Month: February 2015

How Lean Startup Gave Me The Confidence To Quit My Job and Launch My Startup

David Horowitz

I’ve been a “wannabe-preneur” my entire life. I always told my friends and family that “one day I’ll start my own business” but deep down, I didn’t truly believe what I was saying. I had a comfortable corporate job, a good salary, and a relatively easy life. Like most other wannabe-preneurs, I had plenty of business ideas that I became excited about from time to time. But I never became fully committed to any of them, and certainly never quit my job to work on them full-time.

In short, I suffered from three diseases that prevented me from becoming a fully committed entrepreneur:

  1. Analysis paralysis (Is there a market for my product? How big is it? How much can I charge for it?)
  2. Fear of failure (What if I fail? How will I support myself and my family?)
  3. Golden handcuffs (Do I really want to give up my comfy corporate lifestyle?)

That is, I suffered from these diseases until I found the cure. When I first found it, I didn’t realize it was a cure. Instead, it simply seemed like a useful framework for validating business ideas. While that is indeed true, it also cured me of my three diseases and gave me the confidence to become a full time entrepreneur. More importantly, it can cure the diseases that prevent you from starting your business, too.

The framework I refer to is called Lean Startup. And this is how I used it to overcome my fears and start the company of my dreams, Retrium.

But First, Some Background (You can skip this if you know about Lean Startup already)

Lean Startup is a methodology first proposed by Eric Ries in 2011 that emphasizes short development cycles, frequent customer feedback, and “validated learning.” A complete description of the Lean Startup methodology is well beyond the scope of this article, but if you’re considering starting your own business, I strongly encourage you to read about it (start with The Lean Startup, by Eric Ries himself, followed by Running Lean, by Ash Maurya).

For the purposes of this post, here’s what you need to know. Lean Startup encourages you to “get out of the building” by talking to, and learning from, potential customers early and often. So early, in fact, that you don’t even need a product to start talking. All you need is an idea and the courage to talk to others about it.

How Wannabe-preneurs are Different From Entrepreneurs

Both wannabe-preneurs and entrepreneurs typically start with the same drive: a love of building things. What separates wannabe-preneurs from entrepreneurs is that wannabe-preneurs tend to be focused on product alone, while entrepreneurs understand that building a product is only a part of building a business. Building a business also requires marketing, sales, customer development, business models, pricing strategies, HR, and more. Wannabe-preneurs start and end with product. When it doesn’t catch on, they give up.

The trouble with building a product without simultaneously talking to potential customers is that you’re just guessing. You’re guessing that others will find your product useful. You’re guessing that people would pay for it. Most wannabe-preneurs never gain the confidence they need to quit their job and start a business because they are just guessing.

Enter Lean Startup

Lean Startup fixes this problem for you. It encourages you to “get out of the building” by talking to potential customers in order to learn from them. It forces you to validate your business hypotheses early and often. It forces you to iterate on small bits of product by testing them in the marketplace. And best of all, you can do all of that before you build a product and before you quit your job. With Lean Startup, you no longer need to guess that your business idea has a real chance at success. You’ll know it has a real chance at success because potential customers will have already told you that they would pay for your product. And all this, before you even quit your day job.

Here’s My Story

For me, it all started with a simple hypothesis: that it’s difficult for distributed scrum teams to run effective sprint retrospectives (if that sounds like a bunch of mumbo-jumbo, don’t worry, you’re probably not in my target market!). Here’s how I used Lean Startup to test this hypothesis and cure myself of my three diseases.

First, I started talking to people I knew who were in the broader software development space. I did this on weekday evenings, after dinner and after I put my kids to bed. I quickly learned that most people I talked to did not suffer from the pain points I was trying to solve. Good thing I hadn’t quit my job yet! Instead, I simply narrowed my early adopter target market to Scrum Masters of distributed teams. Since I didn’t know too many of these people, I turned to Twitter, found a group who were in this target market, connected with them, and asked to chat. Most were happy to oblige (thank you!) primarily, in turns out, because they did suffer from the pain points I was trying to solve. Great news! I had found my initial target market.

Within two weeks, I had talked to over 25 potential customers. Over 95% had the paint point I was trying to solve. Most were actively looking for a solution, but couldn’t find one. Best of all, the majority of people I talked to were willing to pay for the solution I was proposing.

