English: John Lasseter, Chief Creative Officer of Pixar and Academy Award winning director of, Toy Story, reviews the 550 films on the National Film Registry with These Amazing Shadows co-producer, Barbara Grandvoinet. (Photo credit: Wikipedia)
Charlie Rose recently did an interview with John Lasseter, a founder of Pixar (and summarized in the New York Times). The interview focused on Pixar's in-house theory: be as wrong as fast as you can. Lasseter said, that mistakes are an inevitable part of the creative process, so get right down to it and start making them.
Brilliant thinking, and it struck me that startups should follow the same advice. But the problem is: HOW DO YOU KNOW WHAT MISTAKES TO MAKE FAST? Here are a few thoughts on the process of making startup mistakes.
1. Figure out who your customers will be--in every startup I have been involved with this has been the key question to determine up front. Who has the pain points? Are they willing to pay (on an ongoing basis) to solve those problems? What will keep them coming back for more? Easy questions to ask, but tough ones to answer. But you better figure it out...and fast. At Placester, we originally thought that our customers would be landlords and that we would help them rent, manage and sell their properties. But when we applied the "show me the money" rule, we realized that real estate agents had the biggest need for an on-line presence and also controlled significant advertising money. We may get around to the property owners later, but the agents had the biggest incentive to make a rental or sale happen, because they were only paid on commission.
2. Be selective in team building--not only will these people make or break your startup, you have to live with them 12 hours or more a day. Compatibility is critical and shared passion a key. In one case, a co-founder moved back from his beloved Europe to the US to help run a startup. That shows real passion and dedication. In another case, a co-founder ended up with significant ownership, but other career ideas. We were lucky to have an amicable "return of founder equity" in that case.
3. Only have committed investors--I have seen too many startups take dumb money, either from investors with little knowledge of the space, or investors without access to sufficient funds to carry the company through the development process. It's easy to grab any money coming your way when you desperately need it, but if those investors cannot help you either be successful (via mentoring and industry networks) or gain entrance to the venture capital world, the burden of driving the company forward will fall totally on your shoulders. Cold calling VC's is no fun and its very difficult to get anyone to listen to you without an introduction. So if Uncle Frank is an early investor, that's fine as long as you quickly get a cadre of experienced investors as well to carry you forward.
Finally, celebrate mistakes. Stand up in front of the team and say " I just wasted a couple of days looking at the wrong marketing/HR/etc. strategy!" Your team will learn from your candor and be willing to do the same when they screw up. It also saves someone trying to "win at the crap tables by betting their house after they lost all their money"--or sticking to a solution path that is not working.
The Checklist, a 2007 article in the New Yorker, has become a must read in the start up community. Faced with the high degree of complexity needed to make a new company successful, entrepreneurs have turned to constructing elaborate check lists on how to manage growth. You can read the longer book, The Checklist Manifesto, but gain the same insights from the article, unless you need a lot of help constructing a checklist....
The "Checklist Manifesto" was written by Atul Gawande, a doctor and writer for the New Yorker. Its premise: A simple checklist can help people manage complex situations. Gawande uses a number of examples across a variety of industries, from medicine, technology and even disaster relief to illustrate his point.
I am always encouraging my entrepreneurs to work to a list of priorities. There are so many things you could do when building a company, but three quarters of them are probably superfluous or distracting from fundamental goals.
English: City seal of Detroit, Michigan. (Photo credit: Wikipedia)
According to a recent article in Xconomy by Sarah Schmid, moving to on-demand bus services is the wave of the future, mimicing FedEx and UPS on package pickup. Here it is:
"Gail Lanzon is clearly having the time of her life. Though she drives a school bus in tiny Clintondale, MI, during the week, her weekend nights belong to Detroit. It’s the last Friday of summer, and downtown is a zoo. The International Jazz Festival is going on in Hart Plaza, and the Tigers game has just ended, meaning Comerica Park has just begun to disgorge hoards of blue-and-orange clad suburbanites.
As fireworks bloom in the night sky over Comerica, we’re idling in a Detroit Bus Company bus across the street, in front of the Fox Theatre, and Lanzon is driving. A Detroit Department of Transportation bus has jumped the curb a half block in front of us, and an ambulance puts on its flashers so the bus can back up without getting rammed by impatient drivers. “Oh my God, are you kidding me?” Lanzon says with exasperation. Andy Didorosi, the 25-year-old founder of the Detroit Bus Company and Lanzon’s patient co-pilot, passenger ambassador, and all-around transit cheerleader, turns to me and says with pride, “Gail drives this thing like a Corvette.”
“This thing” would be a 1995 Ford Bluebird bus known as Bettis, which for Pittsburgh Steelers fans is self-explanatory. (It’s named after Detroit native Jerome Bettis, a running back better known by his nickname: The Bus.) It runs on biodiesel and sports a spray-painted mural by a local artist on the side. Inside, there’s a mounted iPad playing tunes off Spotify. Bettis is one of two Detroit Bus Company rigs out on the road this busy Labor Day weekend, which also counts music festivals in Hamtramck and Royal Oak among its offerings.
This is also the first night of the Detroit Bus Company’s new on-demand method of delivery. “Routes are super old hat,” Didorosi says. “We switched to on-demand—we were taking data all along on where people were riding. It opened the range within the city and every time the bus is parked, we save money.”
