So, what’s “Organic Growth”; Organic growth is the gradual growth in a company’s revenue through the slow and steady acquisition of new customers with a limited budget.
This slow and steady approach is common in old school businesses that lack the knowledge and capital to grow rapidly. I know I founded my first business this way decades ago, and it was a damn hard struggle trying to drive growth using small increases in revenue to fund sales and marketing.
It’s common to see businesses like these with limited funds to spend on the important areas that drive revenue, areas like sales, marketing and product development; this typifies organic growth.
These businesses are in effect capital constrained which is the main cause of organic growth, the investment community sometimes refers to this as being “under capitalised”. Which leaves few alternatives other than raising capital.
Now if you had capital in your company and could spend an extra million dollars on sales, marketing and advancing your product I’m sure you would be achieving more rapid growth maybe even 20% a month.
Wouldn’t that be a significantly better outcome?
The other reason why you might need to raise capital is you might be in an industry or a sector where you have competition that is rapidly coming up behind. You don’t want to be overtaken by your competition, which means you need to grow quicker than your competition and to do that you need capital. Organic growth is probably going to see you wiped out by your competition.
Let’s look at two examples.
Company X is a 3 year old small business with 100 customers, X is consistently picking up one new customer a month with a small budget for sales and marketing based on existing revenue. So each year Company X adds 12 customers which is a 12% annual growth rate. Now this is okay for a lifestyle business and organic growth but bad for a business or Startup if you want to exit for millions.
Company Y is a 2 year old Startup with 50 customers, X is consistently picking up five customers a month with a $800k budget for sales and marketing funded by a Series A investment. So, each year Company Y adds 60 customers which is a 120% annual growth rate.
Company Y will overtake Company X in its third year.
So organic growth is a mugs game because your limiting your growth and therefore you need to raise capital.
Furthermore, if your product is online, cloud, software as a service or in a high technology sector, your market is advancing, innovating and growing at higher than average rate
The days of slow organic growth are over, rapid advances in technology are enabling companies to quickly grow and service more customers with less effort. Artificial Intelligence is a prime example of this, if you haven’t heard, it’s going to impact every industry in the coming decade. This is not a bad thing, you can use it to your advantage by developing a smarter sales and marketing strategy using technology.
Bottom line those raising capital have more money to spend than those that do not. Which means you have little choice but to raise capital to not only secure your market but to grow your revenue before your competitive advantage evaporates and your competition overruns your market position.
Don’t even think about organic growth, it’s a mugs game.
Take the smarter path to success and start planning your capital raise now.
June 6, 2018 By Katie Abouzahr, Frances Brooks Taplett, Matt Krentz & John Harthorne. The gender pay gap is well documented: women make about 80 cents for every dollar that a man earns. Less well known: the gender investment gap. According to our research, when women business owners pitch their ideas to investors for early-stage capital, they receive significantly less—a disparity that averages more than $1 million—than men. Yet businesses founded by women ultimately deliver higher revenue—more than twice as much per dollar invested—than those founded by men, making women-owned companies better investments for financial backers.
Businesses founded by women ultimately deliver higher revenue
BCG recently partnered with MassChallenge, a US-based global network of accelerators that offers startup businesses access to mentors, industry experts, and other resources. Since its founding in 2010, MassChallenge has backed more than 1,500 businesses, which have raised more than $3 billion in funding and created more than 80,000 jobs. MassChallenge, which neither provides financial support nor takes equity in the businesses it works with, puts significant effort into supporting women entrepreneurs.
Our objective was to see how companies founded by women differ from those founded by men. Our data shows a clear gender gap in new-business funding. We also spoke with investors and women business owners to get a sense of how they perceive the funding status quo. Our findings have clear implications for investors, startup accelerators, and women entrepreneurs seeking backers.
