Review: Aaron Patzer (mint.com) - The $170 Million Idea: From Idea to Exit in 3 Years

Summary


Mint: The product is FREE, we get money if we can help you save money. Our ad helps you save money: e.g. Save $200 on interest if you switch your current mortgage to this one.

• Validate your idea
• Prototype
• Build the right team
• Raise the funding

Real Business: Business is creating value (not just a feature)

• Problem people will still have in 5-10 years
• Billion dollar market
• Sustainable advantage

Pasychology of Startup: Listen to Frank Sinatra - That's Life to counter Depression

• Quit your job
• Self doubt is okay
• Work flat out hard
• Can be very lonely: working in a room in a new city alone for 7 months, thinking you could change the world could be pretty daunting

Pre-launch Evaluation: +500K per Engineer, -250K per Business Person

1st 5 hires are Engineers, 6th person is Marketing

Profit Projection = Relistic Estimated User Base * Revenue per Year

2012: Yet Another New Hope

100 minutes of the New Year just swoop by, while I spend my time watching the deep (by superhero movie standard) and twisted Watchmen. The sounds of fireworks outside reminded that the new year has arrived, yet I am too lazy to get up and go out, but I decide to make and effort and go out anyway, but all the fireworks are blocked by nearby buildings. I raise my hand in air and shake my hand and body like an insane person, saying “yeah!” to usher in the New Year. 2012 is no longer the future, it’s here.

New Year, New Hope, New Beginning, and Hopefully not too much of the same old shit.

Year-end usually felt slightly shitty psychologically (in regardless of the holiday mood, like a bad hangover), knowing the year had passed and the feeling of we accomplished so little and “wasted” so much time? What had we accomplished? What do we intent to accomplish? What are we doing? We are wasting time living our life. Perhaps we wish for more wealth, more acknowledgement, more gains, more love, less misery and misfortune. Then again, perhaps no news is good news. Then again, we are all greedy being which are not easily satisfied. We wish for the simplest thing, yet we always over complicated things. We always wanted the things we never have (or yet to have, like a child wishing to grow up faster, and later wishing to age slower), else life would have ended.

If I believe end of the world is coming, I am not quite sure what should I do; pack my bags and travel the world, or stop living my life, and how do we actually love our loves one more every day? Can we actually increase the amount of love pumped in per day, or perhaps the current dosage is just fine. So if the end of the world is coming, I would prefer not to be preempted about it, it just adds more misery and it lessens the hope for mankind.

Anyway, after the year end, it feels good because we are being reminded that the old just pass us a few hours ago, and the new is here. It’s like life got a reboot, where the machine is running faster again with more memory to spare (and all the bad problems are gone). We forgotten about the pain and despair, and we are all set to march towards our hope, to reach the destination which we missed last year, and to create bigger and better destination for this year. We are all pumped up, and ready to take on the world, as we have another 12 months to do a lot of stuff. We are going to OWN the world, and the people of the year shall be us.

2012 have to be a better year; else there is nothing to look forward to. In fact, it’s going to be a great year, a year of accomplishment and great satisfaction. Of course we would pray for world peace, less natural disaster and less financial crisis. We hope for less corruption, less stupid and greedy people staying in power, and more “right” things to happen. We want our loves ones to be happy and healthy, and wish everyone would find their dream and have the courage to chase that dream. I just wish everyone would be happy, in regardless of the long list of wishes and hopes.

Then again, if we aren’t specific, we aren’t going to accomplish anything and be happy about it, as the pursuit of hapyness is very broad and we might get lost within. My current ultimate dream is to go into semi-retirement within 3 years, and start doing things because it’s fun and meaningful, not because I have to. Until then, I would give it all out to give birth to 2 consumers Internet Application: Foodoly (morphing from Malaysia Most Wanted Food) and Travelopy, by working really hard and nurture them to grow strong and healthy. All out, not holding back, until I ran out of excuses in regardless of the outcome.

