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The Mean Startup (or a failure in customer development)

A few years ago, almost straight out of college, I was in charge of developing innovative products for a global service provider in the telecom industry. My job was to pitch ideas internally, get budget approval, then work with engineering and sales teams globally until the first sale was made. Getting paid to build corporate ventures and then travel around the world, that was definitely a hell of an experience for someone with not much experience.

The first venture our team built was a huge success: more than 150 mobile operators bought the product in less than a year for a total yearly revenue of $7M. It gave us a lot of credibility internally for our second venture which, as you will see, failed miserably. What I didn’t know at the time though, was that the first product (the successful one) had known features and known customer needs! This product was based on specifications from the GSM Association and mobile operators were mandated to comply with this new specification before a set date. Our job was then to develop a solution with core features as per the specifications, some value-added services, and then try to persuade as many customers as possible that they should comply with this new specification and they should choose our product instead of our competitors’. As I said: known features and known customer needs.

In that sense, our second venture was very different. We were building a business intelligence solution for mobile operators but, this time, without any specifications for the GSMA. Said differently, unknown features and unknown customer needs. In our initial business plan, we had 1 year to sign the first customers and then, for the following years, we were gradually going to sign most mobile operators in the planet as we were convinced this product was going to be a must-have in the ecosystem. In terms of features, we had a small list of features we believed were the core ones and a huge list of features we wanted to test with the first customers. So you know, the core features had been validated by one test customer.

To our team’s defense, we didn’t completely rush to develop all the features on our list without talking to customers. We built a first prototype of the solution in a couple of months and then I started travelling around the world to demo the prototype to as many potential customers as possible. And every time, it was the same positive reception: customers loved and validated the concept. In parallel, our development team was continuing to add more and more features as these were validated every time by the potential customers I was meeting.

It’s only by the end of the first year that we started to realize we were wrong. A few months earlier, we started to sign off potential customers for free trials but very few of them actually tried the product (what is free has no value). Just two potential customers actually came back to us with productive feedback. And God, it was bad. Conceptually we had everything right but all the features were wrong. For example, we thought customers wanted predictive algorithms but they wanted to import their own predictions in the tool (this was in 2009, way before big data went mainstream). And the list went on and on…

At the end of the first year, we had spent more than $1M developing a great product that no one wanted. My management decided it was enough and shortly after shut down the project. I personnally moved to another position within the company. A few months later, I met with one of our former potential customers who told me that he purchased our competitor’s solution. Then he said (I’ll remember this my whole life): “this is really a shame as you guys were right and evangelized the market but did not manage to get the product right”.

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7 Mistakes Corporate Accelerators Make

As stated in an earlier post, more and more big corporations are becoming interested in startups and some of them believe that creating their own accelerator is the best way to interact with them. And in more than a way, they’re right! As most startup accelerators are accepting many types of projects, the probability for a big corporation to find a startup with whom they want to partner is usually close to zero.

So opening their own accelerator and advertising their own challenges to attract startups working on these challenges seemed the best thing to do for big corporations. Unfortunately, it appears that some corporate accelerators that opened recently are struggling to attract the best startups and it is, usually, due to the same mistakes. I tried to put together a list of the most frequent mistakes I saw made by corporate accelerators, based on my own experience in the Paris startup ecosystem but also my interactions with accelerators in other countries. Of course, it doesn’t mean that “classic” startup accelerators do not make mistakes, so to my corporate friends, promise, next post is on the startup accelerators mistakes ;)

  1. The unused 200m2 in your office is not an accelerator. This is the most common mistake. You realize that you need to get closer to startups, you have spare space in your office, startups need offices, et voilà! Unfortunately, while this might has been true in the 2000’s, it is not anymore. Startups need much more than space and, moreover, if your office is located far away from where the action is going on (city center for Paris), no quality startup will show up.
  2. Your brand is not enough to attract the best startups, even if you have a very powerful brand. In Paris alone, I already lost count of the number of accelerators, incubators and contests for startups. Entrepreneurs have now the power to choose and they will choose the best for them. That’s why the competition to attract the best startups is getting tougher and you need to do way more than good PR. Get out of the building and find startups where they are.
  3. Your colleagues are not credible coaches/mentors, and even if it’s true no one from outside will believe it. Big corporations are seen as sloppy, inefficient and disconnected from the entrepreneurial world and you need to compensate that vision. You can, for example, involve outside entrepreneurs (whom you know and/or work with) or involve your colleagues that have been entrepreneurs previously. In both cases, advertise it!
  4. “Lean design thinking” consultants are not mentors, they’re usually the contrary. Methodologies are great, canvas are very important but entrepreneurs always end up doing what they want and they’re always on the rush. Instead of bringing in consultants with no real-life entrepreneurial experience, even if it’s to talk about the same subject, invite entrepreneurs that have real-life stories to illustrate the points you want to make.
  5. Startups don’t manage innovation the way you do. They’re unstructured, (very) fast-paced and, most certainly, they will pivot once or twice during the program. And it’s normal! Don’t try to teach them about release cycles, test strategies or this new agile development methodology. It works well for known products with known features but poorly for startups that are developing unknown features for unknown customers.
  6. Accelerators are not PR, and if you consider it like that, most certainly you won’t exist in 2 years. Accelerators, like most organization (for or not-for profit), need to have a business model. While most of us out there are still struggling to find sustainable business models, you should as well. Otherwise, your line of budget will be the first to disappear at the next finance meeting and it will definitively alienate your chances of really succeeding at partnering with startups and getting innovation outside-in.
  7. Money talks! Like really, it does. The absolute number one reason why an entrepreneur will select an accelerator is the amount of money they can get from it. Then, it’s about program recognition, mentors’ credibility, etc. So, why do you keep not investing money in the startups you accelerate?? Big corporations are seen from the outside as very rich (people don’t care about your budget problems), so when you decide to not invest (or worse, coaching for equity), it’s almost a no brainer for the best startups who will go to another program.