Challenging numbers
One might think that gender plays no role in the realm of investing in early-stage companies. Investors make calculated decisions that are—or should be—based on business plans and projections. Moreover, a growing body of evidence shows that organizations with a higher percentage of women in leadership roles outperform male-dominated companies. (See “How Diverse Leadership Teams Boost Innovation,” BCG article, January 2018.) Unfortunately, however, women-owned companies don’t get the same level of financial backing as those founded by men. To determine the scope of the funding gap, BCG turned to the detailed data MassChallenge has collected on the startup organizations it has worked with. About 42% of all MassChallenge-accelerated businesses—of all types and in all locations—have had at least one female founder. Aiming to build on the growing proportion of women entrepreneurs, the availability of education and support for them, and the sizable community of women who are business experts, MassChallenge determined that it needed to learn more about how its women entrepreneurs were faring and how the program could better prepare them for future success.
In a review of five years of investment and revenue data, the gender-focused analysis showed a clear funding gap (see the exhibit).
Investments in companies founded or cofounded by women averaged $935,000, which is less than half the average $2.1 million invested in companies founded by male entrepreneurs.
Despite this disparity, startups founded and cofounded by women actually performed better over time, generating 10% more in cumulative revenue over a five-year period: $730,000 compared with $662,000.
In terms of how effectively companies turn a dollar of investment into a dollar of revenue, startups founded and cofounded by women are significantly better financial investments. For every dollar of funding, these startups generated 78 cents, while male-founded startups generated less than half that—just 31 cents.
The findings are statistically significant, and we ruled out factors that could have affected investment amounts, such as education levels of the entrepreneurs and the quality of their pitches. (See the sidebar, “A Closer Look at the Data.”)
A closer look at the data
The results, although disappointing, are not surprising. According to PitchBook Data, since the beginning of 2016, companies with women founders have received only 4.4% of venture capital (VC) deals, and those companies have garnered only about 2% of all capital invested.
Why the disparity?
To dig deeper, we spoke to women founders, business mentors, and investors, some of whom were not affiliated with MassChallenge. From those conversations, three explanations emerged. One, more than men, women founders and their presentations are subject to challenges and pushback. For example, more women report being asked during their presentations to establish that they understand basic technical knowledge. And often, investors simply presume that the women founders don’t have that knowledge. One woman who cofounded a business with a male partner told us, “When I pitch with him, they always assume he knows the technology, so they ask him all the technical questions.” We heard that when they are making their pitches, women founders also hesitate to respond directly to criticism. If a potential funder makes negative comments about aspects of a woman’s pitch, rather than disagree with the investor and argue her case, she is more likely than a man to accept it as legitimate feedback. “Most guys will come back at you in those situations,” an investor said. “They’ll say, ‘You’re wrong and here’s why.’” Two, male founders are more likely to make bold projections and assumptions in their pitches. One investor told us, “Men often overpitch and oversell.” Women, by contrast, are generally more conservative in their projections and may simply be asking for less than men. Three, many male investors have little familiarity with the products and services that women-founded businesses market to other women. According to Crunchbase, which tracks VC funding, 92% of partners at the biggest VC firms in the US are men. “In general, women often come up with ideas that they have experience with,” one investor said. “That’s less true with men.” Many of the female interviewees told us that their offerings—in categories such as childcare or beauty—had been created on the basis of personal experience and that they had struggled to get male investors to understand the need or see the potential value of their ideas. One founder told us that this lack of understanding shows up also in terms of social class when entrepreneurs pitch products for people at socioeconomic levels significantly lower than that of the typical angel or VC investor.
Only one thing matters. That you f#@^ing finish what you START.
This is the single most important medium post you will ever read.
I believe that I am about to change your life.
Because I want to tell you one thing.
Your work is not perfect.
Your product, your business, your blog — they are incredibly imperfect.
I could look at your work for 5 minutes and come up with so many flaws you would pay me to point them out.
But you know what?
It. Does. Not. Matter.
There is only one thing that matters in this world, and it is simple, and I want you to understand it.
The only thing that f#@^ing matters is that you finish what you’re working on.
83% of the people who will email me and say they want to do what I do WILL NEVER FINISH ANYTHING.
They will have the best excuses in the whole world. They were busy. They were tired. Life was hard. Their dogs ate their homework.
Can I tell you something? Those excuses might make them feel better but they won’t help them get to where they need to be. There is only one thing that will help with that — finishing their work.
You do not have to be faster than the tiger.
