So what does that mean? That means that I’m volunteering at least two long weekends a year to be shipped around the world to help moderate and facilitate a Startup Weekend in your city – so contact me or tell SW HQ you want me to rock it with you! I’m looking very much forward to meeting so many new awesome people!
And I’m losing my facilitator virginity this very weekend at the awesome Startup Weekend Leipzig (and if you HURRY there’s a very few tickets still left). So see you in Leipzig or at a Startup Weekend near YOU! :)
An the winners are…
Let’s play Half-Baked – The ice breaker that gets you in the mood
Look who I met! Magento co-founder Yoav Kutner was one of the Startup Weekend Leipzig speakers
Recently I was honored and delighted to be invited to the Rheinische Fachhochschule – the University of Applied Sciences – Cologne to share my Startup Lessons Learned and introduce the students to The Lean Startup.
Here are the slides I used:
Students practicing using the Business Model Canvas:
If you want to book me too, shoot me an email and let’s talk.
I have the greatest respect for Mark Suster as an entrepreneur and investor. I really treasure his insights. I also have great respect for the theories and methodologies of “competing against non-consumption and “jobs to be done” of Clayton M. Christensen. I teach them to startup founders and corporations.
Let me be crystal clear: When I talk about the benefits of crowd funding for bootstrapping and validation, I’m talking only about crowd funding without selling equity.
I argue selling your actual product or service is a great way to bootstrap and validate your business, in effect using crowd funding as a channel for taking pre-orders.
I make a clear distinction between trying to crowd fund an idea or a vision and crowd funding a real product or service. That is to say, I think there is a real difference between selling your product or service (asking in effect the market to pay for it and help you validate if they will buy it) as the reward or perk you offer instead of offering ephemeral perks and rewards not directly related to your product or service (which will not help you validate if people will buy it).
“If I had asked people what they wanted, they would have said faster horses.” -Henry Ford
“Disruption happens when companies use technology to help customers “achieve what they already had been trying to do.”” -Clayton Christensen
The theory simply asks, “What job your product is hired to do?” And if you want your customers to switch products you need to ask, “Why would they ‘fire’ the other product and ‘hire’ yours?”
Competing Against Non-Consumption (disruptive innovation)
True disruption occurs when companies compete against non-consumption. “A new-market disruption is an innovation that enables a larger population of people, who previously lacked the money or skill, now to begin buying and using a product and doing the job for themselves,” – Clayton M. Christensen.
If you’re an upstart chasing after the non-consumer, the great news is that your audience is non-discriminating. They want something easy to use and they want it cheap. They’re not expecting that same level of quality and performance. “Because,” says Clayton M. Christensen, “something is so much better than nothing.”
(Business Innovation Factory, 30.01.2006)
I think it’s obvious that Crowd Funding fits the properties of a disruptive innovation and I don’t think anyone is arguing otherwise.
However, (or perhaps not that surprising as Suster is already vested in the world view of the incumbent as a VC) Suster and Christensen seem to ignore the disruptive power of crowd funding as seen from the side of the table of the entrepreneur.
I sense the classic argument we always hear from the incumbents in the talk between Suster and Christensen: It always seem to revert to the argument of quality – as if that is all there would be too it.
We’ve heard this before.
Remember the records industry? “Who would like mp3 files when you can have quality audio on CDs?” Turns out the story was rather people want the freedom of choice to select just the good songs without the 10 other crap fillers on a CD, and would quite eagerly sacrifice audio quality for the ability – hence Napster was wildly successful, hence they sued Napster out of the world BUT without taking over the space of Napster, still not recognizing what people want, what the new opportunity offered them.
And we’ve seen how this turned out before.
Instead of seizing the opportunity for themselves, iTunes, Last FM, Spotify, Amazon, Pandora et al came in and screwed the records industry out of the opportunity – and no one was sorry for their loss but themselves.
And it’s the same old story, same old arguments which are today being bandied about in the discourse about with Massive Open Online Course (MOOC), but that’s a different albeit highly related discussion. Check out Clay Shirky’s post on MOOCs for more on that topic.
Christensen teaches us about the concepts of “jobs to be done” and “competing against non-consumption”. As far as I can tell, Crowd Funding without selling equity is doing both for the entrepreneur very well.
To the best of my knowledge, crowd funding without selling equity is:
Getting the job done for entrepreneurs of getting early stage funding, or perhaps more precisely validating their product in the marketplace (explicitly or implicitly) without substantial financial risks and without taking a lot of time producing something first that perhaps the market doesn’t want (negating risk and time to market or failure for the entrepreneurs).
Enabling entrepreneurs that otherwise would not get the attention – let alone the funding – of a VC, bank or angel, effectively competing against non-consumption (lower barrier to entry for entrepreneurs).
A highly valid MVP (Minimal Viable Product) when used correctly.
As an entrepreneur, you no longer have to ask the incumbent private equity gatekeepers for permission to play. You now have the option to walk it alone.
If you fail, there’s little to no downside. It’s a learning experience. You’ve only lost face. Get used to it! Now pick yourself up and play again. And again.
If you’re successful, maybe you won’t even need an investor at all for scaling or at least you’ll have revenue from sales as a bargaining chip to get the term sheet you want.
Am I saying that the VCs will go the way of the Dodo? No. The way of the record companies? Most likely.
VCs will have their place and will still be a highly valid or even the only right play for some types of ventures, just like the elite schools of Stanford and Harvard will not go out of business because of MOOCs.
