork I found myself with two months free of work, it was the perfect opportunity to give entrepreneurship a second serious try.
I was bursting inside, after not taking any holidays for over three years freedom was a new feeling, leaving behind the uncertainty it carried, I see those very happy weeks I had for a while: I regained control of my time, my health was at it’s highest: I finally followed a nutritionist’s advice, and felt the most creative I had been in years.
The Perfect Product
In a buoyant economy, approaching full employment, and Software Engineers being the strongest commodity out there, I decided to take on the recruiting industry! I had a beautiful insight: recruiters work, care, and are paid by companies but it was in those times that Software Engineers had the leverage. My startup would care for them, for their best interest.
With so many jobs around, I approached it as a search problem and decided to tackle it with the visualization of two main components: expected salary & technological stack. Given that remote was not as big back then, I embed them in a geographical map to highlight location & used a pretty clever NLP and Deep Learning technique to parameterize the companies’ pitch.
I then followed the best of YCombinator’s advice: installed Product Intelligence Analytics Software and launched it across several sites. I was thrilled, motivated, and engaged, I even got some raving reviews for it.
Cracks in the Paradise
Well, you know the story: it was easy to drive visitors to the site, impossible to convince them to go back. After multiple minor iterations: not a single visitor turned into a user. Entrepreneurs sometimes need to lie to themselves, sometimes you need for others to lie to you, whatever it takes to keep the hope alive. And I did: I convinced myself the product was not mobile-first, that I needed more data, the recommendation engine was not good enough, and while powerful the UX was also confusing. Time to pivot!
No problem, I’m a good developer: reworked the UX from scratch and it mobile-first, with a very familiar interface. I developed a smart, highly-performant recommendation engine and scrapped more than enough data to satisfy thousands of users.
The problem: that second version never saw the light, I was tired of pouring my soul every week to make a new release that had minimal impact, of begging people to give their feedback, and looking for partnerships than conducted nowhere. The final blow was that nowhere on the horizon a glimpse of revenue could be seen. I was doing it all wrong!
Collecting the Pieces
It’s funny how you can be so wrong, on so many levels, looking back I really thought I got rid of the entrepreneurial bug, I would embrace my new job, leave the startup chimera behind and consolidate as an outstanding engineer.
“What I faced was a distribution problem: how to tell people what I was building and why they needed it.”
Chapter 4: Enlightenment
A New Hope
Entrepreneurs are a rare breed of humans: generally, we tend to deal with a duel or failure following the classic five steps: denial, anger, negotiation, depression, and acceptance. But it’s in that last step that entrepreneurs take a different path, for some reason acceptance is not in our DNA.
To me, it started as cynism, rewatching all that material for entrepreneurs and making fun of it: of the desperate, ingenious idea that a business could be born by the average Joe. I started to see entrepreneurship as the result of privilege, maybe luck, but nothing more. Sure, if you have an endless streak of attempts or an infinite supply of resources: sooner, rather than later a home run will hit a home-run. But there was nothing scientific to learn about being an entrepreneur.
Professor of Psychology Barbara Fredrickson argues that hope comes into its own when crisis looms, opening us to new creative possibilities. To me, hope is the result of a suppressed desire that finds a minimal, external validation. And between finding being a Software Engineer unchallenging and witnessing the lame efforts by established organizations to fight the ongoing COVID-19 Pandemic it was then, that I heard the inner voice once again: “You can do it, today is the perfect day for innovation.”
It started as a whisper, an ex-Uber guy mentioned that someone had pursued creating 12 startups in 12 months. I thought: that’s the rational thing to do, maximize your chances, build a shared codebase. Heck! at some point, you could even deliver a new project every week. I figured it was relatively fast to know whether a project would succeed or not: just the moment after launch. And something else he mentioned: it was called “IndieHackers” a place for aspiring entrepreneurs to hang out.
Living in Community
He mentioned it with such familiarity as if everyone already knew about this place, the site had a dark background and used fluorescent colors for buttons, it also featured a very logical six-step process to get you started as an entrepreneur, or as they called themselves “IndieHackers”. I was intrigued, excited to say the least.