Have you ever heard that parable? A man and his friend were camping in the jungle. One night a tiger attacked their camp site. They started running. One friend said to the other, “we’re not fast enough, we’ll never outrun the tiger!”
His buddy turned to him and shouted one thing.
“I don’t have to outrun the tiger, I just have to outrun you….”
The tiger is our own will to NOT ACHIEVE. The tiger is the voice that says to give up.
The tiger is the voice of failure.
You just have to outrun everyone who doesn’t have the guts to finish their work.
I don’t care if you disagree. I don’t give a fuck.
Because at the end of the day, I finish my work. I’m a finisher. If you cannot be that and do that, you don’t stand a chance out here.
The world is waiting for you, the opportunities are out there, for the people with the raw guts to finish, to publish, to release, to launch. If you’re one of those people, you’re a goddamn legend and I respect you.
If you’re not?
Well, then I got no time for you.
Finish.
Finish your work.
Put it in the hands of people who give a shit. Be a radical completer. That’s what matters and that’s what counts and anything else is bullshit.
You want to tell me all about how wrong I am? How I offended you by someone swearing and telling you the truth? Email me. jo*@jo***********.com
…and I’ll explain why it doesn’t matter if I’m wrong or if I’m right.
Only one thing counts; that you’re a finisher.
So, are you?
By Jon Westenberg – Chief Empathy Officer, Creatomic
Working from home has got a bad rap. Many people seem to think it’s a way to avoid hard work by getting out from under management’s watchful eyes. Indeed, few pundits seemed to object when Yahoo, IBM, and Aetna rolled back their work-from-home policies.
Indeed, working from home seems like heresy if believe in the “collaborative, innovativeworkplace” idea, or (as I call it) the “let’s-force-everyone-to-work-in-an-office-that-looks-like-a-hotel-lobby-from-outer-space” management fad.
In his TED Talk, Bloom explains that work-from-home is potentially as powerful and innovative as the driverless car. And he’s dead serious.
As evidence, Bloom cites a Singapore company where half of the staff worked from home for four days a week while the other half came into the office five days a week.
The two-year study revealed that the employees who worked from home had a “massive, massive” (Bloom’s words) increase in productivity–almost equivalent to an additional workday–primarily because of fewer distractions and fewer pointless conversations.
The work-from-home employees also tended to remain in their jobs longer, thereby decreasing employee turnover, which (of course) drains management productivity and results in an expensive loss of skills and connections when an employee quits.
Finally, the work-from-home employees were happier and therefore healthier, thereby reducing sick days and absenteeism (as well as people coming into work with contagious colds and flu), all of which decreased the company’s overall health care expenses.
The experiment was so successful that the company instituted work-from-home throughout the company, which also (as a side benefit) allowed the company to grow without adding expensive office space.
These results echo a recent Gallup study showing that employees who work from home three to four days a week are far more likely (41 percent versus 30 percent) to “feel engaged” and far less likely (48 percent versus 55 percent) to feel “not engaged” than people who report to the office each day.
So there you have it. Companies that are forcing employees to come into their glitzy but noisy and distracting open-plan offices would be much better off if they instead let their employees work from home most of the time.
I used to be one of those people who loved to brag about how busy he was. You know the type. Heck, you might even be one of “those” people… Until I completely burned out.
I used to be one of those people who loved to brag about how busy he was. You know the type. Heck, you might even be one of “those” people…
I would work 60, 70, sometimes 80 hours a week–it was never enough. I wore my ‘busy-ness’ like a badge of honor… I loved telling you how unbelievably hectic my life was at any given moment.
Until I completely burned out.
After years of grinding away, I realized one day that I needed to completely reevaluate what I was doing with my life, what my priorities were.
Was working 80+ hours a week really making me happy?!
It was during this period of reflection that I realized simply working longer hours wasn’t going to fill the void inside me.
I love working, don’t get me wrong. Helping people is what gets me up in the morning. But what if I could learn to work smarter, not longer? What if instead of slogging through 100 hours of work for work’s sake, I could consolidate that into as little as possible. Say, 16.7 hours per week?
It might sound crazy, but with a little trial and error, I learned to do just that. It didn’t happen overnight–we have a lot to unlearn about our habits and expectations. But here’s how I did it.