I have most certainly missed other mistakes that corporate accelerators do. If it’s the case, don’t hesitate to reach out to me directly on twitter and I will update the post accordingly ;)

The Corporate-Startup Partnership Maturity Curve

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Since I started to be involved in the startup ecosystem, I have been extremely interested by involving large corporations with startups. Initially, my view was that large corporations had a lot to learn from startups as much in terms of innovation as in terms of energy. On the other hand, startups had also a lot to learn from bigger corporations: being focused on customer and revenue among other things. That’s why my acceleration program, StartUp42, was and is still mainly funded by large corporations.

Since I launched StartUp42 two years ago, it seems that more and more large corporations have discovered (again?) that startups were sexy and that they needed to get closer to them. But, as in any relationships, there’s also a maturity curve for the corporate-startup partnership.

Corporate-startup partnership maturity curve

The figure above is the result of my direct experience involving large corporations with startups, hearing about other programs and a discussion I had last month with someone from Accenture Open Innovation group. I believe that large corporations go through 3 different phases in their attempt to partner with startups: “Amused”, “Worried” and “Welcoming”. Of course, this pattern does not apply to all corporates and not all of them go through the 3 phases in that order but most experiences I gathered tend to confirm it.

The first phase is the “amused” phase. High-level executives, usually HR director or Marketing directors, discover the growing interest for startups. And they’re right! What’s not to like in startups? They’re young companies, founded by equally young talented individuals with big dreams and lots of energy. In that phase, corporates usually tend to sponsor or organize events like startup weekends or hackathons. The main objectives are to increase their brand’s reach to a younger audience, potentially notice young talents to recruit and ideally get wowed by one of the teams’ product.

The second phase is the “worried” phase. Now it’s the C-suite’s turn to notice startups and usually it’s either because they realize that they have troubles coping with innovation cycles or, “worst”, they’re already being disrupted. In that phase, corporates tend to follow the saying “keep your friends close and your ennemies closer”. Instead of partnering with the startups, they prefer to watch them carefully by investing in them or by hosting them in their own acceleration/incubation program.

The third and last phase is the “welcoming” phase. Leaders in that phase understand that the size of their organizations slows down their capacity to innovate and they’re better off integrating startups’ innovations in their portfolio through partnership or M&A.

So far, I’ve seen very few organizations capable of being in the 3rd phase (think Google, Facebook, Cisco). The reason is not because they’re necessarily evil agains startups or because of incompetence but mainly because it demands a commitment of the organization at every level to be able to work with or integrate startups. Entrepreneurs react almost opposite to corporate executives and it demands a lot of work from both sides. But anyway, as in any relationships, they don’t really have a choice. In the end most startups will need to work with big corporations (or get acquired) and most big corporations will need to work with startups. We’ll need to make it work ☺

Grammar and Entrepreneurship

I usually start every entrepreneurship class or seminar I teach by asking each of the participant to quickly give me, by turns, a synonym of entrepreneurship. The idea, until now, was to get a feeling of how much the students knew about entrepreneurship (and entrepreneurs) by analyzing the meanings of the words they gave me, and use that as a starting point for my “demystification”.

Last week, I was giving a 3 hours seminar to Supélec last year engineering students and of course I asked my synonym question as the beginning. But while I was writing down the words on the board I realized that some of them were nouns, some were adjectives and some were verbs. So instead of looking at the words’ meaning, I decided to do a little statistic on the word’s class.

Out of 11 participants in the classroom:

  • 7 of them gave me nouns (like “adventure”, “risk” or “financing”);
  • 2 of them gave me adjectives (like “energetic”);
  • and 2 of them gave me verbs (like “innovate”).