2012 shall be different, and great :) Happy New Year

Review: Evernote Business Model

Founder Showcase - Phil Libin Keynote

The Best Product Doesn't Always Win is a total BS. People who tell you this don't want you to succeed. It is true that some great product doesn't win, but given the choice to invest in product vs marketing/logistic/crm, you should put more emphasis on product and could potentially get the other stuff for free.

2 step plan in making revenue

1. Make an amazingly great product
2. Charge money for it

Stick with 1 revenue model for startup

• Premium Subscription (90%). Not because it's biggest, but because it had the most salable growth.
• Advertising (little money, promote partner product)
• Technology licensing
• Schwag (T-shirt, stickers)
• Giant novelty checks

Stats

• 3 Million Users in 2 years, 8,000 per day
• Free users grow by 10% per month, paid users grow by 15% ($5/month, $45/year)
• Lose 50% users on the 1st month, then the rest stays month after month
• Conversion Rate: 1% (1st Month), 2% (1st Year), 8% (2nd Year)
• Cost per User: 9 cents, Revenue per User: 25 cents
• If you haven't reach break (gross margin profitability), the more users you add (scaling) means the faster you run out of money; after break even, the more users you add means more revenue

Freemium Model

• A great long-term retention rate (don't have to spend money to re-attract users again)
• Product that increases in value over time
• Low variable costs

Startup Realities Checklist: Coder or Entrepreneur?

So what are some of the harsh realities of a startup that applied to me as well?

Your First Iteration of an Idea Will Be Wrong
Our first product is a property website which allows checking for historical property prices so that you could make a wiser decision before purchase. Though it might sounds useful, but we fail the gain user tractions or wrestle with the big boys like iProperty. Price Analysis is nice, but people use property website to search for property (either buy/sale or rent); and we don’t have the resources or connections to succeed in this manner.

Perhaps it isn’t a fail product (yet), just that it would consume more resources and industrial relationship to succeed (something which we don’t have). Restaurant reviews is something which we could do really well given our limitation, thus we focus on that.

Your Friends And Family Won’t Understand What You Do
It takes years before my dad stop asking me to get a “real” job. When I told people we are running a restaurant reviews website without charging for usage, people would ask how we survived. I would explain it is like The Sun newspaper, a free local newspaper and make money from the advertiser. Wait until they found out I am making less than being employed (sometimes).

Why do it (start a business) if it doesn’t make more money than being employed? The short answer is it’s fun and satisfying, I can work through weekend and midnight and still feel good about it (though I curse at the notebook many times). What if it doesn’t work out? The problem is, I could no longer get myself to do work for others which doesn’t interest me. It’s just painful. There seems to be no turning back (I once wished for burning the bridges, seems like it had happened).

You Will Make Less Than Normal Wages For A While
It could be a long while. I would probably earn more if I continue to climb the corporate ladder 6 years ago. Then again, I would end up in a dead end: a life which I wouldn’t enjoy. I need good mixture of freedom and passion, and a good mix of programming and traveling. I am lucky that my life expenses are low, and I am good at saving money, and pretty good at bootstrapping, and doing something which is within my means and capabilities.

Everything Takes Twice As Long…If It Even Happens
Still remember about thinking about making the 1st million by 25, then 30, and now turned to 35. Still remember about become sustainable within 6 months, then 1 year and then forgotten about how to calculate. Being a programmer, we are always optimistic about launching a new product or finishing the feature within 3 days, which might ended twice or thrice as long. All system must go live and all features must go out the door! Luckily that is still true: late but deployed. Getting it done is still better that getting it perfect.

Titles Mean Nothing. You Will Be a Janitor
I can call myself CEO, Founder, Serial Entrepreneur, Software Architect, Product Manager, etc. It doesn’t matter: I’m still a coder, and a thousand other things.

There Is No Silver Bullet
There is no savior (mentor or VC) which is going to come in and save the day, or any magic formula not known to mankind; I have to make it work though countless iteration of experimentation and error, until I get it right, or stop being relevant.