Instead of one bus traveling all night between downtown and the immediate suburbs to the north, Royal Oak and Ferndale, and another bus doing a downtown “party loop,” riders can now call for a ride from anywhere in a “green zone” that encompasses the neighborhoods of Woodbridge, Corktown, Midtown, downtown, Eastern Market, and Lafayette Park/East Jefferson. For $5 per person, cash or credit, they can get a ride to anywhere within this green zone or to suburban drop-off points. The buses run on the weekends from 6:00 p.m. to 2:30 a.m.
Didorosi describes his self-funded startup as “the bus company built on the back of social media.” Though it’s only been in operation since June, it already has 2,746 likes on Facebook and 472 followers on Twitter. His clientele comes to him almost entirely via word-of-mouth, and he has already purchased three more buses—one of which may be running as soon as next weekend—in the hopes of expanding to more suburbs like Birmingham and running buses during the day.
Didorosi created the Detroit Bus Company as a reaction to Detroit’s well-known public transportation issues. In short: The buses are always late or sometimes don’t run at all. And the suburbs have their own system entirely, which makes getting outside the city a hassle. Didorosi’s operation is almost the opposite of the Detroit People Mover, a $210 million system opened in in 1987 that circles the downtown area in an endless 3-mile loop and attracts only a tenth of its projected ridership.
Didorosi, who is in favor of regional transit authorities that combine private ingenuity and dollars with the public domain, points to the game Sim City as a good lesson for city planners everywhere. “If you cut out transportation funding, your city immediately turns to shit,” he says. “Transit is the secret linchpin—cities live and die by public transportation.”
Though Detroit’s city bus system is trying to modernize, and in fact just launched a new transit app designed by Code for America at the end of August, funding shortfalls have meant that progress is slow. As Didorosi puts it: “What good is an app telling you when the bus is coming if the bus is three hours late? Technology can only support a good bus system, not create it.”
The Detroit Bus Company app, launching any day now, will allow riders to summon a bus using their smart phones. Didorosi, who currently serves as the dispatcher, says he hopes the app puts him out of a job. The Detroit Bus Company is also working with another local startup, Flocktag, to create a frequent rider loyalty program that he hopes to have up and running at the end of the month.
New tech aside, what Didorosi enjoys most is exposing new riders to the city. He plans to start hosting all-inclusive dinners, where riders will enjoy food and drink while taking “guided expeditions” of Detroit. He wants his riders to use the Detroit Bus Company to get comfortable with downtown, which he calls “the DMZ” of Detroit, and eventually want to venture further and further outside the green zone. “I’m so excited to bring people downtown—it’s a great, non-committal way for people to see the city.”
Lanz0n, a Roseville, MI native, actually typifies the kind of rider Didorosi hopes to attract. “I’ve seen more of Detroit on this job than I have my whole 43 years of living here,” she explains. “It’s actually a beautiful place. It’s a whole new world that I never knew existed.”
The Detroit Bus Company isn’t Didorosi’s first entrepreneurial gig. As a teenager, he started a business buying distressed vehicles and fixing them in a shop at Detroit City Airport. He later went on to found the Paper Street incubator in Ferndale, which he has since sold. He also spent a year writing for Jalopnik, the Gawker Media site devoted to automotive news. (Didorosi still freelances forPopular Mechanics, Hell for Leather, and other niche publications as a way to raise capital for the Detroit Bus Company.)
Didorosi represents the new brand of Detroit entrepreneur frustrated with a city government that doesn’t always seem eager to partner with them, and sometimes even seems to throw up bureaucratic roadblocks just because it can. What he sees himself doing with the Detroit Bus Company most of all, perhaps, is disrupting an old model of doing things that seems to hold progress at bay and frustrate residents and business owners alike.
“The city should be a lubricant instead of a hindrance,” Didorosi adds. “There are real structural issues behind why people don’t do businesses with the city. It’s just upside down. There’s demand, there’s people, but the last thing in the way is the city itself.”
As Lanzon swings the bus back around and heads toward the suburbs to drop off the passengers who hopped on downtown, Didorosi chats with the riders and passes them his phone so they can see pictures of an accident that occurred a few weeks ago when a drunk driver slammed into one of the buses. (Thankfully, nobody was hurt, and Didorosi says the bus was built so solidly that riders barely felt it.)
As Bettis pulls up to the drop-off point in Royal Oak, Didorosi says that he plans to grow the company by continuing to court his prime demographic: Digitally aware early adopters who are interested in Detroit."
No, this has got nothing to do with the movie or the Pirates of Caribbean ride at Walt Disney World. But perhaps dead companies do tell tales.
This post is all about what we can learn from failed start ups.
Losing your focus--pivoting is a new start up sport. Done right it may be just fine. Done wrong and one ends up far removed from the original, promising paths that you did not correctly execute. And it does make investors question your capabilities. Honestly, I never look at companies who are changing their business models and are seeking "recapitalization".
Spending your money too fast--A primo way in which companies go out of business. Your burn should be adjusted to your growth. Resist the temptation to think you can accelerate growth with a bigger burn and numerous VP's. Focus on having everyone in the company generate revenue early on until you reach the point where you absolutely need those resources and understand what they are going to do to also be revenue creators.
Build it and they will come--what do real customers think about your product? Spending lots of time and money getting a product out the door is so old school. Build something with minimal functionality, then vet it with select customers to see what else they want, instead of trying to figure it all out in a vacuum. Customers will feel more loyalty towards you and you will have a product that better fits market needs.