How to Manage Your Time Effectively
My life changed when I stumbled upon the Pomodoro Technique. Basically, it’s a deceptively simple time management system designed by Francesco Cirilio that helps you work with time, rather than against it.
Here are the five simple steps that make up the technique:
Choose a single task;
Set a timer for 25 minutes (preferably not the timer on your phone);
Work on your task until the timer rings, then put a checkmark on a tracker;
Take a five minute break;
Repeat steps 1-4 three more times, followed by a 15 minute break.
You may think that doesn’t sound like much, but don’t be fooled: The Pomodoro Technique calls for 25 minutes of steady, focused work on a single task. No emails. No phone calls. No checking Facebook. No getting up for a snack. No distractions!
This takes some getting used to. I had to learn ignore all of the digital age distractions that so often occupy our time.
I found that a using a kitchen timer, setting my phone on airplane mode, and secluding myself in a quiet place produced the best results. I spent five minutes each morning planning out what I wanted to accomplish that day, and each Friday I spent 30 minutes reviewing the week and planning for the week ahead.
These tips and tricks helped me hunker down and get to work. After a while, 25 minutes of uninterrupted work came easily, and I was accomplishing what I set out to do. It was a great feeling.
Personalizing the “Pomodoro”
Well, it was a great feeling…until it wasn’t. Soon I found myself cramming as many Pomodoros into a single business day as I could, and it started having negative effects on my work and my mood. I was still working too hard.
It turns out that laser focus for 25 minutes, repeated over and over again, just doesn’t work effectively every day. Life gets in the way. It’s unpredictable, and doesn’t really care how many tasks you have on your to-do list.
So I decided to personalize the method, to give it more flexibility. I asked myself: What *actually* works best for me?
In a perfect world, I’d have eight tasks identified at the beginning of each workday, prioritized from most to least important. I would be equally motivated to work on each one, and I’d finish all of them within three hours, without interruption.
But I’m not perfect–no one is. I get tired, occasionally I get lazy, things happen that are outside of my control. No amount of focus is going to help me with that, and these are realities for everyone.
So I eased up on my expectations for myself. I focused on accomplishing 8 Pomodoros a day, five days per week. Total, that’s 125 minutes of work per day, 1,000 minutes per week or around 16.7 hours, not including breaks. It was getting better.
Adding Flexibility
But something was still off. After working on my method for a while, I came to the realization that I was still too constricted. I had promised myself I would only work during normal hours–9 to 5, Monday through Friday–and spend the rest of my time enjoying my life.
But that didn’t always happen. And when I didn’t finish a set amount of Pomodoros before 5 p.m., I found myself thinking about my work and the tasks I didn’t accomplish in my “off” time, which was exactly the opposite of what the Pomodoro Technique is supposed to do.
Rather than restricting my work hours, I actually needed to expand them. So weeknights, weekends, vacations, holidays–all of those times came into play for me. I shifted to a seven-day work week, and began working when it suited me, rather than forcing my time to suit my work.
More importantly, opening my working time allowed me to do non-work stuff during normal “work” hours, like attend my daughter’s recital. It actually gave me more freedom, not less.
And that’s how I went from spending 40 to 45 hours a week fitting in my 40 Pomodoros, to having 168 hours each week. Since I only need 16.7 hours net, that means I only work 10% of my time. And it’s made all the difference.
I love this post from the Buffer co-founders Joel and Leo, (open.buffer.com), I have personally experienced consistent doubling in team sizes in nearly every tech startup i have either founded or guided and its a dynamic that if managed well will ensure your success, failure is messy and painful. So read on, regards Bradley Birchall …
The Buffer team is more than 65 people right now, which means our startup has more than doubled in size this year. It’s been an incredibly exciting adventure!
The Buffer team is more than 65 people right now, which means our startup has more than doubled in size this year.
It’s been an incredibly exciting adventure!
There are a lot of big factors for this growth, as well as many changes for all of us that have gone along with it.
We recently sat down for a video chat with Buffer: Open’s Content Crafter, Courtney, to talk about why and how we’ve grown so much this year. She asked us some great and tough questions about things like the challenges of growth and scaling our culture, how big Buffer could possibly become and lots more. We wanted to share it all with you here!