Customers Will Frustrate You
I like the users and consumers (since they are not paying and happily using our free services); customers could be a bit demanding since they are forking out the money. Then again, I am thankful of Google Adsense which could temporary shield me from sales and customers.

You Can’t Do It All Yourself
Yup, I have tasks piled up for me for the next 12 months if I am going to do this alone. I can pick-up multiple skills, but I could squeeze more than 24 hours in a single day. I definitely need help, HELP!!!

Building A Team Is Hard
Yup, I could be very tricky, but there is no other way. Then again, we shouldn’t just assemble a team just because we need to, we need to find the “right” people; just like we should not get married just because it’s time to get married, and we need to find the “right” girl or else we would be miserable for the rest of our life.

Building a team is like a courtship which hopefully would lead to marriage, and expect a lot of heartbreaks, incompatibility, wrong timing, betrayal, bad judgment, misaligned vision, not good enough, etc.

You will LOSE all of your money that you ever earned, and then a bunch that you still have not earned. If you’re not prepared to put it all on the line, you’re not prepared for a start-up.
When I am Solo, I just need to feed myself and get a shelter (which my parents could temporary provide for me).  Worst case scenario for me is that I might lose that “potential” income per year, or don’t have enough money to get married or have children. Should I take on more risk?

Am I a Coder or Entrepreneur?
I have ponder this question for quite a while, am I an Entrepreneur doing a Startup? I know I am a coder who likes to build stuff, and I am happy when people like to use my stuff. Is my stuff (a product or a website) a startup? Is a coder running some stuff an Entrepreneur? Before the word Entrepreneur doing Startup becomes popular, it was known as Businessman running a Business; and it is common knowledge that technical person are less likely to be a businessman. Technology (and Timing) made it possible for a coder to become an Entrepreneur doing a Startup. We know Entrepreneur consist more than just a coder: the business and management side, the sales and marketing side, and the whole “running a startup” side.

Rather than being all glamorous about entrepreneurship and startup, perhaps I am happier being a coder building some useful stuff which people happens to like to use. I guess I am not getting any VC love after admitting to this :)

Jeff Hoffman: How to overcome criticism of your idea?

Kinda missed his talk during the SVC2M event due to an 1-to-1 session, now I know why it's the most liked talk: Inspiration and No holding back (and no excuses).


Notes:

• Successful people are not smarter. They just wake up and go do something about it, no more excuses.
• Entrepreneur take gamble on themselves.
• Info Spunge: read (and gather data points) about things which might not be relevant to what we are doing, and somehow the dots might connect after a few cycles to form a new picture.
• You'll fail, so what?
• Leader: build a team who is smarter than you.
• Ask what your future team member want? Do you share the same value or vision?
• 299 vs 300: It's what differentiate Heavyweight Champion and other boxers.
• Should I do something which make instant money, or work on the product? Hardwork & Sacrifice are the nutients
• We always know we are going to sell everything, but let's focus on selling one thing. Amazon got so good at selling books, people start asking what else are they selling. Same goes of Zappos.
• Protect Idea: Patern, Switching Cost, Industry with Relationship
• Blue Sky: Pretend there is no gracity and rules, don't try to innovate by making more lanes in the highway to solve traffic.
• You cannot control of being a victim, but you can control if you want to continue to be a victim.

How to take on Negativity?

• Don't take advice from golfer if you want to play baseball (find the right mentor/advice)
• Great Multi-tasker = No Focus
• The Drive to get it done now = Impatient
• Not afraid to try something no one else had tried before = No Respect for Authority
• Quit taking opinion from the guy you are not going to sell your product to

PS: I always knew I am pitching/talking to the wrong kind of people: they are not the users of my product, they do not understand the dynamics of consumer Internet and they are definitely not entrepreneurs. Thanks Jeff for the validations.


It's time to do more with less excuses.

Why users' desires and needs are the most underserved?

