Hi - my name is Alex McClafferty thanks for having me here - I'm really excited to talk to you guys. Now before we get started… who here has heard of Eric Ries and the Lean Startup? And who here wants to start their own business? *** clap hands *** alright I came to the right place if you have any questions During this presentation – please interrupt me. This isnt going to be a boring lecture that puts you to sleep - it’s a discussion.
A few years ago I was just like you I was a working class man. paying for an education a good university educatioin Sporting a ridiculous moustache – this was for movember, by the way I was one of those guys who is always going to start a business and million ideas that never followed through all the way with any of them. I moved from Australia to America in May last year and said goodbye to corporate slavery and hello to startups.
Here’s some background about me. *** read slide *** I completed my MBA in 2012 but throughout my professional career and education I knew that I wanted to be a entrepreneur. i've worked as a call centre sales agent a call centre team leader a financial planner a business analyst a project manager. With all those titles you think that I'll have some sort of technical background and I'm gonna stand up here and tell you about my amazing app is keeping Jack Dorsey and Even Speigel awake at night Unfortunately I'm not that smart, but I had co-founded a few businesses that are doing OK
The business I co-founded is called WP curve We provide 24x7 WordPress support to business owners. In 7 months, we have signed up 210 customers and as of right now, are generating $11.900 in monthly recurring revenue. This pays me a $50,000 salary and allows me to work on what I want, when I want! WP Curve was born as a lean startup and although it wasn’t my idea, I will show you how my co-founder validated it in one week.
Today I Wanna help you with three things. The first thing is understanding what a lean start up is. We’ll go through the buzzwords that you need to know if you’re going to talk the talk. The second thing I Wanna help you with is creating your very own MVP. I also call this ghetto testing and it's really fast way to understand if there is both a need and a market for your product. I’ll also share a case study from our business to show you how WP Curve was validated, how I met your mother… I mean my co-founder and the lean startup nearly killed him.
Let’s get through some boring definitions first. If you hear the word MVP – it means minimum viable product. Some people get caught up with this because it’s subjective. What’s an MVP? As your professor often says - it depends. To some founders it might be a working prototype of the application that they can share with friends in a small beta group. For more lazy people just like me, it’s a really simple landing page with some copy and a pay now button. You might laugh and think about how ghetto this is but trust me, this is the quickest way to find out if people will actually paid your service This point is so important that I need to repeat you need to find out if people are going to pay for your service and this is where people get caught up with talk about validation.
Everyone's has got a million dollar start-up idea. When you ask your friends and family for feedback – they will support you, your business and your ideas. This is not validation. In my opinion – validation comes from people opening the wallets and pay you that's when you understand if your business idea is validated.
There are two validation methods. Let’s talk about feels good man valdation first. feels good man validation means that you ask peoples opinions on what they think about your business. this can include customer surveys it can include customer development interviews and surveys. The problem with indirect validation is that it'll make you feel really good, will make you feel like you're making progress. Most people I know can’t write an algorithm on their window, borrow some money and become a billionaire. Maybe Mark Zuckerberg, but for our purposes let’s focus on finding one paying customer.
REAL validation means that you seak to potential customers and ask them if they will pay for your service. Then you ask them to give you money for your product or service. You can speak to people face-to-face on the phone on Skype or you can create a landing page for your product or service. Send it some qualified traffic and let’s see if we have a business.
Let’s talk about is a pivot. This is what people do when they reach the point the oh shit point in their MVP. It’s a really nice way of saying you messed up and that you need to do something different to keep the business alive. If you want to be an entrepreneur, then get ready for some failures and pivots. People pivot for a number of reasons – maybe they haven't found a market for their product., Maybe their service is not really servicing anyone Pivoting is not a bad thing and you shouldn't feel that it is. You should however, try to get to a pivot quickly. You do this by writing a list of your assumptions, testing them within a defined timeframe and working of data. Believe me – I spent 4 months of my life when we started with WP Curve trying to sell with web agencies because we THOUGHT there was a market. Pivoting is a good thing. Move quick.
The next definition is something I love… vanity metrics. To me that vanity metrics are anything other than dollars. Retweets, favourites and facebook likes do not pay the bills. The same thing goes for media coverage. WE’ve been featured in Lifehacker Australia and it sent us zero customers. We’ve gone viral on Hacker News and it sent us zero customers. Remember my co-founder Dan made it onto mashable and the next web… and it sent him zero customers. You get a ton of traffic that bounces off your homepage. high traffic does not equal dollars! This concludes the your lean startup vocabulary lesson.