Notice that I still haven’t talked about actually building a product. That’s because I didn’t have one, nor did I need one yet, as long as I kept working on validating my problem hypothesis. And the more people I talked to, the more I became convinced that I had an idea that could really work. And not just as a cool product, but as a business. In effect, my potential customers had convinced me that the primary risk of going full-time on my startup was no longer whether people would pay for my product, but whether I could build such a product in the first place.

Did you hear that? Product! The thing that wannabe-preneurs are good at. The thing I know I’m good at and my co-founder is good at. I now had the guts to quit my job and start Retrium, the company of my dreams.

Lean Startup As The Cure

Let me end by going back to the beginning. I had three diseases as a wannabe-preneur: analysis paralysis, fear of failure, and golden handcuffs. Lean Startup cured them all. It allowed me to gain confidence that there was a market for my idea (overcoming analysis paralysis), it helped me validate my problem statement (overcoming fear of failure), and it let me believe that my startup could realistically lead to financial success (overcoming golden handcuffs).

Lean Startup can do that for you, too. All you have to do is start talking.

Why Retrium?

David Horowitz

This past week, I told my boss at work I’d be quitting my job to be the co-founder of a startup, Retrium. Over the years, I’ve had plenty of ideas — some more successful than others — but I never quit my job to work on them. One might reasonably ask: why go “all in” on this one? In other words, what makes Retrium different from my past entrepreneurial endeavors?

Good question! Here are three reasons why I believe Retrium has a really great shot at becoming a very successful company:

1. Broader Market Forces

Retrium is a toolbox of facilitated retrospective techniques built specifically for distributed scrum teams. If you’re not in my target market, that might sound like a jumble of jargon, but it sits at the intersection of two powerful market forces:

  1. The increasing popularity of remote work and distributed teams
  2. The incredible adoption rate of agile and scrum within the software development community

Let’s start with the first one: the increasing popularity of remote work and distributed teams. According to ESNA, 20% of the global workforce telecommutes. More anecdotally, we’ve recently witnessed the incredible popularity of websites like Nomad List, which provides information about the “best cities to live and work remotely”. We also have lengthy crowdsourced lists of startups with a distributed workforce. In short, companies have begun to realize the importance of hiring the best talent, regardless of location. This trend is only going to continue as technology gets better and better at reducing the friction of a distributed workforce.

The second market force is the incredible adoption rate of agile and scrum within the software development community. The jury has decided, and agile has won. What began as a simple manifesto has turned into powerful force that is helping teams produce better software, faster. This is true, of course, for the startups of Silicon Valley, but it’s just as true for the multinational enterprises of New York and the nonprofits of Washington, D.C. After all, who wouldn’t want to be more agile?

Clearly, there are plenty of pain points left to solve in both of these relatively nascent markets. Retrium solves one of them.

2. External Hooks That Naturally Reduce Churn

The biggest challenge to the sustainability and profitability of any SaaS company is customer churn. The simplest definition of churn is “the rate at which customers cancel their subscription.” Why is churn so important? For each customer that cancels their subscription, a company has to find another just to maintain current revenue. If a startup wants to grow, then its customer acquisition rate has to be greater than its churn rate. Clearly, the higher the churn rate, the harder this is to accomplish.

One of the best ways to reduce churn is to have a high level of user engagement. After all, users who are engaged with your product are less likely to cancel. One of the things that excites me most about Retrium is the fact that it has a high likelihood of having extremely low customer churn.

Retrium benefits from something I call an “external user engagement hook,” which is something that encourages customers to use your product from outside the product itself. Retrium’s external user engagement hook is the scrum framework, which requires teams to run retrospectives on a regular — and frequent — basis. The hope is that every time a team needs to run a retrospective, it will be reminded to use Retrium. Having an external user engagement hook can be an incredibly powerful driver of low churn, and it makes me confident in Retrium not only as a product, but as a business as well.

3. I’m Passionate About It

One of the worst mistakes a founder can make is to start a company in a market that he or she is not passionate about. Popular culture would have you believe that founding a startup will lead to a glamorous life full of parties and ritz. The reality is quite the opposite — startup life means hard work — really hard work. As a result, founders of startups can burnout quickly, especially those who start companies in markets they aren’t personally passionate about.

As for Retrium, I’m fortunate that it’s at the intersection of two areas I’m truly interested in: agile software development and distributed teams. In fact, Retrium itself is being built with these concepts at its core. Not only are we using the scrum framework to develop Retrium’s code, but we’re also a fully distributed workforce (we have no office).

