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Over 90% of startups fail, yet every entrepreneur starts their venture with such a fiery passion that failure never crosses their mind. Blinded by the potential opportunity, it isn't until you miss your first goal or milestone that you realize, 'This is going to be a lot harder than I thought.'
One differentiator in failed versus successful startups is experience. Not necessarily in how to solve the problem your attacking - But in how you approach the building the solution.
In this video, Matt Lo and I discuss how to build your MVP, common startup mistakes, and how to deal with failure.
Matt Mroczek recently left the marketing agency world where he was overseeing national campaigns for some of your favorite household brands. Currently, as the VP of Marketing for Chipbot, his primary focus is finding new and unique ways to help small businesses grow.
Matt Mroczek: The term ‘Founder’ - That’s given, that’s earned, that’s self-proclaimed, what do you think?
Matt Lo: It’s just a title. I mean I know tons of people who; I’m sure you’ve heard this, The 'Wantrepreneur' right? People who just want to be, but they’re not doing anything.
I think founder, people think “Oh! I actually did something, I am a founder. I’m just like all these other great founders that you know about. Treat me like one of them!”
I think there’s that perspective and then there’s the people who just say I’m here to sell you a product. I don’t care if I’m a founder or I don’t really care what my title is.
I’m here to see if there’s just product-market fit.
Matt Mroczek: What do you think about titles? They mean something, they don’t, they’re needed?
Matt Lo: They used to mean something when I was a consultant because you work with different titles when you’re trying to pitch your services.
But, I think once you start running your own company the customer cares more than anything.
So whatever is driving your product, marketing, and sales, that’s the top priority. So that means title doesn’t mean anything.
The only time it does matter is when you’re really raising money because you know, I raised money as the CTO and It was always awkward to do it on both parties.
The technical person trying to sell the business, sell a portion of the business. I think a CEO has to do that.
Matt Lo: What’s the number one failure you see in first-time entrepreneurs when they have a product built and maybe they have a co-founder that can help out with some other tasks.
What’s the number one failure usually hitting them right now?
Matt Mroczek: It’s one they don’t realize and it’s over delegating the core responsibilities that they need to own.
I hear so many times of either using Facebook Ads or inside sales or somebody else to find and close that first customer and it’s not them.
And there’s no way they can rely on somebody else to crack that code for them unless they’ve done it first.
Matt Lo: So it’s marketing, right?
Matt Mroczek: Absolutely!
Matt Lo: Building the product is so easy, but marketing is the hard part - Trying to sell to a customer.
Matt Mroczek: I was reading somewhere recently that there are more SaaS companies being started now than ever before.
Five years ago, so many thousand a year and then now the number keeps climbing.
Do you think that for non-technical founders, they should hire in, they should make it themselves, they should hire an agency to do it, or should they find a freelancer?
What’s the best method for them to take their idea, and they can’t code, and make a website and start seeing if anybody cares?
Matt Lo: First, let’s eliminate some of those options.
Don’t hire an agency and don’t hire a consultant.
Matt Mroczek: Why?
Matt Lo: Because you don’t have any money to do so and you don’t have a proven idea.
You don’t have a product, you don’t have the customer, you have nothing.
Why spend money on something that has a very very high chance of failing. So those two options are out the door.
Next is you have to find a co-founder if you can’t build the product yourself. Your idea must be so good and must convince someone else to build it for you.
And your proposition to that person is a portion of the equity of the company.
Matt Mroczek: What’s one podcast that’s made you a better founder or maker?
Matt Lo: I think it’s the one by Jason, which is a startup...a week of start...I don’t remember what the….
Matt Mroczek: This Week in Startups
Matt Lo: One startup a week...something like that.
It’s really insightful because you get really good questions and answers from from the recording.
I think often, it’s not about what you hear in the media or TechCrunch, it’s very specific like, very specific pain problems you’re having at very crucial points in your business.
I think hearing those is really valuable because you get to see the...oh!...this person had the same problem too.
Or, here’s a highly likely problem you’re about to encounter if I hit these milestones.
Matt Mroczek: How do you relate to a SendGrid or somebody similar. Their company, when you hear about the problems they had, in the most recent episode that you shared with me, the CEO walked into a 30 million dollar company and so on and so forth…
How do you relate to the challenges and the stories they tell to a company like ChipBot very much younger than that?
Matt Lo: Well I think that SendGrid being acquired by Twilio, it’s really hard to relate.
So, not every podcast coming out of there is something like ‘hey I can relate to right now’
But what you can relate the nuances - Like here’s a situation where we didn’t know how to solve the problem at all.
With all the resources and capital we had, investors, and network. We didn’t know how to solve it.
I think looking at the creativity coming in them, it’s the same level of creativity as they started the business. And you know in that interview, that wasn’t a founder talking. That was a CEO that came in later.
But, it’s interesting to see that the problem-solving we do right now at ChipBot is going to take about the same quality of and creativity later down the road.
Matt Mroczek: Is solving a problem, is that something you can just throw money at, resources at, team members at, or how do you…?
Matt Lo: Sometimes I think it always comes down to the decision makers strategy and willingness to change, that can help decide what’s the best options.