The site featured posts from bright Software Engineers and highly-motivated folks living the dream: paradisiac locations, constant travel, and 20 hour work weeks, they engaged in creative activities outside, far away from the standard enterprise life. Podcasts contained the stories of those that had made it big, and the overall feel was of incredible support among the community members.
They spoke about a radically new concept, to me, called “building in public”, it was a diametrical approach from the closed source, IP-driven, full of NDAs and secrecy many legacy companies used to follow. While the concept of sharing every step when building a company sounded intimidating, possibly even dangerous (many worry their “idea” would be stolen). Having worked on so many startups and a couple of larger enterprises myself: I knew how little room for innovation there was within established companies -they are all so busy-, how important execution is instead of having a “good idea” and how other “tangible” assets are quiet worthless instead without the right team around them. More than that:
“Building in public was the quintessential solution for the distribution problem I faced.”
Twitter the Perfect Match
Remember Twitter? That odd Social Network that never quite lived to the hype? that does not serve a real purpose? Well, allow me to share three personal stories on why it is the perfect medium for founders building in public:
- Great audience: The discovery was fortuitous, I work hard and long to produce a delightful piece of content about Microservice Architecture. Usually, I share it with my 2,000 Linkedin connections, for some reason I clicked the button “Share with Twitter” as well, I knew most recruiters on Linkedin would not read about my dissertations and design patterns. But what I was not expecting at all was that with only 6 followers I would get 5X more views from Twitter than Linkedin. “Perhaps Twitter is, after all, the place to be.”
- Praise and recognition: You know Sundays? time for randomness and laziness in your life, on one of those, I had a smart thought: it was an acronym for a particular technological stack. Now, where to share it? Well, nobody really uses Linkedin on weekends, so why not try Twitter instead? What would you know? A couple of blog posts attributed my Tweet, it was a strange feeling: being credited, recognized.
- Sudden virality: Remember I’m Engineer, Software Engineer, by definition I’m a private, introverted person. Using social media is not natural to me, I only develop it, do not use it myself. So it was natural to me to downplay this emotion called: “going viral”, being seen, lauded. Until I experienced it: how would I know? It actually feels good, a well-documented rush of happiness that runs through your blood, pumps your heart, and leaves you making for more.
“And I wanted more, I wanted to learn how to Tweet.”
Chapter 5: Success
The Fire Within
I remember it like yesterday, only a few hours away from my last day at work. I could finally attend the much-awaited Start-up School group meetings for founders. I was ecstatic, but what happened next was even more interesting: each one of us had its turn to share about our “startups”, what were we building, what were our goals and struggles. That’s when I found it: my moat, I spoke about what I discovered: distribution channels, the importance of having an audience, and how to easily lower customer acquisition costs. I could feel the engagement in the room, feel my excitement of delivering new information, and the satisfaction of changing other people’s views.
I knew this distribution problem was not only about me, it was bigger than that. Other entrepreneurs also, ake, suffer from it, and you can help them. Most importantly, I could sense in my tone, the fire spreading through my cheeks, the heart pumping fast, and recovering that passion dormant during my last days as a Software Engineer.
Solving the Problem
“The knowledge that will revolutionize how we understand, teach, think and do entrepreneurship.”
After finding a problem worth solving, I had to go against every instinct not to build a product around it. So what to do then!?
Turns out, that for every problem you can think there is most probably already a lot of documentation on the topic: books, articles, videos, and forums. The purpose is to become an “expert” on it. Do not be intimidated, by delimiting your niche it should not take too long to gather a substantial amount of information about it.
The best part of this becoming an “expert” is that it actually leads to developing an audience, just by sharing your learning path, outliving your thoughts, and giving recognition to experts you’ll have a great panorama of how the industry is shaped and develop key relationships with fellow leaders in the field.
During that research process, you’ll also come aware of the competition, the main players in the space, and who suffers the most from the problem you are trying to solve.
Please note, that while radically logical, this process is drastically different from the status quo of building an MVP.
Believe me, if you do not have a reproducible way to fix the problem you encountered: there is zero chance you’ll solve the problem with Software.
