Lukasz Szyrmer

lean startup is so overrated and trendy. all these acronyms like mvp, arrrr, p&l just get your head in the wrong place. who wants to be pirate anyway? they all had scurvy. i think lean startup causes more problems than it solves. i’d rather run a fat ( phat ) startup. i’ve done it many times before, and i liked it while it lasted. so, i’m going back to doing that. my favorite reason for running a phat startup was that i could delude myself. as much as i wanted. i could paint visions in my head, without actually needing to think. i think self-delusion is a great experience. somebody should productize that. unparalleled.why hire a pr company? you can spin your own yarns, since you believe so much more in your own vision than some–hired guns. yes, delicious delusions are the best, with lots of delicious money. you don’t need to confront day-to-day reality then. or learn anything. just execute. speaking of delicious, the next reason i like running a phat startup is the hors d’oeuvres at cocktail parties and events. if you’re running a phat startup, you can go to these events and hand out designer’y business cards. those cards have your name, phone number, and the title “founder” on them, or even better, “co-founder”. that means you’re part of a hip team.it’s lots of fun to show off and make friends, even though they aren’t your customers, in your industry, or potential funding providers. i still hang out with some of those friends from my phat days…even became a godfather for one of those friend’s children. another reason to create a phat startup: you can build anything you want. ignore those pesky customers and what they want. after all, who are they to tell you what you should build? what do they know?customers or prospects have a well-meaning way of deflating your vision. they all say they want something different than what you do. i mean, they’re good people and all, it’s just better to avoid them when you’re working on your idea. you wouldn’t want them to screw it up. on to the next part. since you’re out building your idea, you get to play with lots of techie toys. that’s my favorite part of being a phat founder. nobody tells me what technology i can’t play with. i can sign up for lots of websites and software. i can tweak things so that i really get my product to be polished and perfect before showing it to anyone.even though i probably spent a lot of time playing xbox as a phat founder, nobody needs to know that. my cocktail friends thought i was trying out the latest javascript framework, the one that makes coffee and writes a book for you at the same time. if you’re running a phat startup, you can just focus on raising investor and shareholder money. fund a lavish startup lifestyle. if you run out, you can always raise more. diluting your stake doesn’t really matter, as long as you can find someone else to give you money.some founders just don’t get it. why try to keep as much equity as you can? i mean, you wouldn’t want to be risking your savings or anything. that’s not the point here. you want to be living the good life now, not after your exit. so that’s my case for a phat startup. i hope you see that i’m onto something, and that these lean startup guys have it all wrong. stop getting canvassed. go phat. [image: kevin harber]

yesterday i was speaking with a gaggle of early stage tech entrepreneurs about lean startup. they were eager to learn more about about hypothesis testing. newbies wanting to learn about the lean startup approach. yet they were falling prey to what i call the “solutionizing bias”. they only wanted to talk and think about solutions. and making sales. it’s so tempting, easy and natural for founders to fall for that trap. as entrepreneurs, we’re naturally optimistic go-getters. we have a solution for every problem. we want to help out. yet when you’re building a new product, you don’t know whether your solution is important for your customer. if you don’t prove that first, then brace yourself for a long uphill battle. your solution solves a problem your customer has. the customer cares about their problem, not your solution. before you think about solutions, you need to know whether the problem your solution solves is important. in your customer’s eyes. that’s why validating your product idea is so important. first ensure that the problem you’re addressing affects a large percentage of your target market. if you focus on your solution only, you won’t know which problem is worth addressing. it’s blinding. imagine you’re reading a market research report about the biggest problems of your target market. in that report, there is a pie chart. let’s say your prospects have 4 different problems: a, b, c, d. 40% consider a their main concern, 30% b, 20% c, and 10% d. yet, you’ve already built a solution. you realize it addresses problem d. for the same amount of marketing effort, you’ll get 4 times less results than another founder who addresses problem a. in my experience with building products, i’ve managed to build products that addressed problem e. in other words, it was a problem i thought the market should have, but actually didn’t. i was dead in the water. i write about an example like that, and how to prevent it from happening to you, in launch tomorrow . while it’s critical to think in terms of sales you’re going to make when you start a business, first check if you are addressing a meaningful problem first. one that a big chunk of your market thinks they have. and that they’re willing to pay for a solution. then you set yourself up for hockey-stick growth. only then do you build a money-making machine. otherwise, you might as well be a missionary. if you follow the one-day launch sequence in launch tomorrow , you’ll get a decent blueprint to do exactly that. build what your customers want.

A lot of founders I speak to struggle with finding a co-founder, particularly on the technology side. While they have an idea, they want to find someone who will help create that technology. Often development cost is a consideration, so equity seems like the easiest way to get address that. I find there's three big issues with this approach: If your problem was correctly validated, you'd be making enough sales that you'd be able to pay a developer to build out your idea. Pre-sell if you have to. Often, you don't need a product to make the sale. You need a solid understanding of your audience's needs to make a sale. At the same time, try to empathize with developers and understand their motivations. Developers are a curious bunch. Often, they're more motivated by getting to play with new technology. They want to solve difficult problems. Overcoming intellectual challenges. If you can frame what you are doing as an intellectual problem, you'll have a much easier time speaking with developers. Make sure that anyone you recruit as a co-founder is critical to executing your vision. Don't leave gaping holes. For example, one of Steve Blank's startups, a game building one, went bust. They didn't have a hard core gaming developer on the co-founding team. The easiest way to identify any major gaps in your co-founding team, take a look and your canvases (Business Model Canvas or Lean Canvas). Here's more: http://qz.com/321585/to-pick-your-perfect-startup-co-founder-do-this/ You may, in fact, need a developer. You don't need one until you've validated your problem and proposed solution. Otherwise, you're giving away your equity. Customers must clearly indicate that they're willing to pay for what you're thinking of building. Another good way of recruiting a technical co-founder is to ask the developer to help you interview customers. Have them help out with founders' work, what co-founders do. Have them interview customers about their problem. Then, once they get back into creating technology (where they feel comfortable) they'll benefit from a much clearer sense of what's needed. Not just what they hear from you. In that case, you can then focus on marketing, growth, and everything else your startup needs. The developer can build exactly the right solution.

