Learning the hard way - Part 2

How to focus on the right things and solve them efficiently.

This is the 2nd post in a series “Learning the hard way”. Please read part 1 to get the right context for further reading. 

According to Paul Graham “A startup is a company designed to grow fast”. He provided the reasoning for that in the essay “Startup = Growth”

In my last post, I talked about why startups need to grow quickly and shared my own experience of what that growth looked like and what made it possible. I emphasized that the team responsible for building the company is a critical factor, if not the most important one. 

In this post, I would like to dig deeper into how to focus on the right things and solve them efficiently, while building a startup. 

What does focusing on the right things consist of?

Putting your customers first 

It’s a cliche, but it’s really what matters most. Your startup solves a problem for a group of people. If these people are happy, they will choose your solution. They will spread the word and pay for your services. It’s that simple. 

To put customers first means, first and foremost, to deeply understand both what they want to achieve, why they want to achieve it, and what they struggle with. Struggles  are a gap between how they currently solve their problem and what’s the best way to solve the problem. That delta is what your startup tries to sort out, typically using technology. 

How to understand what customers are struggling with? 

Getting to know them, observing how they work and asking questions. There  really is no silver bullet. Just spend as much time as possible with them and you will know their struggles best. 

At Base, our sales team was dogfooding the product; we used to go onsite and spend time with customers. We were greedily gathering as much understanding of  the way our customers work as possible. 

Being close and learning from customers is a continuous process. It doesn’t end. 

I remember an implementation of Base in Chicago. The plan was to introduce Base to two teams - around 20 people, make them our champions and only later roll out to everyone. The company we worked with was big with a few hundred sales people. I was a part of the implementation team. We arrived at the customer office and I spent 2 days just observing how the team goes through their day. It was awkward to sit in the middle of 10 strangers and observe what they do, what system they use, ask “stupid” questions, in general being a pain in the butt. These observations however become a fundamental input to what we needed to work on in the product.  One thing which stuck in my mind was that few people used Notepad in Windows as their daily task management solution. After each call with a prospect, they would extend the same note, write down next steps, only to re-enter the same data at the end of the day to the system. Had I not observed it myself, we wouldn't have known that people experience a challenge like that. 

Measuring stuff

Naturally people tend to trust their intuition. Intuition is important but it introduces bias. In a startup it’s better to be analytical and measure stuff. Ideally every project should be measured and have a certain goal assigned to it. A hidden advantage of assigning goals is that it forces you to think about what the success of each project means, which then  typically triggers another question  whether it makes sense to work on a project in the first place. It also forces you to measure stuff. 

We tried to measure things from the very beginning. Unfortunately it’s not as simple as it sounds. We started with an admin dashboard in the first version of Base. We outgrew it quickly. The next iteration was creating a dedicated solution. We called it Overmind, and yes, we used to play Starcraft. Every evening we would update the Overmind database with the fresh data so that we understood how people used Base. After a few months, updating the database would take almost a day, so one could use Overmind only a few hours after one database update finished and the next one started. We kept improving the flow but we had to switch again. We realized that in order to get proper analytics, we needed to build an even more advanced system consisting of proper data collection, storage, processing etc. After a few iterations, we ended up with dedicated teams responsible for different parts of the analytics process. Measuring things is an iterative process and it requires ongoing work. That is definitely something I didn’t appreciate from the beginning. 

Another challenging part was determining what to measure. Over time we kept expanding the number of metrics. On one hand it felt that we knew “everything”, on the other it was hard to know which metrics were most telling. There were numbers like: churn, retention, MRR, which showed the general performance of the business. Various factors impact metrics like those: product, customer support/success, competition, changes in pricing, etc.

At the same time these were not great for measuring the immediate impact of the roadmap. We started looking for a metric which would better portray the value a product delivers to customers. We were looking for a North Star metric for Base.  We believed that a good one should meet the following criteria: 

• be actionable 

• be relevant on an ongoing basis

• be simple 

• provide fast feedback

After a decent amount of exploration we found that there is a strong inverse correlation between the usage of Base and churn. In other words the more active and engaged salespeople are in the system, the less likely it is that the company they work for would churn from Base. 

If a salesperson used Base on a given day, we qualified them as an active user on that day. Based on that, we measured DAPU, which aggregated all daily active paying users. From that we could measure %DAPU - which was a percentage of active paying users on a given day divided by all paying users who could use the system in a given day. 