We know Malaysians are crazy about food (the further we traveled, the better the food taste), and there are plenty of restaurants popping up and closing down every month, yet there are very little successful websites which help consumers to look for good food and restaurants. There are probably 2 dozens of food websites (non-blog) in Malaysia versus a few hundreds food bloggers, and Malaysians actually get makan advice from food bloggers rather than using a food website like Yelp (for Malaysia).

We know fairly sure most Malaysian eat out and there are plenty of thriving restaurants, but why the supporting web services to help match foodies with their desired restaurants is not quite there yet? In fact, most food websites are started as a hobby project; and some done by small companies, and the big players are certainly not in sight.

Is Malaysian web sphere not vibrant enough? I don’t think so. We have Groupon and dozens of its clone such as MyDEAL and Dealmates. For online property, we have iProperty, ThinkProperty and PropertyGuru. For job hunting, we have JobStreet, JobsDB and Monster. For e-commerce, we have Lelong/SuperBuy, Postme, AirAsia Megastore and Jipaban (in fact, most individual setup a blogshop).

Why are certain segments more vibrant and filled with bigger players? I have a theory: short cycle to profitability. Most of these segments require low development time and cost, perhaps high marketing spending, and the ability to monetize and be profitable within 6 months (or gone out of business). Almost everyone can setup a Groupon shop, though you need to have sizeable capital for marketing and hiring sales people, and there are multiple proven local models and success stories where the top 10 local Groupon clones are hitting the revenue of RM 200,000 to RM 5 million per MONTH! It’s like a gold mine, and everyone is getting the shovels. Success story like iProperty and JobStreet shows there are millions of ringgit to be made from the local market, thus people are willing to invest in and try to wrestle some market share from the big established players. How about e-commerce? We never really heard about most of the websites besides Lelong. My theory is E-Commerce = Sales = Money, thus people inherently thinks there are always money in this segment (just like a brick and mortar shop which sell things). E-bay could be an inspiration for some.

So, does that mean there is no money in helping people to discover great food, but tons of money in selling restaurant coupon? Let’s just say selling restaurant coupon is easier and faster. There are basically 2 type of consumer Internet business: Type A) one that focus on the users and help them to get what they need. Type B) focus on the merchants and make it super easy for users to buy the merchant service. TripAdvisor and Yelp is Type A (focus on users); while services like KAYAK, Expedia, Booking.com, and Agoda is Type B (focus on merchant). Bigger companies would like to venture into Type B kind of business, because it’s nearer to the money (there is profit in every booking).

What is Type A (user-focused)’s business model, like TripAdvisor? TripAdvisor is more costly to develop (platform, content, community), which might take 1-3 years to gain traction with minimum profitability; once they became the market leader and everyone goes to TripAdvisor’s website to plan for travel and seek recommendations, then it became a valuable platform. All Type B business like Expedia would want to be featured on TripAdvisor website, because there is where their customers are. TripAdvisor make its profit from referrals bookings made on Type B’s platform, without the need to handle customer service and all the work. Click and KaChing!

What is the different between TripAdvisor and Yelp's business model? TripAdvisor is slightly luckier as they could make profit from travel booking business like Expedia, and they don’t have to do the hard work of engaging every hotel and travel agencies in the world. Is there a booking service for restaurants? Perhaps there are some, but nothing as elaborate and vibrant as Expedia. My guess is Yelp! still have to do a lot of ground work, engaging restaurant owners and merchant to do some kind of advertisement or promotions on the website. Each travel deal could average RM 500, but each restaurant deal is only RM 50. For restaurants, there are more work and less money.

So, why would we want to do Type A (user-focus) business if most of the money is in Type B (merchant-focus)? I guess I am a believer that if I do something which actually helps others to solve their problems, it means I am creating value and good things will happen. A lot of people are trying to look for great places to makan (including me) every day, and I am serving that need. Though that might not sound very business-minded, but I do believe in its value (though I got criticized a lot by business-minded person who thinks I am delusional for treating this as a business). Basically I believe we solve a problem, serve a need and acquire users who like our services.