I am saying that crowd funding without selling equity is a powerful disruptive tool for entrepreneurs.
It is enabling many more entrepreneurs to succeed that wouldn’t otherwise be able to play.
And it will enable many more entrepreneurs to FAIL – and fast, before they have spent all their savings, bet the barn, lost their spouse and spent a good part of their life building something that no one wants.
And that’s all good:
For the VCs that will be able to fund more validated businesses and proven entrepreneurs instead of throwing spaghetti on the wall to see if it sticks (perhaps at the cost of less proprietary deal-flow).
For the entrepreneurs that get to play without asking for permission and again and again ad infinitum with little or no cost and risk to learn, learn, learn.
And for the world that will hopefully see more value generated, more new jobs as a result of the lower barriers to entry for more people.
Do listen to anybody that tries to tell you otherwise – just don’t take their advice. You no longer need their permission. JFDI.
It seems to me that he doesn’t know how crowd funding without selling equity (e.g. Kickstarter and IndieGoGo) works – or deliberately wants to discredit the incredibly powerful new tool available to entrepreneurs for validating ideas and product – or perhaps more likely he just lost track of the evolution of entrepreneurial methodologies since graduating.
(Kudos to him on the polemic page impressions link bait material, though.)
These are my highly opinionated thoughts on his three outrageous claims in the Inc. article.
Claim 1. “It [Crowd Funding] makes it too easy to kid yourself”
– In which he argues for the writing of a business plan (!) instead.
1. Crowd Funding without selling equity is bootstrapping.
There’s nothing more sobering and honest feedback than direct contact with the market. Crowd funding WITHOUT selling equity can be used as a valid MVP (Minimal Viable Product) that will help you validate your thesis that if you build it, they will indeed come – AND buy.
Just don’t build and produce anything until you’ve received pre-orders that will cover the production at cost or better. Obviously. Crowd Funding without equity IS a valid bootstrapping strategy. Make no mistake about it.
Who cares about business plans? No business plan ever survives first contact with a customer anyways. Business plans can only work if you are executing a known and validated business model. That’s the polar opposite of a startup which sole purpose it is to search for a scalable and repeatable business model. No magical business plan is ever going to help you find it. Validating your product in the market will.
I do personally recommend writing a very basic business plan as an educational exercise to arrive at an back of the envelope estimate of how much money is going to come in and go out and where – and then burn it! It’s not an operational guide nor a road map. It’s a work of fiction, a fantasy, a guess.
Isn’t it a no-brainer that as long as you can sell your shizzle, you should try to make as many pre-orders as you can before production and shipping, at least enough to make it cover your cost and perhaps contain some profit to channel into marketing of the second batch? Isn’t crowd funding a perfect viable channel for facilitating such pre-orders?
If you can’t sell enough to just break even, isn’t that a clear sign that maybe you’re not solving a problem that the market cares enough about to pay you? Or that you are doing a crappy job at describing the problem you’re solving and the solution you’re offering? That you should probably be doing something differently?
Isn’t crowd funding an awesome low-risk, low-cost channel to test the viability of your business idea, to help the market find you and fail or succeed faster?
And so frigging what if you don’t make your funding goals? At least you failed before you committed significant amounts of your or other friends, fools or family’s money – let alone an investor’s – bet the barn and lost your life partner.
And hopefully you learned more about what you should be selling instead by getting invaluable feedback directly from the market. Consider your time spent raising crowd funding a considerable investment in your personal entrepreneurial education.
And consider this: Every time you fail at crowd funding, you get to play again and again and again ad nauseam, ad infinitum – without going bankrupt or having to beg private equity funds for the privilege to play.
Claim 2: “It [Crowd Funding] isolates you from people who can actually help you”
– In wich he argues you need feedback, permission and validation from investors, not the actual market and your actual potential customers.
2. An investor is a commodity, an outstanding entrepreneur is the prize.
If you as an entrepreneur can show a VC or an angel how you already validated your business and how you’re already making money, you can pretty much shop around for the investor you want to a price advantageous to you.
Basically, you’ll have the best bargaining chip available to any entrepreneur in your pocket. In fact, you might even find out that you don’t need an investor at all to scale your business, that you can build on actual pre-orders and sales yourself.
I call hot steaming bullshit on the ridiculous assumption that savvy VCs and Angels would be less interested in you if you crowd fund (read: bootstrap) your startup at an early stage.
In fact I’ll claim the polar opposite: Crowd funding provides you with a new channel to get found. If you’re able to show traction and sales – they’ll come knocking, or at least it will help get you through most doors.
As an anecdotal proof, I myself have been approached by tier one Silicon Valley investors as a direct consequence of crowd funding projects.
I was honored and delighted to be invited to moderate a day of discussing if entrepreneurship is something you need to be born with or something you can nurture, something you can teach everybody, at the Maastricht Week of Entrepreneurship 2013 and interview the father of the Lean Startup, Steve Blank live on skype in front of an full university auditorium.
The Maastricht Week of Entrepreneurship is Maastricht’s largest entrepreneurship event. Happening yearly, the ME Week brings together over 200 students and entrepreneurs for an exciting 5 day program highlighted by workshops, presentations and lectures. Participants get inspired, network, share practices, and ask for advice.
Here’s a fun little excerpt from the interview with Steve Blank. He was kind enough to help us send greetings to Startup Weekend Giza in Egypt:
Moderating the panel debate on entrepreneurship, nature vs nurture
As a bonus for you, I recorded this interesting talk by Paul Campbell on corporate innovation and entrepreneurship:
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