The Secrets of Launching a Startup


Interview by Boston Business Journal
Michael Skok spoke on the topic of startup value proposition at the Harvard Innovation Lab on October 11, 2012. Kyle Alspach, VC Editor- Boston Business Journal wrote the following the next day:

Michael Skok wants tech entrepreneurs in Boston to deeply analyze their value propositions before launching their startups. But not to fear: The venture capitalist also wants to help startups know what he knows on the subject.

“When I started as an entrepreneur, I didn’t have anyone telling me the things I was going to screw up,” Skok said during a talk Thursday at the Harvard Innovation Lab in Allston, the first in a series of four “Startup Secrets” classes.

It’s the second time Skok has offered the free classes, which he said aim to give an “unfair competitive advantage” to entrepreneurs. Skok is a partner at North Bridge Venture Partners in Waltham, and formerly CEO of software companies including AlphaBox (acquired by IBM).

The first class, “Building a Compelling Value Proposition,” also featured insights from several fast-growing tech companies in the Boston area —Akiban, Apperian and uTest. (The slides from the talk can be found here)

Some of the insights from the class:

  • Start with a problem, not an idea. Ideas are “free floating” — and most will never turn into a business unless they solve a fundamental problem. Instead, start with a problem that is either unworkable, unavoidable, urgent or underserved — or some combination of the four.
  • Unworkable or unavoidable problems can spell big opportunity. When a problem is unworkable, find the person who could get fired if it isn’t fixed — that person will be highly motivated to buy your solution. Unavoidable problems — such as accounting, regulation or even aging — will similarly give you a built-in set of potential customers.
  • Non-urgent problems won’t be a priority for potential customers. “You have to have something that’s in their top three priorities” to get a potential customer’s attention, Skok said. Most large enterprises also budget a year in advance, so your solution can’t mean a net increase in cost for the company — so it needs to save money for another area in the business.
  • In consumer business, not all needs are blatant or critical. Obvious critical needs can be the basis for huge businesses, of course. But latent needs — in which a consumer doesn’t know they need it until after they’ve had it (think of Facebook) — can be powerful too. So can “aspirational” needs, such as nice clothing; a person aspires to fit into a certain sphere, so they’re willing to buy the clothes regardless of other factors.
  • Don’t just aim for “faster, better, cheaper.” That typically represents just an incremental change, and it will only be a matter of time before another company does it faster, better or cheaper than can do it. Instead, aim for breakthrough changes, Skok said — pointing to Akiban as an example. The Boston database technology company has developed an entirely different way to organize data than previously available, one which allows for much faster accessing of data and no re-writing of applications, Skok said. “Akiban is a discontinuous innovation in the database world,” he said.
  • If you’re going to pick a fight, pick a big fight. It’s often just as much effort to go after a small fight as a big one.
  • Disruptive innovation shouldn’t have disruptive adoption. If it’s too hard to adopt an innovation, it may never happen. In the case of databases, most new technologies require application re-writes to take advantage of the technologies, which makes them difficult to adopt, said Akiban CEO David McFarlane.
  • Pursue something you believe in. The best value propositions are developed by people who are uniquely suited to tackle the problem. Skok said he’s seen unlikely people find great business success through their passion for the work.

Original article here.