In this post we’d love to highlight just a few of the things we talked about in the video and invite you to share any thoughts this brings up for you!
When we noticed that from one retreat to the next we had almost the same amount of people, that didn’t feel too ideal.
We realized that there’s so much more that we want to do; so much opportunity. We weren’t moving as fast as we wanted to, and that was a big trigger point.
Luckily, we were also growing in revenue, and had started to hit profitability.
We decided to reinvest that, thinking that ideally we should keep growing and make use of that money to provide a better product and better customer service.
As a result, we have a different situation leading up to our upcoming retreat in Hawaii in January, where we’ll almost have doubled from one retreat to the next!
How has it changed the way we work?
As we began to ramp up and grow again, we realized we had stretched our existing structure as far as we could.
We’ve never had a lot of hierarchy, especially during our self-management period. We were a small enough group that we organized naturally, for the most part, without breaking into too many specialized teams.
So when we hit 10-15 people in the product and engineering group, that was 15 people on one team. That becomes really inefficient—people are jumping from one thing to another.
The product has grown so much at 4-5 years in, and it has a much wider span. It’s hard to be able to effectively jump into all its different areas.
And ideally, you don’t want to have to split your brain between them. For people to be able to work and focus, we’ve learned that areas needs to be separate so someone can give one all their attention.
We realized that we needed to split into multiple teams—ideally, we’d have 5 people per team. So at a team size of 15 in product and engineering, that’s 3 teams.
We knew we needed more than that to handle each element of Buffer, maybe 7 or 8 teams total.
So that meant we would need to be a product and engineering team of 35 or 40! That’s what triggered this wave of growth.
The system we have now, we think, works. And yet we’re growing so fast that as soon as we hit the point where things works, we might grow to the next point and it’ll all break again.
That’s just going to be how it works now. It’s a challenge, but it’s also exciting.
How big could Buffer become?
In terms of vision, our feeling is that there’s a lot of opportunity.
We want to continue helping small businesses to have the voice they deserve to have and get more reach through social media. There are a lot of different spaces we could move into, and much more we could do to help customers with social media publishing.
The culture we’ve established and movements we’ve ended up being part of, like transparency and growing as a distributed team— we believe this is a purpose of Buffer, too, to spread these movements.
The more we can grow, the more we can show that this kind of work can scale. That’s part of the motivation for going further.
Nothing grows forever, and that’s not a good aim to have. But right now for Buffer, we think we’re far from our limit. Our growth may not always be this fast, but we will be on a pretty fast trajectory from now on.
We’ve now moved to this new structure, so we’re building up to that. Once we hit it, we probably won’t need to double every few months again—until we need a whole new structure, which could happen every few years.
How does our culture evolve as we grow?
We’ve recently started to send out periodic surveys to get a feel for how teammates are feeling at buffer, and recently the rate of growth has got quite a few people worried about the culture changing.
That’s on people’s minds, and it’s really important to talk about and think about and make changes around.
Culture evolves. Every new person we add evolves the culture—that’s why diversity is so important, because we want the culture to evolve in a diverse way.
At the same time, there is this underlying idea that you’ll have culture whether you like it or not—it’s down to whether you decide to shape it.
That’s something we’ve always believed in, and why we put our values into words when we were just 10 people. We believe we should be very deliberate about what kind of company we want to build and how we want it to feel.
The two of us used to talk about culture together. On Fridays, we would go to a coffeeshop and work on culture, make changes. Things like pair calls, the salary formula, all these things we introduced through that weekly meeting.
Founders are increasingly pointing to Asia when asked for an example of a product they aspire to create, and WeChat is very often that aspirational product. My friend and former colleague Connie Chan described WeChat as “the one app to rule them all”.
Sam Altman, the head of Y Combinator, is so convinced that we’re going to need to figure out new ways of providing people with a means to live that he’s giving ~$20k each to 1,000 people in Oakland for a year just to see what they do with their new jobless income.
Stephen Hawking says that “we are at the most dangerous moment in the development of humanity” and that the “rise of artificial intelligence is likely to extend job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining.”
