Posts Tagged ‘startups’
On Thursday I talked with Andrew Lee, who is a senior advisor for the US Small Business Administration, about some of the programs they have for high growth startups. Andrew previously started and sold an social gaming company so it was super refreshing to talk to someone in government who understands startups and wants to make the government more helpful to startups.
I was really excited about the three programs Andrew is working on so I wanted to share them with you.
- RFP-EZ – Most relevant for startups with a working product they are currently selling.
- Small Business Investment Company (SBIC) – Most relevant for early stage investors, including venture capital funds and angel funds.
- Small Business Innovation Research (SBIR) – Most relevant for pre-product startups, especially in the hard technology and science space.
This is a program to help startups get contract work from the federal government. Government agencies needing work post their projects they need help with, startups can register as a provider, and startups can bid on the projects (screenshots here and here).
Here is also some thoughts Tim O’Reilly had on the new RFP-EZ program.
Right now there are two projects that look promising for a tech startups. One the SBA is looking for a transactional email service provider. Two the SBA is looking for a new website/content management system. (hint hint an opportunity for an influential reference customer?)
Early Stage SBIC
This is a program to help give investors more capital through matching funds raised by venture capital firms with government backed debt. For every $1 raised privately the SBIC will provide $2 of government backed capital up to $150M. (hint hint potential relief for the Series-A crunch?)
This is a program to help give research funds to startups working on hard technology with the potential for commercialization. Research solicitations comes from a wide range of federal agencies throughout the year and startups can apply for grants if they are working on one of these areas of research.
Here is a full presentation on the program with more on how it works. Also here are the open solicitations for startups. (hint hint health/science/biotech startups should take notice, here’s an interesting solicitation I found.)
If you are interested in any of those programs check out the sites to learn more information about them. Also if you want to talk to someone at the SBA directly send me a note (chris.r.mccann at gmail dot com) and I’ll try to help put you in touch with the best person.
Both events were sponsored and organized by Enterprise Lithuania, an organization owned and operated by the Ministry of Economy of the Republic of Lithuania.
I’ll have to admit, being an entrepreneur I have always been skeptical of any government involvement with the entrepreneurial ecosystem. Historically I have always taken the approach that government should leave entrepreneurs alone and let them get back to real work.
However this trip changed my view a bit. It was interesting to see the ecosystem organize themselves around these two big events and bring over 1,500 students and 200 engineers/designers to these two activities combined.
Unlike entrepreneurs, governments have to big opportunity to take the long-term view on the entrepreneurial ecosystem and selectively make a difference across the whole ecosystem.
If you work in government and are reading this, here are a few things I would do & consider if I was in your position (feel free to take these suggestions with a grain of salt):
- The entrepreneurial ecosystem in your country has to form organically from the bottom up, it can’t be created by force.
- One simple thing I would try would be to bring together all of the existing entrepreneurial leaders in your country (founders of startups, investors, community organizers, developers, immigrants starting companies, university leaders, etc) and have everyone sit down over a casual dinner with beer. Let these community leaders tell you what is needed and what’s important to them. Don’t talk just listen.
- Another simple thing I would try would be to bring together all of the existing entrepreneurial leaders in your neighboring countries and do the same as above with your own national entrepreneurial leaders. Again don’t talk, just listen.
- The last simple thing I would try would be to bring together some successful founders of your national decent who have moved outside your country (to silicon valley or elsewhere) and do the same as above. The same with before: don’t talk, just listen.
One of the most important things I feel a government can do is provide long-term connections to the entrepreneurial ecosystem which already exists in your community.
You yourself will never be able to understand what it’s like to start a company (unless you decide to start one) but you can provide the connections of people who do know what that experience is like to your citizens.
Let the community leaders be the star of the show and let them help you decide how to selectively help the entrepreneurial ecosystem in your country.
Last week I gave a talk at Cal Poly San Luis Obispo (my alma mater) about multidisciplinary learning and minimal viable products.
One of the mental models I came up with was a theoretical framework for a “Minimal Viable Product” or MVP for short. In the post I want to put my idea out there for further refinement and get some feedback on it (in MVP style :))
Lets start with some basic definitions.
