Startup Stories: Building a Minimum Viable Team

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Elevator: To get a startup going, you need three major competencies: the capability to build your product (whether it’s coding, designing shirts, etc.), the ability to sell your product, and an understanding of how to run a company. That allows you take your product to market in a relatively efficient way. Think of having those three as your Minimum Viable Team, and the farther away your founding team is from that the more you’re at risk of having the wheels fall off. The MVT is also a solid foundation to build your team on.

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After spending some serious time evaluating Rocket Listings (using the ZBM) and realizing it had promise, the next step was building the foundation to make it happen. The first thing entrepreneurs need is a Minimum Viable Team (MVT) to then build the Minimum Viable Product (MVP). The key operator in the term is “Viable.”  The three major competencies needed to be viable are the capability to build your product (whether it’s coding, designing shirts, etc.), the ability to sell your product, and an understanding of how to run a company. It’s rare to find a single founder with all three of these competencies, so there is often some headhunting to do.

The first addition to my MVT was my boss/mentor/friend Steve Blood. Having an experienced entrepreneur to mentor me through the process has been the single most important factor to getting Rocket going. He not only helped cover some of the early development expenses as an equal partner in the startup but also used his 20+ years as an entrepreneur to advise me. Steve is a sounding board for ideas, provides advice and direction, and generally filters any major decisions I make for some quality control.

There’s not always an obvious partner or mentor, but every entrepreneur should spend as long as it takes to find a willing advisor who understands the entrepreneurial process. When Brighter Planet was getting started by Andy Rossmeissl and Jake Whitcomb in Middlebury, it wasn’t until Pieter Schiller, a Midd grad with tons of expertise in the startup world, came on as an advisor and demanded weekly updates that Andy and Jake really made progress. If you’re not sure where to find a mentor, check out this great post from Dave Lerner. A great mentor and advisor will provide more value than I can list here, but at the very least they’re another, more experienced opinion on any key decisions you need to make.

I was lucky enough that Steve not only provided the steps for me to get going, but he also came in as a partner and provided some founder’s capital to pay for development of the site. He is the CTO for an awesome tech company, Kohort, so he provided a ton of technical expertise and helped me manage the developer he set me up with. Essentially, since I wasn’t able to build the product myself, he filled that gap in skills, finding a developer, and covering the costs. We were (and still are) the two halves of the MVT.

Everyone’s experience will be very different, but the best advice I can give is to be very honest with yourself about your strengths and shortcomings. Often, non-technical founders spend a ton of time searching for a technical co-founder, which also puts the power structure out of balance early on because it is clear that the non-technical founder can’t get anywhere without a technical founder’s help. This is especially true at Middlebury, where there is a glut of technical talent. Another situation I’ve seen is technical founders underestimating their need for a co-founder who has experience and skills in the sales side. They seem to assume that since they’ve learned how to code, they can easily learn how to sell and raise money. In my experience, it’s better to separate the roles but still have crossover. More on that later, but a company should be structured so that everyone, including you, can spend the majority of their time on their core competencies.

With a vetted idea and a balanced team, the next move is to start building the product.

Startup Stories: Evaluating an Idea

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Elevator: Use a formal business model to think through all the facets of a business and then bounce it off as many qualified people as you can. Ask them to blast holes in it, refine it until it holds some water, and then you’re ready to start executing.

I got the idea for Rocket Listings about a year ago when I spent the summer doing a bit of work for a startup called Kohort, while doing some other work for a crazy entrepreneur named Steve Blood, Kohort’s CTO. I had an idea to make a better Craigslist, but realized that everyone already uses Craigslist for a reason, so decided the goal of Rocket Listings would be to make Craigslist and other existing classifieds sites better.

I’ve evaluated hundreds of businesses by now, some for school, some professionally, and many just for fun. Every time I use the same business model, called the Zero Business Model (ZBM), to evaluate the idea and see if I truly understand what the business is about or have thought a business idea through. It was created by Michael Claudon, a former professor at Middlebury, who pioneered many of the awesome entrepreneurial programs at Middlebury. I had the pleasure of taking an number of classes with him, including Middlebury Solutions Group, where he gave us the ZBM. It has proven incredibly valuable to me and the first couple parts are always the hardest.

Very appropriately, the first part of the ZBM is defining your customer. Sometimes this can feel frustrating, because you don’t want to get so specific and granular, but it really tests if you have thought your product through. For Rocket, we realized that we had a lot of potential customers, so we brainstormed every possible customer we could think of and put them on a grid with potential revenue, barriers to entry, and risk (to exposing our business model to competitors) to figure out who our ideal starting customers were.

Measuring the Market and Understanding the Competitive Landscape are fairly clear, but I would just say underestimate the market size and overestimate the competitive landscape. Usually, the whole point of a company is to differentiate itself from competitors, so too many people say “we have no competitors!!!” and then move on. Obviously you didn’t create a company that does the exact same thing as your competitors, so think about who your closest substitutes are and if you are actually providing a faster, better, or cheaper service.