Sam Hinkie, the smartest man in sports and a Stanford grad, asks, “How are you preparing your kids for a life with 60% unemployment?”
Sam Altman, the head of Y Combinator, is so convinced that we’re going to need to figure out new ways of providing people with a means to live that he’s giving ~$20k each to 1,000 people in Oakland for a year just to see what they do with their new jobless income.
Literally the smartest people in the world think an unprecedented wave of job destruction is coming with the development of artificial intelligence, robotics, software and automation. My friends in Silicon Valley have read the Second Machine Age and Rise of the Robots and they see a wave coming.
The White House published a report last month that reinforced this view. Some of the headline stats:
83% of the jobs where people make less than $20 per hour will be subject to automation or replacement.
Between 9% and 47% of jobs are in danger of being made irrelevant due to technological change, with the worst threats falling among the less educated.
Between 2.2 and 3.1 million car, bus and truck driving jobs in the U.S. will be eliminated by the advent of self-driving vehicles.
Source: Executive Office of the President of the United States; Artificial Intelligence, Automation, and the Economy; December 2016
Read that last sentence again: we’re confident that between 2 and 3 million Americans who drive vehicles for a living will lose their jobs in the next fifteen years. Self-driving cars are the most obvious job-destroying technology, but there are similar innovations ahead that will dislocate cashiers, fast food workers, customer service representatives, groundskeepers and many many others in a few short years. How many of these people will be readily employable elsewhere?
Okay, you’re thinking. But isn’t this all still in the somewhat distant future, since unemployment is only 4.6% according to the headlines? Actually, automation has already eliminated about 4 million manufacturing jobs in the U.S. since 2000. And instead of finding new jobs, a lot of those people left the workforce and didn’t come back. The U.S. labor force plummeted by about 10 million during the same period, down to levels not seen in decades. The labor participation rate is now at only 62.7%, a rate right below El Salvador and right above the Ukraine:
Each 1 percent decline in the labor participation rate equates to approximately 2.5 million Americans dropping out. The number of working-age Americans who aren’t in the workforce has surged to a record 95 million, up almost 500,000 in the last month alone, with many of these being factory workers.
Yes, there are 95 million working-age Americans no longer in the workforce. The Great Displacement is already here and is set to accelerate.
High rates of unemployment are linked to higher rates of substance abuse, domestic violence, child abuse, depression and just about every other social ill. Despair, basically. Note the recent spike in drug and opioid overdoses in the U.S. If you care about communities and our way of life, you care about people having jobs. This is the most pressing economic and social issue of our time.
Our economy is evolving in ways that will make it more and more difficult for people with lower levels of education to find jobs and support themselves.
It’s a boiling pot getting hotter one degree at a time. And we’re the frog.
In 2011, Joel Spolsky launched his company Fog Creek’s new product at TechCrunch Disrupt called Trello. It looked a lot like a whiteboard with sticky notes translated into a web browser and an iPhone App.
In 2011, Joel Spolsky launched his company Fog Creek’s new product at TechCrunch Disrupt called Trello. It looked a lot like a whiteboard with sticky notes translated into a web browser and an iPhone App. Instead of physically moving a sticky note on a whiteboard, you could drag and drop cards on a board from your web browser.
Within days, Trello succeeded in getting 131,000 eyeballs. 22% of them signed up. The vision for Trello was to create a wide product that was so simple and useful, just about anyone could use it. It caught on like wildfire.
It’s alsowhy Trello ultimately had to sell to Atlassian for $425 million when it could have become the next $1 billion SaaS application.
In a blog post Spolsky wrote a couple months after launch, Joel presciently touched on the biggest challenge ahead:
“Making a major horizontal product that’s useful in any walk of life is almost impossible to pull off. You can’t charge very much, because you’re competing with other horizontal products that can amortize their development costs across a huge number of users. It’s high risk, high reward.”
Trello was successful building this horizontal product, achieving rapid growth to tens of millions of users and an acquisition of hundreds of millions of dollars. However, the one thing Trello didn’t do a good job of was keeping track of it’s paying customers.