Now I Wanna take you through what happened to my co-founder when he strictly followed the lean startup principles from Eric Ries book. Dan built a few different prototypes of his software, informly. His original idea for informally was to create a dashboard application that brought together all of your website metrics. Dan did everything by the book. Literally. He built a prelaunch list of FOUR THOUSAND people. He made it onto the The Next Web and Mashable. His idea was featured on This Week in Startups. He did customer development. Ran surveys. Had dozens of customers tell him how excited they were to pay for his product. Then – he moved from a free version to a paid version. How many people do you think paid out of 4000?
15. Not 1500. Not 150. Not 50. FIFTEEN out of 4000. There are a number of things that he got wrong with his product. He targeted web agencies, who are notoriously frugal. He pivoted too many times and it became unclear what his service did. THE BIGGEST MISTAKE? Using indirect validation. Remember Borat – who says very nice? I’ll take Benjamin Franklin over Borat any day. That is how you have GREAT SUCCESS! In startups. But it wasn’t all bad.
Dan had a few bottles of wine and wrote about his experience using the lean startup methodology. You can find it on startupchat.co If you go to the comments, you’ll see some comments from me. I saw that Dan had an idea about building a 24 / 7 wordpress support desk. I wanted to help. I offered to do it for free. 5 days later, I was Dan’s co-founder. Dan had used the lean startup principles the right way. He had paying customers. He had a great idea. He had a real business.
Now, lets talk about validating your own business idea. Here’s a Sample of a business idea that I validated back when I was in my wantrepreneur days. I was sitting on the bus and I noticed a man playing on this phone that had a cracked screen- I thought nothing of it and I went about my boring bus ride to corporate slavery. Iwas coming home that very same day and then I saw another lady playing on the bus with a cracked screen phone. now I know I sound like a stalker, but I promise I wasn’t looking over people’s shoulders to see if they were playing angry birds. What I was actually noticing was a problem. people have cracked phone screens but they haven't fixed them yet. WHY? Too expensive? Too inconvenient? Are they lazy? I started to do some research is what I found at phone a cracked screen phone in Australia will cost you $250 to get fixed by apple or Samsung. It can take aweek to get your phone back. I ran some numbers and wondered.. How much can a piece of glass, some glue, screws and maybe 10 minutes of labour cost. theres gotta be a better way! I had a startup idea.
Unfortunately I did it the wrong way. I looked around online and saw the existing providers looked shady and kind of dodgy. I figured hey I can validate if there's a business idea here by setting up a learning page for free using weeks, using the free $75 AdWords voucher and see if I get some bites. It cost me $15 to get started with Wix. Within three days of running this as lean startup, five people filled out the contact form. Oops. Vanity metrics strike again. I didn’t even have a PAY NOW button. I was testing the wrong thing. People will always enquire about having their phone fixed. But maybe 1 in 5, 1 in 10 or 1 in 20 would actually pay. I’ll never know. There was one other problem with that business idea – I had no skills to fix phones and no hardware to do it. But hey – if you need a lean startup – you can steal that idea.
The right way When my co-founder came up with the idea for24 seven WordPress support before the exact same process he spent three hours putting together a nice looking landing page. He added a paypal pay now button and posted the link and indeed some details about his service online to a number of private communities where people with small businesses help each other within 7 days, he had 10 paid customers. That’s REAL start-up validation. The best part is that he actually did ask people what they thought of the idea and nearly everyone said it was a silly idea and wouldn’t work. Money talks and bullshit walks
Here’s my simple formula to creatng your own lean startup. *** Read formula and elaborate ** ** If you’re building the next facebook or twitter, then its going to work a little bit differently. But I haven’t build an app – I’ve built a business that pays us monthly recurring revenue and allows us to do what we want. Here’s something to remember when you build your business. People’s money has a lot more value than their opinions. The twist to this story is that I’ve never met my co-founder face to face and we’ve been working on this business together for 7 months. Most people thought Dan’s wordpress support service idea was crazy. Most people thought i was crazy for working with Dan. Most people will think you are crazy when you say goodbye to corporate slavery and hello to being an entrepeneur. Let people have their opinions – you should always do what makes you happy and fulffiled. I was demotivated when I worked a desk job and used to leave early, half do things and find ways to cut corners. Now I work 70+ hours a week and I love every single second of it. The best part is I get to come here and share what I’ve learned with you guys. Thanks for listening – now are there questions?
The Lean startup in practice by Alex McClafferty
A practical guide to the
by Alex McClafferty
audio available at startupchat.co/57