Looking Forward

None of this means that Retrium will, in fact, be successful. Most startups fail, and it’s far too easy to live in a positive echo chamber that can lead to overconfidence in your idea. Nonetheless, I truly believe the future for Retrium is bright. I’m excited to get going.

Coming soon: a post describing how I got the confidence to quit my job and start Retrium. I’ll give you a hint: Lean Startup.

Getting an MBA vs. Starting Your Own Business

David Horowitz

kaboompics.com_Girl reading a notebook

Let’s start with the profiles of two high-success individuals who are about to embark on two different life adventures.

Individual #1 (We’ll call her Lucy)

After graduating five years ago with a bachelor’s degree in Computer Engineering from MIT, Lucy took a job as a software developer at a large corporation. Her starting salary was a healthy $90,000. In no time, Lucy was identified as a high potential employee. She was quickly promoted to project manager, then to senior project manager, and was correspondingly given multiple raises resulting in her current salary of $125,000. As she moved up the corporate ladder, Lucy started to realize that she lacked some of the foundational business knowledge that her older, more experienced colleagues seemed to have. So she decided that it would be a good idea to quit her job and enroll in a fulltime MBA program. As a star performer with great references and a solid academic background, Lucy was confident that she would get accepted to a top-ranked business school. She knew the costs are high: $170,000 in tuition payments plus an opportunity cost of $250,000 in lost salary, for a grand total of $420,000 in lost income over two years. Yet, with the support of her family, she decided to go for it. After applying, interviewing, and nervously waiting for a decision, Lucy finally got the good news: she was accepted to Harvard! When she told her parents, friends, and colleagues of her decision to leave her corporate job and get a Harvard MBA, they were immediately supportive (“you’re lucky to be able to attend such a good school!”) and wished her the best of luck.

Individual #2 (We’ll call him Tom)

Tom is a technical wizard and a natural leader. He’s the rare combination of a geek who is also an outgoing, personable guy. He’s five years out of Stanford University, where he graduated with honors with a Computer Science degree. Upon graduation, he was recruited by all the hot Silicon Valley companies – Google, Facebook, Apple. Now, he’s a rising star and a lead engineer and has been told by the suits that he has the potential to become a “big deal” at the company. His starting salary was $90,000, but he’s now making $125,000. He’s generally happy with his job, but he also feels that by working at a big company, he’s missing out on his lifelong dream: to start his own business. One day during his daily 6:00am morning shower, Tom has a flash of genius: an idea that could change the world! Tom hurries into the office, excited to tell his closest friend at work about his idea (and secretly hoping that his friend would be interested in becoming a cofounder). It works! Tom and his friend start working on the idea at night and on weekends. One day, after receiving yet another urgent email from his boss (they always seem to be urgent), Tom decides that it’s time. He walks into his manager’s office and tells her that he’s quitting his job. That same evening, he calls his parents to tell them the news. The reaction is predictable: “You’re doing what? Tom, you could lose everything! What if it fails? Are you sure this is a good idea?”

What People Think About Lucy and Tom

The difference in reactions to Lucy’s and Tom’s decisions is not mere hyperbole; it’s how most people in our society think. At first glance, there’s a good reason for that: Lucy is smartly investing in her future by getting a Harvard MBA while Tom is risking everything, since the vast majority of startups fail.

What’s So Different About Lucy’s and Tom’s Paths, Really?

Let’s look at what Lucy will most likely get from her Harvard MBA:

  1. A really great business education
  2. An amazing lifelong network
  3. A guarantee of lost income in the short run
  4. Hopefully a lot of extra income in the long run

And here’s what Tom will most likely get from founding his startup:

  1. A really great business education
  2. An amazing lifelong network
  3. A guarantee of lost income in the short run
  4. Hopefully a lot of extra income in the long run

That’s the thing. The expected outcomes of getting an MBA and starting a business are nearly identical in almost every way. Both are opportunities to learn. Both are opportunities to meet people. Both are guaranteed to lose you large sums of money in the short run, while having tremendous potential to make you a ton of money in the long run.

What Needs To Change

Despite the similarities in outcomes between the two, most people consider quitting your job to found a company to be an extremely risky activity, while quitting your job to go back to school to be a worthwhile investment. This needs to change. Yes, of course starting a business is risky. But starting a business, like getting an MBA, is also a worthwhile investment in your future. And that’s true even if your company fails. The business skills you will gain and the people you will meet will, in the long run, open doors for you.

So the next time someone you know quits his or her job to start a company, treat it the same way you’d treat someone who is going back to school. Both are deserving of praise.