The rest of the ZBM and how we applied it to Rocket Listings will come up later as I go through the other parts of starting a business, but those are the most important three parts to evaluating an idea in the first place. I don’t remember where I first heard that it is 3% Idea, 97% Execution, but that seems about right in my experience. The rest of the ZBM is more about execution than evaluating the idea.

The final thing I’ll say about evaluating a business idea is a metaphor I heard at a summer program at Tuck Business School. The entrepreneurship prof there said that too many entrepreneurs treat their business idea like a baby, shielding it from criticism, insisting it is perfect, and making sure it is carefully nurtured. He said that you should take that baby, whack it in the head a few times, throw it in the pool, and then leave it five miles out in the forest. If it crawls back, then it’s an idea worth taking to the next level. This means shooting out your initial plan to as many qualified eyes as you can. I say qualified, because there is no better way to get frustrated and waste time then talking to people who have no idea about startups. Shoot it to people that have worked on startups themselves, have consulted startups, or are VC’s or angel investors and ask them to blast holes in it. That will allow you to refine the idea until it is worth taking on and executing.  The next post will be about building the team to do it.

Startup Stories: Early Days

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Rocket Listings is now in an alpha state at our dev site, we are moved into our awesome office in Burlington (pictured above), and have a solid staff of six people. The past couple months have been crazy, so I thought it would be worth doing some posts on things I’ve picked up from the process. The major ones I wasn’t expecting to spend so much time on were things like hiring, setting up payroll, bookkeeping, legal, office space, setting up a bank account, wire transfers, corporate formation, finding PM software, CRM software, social media accounts, etc.

I’m going to try and write a fairly helpful guide for this process for anyone going through it themselves and make a checklist to make sure everything is getting done that needs to be. The first thing on the checklist is to make absolutely sure you are willing to go through with the whole process and not take any shortcuts. Having your first employee fill out a W-4 when they arrive or using Project Management software when there is only two of you might seem like an inefficient way to spend your time early on, but it all matters and is worth doing right the first time. You need to have the right processes and a solid foundation to build your business on, so that when you are hiring your 28th employee you don’t get audited because you aren’t following the proper state regulations.

If you are willing to take the time, I’ll do my best to lay out the right steps to make sure that you are prepared to grow your startup.

Why start a business in college

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I know there are quite a few sites out there already that list why college is a great time to start a business. I haven’t found any of these lists from any actual entrepreneurs in college, so thought I would add one of my own.

  1. Low downside - If you fail in college, you lose whatever small amount of money you put into plus the time it took. Overall, that’s a very low cost. You aren’t going to get kicked out on the street, you don’t need to feed your family, and you aren’t going to suffer much damage to your reputation.
  2. Huge upside – If you’re business succeeds in college, depending on the scale of the business and your definition of success, you are either making a nice little side income or you are blowing up and can consider dropping out.
  3. Learn some amazing skills - I know that there is a huge range of entrepreneurial support in colleges, from full on programs to just one small student club, but either way you stand to learn a huge amount from starting a business that you can’t learn anywhere else.
  4. Looks great on a resume - How many students do you figure have your GPA or higher? How many of those can say they started their own business, whether it failed or not?

If you’re on the fence, college is a great time to give a business idea a try. It’s almost all upside and you’ll have fun doing it.

To drop out or not

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A good friend recently asked me what whether or not I thought it would be worth him dropping out of Middlebury to work as a co-founder on a funded startup. I had to think about this question a fair amount myself, so thought it would be a good topic for a blog post.

It’s easy to think up some names of successful entrepreneurs who have dropped out, most recently Mark Zuckerberg and most famously Bill Gates. It would be crazy to think that just because they did it so successfully anyone can do it, but it certainly does show that two very very smart guys decided dropping out would be a good idea.

Even with these shining examples, it obviously still goes on a case by case basis. My first piece of advice is don’t drop out if you aren’t funded or until you get funded. Spend as much time on your startup as you can and try to get it to a point where it is ready for investment but don’t drop out yet.

You can also still easily seek investment while still in school, just be prepared to tell investors that you are willing to drop out if they fund you. If you get funded, I think the choice is easy: drop-out and focus on your startup.

I feel this way for a number of reasons. 1) You can’t be funded and still be in school, you just don’t have the time to put into your startup that your investors want. 2) Getting investment is huge validation for your idea, so it might actually have some legs. 3) You don’t need to drop out and go back to your parents house, you can actually get an office and have a real go at starting your company. 4) The time window to get a college education is going to be there for the next 50 years of your life. Middlebury lets you come back anytime in the next 10 years and pick up right where you left off. The time window for your startup to be successful is infinitely smaller (it might already be too late), so drop out and have a shot at it.

The last reason is the most important to me, and reminded me of a great quote from Timothy Ferriss that I pulled from his book 4-Hour Workweek for my elevator books summary:

For all of the most important things in life, the timing always sucks. Waiting for a good time to quit your job? The stars will never align and the traffic lights of life will never be all green at the same time. The universe doesn’t conspire against you, but it doesn’t go out of its way to line up the the pins either.