I think if you assume that these are my options only, you come into this sort of mindset of status quo, and you never really actually get to break things.
Which means if you’re not breaking things you’re not actually asserting that your changes are working or not.
Matt Lo: You work with a lot of early-stage companies here at mHUB?
What is the number one problem they all share right now?
And I know a little background, I know these have a product or prototype.
They come to you help them with their website, but then they’re all at that level.
What’s a common problem they’re stuck at?
Matt Mroczek: All of them want attention and a faster product development lifecycle.
Matt Lo: They want it, but they don’t want to spend the effort to do it, or they don’t want to learn about the processes?
What’s the root problem there?
Matt Mroczek: I think actually the real problem is that they don’t settle or they don’t spend enough time developing what a true MVP is.
I think that an MVP is literally anything that you can put in front of somebody to get feedback.
Which could be a blog post and I know we’ve talked a lot about that before, but it’s a matter of anything to get a reaction.
Now I get it, not every business is the same but if you’re working especially on the physical product and it takes you...just a minimum think about a coding effort right?
You could have a website up in an hour if you really needed it to, but a 3D print takes six hours, and then more to print so on and so forth.
So it’s thinking about how to fail faster so they can get more feedback and I know we mentioned the live stream before, just introducing new technologies to get more feedback, faster feedback and fail or learn quicker.
Matt Mroczek: Mentally, how do you deal with failure?
Matt Lo: Managing despair.
I always tell everyone this, that when you first do a startup you get this high of excitement and opportunity.
Maybe if you’re seasoned you know...like it’s gonna be rough times ahead but you still have this high of we're gonna get this to work.
I think managing that is very key into managing despair because if you can manage your excitement when the bad times happen you can flip it...you can say here are the things that can go right
If you actively manage it you sort of have this equal sign wave of you know excitement and despair.
That’s where you want to go, you don’t want extremes in either direction.
When you manage despair, then your emotions get less in the way when you’re are trying to improve your product, trying to get MVP out. When you are trying to get your first 10 customers.
You don’t want emotion in the way.
Shifting Your Mindset
Matt Mroczek: I would set a personal goal of how can I talk to one new person a day who doesn’t know me, who doesn't know my product, and maybe or maybe not has a problem that I’m trying to solve and just talk to them
Find a way somehow, if you’re in a co-working or community as well, go out and go in person if you can. Otherwise, just find any way to get feedback every single day to validate or further understanding of the problem.
Matt Mroczek: What are three ways that you can fail fast over the next week or so to either better the understanding of the customer or the problem you’re solving?
Matt Lo: First do a cold sell to a different persona at least every week or even every two weeks. Fail on that to see what the reaction is. Challenge your current assumptions right now.
Second is to add things in the product that you think are valuable, but you are not totally certain.
Adding that and then testing it against your current customers or early users. And by doing so you can introduce change.
Is it going to add more churn or is going to give a positive response or more direct feedback through email or if you have ChipBot. You can get your feedback through ChipBot.
Three, the other way to fail fast is to start pitching to investors.
If you are confident that you have something sellable, well try to sell it then. Not just the product, the whole idea and see if that sticks.
I think you know a lot of it is more into the communication and in terms of failing fast but that’s critical because that gives much more value than you building a product and waiting for it to fail.
Matt Mroczek: What kind of answers are you looking from a cold audience, from your current user base, and from an investor?
Matt Lo: The answers are going to be wide-ranging. Oftentimes you get no, but what you’re trying to ask is why.
So you can just predict that 90% of the time people are gonna say no.
Anyone who says it’s a great idea, you should really maybe not give that as much value. You want to look at the no’s because those will see where the boundaries are.
Anyone who says yes, you don’t know if they’re a fan of you. You don’t know if they’re a fan of the industry, fan of the product.
Those all add to biases.
Matt Lo: How do you know when you need to turn down the business...shut it down?
Matt Mroczek: There’s a quote that I came across recently and it was from the Airbnb podcast on How I Built This and it’s called the trough of sorrow and it’s basically after the excitement of launch; after all your friends know and ProductHunt...so on and so forth.
It’s that whole period of, ‘Can I push through this difficult part?’
We’ve got people, but they’re not real customers because they’re too early - They’re the very early adopters.
As quick as they came, they can quickly leave and exit as well and it’s that pre-product-market fit, part of the curve, the trough of sorrows. And it’s can you push through or not and that’s where 90% of the businesses do fail.
I think to identify when you should turn it off… When you have given every ounce of effort into the company and you feel like you are not providing an A+ product experience and that your competitors are doing it tenfold better than what you are.
Matt Lo: To add on that, it’s not just the effort it’s making sure you’re spending the effort to validate; it’s can you build a scalable business by capturing 1% of the market or less.
Matt Mroczek: Yeah, I think an Elon Musk kind of quote of that really changed my thought of startups.
Can you be 2x what the industry leader is? Because if you’re not double, if you’re not providing double the value that they are - why would anybody want to switch to your product?
And that for me on was like okay...we need to create a lot of value here that our customers can see very quickly and then realize very quickly as well.
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