Entrepreneurship Series Overview I

Dennis Goh, River, Entrepreneurship, Entrepreneur, start up

Over the past 8 years, many people have approached me to ask about running a technology start-up, and what it is like

Decided it would be good to share my thoughts on this over this year, in a series of articles here. At the very least, I hope that it would minimise your pain points and make your entrepreneurship journey that much more enjoyable, if you decide to take the plunge too one day

I will elaborate more on the following points in later articles, but off my head, here are some of the key ones that I always share with people

KEEP YOUR COST LOW

Unless your technology start-up has strong cash flow coming in from day 1 (rare), you better make sure your costs stay low for as long as possible. It is well documented that revenue always take far longer than expected to come in for technology start-ups. The default disruptive nature of technology start-ups means that revenue models are frequently not yet proven, or worse, non-existent. So you need as long a runway as possible to give your website, app or product/service a decent chance of survival and take-off. By that, I mean getting enough traffic to generate a sustainable revenue stream

There is nothing more painful than seeing your website/app acquire millions of users, but you have run out of cash. And investors are not willing to bank roll you anymore. And no one wants to acquire you. We all know what happens next

My heart really goes out to Everpix when I read their story

Wonderful product, passionate talented team, strong user base – just ran out of money too early. Look at the expenses vs the revenue. If they had just a few more months of cash, a revenue tipping point could have occurred….or at least had a few more precious months to raise another round. The silver lining in this terrible tragedy is that they have just increased their odds of success tremendously when they run their next start-up. They will never forget this experience and will surely put it to good use next time round

But for the rest of us, let this be a reminder that costs matter.

Update 17 Feb 2014: I have elaborated on “Keeping your cost low” here 

REVENUE MODEL 

While you are defensively focusing on your cost, that is not something that will win you the battle.

You need to go on the offensive, by testing and finding a sustainable revenue model

There are essentially 4 kinds of revenue sources in the digital space

1. Advertising

2. Regular Subscription (monthly, annual)

3. One-off payment (like purchasing an app, or accessing a premium web page)

4. Donations (I can already hear you laughing….I am serious, it could work under certain conditions)

I will describe the above in more detail over my coming posts, but in summary, you need to constantly test all of them for your website/product/service. In most cases, it is a combination of at least 2 out of the 4 revenue sources above that will help sustain your business. But you do not really know until you test your audience’s propensity to pay. And to successfully test this, you need to be very clear about the next point below

DATA DRIVEN  

In a digital business, it is always about being data driven. I repeat – data, data, data. You need to understand your user behaviour inside out. High level metrics (Unique visitors, page views, total app downloads) are necessary but not sufficient. What is far more important are the engagement metrics – time spent on site, average pages visited per user, which pages they spend the longest on, DAUs and MAUs for apps etc

The questions I am always asking myself are: Which pages are they reading the most. Which pages generate the most engagement. What kind of content are they asking for. Time spent on each page etc etc

From here, you can get a rough idea on the kind of content that you could run advertisements on, the kind of content you could charge for premium upgrades, which pages on the app could generate in-app purchases etc. Then test, test and test. It does not guarantee success, but it sure points you closer and closer to revenue generation with each attempt you make based on what the data tells you about your audience

Even if you cannot get any sustainable revenue via all these efforts, you could at the very least use the data to show investors that you understand where the growth trajectory in your audience is. And that…..would increase the odds of your next successful fund raising

There are other points, more to come in the coming posts……

4 comments on “Entrepreneurship Series Overview I

  1. Great idea Dennis. I am sure a lot of people will learn a lot from your own experience with HGW. Regarding Everpix I think their greatest issue was “While the team obsessed about perfecting the service, the founders paid less attention to the subject investors care about most: growth. Everpix built some features for sharing photos, but there was little else in the product to help it spread to other people… …so at a time when successful photo apps were attracting users by the millions, by March the company had attracted fewer than 19,000 signups.” Investments are made not only to make great products but also to make sure people hear about and get to use them.

    • I entirely agree – having a great product is necessary but not sufficient. The viral construct is equally critical in this social media age.

      Having said that, they did raise a good round, and getting 19,000 sign ups is not a bad starting number (heard they were pretty die hard fans too) – given time, they could have improved their viral construct or even pivoted with their 19,000 hardcore fans.

      Key is they needed time – and time they did not have in the end due to the cash running out

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