concerned you might be not lean if you raise funding? that’s actually a pretty common myth related to the lean startup approach. let me ask you this. have you ever received a “recycled” present? while it’s clearly new, it doesn’t actually match your interests. in fact, you know that the giver received that present from someone else a few months earlier. it’s likely, therefore, that they never opened it, and just gave it to you. that’s similar to the day-to-day experience of a tech startup investor. i actually worked at a vc fund in the past. more on that in future emails. download a free chapter of launch tomorrow to get in on the action. many times a day, vcs get pitched equity in a tech startup. the founders don’t want the equity. they prefer cash. this immediately reduces the equity’s perceived value, in the vc’s eyes. in some cases, screams desperation. if the founders, who have lots of equity they got somewhere else, are willing to give it away…what does it say about the company’s value? about its prospects? about what the founders believe about the company? a common question that i get from people first looking at tech startups is why tech startups need so much money. after all, it shouldn’t cost that much to throw a product prototype together. isn’t it all just self-serving hype? not always. there are five strategic reasons to raise money in the tech startup world: funding customer acquisition hiring top talent the “land grab” the “pre-emptive strike” the cash flow shortfall so, starting from the top. in all but a handful of businesses, if you can’t buy customers, you don’t have a business. sometimes an idea takes off and goes viral. for the mere mortals out there, though, you need to figure out how to acquire customers and serve them profitably. paid advertising, in particular, has a bad name because it’s easy to misuse with other people’s money. it’s easy to fool yourself and others that something is happening, unless if you know what you’re doing. admittedly, most investors aren’t keen on providing money just to acquire customers, unless if you have already proven you can do this. turn $1 into $4. or $40. a marketing expense can reliably generate profit. recruiting talent to help you execute also costs money, particularly if you are breaking new ground technically. figuring out how to scale certain technical problems (like search or constructing social graphs) requires serious technical chops. the number of software engineers capable of doing that is pretty small. and the first guys who scaled google, for example, were self-taught. moreover, to be blunt, the guys in most cheapo emerging markets live in much smaller markets. they’ve never had to solve these problems in their home country. so you need to hire smart people and keep them happy. now–we get to the really good reasons why raising money is a good idea. the strategic ones. if you and your competitors are creating a completely new market, there is a land grab going on. whoever can get the most market share–wins. there’s an old rule of thumb from davidow who ran intel’s marketing during their high growth phase. having at least 30% of market share leads to consistent profitability in most niches. at that point, you can influence what happens. until you get to that point, you’re a commodity vendor. so while it can be a bit abstract, getting a strong footing in a niche will help establish you as a player. if you’re in a niche where this is happening, suddenly paying for growth has whole new meaning to investors. you only need to be a little bit better to beat out the competition, after all. the pre-emptive strike is similar to the land grab, but more defensive. let’s say you are a cheeky bootstrapper. you enter a market adjacent to niches already inhabited by companies with deep pockets. you’ll be at a loss when they decide to enter. for example, google entered the search market, knowing there were a lot of well-funded competitors at the time. yahoo, lycos, and altavista to name a few. moreover, there were big tech players like microsoft who had kind of missed the boat, but still had a lot of money. they could catch up quickly if needed. think bing. if google had tried to bootstrap their way into the market, despite having better technology, they could have lost. instead, they got funding. they built their technology to be completely scalable, while building up goodwill with users. then, after 6 years of funded growth, they finally introduced advertising to monetize the growth. in 2004, they launched adwords. last but not least, there’s the cash flow shortfall. this is more common in tech companies that combine hardware with rapid scaling. in essence, though the same financial problem happens across the sector. there’s a long list of well known companies which blew up, despite having a sales growth trend: osbourne, spectrum. that’s right. high growth, high sales, high profits, yet low cash inflows. if there is a long time gap between a sale and getting cash, the company won’t have enough cash to fund operations. scaling their operations becomes impossible without that. you may need an exponentially growing staff to service your exponentially growing revenues. you need inputs like parts for a hardware company–also at an exponentially growing pace. unlike in software, manufacturing at scale is complicated and costly. should you think this is a throwback issue from the 1970s, what about the internet of things? what about hardware startups today? so there you have it. five legit reasons to raise money for your startup. if you want to get on that path, you’re much better off using the lean startup approach. don’t take external money, if you don’t need it. stop selling yourself (and your business idea) short. validate your idea. with launch tomorrow , you can be certain that you’ve proven people want to buy what you’re selling. or thinking of proposing. or building. build the right product. make sure you can acquire customers profitably. then get funding. and break out the bubbly.