Once we had those numbers, we came up with wDAPU (weekly DAPU), which became the North Star metric. wDAPU was an average of %DAPU for a given week. 

Measuring wDAPU definitely upped our game. We could fairly quickly understand the impact of our work. It was a significant improvement. 

How can one think of working on things efficiently?

Give up on scope 

There are three forces driving every project you might work on: scope, quality and time. Since resources are always constrained, you can’t have it all. To move efficiently, we always chose to do less work faster but with great quality. Short and quick iterations allow getting feedback earlier and avoid unnecessary work. 

That approach tends to be intuitive in the beginning of startup life. Typically, thinking is focused on days and weeks rather than months or quarters. Since there is a lot of uncertainty, the natural reaction is to iterate quickly and learn whether the direction is right. However, that attitude tends to change over time. There are more people in the company, projects get bigger, timelines extend. Suddenly everyone starts planning in months and quarters. 

To keep the momentum and operate quickly, the easiest way is to limit the scope of projects. Large projects can always be divided into a series of smaller ones. It’s a matter of the approach. I really can’t remember any big chunk of work at Base which couldn't be divided into smaller pieces. 

Focus

To move quickly, ideally, everyone in the team focuses on the most important tasks.  People lose focus mainly for two reasons: either prioritization is not clear or they get distracted. 

Try to avoid distractions as much as possible. This is often about being considerate of other people's time and minimizing unnecessary interruptions. It’s helpful to always ask yourself, ‘Do I really need to bother someone now?’ Very rarely do you actually need to. 

Prioritization is more difficult. At the minimum shorter projects help as it’s much easier to decide what’s more important if an outcome is not too far in the future. 

The trick that often worked for me was setting up goals for each week. Goals were easy to understand and verify. These were also bringing me closer to longer term objectives. At the beginning of each week, I would write down three things I had to achieve. I was rigorous about achieving them. By doing so, focusing on important stuff was simpler as I had a short term goal which I committed myself to. The beauty of an approach like this is that I would never need to worry about my long term focus. I only needed to make sure that the short term focus was right. 

Remember about costs 

At the beginning of a startup journey, when founders build the initial version of a product and the first users are coming, being frugal is natural. It’s actually the only reasonable approach. The company doesn’t have revenue. Costs start to pile up. Since all expenses are covered from the founders’ pockets - money is spent wisely. 

The challenge appears when a startup is injected with external financing. Nothing really changes, but suddenly there is money in the bank and it needs to be spent. It’s easy to spend money, but it’s extremely difficult to do it wisely. 

Working on initiatives with explicit goals and measurement helps in the allocation of the capital. So again it’s critical to work on the right things. 

Having the same mindset in spending habits like at the beginning of a startup’s life, helps  to make the right investments. 

The thing which I haven’t mentioned yet is that to ensure long-term fast growth for a startup, it’s best to operate within a large and preferably expanding market. I guess I just took it for granted. 

We started in 2009 when business software was in its infancy of moving to the cloud. The SaaS model was significantly less popular than today. Before, companies used to pay up front for on premises solutions. Monthly subscriptions changed that. Additionally, the iPhone was only introduced a few years before, and smartphones were only then becoming popular. In 2010 - 40 mln iPhones were sold, 5 years later, it was 230 mln. Since we released native iPhone and Android Base apps in the end of 2011, we managed to ride a wave of mobile revolution.

To sum up, market dynamics were definitely a tailwind for us. Businesses moving to cloud, SaaS becoming a first citizen software model, hyper growth in mobile adoption. Because of that CRM, software revenue worldwide grew from $14 B in 2010 to $69B in 2020. We definitely had good timing. 

When I reflect on the observations I shared above, they don't seem very revealing to me. There are really no silver bullets. At the same time, these resonate much deeper with me today. I guess it’s just difficult to embrace them on a daily basis and stay behind them every single time. 

Startups are companies designed to grow fast. There is no one way to achieve it. Working with the best people, focusing on the right things and solving them efficiently increases your odds. The learning shared above helps with that.

Additionally, ​​I’m open to invest and/or help your startup grow. If you have any questions or thoughts, don’t hesitate to reach out at bart@founderspond.com or DM me at @kiszal on Twitter.