Trello was so focused on building its free customer base first and monetizing later; by the time it looked to its paid subscribers, it was too late—they’d already moved on. While that makes Trello a perfect complement to Atlassian’s suite of enterprise productivity tools, it hampered the company from growing further on its own.
Let’s talk about the opportunity that Trello missed, and what it could have done instead.
Why Trello Had to Sell
Trello is organized around a “kanban board” concept. Kanban was a system for lean manufacturing that Toyota popularized in the 1940s. The basic idea was that each “card” represented a product, part, or inventory. When a card moved around a board, it meant that something had been physically moved from a supplier to a factory.
In practice, it looks like this:
When Trello first started out, it was really technically challenging to create a board in a web browser where you could collaboratively drag and drop cards into lists. A lot of other SaaS tools at the time were big databases with a visual interface built on top (think: Salesforce). This basically created an architecture where you structured data in terms of leads, customers, or tasks.
Trello came at this from the opposite direction. The product vision was to strip everything down and build around the visual idea of cards on boards. To get this to work, Trello implemented a bleeding-edge stack. The single page web app basically worked as a shell that pulled all of the data from the servers in less than half a second, at under 250 kilobytes. After a user visited for the first time, they then cached the page so Trello would load even faster.
They built their servers on top of Node and used MongoDB to store data so that the web app would load really fast. Everytime a user dragged a card to a new list, or changed the entry on a board, Trello pushed this data to every other browser with the board open almost instantly.
Trello Architecture
The result was breathtakingly simple. You made a change to a board by dragging and dropping a card, and that change was reflected everywhere else in the world.
All of this stuff was new at the time, and gave Trello a lot of runway. But by 2016, it wasn’t as hard to a build beautiful and responsive web app like Trello, and you started seeing Kanban boards everywhere:
GitHub builds Kanban boards in September 2016:
Asana announces Kanban Boards in November 2016:
Airtable Launches Kanban Boards in November 2016:
Justin Rosenstein, co-founder of Asana—one of Trello’s biggest competitors—said, “We definitely give Trello full credit. That is clearly the product that has done a good job pioneering this view.” But Justin was equally unapologetic about copy-catting Trello’s board feature: “We see Trello as a feature, not a product.”
Trello might have become a $1B+ business if it looked like a “system of record” application—the single-source of truth for a company. Imagine if you could use Trello not just to track your marketing funnel, but to move information from your marketing board to your sales pipeline and product roadmap. Instead of having a separate Trello board for each team, you’d have a big board for the entire company.
Trello never became this “system of record.” It was an strong visual metaphor that the competition ultimately copied. Ultimately, the Kanban board was a really cool UX feature, but not a difficult one to replicate.
In SaaS, you don’t win by getting there first or having the best idea. You win by continually solving the problem better. When you build a feature that’s extremely popular or successful, the competition will steal it.
Trello could have doubled down on upselling individual consumers to paid plans. They could have focused on building features for SMB customers. Or they could have expanded into the enterprise faster. Any one of these things would have led to a $1B+ valuation. Let’s talk about what Trello could have done with each path, starting with its consumer plan.
#1) Trello Didn’t Monetize Free Fast Enough
Chart of Trello’s user growth based on publicly available data.
It’s possible to build a $1B+ company with a freemium business model targeted toward consumers. In 2013, Dropbox was valued at $8B on $200M in revenue with 200M users six years after launch. This was before Dropbox had even launched a business plan—the company’s revenue primarily came from upselling free users to a $10/month plan.
Three years after launch, Trello’s growth in users looked on track to explode past Dropbox’s levels, at 10 million in 2015 (Dropbox had four million three years after launch). But Trello had a much harder time upselling free customers to its paid “Trello Gold” plan.
The 2013 blog post that announced the launch of Trello Gold highlighted three main reasons users should pay $5/month for Trello:
Customizable board backgrounds
250-megabyte attachments for each card in Trello (vs. 10 megabytes on the free plan)
Stickers and custom emoji
While everyone likes emojis, it’s not a good enough reason to spend money on software. Dropbox’s free plan gives away 2 GB of space. Its paid plan delivers 1TB of space—50x what users get for free.
Trello’s value proposition is harder to locate than Dropbox, which is exactly why Trello should have figured out early what features individual consumers were willing to pay for.