Mr. Stoppelman (Yelp) said that the site deliberately tilts its rules to support the reviewers. “We put the community first, the consumer second and businesses third,” he said. - Source: NYTimes

Besides personal and philosophical reasons, there is a long term strategic reasons as well. It might take you 3 months to start a Groupon site and start making money, and it’ll take any guy 3 months to be your competitors and reduce your profitability. The barrier of entry is very low, and it’s a very hot gold mine; and money can buy success easily through marketing in this case. How many people are willing to invest hundreds of thousands and be patient for 1-3 years to gain traction; and have the opportunity to monetize in the end? There are hardly any competitors left at the end, and new comers will take years to play catch-up, and we gain the priceless reward in becoming the market leader. Most importantly, we have gotten the content and the users; content attract the users, and users attract the merchants (and profitability).

Jeff Bezos said, “It’s all about the long term.  If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow—and we’re very stubborn. We say we’re stubborn on vision and flexible on details.” - Source: Forbes

In Malaysia’s context, the idea of pouring hundreds of thousands and taking 3 years to make real profits might be unbearable of most investors. The idea of food hunting using websites (or mobile applications) is quite alien to users above the age of 35 (they like to read reviews on newspaper, and ask for advice from friends). Thus, most investors would think I am a young ciku who know nuts about business. Then again, I still have a lot to learn.

In the meantime, we will make Malaysia Most Wanted the ultimate gateway to all Malaysian food and restaurants; provide satisfactions to all the foodies out there.

My Last Bite at Government Grant

Hi, I am Desmond, and I am jinxed with Government Grant applications. For the past 6 years, I applied for 4 government grants (from 3 different agencies) and entered a reality TV pitching show, and all of them sunk. You can read about my journey.

In the early years, I thought I am half-hearted with no track records, thus I fail. Then I manage to develop a service with great traction (self-funded), yet they still doubt my capability to venture into new markets and criticized my inability to monetize on the traction. When I mentioned Twitter secured millions of dollars in funding, with hundred millions of users, considered wildly successful and still hardly profitable: everyone keep their silence because they can’t come up with a reasonable answer, but I know none of them agree with the statement. I was asked why I have 300,000 visitors and still can’t make great profit, and waiting a year before profit comes in is labeled as “pathetic”. I try to explain to them that this is not a software product which you can profit immediately per sale, this is consumer web (product > traction > trial & error / pivot > maybe profit): and I know none of them understand what that phrase means.

At the end of the day, government grants are KPI-based to improve the country’s GDP (towards the ETP): so you need to prove that you can make tons of money, or already making tons of money (Ironic, isn’t it?). They are not going to invest in Twitter or YouTube which can’t generate great profitability in the early years, in regardless of how many users you have. Government grant is about short term profitability (will be better if it’s proven profitability); but there are some exception. Why TryMasak is portrayed as a success story for ICON fund? Traction? Profit? Perhaps is the collaboration with MOSTI, ability to watch cooking video on Hypp TV and featured on Malaysia Book of Records.

Forget about what Silicon Valley taught us about 1) Team 2) Product 3) Traction, it doesn’t work for government grant in this country (it’s like some weird idea from a different world. I dunno what are these crappy stuffs? Show me the money!). Though I suspect the forth element, social proof, might still work very well. If you are like me, who have no connections with the “right” people; don’t try to focus on the product or tractions, and don’t even try to promote your team because we are all crappy little minions begging for money. I am not encouraging this, but I guest boasting about your current profit or instant profitability within the next 6 months is something they would like to hear; and perhaps some partnership with big names like AirAsia, Maxis, and TM would ring the bell as well.

Government grant evaluation panel nowadays include “industry expert” besides a bunch of bureaucrats, which sounds more promising, but not quite so. These experts might not be entrepreneurs themselves, perhaps managers or CEOs (which have a very different mindset from entrepreneurs, but confident of their personal achievement due to the 5 figure monthly salary). I am guessing none of them have experience with business like Google, Facebook, Twitter, YouTube, TripAdvisor, Yelp!, etc.; and I am not sure if they even read about them, or at least use them. There is a high probability they might still be traditional-minded: build some product with 3-6 months, spent tons on marketing and branding, sell like hotcakes and become profitable. Spending millions and years before profitability is just crazy, something they genetically couldn’t comprehend.