I like to define a minimal viable product as the quickest and simplest way to test a product idea in the open market. The MVP can be as simple as a signup form, or first prototype, or screenshots. The most important thing about MVP’s is how quickly you can put it out there to start getting feedback from your potential customers or whom you think your customers might be.
The reason why MVP’s exist at all is because it is much easier to test your MVP to see if people want your product rather then to build a fully functional product and figure out no one really wants what you made. An MVP is a quick way to test your initial concept before starting the product process.
The mental model I came up with for a MVP is inside a “while loop” a concept from computer science. A simple definition of a while loop is a “statement of code that can repeat given a boolean statement (true or false). If this is your first time ever seeing this concept I’d also suggest checking out Khan Academy’s talk on while loops.
With the basic definitions out of the way here is my mental model for a MVP:
while Traction is not True:
Idea = Hypothesis
Experiment = Market
Traction = True or False
Idea + Experiment = Traction
If Traction = True
Return Idea, go Build_Product
Traction = False
Lets break this function down and then also explore some interesting observations that come from this function.
The main premise of a MVP is you are trying to test for “traction” which I will explain in a bit. Inside the while loop your business idea is the hypothesis you want to test and you want to test this against the market. Said another way you want to put your idea in front of who you think your customers for the idea would be.
Once you run this experiment against your idea you will see if your idea generations traction or not. The True or False inside the while loop is a Boolean statement, which means you are either going to get traction or not.
One of the most difficult parts of this function is defining what “traction” means. It’s hard because there is no exact answer, e.g. if 10 people sign up for the beta release of your product that isn’t necessarily traction. Traction is much more of a gut instinct you feel when there is genuine interest, demand, or buying intent for your idea. E.g. If you’re creating a enterprise application and a large corporation wants to sign an Letter of Intent (LOI) as soon as they see your MVP that might quality as traction.
The best definition of traction I could think of is: if the reaction from your potential is significant enough for you to be excited and motivated enough to take the next step of building the first version of the product itself. The answer will either be yes or no (True or False).
If your MVP delivers traction then you are done and you move onto the build product stage, but if your MVP does not deliver traction then you need to iterate (change) your idea and try the while loop until you find traction.
Now for 2 interesting aspects of the MVP function.
Idea vs. Market:
The reason why you need to iterate your idea and not the market is because it’s really hard to change the market conditions during a short time period. It’s much easier to change your idea and try the process again.
But if the market you’re in is rising rapidly in your favor, your idea doesn’t need to be that good and it can still pick up traction quickly. These conditions probably lead to the “Powder Keg” startups Gabriel Weinberg, the founder of DuckDuckGo, was referring to in his recent blog post. This is also probably why you see a lot of variation of startups around fast-growing markets all during a short time period e.g. all of the Groupon clones, social gaming startups, and startups in the social/local/mobile space.
All this variation, a concept from Biology, is probably a key factor in producing companies that survive in the long term (also related to survival of the fittest). This could be a whole post in itself, which I might come back to on a later day.
The Initial Idea:
I suspect the idea which gets traction and the entrepreneur decides to go forward with would follow the Physics principal of Chaos Theory. Chaos Theory is a theory in which the initial state of a system drastically affects the result in a chaotic system. You might have heard the phrase “A butterfly flapping its wings in Africa can cause hurricanes in Asia”, this is a hypothetical example from Chaos Theory.
Just like weather systems, the market is a chaotic system and your initial idea will matter a lot in determining the final outcome. This is why I believe an idea matters a lot but only in the initial state of your company. Right after the initial state other things like building product and execution matter much more than the idea itself.
Whenever I talk about MVP’s I always the same question asked repeatedly so I will answer it now rather than later.
An MVP is NOT a startup; it is Step 0 on your path to creating a startup. There are many more aspects to starting a company that I could not possibly cover in one post nor do I know them all myself. An MVP is only a tool to test the need in the marketplace before you do the hard work of building a product behind your idea.
*Also for any engineers reading this my while loop probably has some syntax errors in it. It’s not like you could ever run this function so I use the while loop mostly for conceptual purposes.