Solution: Dig Into the Freemium Use-Cases
Instead, Trello focused on building a freemium, horizontal product that everyone could use, and chose to figure out monetization later.
Instead of focusing on building a wide product for everyone, Trello should have dug deeper into its use cases in the beginning to figure out why people were signing up, what they were using the product for, and what people found so valuable that they’d be willing to pay to use Trello.
If you have a broad product with a lot of applications, dive into all of the different use cases first:
Is there a competitor that’s able to do this—or is already doing it today?
What’s the revenue potential for people using this use case?
“You know that old saw about a plane flying from California to Hawaii being off course 99% of the time—but constantly correcting? The same is true of successful startups—except they may start out heading toward Alaska.” —-Evan Williams It’s the same story again and again.
“You know that old saw about a plane flying from California to Hawaii being off course 99% of the time—but constantly correcting? The same is true of successful startups—except they may start out heading toward Alaska.” —-Evan Williams
It’s the same story again and again. First, a team comes up with an idea.
Next, they build a minimum viable product (MVP) as a proof of concept, spending a lot of time arguing about which features to include or exclude from the MVP. Finally, if the MVP works well, they plan on building the full, mature, stable product.
So what’s wrong with this picture? Why does it all go wrong for so many startups?
The problem is that these teams do not understand the point of an MVP. An MVP is not just a product with half of the features chopped out, or a way to get the product out the door a little earlier. In fact, the MVP doesn’t have to be a product at all. And it’s not something you build only once, and then consider the job done.
An MVP is a process that you repeat over and over again: Identify your riskiest assumption, find the smallest possible experiment to test that assumption, and use the results of the experiment to course correct.
When you build a product, you make many assumptions. You assume you know what users are looking for, how the design should work, what marketing strategy to use, what architecture will work most efficiently, which monetization strategy will make it sustainable, and which laws and regulations you have to comply with. No matter how good you are, some of your assumptions will be wrong. The problem is, you don’t know which ones.1
In a post-mortem of more than 100 startups, CB Insights found that the number one cause of startup failure (42% of the time) was “no market need.” Nearly half of these startups spent months or even years building a product before they found out that they were wrong in their most central assumption: that someone was interested in that product in the first place.
The only way to find that out—the only way to test your assumptions—is to put your product in front of real users as quickly as possible. And when you do, you will often find that you have to go back to the drawing board. In fact, you’ll have to go back to the drawing board not just once, but over and over again.
This is not unique to product development. When you’re writing a book or an essay, you have to produce many drafts and spend lots of time editing. And when you’re writing code, you frequently have to refactor or even rewrite the code.2 Every creative human endeavor requires an enormous amount of trial-and-error.
In a trial-and-error world, the one who can find errors the fastest wins. Some people call this philosophy “fail fast.” At TripAdvisor, we called it “Speed Wins.” Eric Ries called it Lean. Kent Beck and other programmers called it Agile. Whatever you call it, the point is to find out which of your assumptions are wrong by getting feedback on your product from real users as quickly as possible.
Whether you’re building a product, writing code, or coming up with a marketing plan, you should always be asking yourself two questions:
What is my riskiest assumption?
What is the smallest experiment I can do to test this assumption?
MVP-as-a-process, in action
Let’s go through an example.
You decide to build a product that allows restaurant owners to create a mobile app for their restaurants in just a few clicks. It’ll have a simple drag and drop interface, a bunch of pre-built templates, an events calendar, newsletter, check-ins, photo galleries, real-time chat, integration with review sites, social networks, and Google Maps. And most importantly, it’ll offer a way to make reservations, place take-out orders, and use coupons, from which you’ll take a small cut as a way to monetize your product. This is going to be awesome!
You find a few friends to join you as co-founders and, if you’re a typical startup team, you’ll raise some money, lock yourselves in a room for 12 months, and try to build all these features. If you’re slightly more savvy, you’ll cut a few features that aren’t essential for the first launch, so you’ll be able to launch your “MVP” in 8 months instead of 12.
And in both cases, you’re most likely going to fail.
Why? Well, consider how many assumptions you’re making that could turn out to be disastrously wrong:
Recent Comments