As crazy as it sounds, it made me realize that the words’ classes were even more representative of what students feel about entrepreneurship than their meanings.

Why? Well, as you know, nouns are usually used to describe concepts and since 60% of the class used nouns as synonyms of entrepreneurship, it seems that entrepreneurship is still very conceptual to them. Adjectives are used to describe a particular quality so for 20% of the class, entrepreneurship describes a behaviour (most probably of someone they know or how they imagine entrepreneurs). And since verbs typically express action, for just 20% of the class, entrepreneurship is about action.

For all you entrepreneurs that read me, you surely have realized by now what my point was: entrepreneurship is first and foremost about action, not about concepts and not about behaviour (perhaps a little though). Well, at least, this is how I started my seminar :)

Should accelerators nurture or challenge?

StartUp42 v0.4 is now over and until we start a new season, I wanted to use this quieter time (at least on the acceleration side) to share some thoughts about acceleration and the birth of (very) early-stage startups.

During this last season, I had a very interesting discussion with one of the teams. Just a month into the program, the founders had a disagreement with their CTO who decided to leave the company. The founders immediately came to seek my advice on how to peacefully solve the disagreement. When they told me, my reaction was as follow: “I will of course help you on solving the disagreement but I’d like to warn you that if you don’t find a new CTO in the next 2 weeks, I will have to kick you out of the program”.

Indeed, since we only accept teams with a CTO at StartUp42, I couldn’t keep a team who’s not building their product. It’s bad for them as they don’t benefit fully from the program but it’s also not fair to teams with CTOs that were not selected. The founders were very surprised by my ultimatum. They came looking for comfort and they left with pressure. They said they were not expecting me to act like this.

In my opinion, accelerators are here to push you to your best. We’re not protective parents that help you cope with the difficulties of the entrepreneurship world. We’re here to make you feel these difficulties as early as possible in the process. Entrepreneurship is hard, very hard, and not everyone is fit for it. This is also why I made StartUp42 as a toolbox for entrepreneurs instead of a set program. I have no catalogue of available services and mentors but if you ask for it (or use us to fetch it), you will have it.

I think not everyone can feel comfortable in such environment but again, I don’t want entrepreneurs to ever feel comfortable anymore.

And by the way, that team took just 1 week to find a new CTO ;)

Enterprise IoT

This afternoon, I was invited by Econocom to talk about enterprise Internet of Things during one of the CRIP sessions. The CRIP (Club des Responsables d’Infrastructures et de Plate-formes) is a French IT infrastructure executive club. If you’re interested, I embedded my slides below (in French) but the key message I wanted to share is the following:

1/ Whether it’s connected glasses enhancing technician’s work or simply Jawbone Up’s given away by the company, wearables are slowly but surely entering the workplace

2/ While wearables open amazing opportunities for corporations, they also uncover brand new challenges for IT decisions makers, namely: device management complexity, issues with data privacy, weak authentication and Wi-Fi dimensioning problems

3/ Wearables’ security in the workplace is IT executives’ responsibility

As you can see in the slides, I haven’t mentioned any startups working on helping corporations deal with wearables. Even though, Salesforce and other B2B giants recently announced initiatives to support wearables integration in the workplace, I haven’t seen any startups working on this. At least in France.


Has Paris FinTech scene finally kicked off?

Eiffel-Tower-Paris-France

This post was originally published on Medium.

Last week, not one but three Paris-based FinTech startups announced a fundraising: Finexkap completed a $22.5M fundraising to launch the first French on-line working capital financing platform, Lendix raised €7M to fuel the growth of their crowdlending platform for SMEs and Paytop received€3,3M from historical investor Truffle Capital (link in French) to scale its international payment card solution.

Until this year, I must admit that apart from first movers like Litchee(money pot collection) or KissKissBankBank (crowdfunding), the FinTech scene in Paris was almost nonexistent. According to an Accenture study, even less than 10 FinTech VC deals were done between 2004 and 2013. But it seems that 2014 is changing all that. Founded in March 2014, the Paris FinTech meetup now counts more than 350 members.

With this growing interest for FinTech, we’re seeing more and more startups popping up. The last time I counted, there were more than 50 startups just in Paris with my personal favorite being Marie Quantier andPayplug. On top of that, new regulations favorable to crowdfunding have opened the way to several crowdlending services like Lendopolis and Prêt d’Union.

Don’t open the champagne bottle just yet. Paris is still way behind London is terms of funding and valuation for FinTech startups, with the likes of TransferWise ($1B valuation) or FundingCircle (raised $65M earlier this year). And I’m not even talking about accelerator programs focused on FinTech like Startupbootcamp FinTech, Level39 and the Barclay’s accelerator (powered by Techstars).

Despite all that, it seems to me that the time is finally right for Paris to get into the race and host FinTech champions that could become as great as Criteo or Blablacar.