Remember, software is good but is also dumb, it can only work for you if there is already an automatic way to solve the problem. After all, developing software is all about conditionals and iterations. Everything else is a fancy abstraction of the above.
Will this approach work for any problem? Absolutely not! But it is the best path for being a succesful entrepreneur.
After finding a way to solve the problem, it’s a good time to monetize it. Else, why would you invest in building a product if you can’t make money from it?
The good news? You already have an audience (and growing every day) that cares about your problem. So who are you going to sell your solution to? Well to your audience!! See? Simple and works!
Monetization is the process of transforming an audience from passive listeners to active customers
How Product Market Fit Feels
This is the mythical inflection point in every startup journey: once you have found product-market fit. When everyone wants a piece of your product that you can barely keep up with demand, and investors fight for a piece of your pie.
If you have the right understanding of your product and audience. You will know how to approach them. To me, product-market-fit is attained when you are able to cold message someone and less than 20 seconds later you get an overwhelmingly positive response demanding your product.
Is not the size of the audience, its the engagement.
You might be thinking, where are the millions I was promised? The investors fighting for me? The interviews, and glam life I was looking forward to? But especially, where is the software, how can I build a startup without tech?
All things come at the right time: and after becoming proficient in solving the problem, dominating your sales funnel, and being recognized as an expert in the field. Once you accumulated that knowledge, the experience, track record, and have a sufficiently big audience. You’ll then be able to produce and sell an InfoPrdouct!
Coming from a Software background, it might seem insulting. After all, are you telling me that a book, video course, or podcast can replace the beauty I bring into the world? Yes!! Before automating a solution to the problem acquire the ability to teach, it’s from that knowledge that a product will be shaped.
Also, you’ll need a constant flow of capital, passive income, to engage in the lucrative but very expensive process than it is to develop Software. Or do you plan to trust estimates? Will you allocate capital for pivoting? How many times, have you encountered a product that you do not know how to use? Or worse, it does not accomplish what it was built for?
“An succesful infoproducts is the cocoon of your startup.”
Redefinition of Success
Believe me, I’m like you, I was seduced by the startup promise-land, the millions, the fame, the ego-driven impulse to change the world. But I’ve also seen how greed, waste, and unsustainable long work journeys pile up in the search for it.
No, being a successful entrepreneur it’s not about how much worth your latest funding round was, it’s not about who wrote the first check, or how aggressively are you expanding the team, nor is it about the triple-digit growth you are paying advertisers to sustain.
A successful entrepreneur means living according to your values, having freedom surrounding your life, being the owner of your decisions, providing a decent living for those that trust your gut, and positively impacting society around you.
This methodology is in direct opposition to the continuous growth model, it gives a reproducible, accessible, risk-free framework to get started as an entrepreneur, whether your background is in Software or is not. Or you dedicate a full day to it or not.
In short, writing Software is the slowest, most expensive, highest-risk path to validate a hypothesis.
“Growing an audience, takes you only 30 minutes a day.”
Thanks for reading along, if you enjoyed the story please give it some claps and follow my account. Every month I dig deep in my psyche and try to come up with a transformational blog post based on what I’ve thinking, reading, and need in my life. If you have comments please do share them, I’ll promise to reply to them the best that I can.
You can also follow my Twitter account. I tweet a couple of times a day mostly about entrepreneurship, personal branding, and how to perfect distribution channels.
If you like the ideas behind this post please consider purchasing my coaching on how to get Twitter right, is tailored for small internet companies and highly-motivated individuals looking to take a step up in their careers.
Coaching is an interesting topic in its own right: how to shape, mentor, and transform a person to be the best version they can. It is most likely I will be writing about it next month.
Finally, SocialQ is the name of what I’m building: visit our website, ask for our pitch deck, and follow us on LinkedIn to stay up to date on how we fulfill our mission to empower, align and measure communication using NLP.
- Most of the topics I covered here were first discovered, better explained, and more successfully applied by many others before. In particular, I suggest you follow Daniel Vasallo.
- When preparing for this piece I followed the magnificent leadership lab imparted by Larry McEnerney
- Finally, I want to share words of gratitude to my collaborators and family members they have been incredibly supportive during this journey.