1. 06:22 8th Nov 2012

    Notes: 10

    Making something people want - The GoCardless story

    I’m a co-founder of GoCardless, a direct debit payments company in London. This is the story of our first two years and the people we’ve met along the way.

    Making something no-one wants

    One startup I know very well in San Francisco was started by 3 ex-financiers. Their idea involved an industry in which none of the 3 had any experience - they wanted to build software to help building contractors bid for big construction projects.

    None of them knew how to code, so they specced up a “prototype” and engaged a web-development agency to build this “MVP”. Development was slower than hoped for, and the specs changed repeatedly, based on the evolving strategies of the founders and conversations they had with the “big players” in the industry. Almost 10 months later, this MVP was ready for a trial launch. Unfortunately, the product by this stage was so complex that it was almost impossible to use. Successful use of the product involved no fewer than 14-stages, involving 3-way communication between the bidder, the project-owners and referrals from previous projects.

    They’d spent so long story-boarding their product that they had a really good idea of how it would work once they’d achieved huge market penetration. According to their “vision”, all communication would be managed within the app, as everyone in the industry would be using it.

    They had some pretty great features that were novel for the industry at the time - sharing quotes electronically (step 8), exchanging &  signing contracts online (step 11) and eventually paying for the services (step 13) as part of the process. Unfortunately, it was impossible to use an individual component without completing all of the previous steps. Until they’d reached huge penetration amongst all 3 types of user, their product would be almost unusable.

    But, when looking back on the project, each of them professed that they thought they were building an MVP.

    The mistake they made was focussing too much on their “vision” or “strategy”, and not enough on the dirty, mundane work of making a product that addressed real needs or desires. Chances are that one or two of the 14 features were genuinely useful and would have made a fantastic starting point for a startup. Unfortunately, they were unable to work out which ones they were.

    Unless people are incredibly lucky, they’re often not making something people want.

    "Ideas for startups are worth something… but mainly as starting points"

    "An idea for a startup… is only a beginning. A lot of would-be startup founders think the key to the whole process is the initial idea, and from that point all you have to do is execute. Venture capitalists know better. If you go to VC firms with a brilliant idea that you’ll tell them about if they sign a nondisclosure agreement, most will tell you to get lost. That shows how much a mere idea is worth. The market price is less than the inconvenience of signing an NDA."- Paul Graham, How to Start a Startup

    "Making something people want" is not the product or conclusion of your idea plus development time. It’s not the end result - it’s the process. "Making something people want" means prototyping, launching early (often by faking large parts of your service) and talking to users.

    It’s the fastest, most cost-effective way of finding that smallest “quantum of utility” - the kernel of an idea that solves a burning problem for a tiny subset of people. 

    In other words, it’s a way of ensuring you’re not wasting your time. 

    People

    There are two kinds of people who most commonly have this problem. 

    The first is the “Business Strategist”. He’s the “ideas guy” who goes to meetups to tell people about his gleaming vision for his startup. He’s a management consultant, a banker, a lawyer. He doesn’t want to get his hands dirty with actual customers, and he’s looking for developers to build his “MVP”.

    The other is the “Technical Purist”. He’s often got a Computer Science Degree (or several), he’s a fantastic developer and he’s worked at a big tech company or in a well-respected development agency. He develops against the nightly builds of the hottest new graph databases. Everything is test-driven and built to scale to tens of millions of users. He loves building stuff so much that he doesn’t want to waste any of his time actually talking to people or selling his product.

    At my company, GoCardless, we had a combination of both of these problems.

    During the summer of 2011, we were 6 months into our startup. We’d built a product the previous January and launched after just 3 weeks of development. Our “vision” was to solve group payments - we were a platform for sports teams & university societies to organise & collect money. We managed to convince about 20 or 30 of our friends & family to collect money for their various causes - from rowing clubs to stag parties. It worked ok - people we knew used the product, and some used it repeatedly. It was enough to show a glimmer of possibility, and it helped us get onto Y Combinator that summer.