Testing Narrative Clip

IMG_3184While attending the Web Summit last week, I stumbled upon the Narrative booth and got the opportunity to test for a couple of hours their wearable clip, a tiny, automatic camera and app that gives you a searchable and shareable photographic memory.

As you can see in the picture on the left, I clipped the camera to my jacket’s chest pocket and walked around the venue, visiting booths and talking to people.

Narrative – The pros

–> I already had seen the Narrative videos but until last week I couldn’t find any good use for it. Actually, going around a conference like the Web Summit, where you meet tens of people every day, makes it a very good use case. Finally a way to remember everyone you met!

–> The Narrative clip is definitely less dorky than Google Glasses :) No one noticed it or at least, if they did, they didn’t tell me anything or didn’t realize it was a camera.

–> The double tap feature allows you to take a picture when you want it (instead of the 30s standard pace). Very useful when you want to remember someone’s face or business card.

–> The Narrative back-end software is supposed to automatically delete blurry pictures and arrange the good ones in a timeline

Narrative – The cons

–> I was pretty disappointed Narrative clipby the photo quality… As you can see in the picture on the right, lots of chests and useless photos. Most of the others are blurry and not really useful.

–> Almost every time I told the person I was talking to that there was a device clipped on my jacket taking pictures of them, they reacted negatively. Getting shot by a camera without knowing it made them feel almost raped. Not really good…

–> The clip does not support bluetooth so you have to wait until you plug it on your computer to see the results

Conclusion?

While I was seduced by the Narrative concept and form factor, I was really disappointed by the photo quality and the lack of bluetooth. Moreover, the social impact is a big turn-off. Too bad because the promise is very interesting.

Ideally, I wished it could recognize someone in a crowd and make my phone buzz and open automatically the LinkedIn profile of the guy I’m talking to in case I don’t remember who he is. Maybe the next version?

Entrepreneurship at Supélec

Yesterday, for the second time this year, I was invited by the Supélec engineering school, to talk about tech entrepreneurship for 3 hours. As you can see below, my slides are very much inspired by Steve Blank’s Lean Launchpad course. Some thoughts and comments about this course:

  • 50 last year engineering students attended the speech and more or less half of them seemed interested by starting their company. That is way better than I would have thought
  • Students were much more interested by practical examples than concepts
  • I still get questions like: “should I start my startup in college?”, “what happens if I fail?”, “how can I work in a big company after a startup?”

All in all, it seems that more and more engineering students are interested by the startup world and it feels great :)


 

 

Start your company in college: a good idea?

This post was originally published on Medium.

French newspaper Les Echos published today a series of articles on student entrepreneurship. According to the article, 24% of new company founders in France are below 30 years old and 9% of them are below 25. In 2002, only 20% of founders were below 30. While the explanation of this new trend is relatively easy to find (more and more role models a la Mark Zuckerberg, using the auto-entrepreneur status to do freelance jobs, a desire of Generation X to be more in control of their lives), I wanted to take some time to reflect on starting a company while being in college.

When I started StartUp42 accelerator 2 years ago in partnership with EPITA, it was obvious to many that most of the projects we selected would be founded by EPITA students. In reality, and since we’re open to all, EPITA applications represent more or less 20% of all applications received and just half of them are founded by students (i.e. have not yet graduated at the time of application). Nevertheless, over the past 4 batches, we consistently selected at least 1 student startup per session (EPITA or not). Here is what I found out.

Why College is the perfect time to launch your startup

  • The trade-offs of starting a company are definitely lower: at 21, you don’t have a family to feed, a loan to pay back or already high living standards. So living of noodles until you startup grows and working nights and weekends will not affect much your lifestyle
  • The fear of failure is also lower: no one will ever blame you if you fail because, hey, who can blame a 20-something to start a company. More experienced people might fear for their reputation in the marketplace and difficulty to find a new job in case the startup fails
  • Everyone wants to help (sometimes not necessary the most helpful though)
  • With hundreds of other students, teachers, researchers, you’re in a perfect micro-climate to test your idea before releasing it to the world

Why College is not the perfect time to launch your startup

  • As very well said by Paul Graham in his recent guest lecture at Stanford (and subsequent essay), “starting a successful startup is similar to having kids in that it’s like a button you push that changes your life irrevocably […]. You can do things in your early 20s that you can’t do as well before or after, like plunge deeply into projects on a whim and travel super cheaply with no sense of a deadline.”
  • You only come up with ideas to change your life (I mean your student life) and miss out on an enormous amount of other business opportunities
  •  Some people want to take advantage of you, since they think you’re young and unexperienced (and they will probably succeed)

So?

Well I believe the answer is inside yourself and, as summarised by David Cohen in his Do More Faster book: “if you can quit, you should”. In other words, if you can’t stop yourself from starting your company, do it!