Oct 27

The title is a reference to the final scene of one of the radest 80’s movies ever: “Back to the Future.” I remember walking out of that theater as a kid hopped up on red vines, Huey Lewis, the prospect of time travel, and all the possibility that a flying delorean represented. It seemed like anything was possible.

I have a similar optimism today with this swirling curling storm of a revolution that’s promising to change how products will be test marketed, built and delivered. I predict this fundamental change is going to do for product development and business model generation what test-driven development did for software dev. And it’s pretty freakin’ exciting to be swimming in this stew of startup activity while this storm is developing. To explain the essence of this mentality let me first tell a story that will reveal a double entendre in this post’s title:

I don’t have the original source on this anecdote but supposedly at a California college (Cal Poly?) they were redesigning the campus and trying to figure out where to build the new sidewalks. It was a complex arrangement of buildings and there were a bunch of conflicting opinions about where the sidewalks belonged. Someone had the ingenious idea that rather than speculating, they should instead run an experiment and let the market speak. So they planted grass the first year and waited. At the end of the year they took an aerial photo and the tread-worn ground became the blueprint for the optimal sidewalk routes as chosen perfectly and implicitly by the student body.

So what does this have to do with startups?

I believe we’re on the cusp of seeing some major changes in how products are brought to market. If you follow the Lean Startup, Four Steps to the Epiphany, Customer Development movements then you have the core philosophy already. But what’s interesting is the emergence of tools that allow you to apply these concepts very rapidly on a large and targeted scale via online experiments. We in the tech industry no longer have to build and tear up sidewalks – we can just plant grass first. Rather than explain the techniques for “virtual grass planting,” I figure it will be easier to simply publish the data and methods for experiments I’m conducting now with a local Phoenix startup that I advise. Here’s the gist of it though:

You can think of this mentality like test-driven development for business.

Test-driven development (TDD) is a methodology for creating software where you seemingly put the cart before the horse and write the tests up front. You then go back and do the necessary coding to satisfy the tests. Once the code meets the test, then (and only then) do you go back and fine-tune, refactor and optimize things. Having been a confessed “cowboy coder” back in the day this style of development sounded completely absurd until I saw it in practice at the San Diego Java User Group. Writing the tests first forces you to think differently by getting consensus on the destination and then worrying about the implementation details of how you get there after the fact. In the same way it’s now possible with all these tools to front-load much of the learning about product-market fit, price elasticity & messaging before you ever actually do an ounce of engineering. It’s all about systematically removing uncertainty and converting unknowns to knowns before charging ahead with the concrete.

Anyways, I don’t mean to leave anyone with startup blue balls but we’re not quite ready at this point to open source our experiments. This is an exciting time to be in this space though. To get a good flavor for this type of thinking check out Kent Beck’s talk from the Startup Lessons Learned conference on the logical extension of Agile development to business. And if you’re new here sub the RSS of this feed or this Twitter account to follow along on how we’re validating and iterating at 88mph and 1.21 gigawatts.

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May 27

Here’s a simple proposal: if you’re calling yourself an Angel Investor at an event, you should wear a standard name tag that gives an objective measure of some basic facts about your “nutritional content” as an Angel.

At least in AZ, the term “Angel” seems to have been co-opted by anyone who has ever bought a piece of real estate. After holding a piece of dirt and making money, these people are somehow magically imbued with divine powers to forsee why your technology startup won’t possibly work (and they’re happy to prognosticate about it).

I was at an event last night helping a friend pitch his company and one of the panelists (who shall remain unnamed) made the repeated feedback to the presenters that “you didn’t specify what my return will be.” Sir, frankly if that’s the only feedback you have for these entrepreneurs pitching their early-stage, pre-revenue technology startups, you do not deserve the title Angel.

Go buy a treasury bond and the bankers will happily explain what your return will be.

At this stage in the search for the repeatable scalable business model, companies have no f’ing clue what the return on your $50k is going to be. And it’s a silly tapdance you put them through when you force them to fabricate and justify one. The idea is to make it as big as possible – we all agree on that right?

If you’re a VC adding fuel to a finely tuned business model where the formula has been determined and tested, by all means ask the entrepreneur to calculate and substantiate what the return will be. At that point that exercise makes sense. But at this pre-revenue stage by asking this question you’ve self-identified yourself as being unsophisticated, focused on the wrong motivation of Angel-stage investing and frankly you’re not someone whose money I would want at that point. At the Angel stage the entrepreneur has demonstrated the ability to create a product which appears viable. You’re funding their search for the repeatable scalable business model, not putting gas in the engine of a working model. Think of it as a more interesting/rewarding alternative to throwing your $50k down on a craps table in Vegas. If you’re treating it like a blue chip stock and can’t afford to lose that money you shouldn’t be doing Angel investing.

Note: I’m not proposing regulation on Angel Investing, I’m proposing a standard for Angels self-reporting some basic traits to the folks who are pitching you. This objective label would do two important things: 1) for the budding entrepreneur, it gives him/her the ability to assign a level of credence to the words coming from the person telling them why they’re going to fail. 2) for the Angel, it forces them to admit publicly how many deals he/she actual does at the end of the day. The guy with the “Deals last year = 0” label on his breast pocket will likely think twice next time before he publicly craps on a guy starting a company for the first time.