    By June, growth was stagnant. We spoke to our users every day, asked them what additional features they wanted to see, and then we built them. From scratch, we built a set of customisable forms for collecting information from group members (wufuu, anyone?), advanced calendaring and reminder functions (doodle.com) and the most complex set of functionality for managing large sports clubs with multiple teams, roles and permissions that anyone could possibly imagine. Our solution to crappy growth was to split out time roughly 50:50 between building more features and debating the vision of our company.

    After an afternoon of meetings with pg & the other Y Combinator founders, we resolved to take a different approach. We’d give ourselves 2 weeks to see if we could make this thing work. We paused development entirely and spent all of our time cold-calling new potential customers. And since our payments platform was UK-only, this meant getting up at 3am East-Coast time.

    One particularly memorable conversation involved 20 minutes speaking to a man who ran a local village cricket club in the South-West of England. I’d empathised with the strains of running a sports club (I’d run one at university), and the terrible administrative burden it came with. We’d discussed the trials of collecting subscription fees and the social anxiety caused by chasing up over-due debts. So I moved to close him; “We’ve built a website to solve all of these problems - give me your email address and you can try it out.”

    "What," he asked, "is an email address good for? Why would I have one of those?"

    "To communicate online," I spluttered, "to use the internet!"

    "The internet? I don’t use the internet. Goodbye, sir" he concluded.

    Our problem, we discovered, was two-fold. One, that the mass-market didn’t appear ready for our product. It turned out that the most successful Irish sports-team management tool (teamer.net) is still based almost entirely on SMS. The second problem was more fundamental; we hadn’t really discovered our “quantum of utility”. We didn’t have that tiny kernel of a product that solved a really burning problem. Collecting money for sports teams is annoying, but it’s only a small part of a few people’s lives.

    On the other hand, it turned out that businesses faced the problem of collecting money every day. And for particular people within those businesses - the accounts receivable department - this was their entire job. The core of our product - a Direct Debit API - was an ideal solution to this burning problem.

    "In nearly every failed startup, the real problem was that customers didn’t want the product… The only way to make something customers want is to get a prototype in front of them and refine it based on their reactions." - Paul Graham, How to Start a Startup

    To that quote I would add "and if it turns out that no-one cares, do something else"

    Most startups aren’t competing with other startups; they’re competing with no one giving a shit.

    A few years later…

    One of the founders of the construction startup (mentioned at the start of this article) came across another group of founders who looked like they were on the same path. This company had what seemed like a promising idea - an interesting take on loyalty-schemes & subscriptions for real-world products and services. Its non-technical founders were looking for a designer and a coder to build an iOS app & website, which would be their MVP. They’d planned out exactly how it would work when they’d achieved massive adoption.

    They had a long and frank discussion with the earlier founder. Heeding the words of warning, this company reformulated its plans. What was the bare minimum they needed to work out whether customers & businesses were interested? How could they simulate the benefits of their service without blowing tens of thousands of pounds on outsourced development?

    The founders decided to sell shop-by-shop in their local area, signing businesses up to their new “platform”, promising them new patrons & more repeat custom. They then quickly ran a local advertising campaign offering people great deals at their favourite cafes & bars. Instead of spending time & money building an app and a website, they simply distributed laminated cards printed with with unique IDs to their customers, and every morning took a paper lists to the local businesses with details of the discounts each person was entitled to. Every night, they’d collect the lists and manually enter the data back into an Excel spreadsheet. By the end of the month, the majority of the businesses reported remarkable increases in volume & cash-flow, in some cases up to 75% improvement. They used this proof to secure investment & build a team of developers and salespeople.

    Conclusions

    You should spend most of your time focussing on making something people want. This is a process, not a goal.

    If you’re worried you’re not making something people want, the solution is almost always the same - focus on what you’re shipping in the next month. Don’t obsess over long-term strategy, or stick dogmatically to a “vision”. Launch sooner than makes you comfortable. Fake as much of the service or product as you can to save time. Talk to your users to make sure you’re solving a burning problem. Once you have 20 or 30 regular users, do everything in your power to absolutely delight them.

    Ensure you’re making something people want. If you’re worried about this, ask them.

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    1. henrydillon reblogged this from tomblomfield and added:
      Oh so true!
    2. aanwar reblogged this from tomblomfield
    3. tomblomfield posted this