Pro and con lists are just as bad. If it’s important to you and you want to do it “eventually”, just do it and correct course along the way.

I think that hits it spot on for this topic. As a side note, I told investors in the fall that I would be completely happy to drop out if I received investment. As it turns out, I’ll do my main raise for the start of the summer and then just take a couple classes in the fall while still working full-time. I do think that it was smart to let investors know I would be willing to dropout because it signalled my believe and commitment to the idea.

So if you have an idea and are asking for investment, let them know you’re prepared to drop out. If you get investment, drop out and take advantage of the opportunity now, school can wait.

Elevator Books: The 4-Hour Workweek by Timothy Ferriss

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Book: The 4-Hour Workweek: Expanded and Updated by Timothy Ferriss

Rating: 0 (all ratings based on the binary system of must read or not)

In a sentence: The first chapter has some solid advice, but overall there is a better source for each subject he tries to tackle.

Elevator style:

*None of the content is my own and is solely owned by Timothy Ferriss and Crown Archetype Publishing

Alternating periods of activity and rest is necessary to survive, let alone thrive. Capacity, interest, and mental endurance all wax and wane.

For all of the most important things in life, the timing always sucks. Waiting for a good time to quit your job? The stars will never align and the traffic lights of life will never be all green at the same time. The universe doesn’t conspire against you, but it doesn’t go out of its way to line up the the pins either.

Pro and con lists are just as bad. If it’s important to you and you want to do it “eventually”, just do it and correct course along the way.

Limit tasks to the important to shorten work time (80/20). Shorten work time to limit tasks to the important (Parkinson’s Law). 

Meetings are an addictive, highly self-indulgent activity that corporations and other organizations habitually engage in only because they cannot actually masturbate. – DAVE BARRY, Pulitzer Prize-winning American humorist

Never automate something that can eliminated, and never delegate something that can otherwise be automated or streamlined.

It is more profitable to be a big fish in a small pond than a small undefined fish in a big pond.

Elevator Books: Crush it!: Why NOW Is The Time To Cash In on Your Passion by Gary Vaynerchuck

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Book: Crush it!: Why NOW Is The Time To Cash In on Your Passion by Gary Vaynerchuck

Rating: 1 (all ratings done on a binary system of must read or not)

In a sentence: Could be a bit more concise in spots, but because of some awesome insights and the fact the he is the first author to really seem to grasp the importance of the Internet, social media, and personal branding, it’s a must read.

Elevator style:

* None of the content below is my own and is the property of Gary Vaynerchuck and Harper Studio.

Well, my secret is that I live by three pretty simple rules: Love your family. Work superhard. Live your passion.

It’s never a bad time to start a business unless you’re starting a mediocre business. I think economic downturns represent a huge opportunity for everyone to get their focus on and start to crush it.

Everyone-EVERYONE-needs to start thinking of themselves of as a brand. It is no longer an option; it is a necessity.

Skills are cheap, passion is priceless.

Storytelling is by far the most underrated skill in business.

The thing that people don’t realize is that in today’s world your business and your personal brand need to be one and the same, whether you’re selling organic fish food or financial advice or just your opinion.

No matter how you shape and color your personal brand, honesty has got to be at your core.

Your latest tweet and comment on Facebook and your most recent blog post? That’s your resume now.

My feeling is that no matter how much you like your job, you should aim to leave it and grow your own brand and business or partner with someone to do so, because as long as you’re working someone else you will never be living entirely true to yourself and your passion. That said, I will never tell anyone to quit their job, especially if they’ve got other people to support.

If you’re not using Twitter because you’re in the camp that believes it’s stupid, you’re going to lose out. It doesn’t matter if you think it’s stupid, it’s free communication.

I want to share with you the best business tweet of all time: “What can I do for you?” You’ll be amazed at the response you get. You’re in business to serve your community. Don’t ever forget it.

Fifteen years ago you could have had a rock-solid idea of your DNA and your passion, but there was a billion to one chance of you actually crushing it in business-the platforms and channels were just too narrow guarded by some pretty tight gatekeepers. Now we can take advantage of the explosion of tremendous, free digital platforms on the Internet, which are also making the gatekeepers more and more irrelevant.

Anything insane has a price. If you’re serious about building your personal brand, there will be no time for Wii.

The thing is, if you’re living your passion, you’re going to want to be consumed by your work.

Single best marketing strategy ever: CARE (I love this)
We’re all in the public eye now, swimming around in a clear glass fish bowl of our own making. With every e-mail and video and blog post and tweet and status update, we add to the real-time documentary of our lives.

This is why every decision I make is weighed in terms of currency and legacy. Will this business deal make me money? Yes? Good. Will I be proud of how I made that money? Yes? Okay, then, let’s do this. If the answer is no, I don’t go there, ever. Legacy always wins.

If there is any message I want you to take away, it’s that true success-financial, personal, and professional-lies above all in loving your family, working hard, and living your passion.