My conclusion is:

1. The expectation and benchmark of Silicon Valley VCs are different from local government grants. So it's Product + Traction + Team vs Profit.
2. At the end of day, it’s all about proven profit and fast profit (within 6 months – 1 year, not beyond). They are not interested with traction, though they might criticize you if you don’t have it.
3. Although they say there are looking for the next Google, but we know they won’t invest in Google during their early days (for God’s sake, they don’t even have a business model then, forget about profitability). So do something proven, especially proven locally; so that they could smell the money.
4. Know the “right” people. Social Proof works globally. 
5. Sometimes it's like selling a bat to a golfer; or Tech and Business person speak a different lingo (it's like why Man couldn't understand Woman). Choose you investor wisely, if there is a choice.

I hope I learned the final lesson from the grant applications spree, which cause a lot of distractions. I conclude that they are not interested in my kind of startup: focus on content and user tractions, not proven business model locally and no proven or instant profitability. I do admit I didn’t focus on monetization, because I felt that someone could do a better job than me, so I focus on what I do best (my theory is, the inability to monetize doesn’t means the platform has no value). More work required here.

Am I being delusional or arrogant here, sometimes I asked myself? My brother said, “If you still know how to ask yourself that question, you are pretty much safe.”

What’s next? Do more, complaint less. If I don't believe them, the next thing to do is to prove them wrong :) Malaysia Most Wanted Rocks!

 Be so good they can't ignore you - Steve Martin

What I learned from StartupMalaysia: Silicon Valley come to Malaysia

I better write these down before my memory fades me again.

1. There are almost 1000 start-ups in Malaysia, which is really cool (we are not alone); some had gone as far as Silicon Valley to get funding, and some even make Millions (it would be nice if we know who are they, and what they do).
2. I had read that Silicon Valley investors look into team, product/demo, traction and social proof (be exceptional in one of these) and throw business idea and proposal away; I have the opportunity to experience some of the processes and found that to be TRUE. Sadly, that’s not the case for Malaysia Investors (at least not so for Government Grant).
3. Investors look for really either really smart people who can rewrite the rule (not just incremental enhancement), never say die or inspire. – Saad Khan, CMEA
4. In pitching, we need to tell a story. But what is a story? Your experience and hardship? You experience the pain which you are trying to solve? 
5. If there is a high failure rate with entrepreneurship, there is an even higher failure rate in securing funding. Besides team, product and tractions; pitching is still an emotional sale (admitted by Naval Ravikant of AngelList), which means they won’t invest if they don’t like you. Sometimes people are looking for Apple (the fruit) and you just can’t sell them Orange. So keep trying until you find someone interested in Orange, and then you get the real feedbacks from them. Not all investors are equally experience or brilliant as well.
6. Code is Power; then again there are many good coders out there. I believe code is the basis, but there is more to be done on top of it.
7. There is no magic formula: how do YouTube or LinkedIn gain traction? Continuous tweaking, iterations, trial and error, trying something new and measure the results, understand your potential business model and customers, until you get it right.

I believe StartupMalaysia (and Silicon Valley come to Malaysia) is awesome because

1. It’s the first time I ran out of Business Cards (which is a good sign); so the networking really works here without the need to be a PR expert, and we get to meet many entrepreneurs and gotten linked up as a community.
2. We get the chance to have dialogues with some real silicon valley people, thus giving us a better perspective in terms of i) is our product really good, or jaguh kampong only ii) what these people are looking for iii) how do we bring it to the next level.
3. Some acknowledge and recognition given by budding entrepreneurs about MalaysiaMostWated is pretty comforting :)
4. And the Startup Experience boot camp: learning how to survive as a team and opportunity to know a few budding entrepreneurs closer.

Team Hati Bank