May 09

This is half rant / half proposal for a free business idea. I’ve gotten four emails in the past week from various entities (2 banks, 1 health insurance provider and 1 telephony carrier) that notify me of changes to their TOS (apparently I need to accept them if I want to continue being a customer). One of the documents was a 35pg PDF which presumably had a few sentences change since I first accepted it. Given how much we have going on in our company the effort involved in combing through that document vs. the likelihood of that task returning value all but condemns it to reside indefinitely at the bottom of my todo list.

A better way & an open letter to service providers

These verbiage haystacks are bad news. Your customers are busy people and while it may be in your best interest to cloak the tweaks to your policies that may stir up unrest amongst your customers, this practice is asinine. Publish the damn “patch” to the TOS so we can skim it, see the crux of what changed and rapidly make a decision about whether we agree the tradeoff is worth it to remain your customer.

Yes, your attrition rate will go up as a result (and it should) But the thinking that “we’ll just bury the new stuff in the huge doc and people will accept it out of frustration/lack of time” is hugely short-sighted. We already know 88% of the people don’t read the TOS the first time, you think that % is going to be any better when you ask them to re-read a slightly-modified version a few months from now? While you may get a short term attrition benefit w/ the current method you’ll eventually end up with angry rants from pissed off customers higher support costs from fielding inquiries caused by inaccurate expectations. By doing it the way you are now you set the stage for an inevitable exodus of angry customers to your closest competitor that respects the value of their customers’ time. And the loyalty they earn by making it easier to stay informed and make faster decisions is priceless – you will not see the people that defect specifically for this reason again. And they will be vocal about their exit.

Abstracting this to a business idea

So the meta from this is that there’s an opportunity for someone to deliver “Policy as a service” to companies. Us geeks can figure out how to put docs in source control or publish pages that automatically highlight the diff from the last version. But for the rest of the world the path of least resistance to writing/reading is creating a new PDF and expecting readers to comb through the whole doc.

Someone should develop a simple service that allows companies to publish policy docs (TOS, privacy, employee handbooks, EULA’s and such) and give their end users a way to easily see what’s changed before accepting it and track the history of acceptance. The stage is primed for a service like this to work and it’s something that would allow it’s creator to “do well by doing good.” It would drive better transparency in business practices, support consumer rights and promote better corporate responsibility.

If you build this and make a million, buy me a donut and follow me on Twitter.

Apr 23

My friend Josh suggested I submit this idea to Sunlight Labs to build. That seems like a noble effort they’ve got going but I figured it might be more interesting to instead do a blog post and cast it into the wild. So here’s a free business idea for someone who needs something to build:

Give me an easy way to compare what people said they would do with what they actually did.

Hindsight is 20/20 right? The first place to incubate this app is using government. Leverage the data.gov “open government” initiatives that aim to create more transparency through exposing raw data via API’s and offer a service that counters a real problem.

Problem description: Legislative officials get elected based on specific promises and then renege and vote the opposite way. They bury the issue, voters forget, they get re-elected indefinitely and the cycle continues endlessly.

Start with this very focused use case around this problem and build an app that lets me see the track record of how Senators and Congressmen voted vs. how they committed they would vote.

Question: How do you monetize this?
Answer: Build it as a platform with the logic abstracted but with the first iteration focused specifically on this government scenario. That’s your freebie giveaway. Make this available and free as a public service and have it serve as a marketing tool for the underlying platform which you’ll then sell to companies who want the same accountability/hindsight for their own internal decisions. This works for any scenario where there’s a record of expressed intent for a decision followed by the actual decision. Follow the lead of companies like Spigit and Inkling Markets who hosted public “fantasy league” prediction markets to create awareness and drive sales of their underlying platform.

All the data necessary to get this going exists publicly. You’ll have to get an intern to aggregate the unstructured historical info that’s scattered via newspaper articles and such on how politicians proclaimed they’d vote, but going forward much of this data should be available in structured format via the data.gov effort.

So my question at this point: “Is there anything remotely like this that already exists?” Sunlight Labs or Startup Weekend– what say ye? Could you guys knock out something along these lines? The domain is available.

Mar 31

Big thanks to Francine Hardaway, Phil Blackerby and Ed Nusbaum for inviting me to speak with their class on monday and share what we’ve learned on product development in our experience in building JumpBox. Fastrac is a great program sponsored by the Kauffman Foundation. I went through 2 semesters of this course a few years ago and it’s an honor to be invited back as a presenter. Note: realistically Kimbro is the visionary behind our product and he should be the one to give this talk, but I did my best to distill the 10 lessons I’ve gleaned around product dev while riding shotgun in building our our company/product offering. Here are the slides (feel free to share, embed, email, whatever):

We played the “product box” innovation game and had two teams invent and sell a new type of lawn mower in 10min. This is a great exercise to grok the difference between features, advantages & benefits. Here are the product boxes they came up with:
Gallery is empty!

We had a little friendly “industrial espionage” given the proximity of the teams ;-) but good times. If you’re starting a company I definitely recommend looking for the fasttrac course in your area. It’s inexpensive and “gets you out of the building” and talking with other people who are in the same boat.

Oh and I try to share helpful info and links for entrepreneurs and software startups. If you use Twitter follow me for those tidbits.

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Jan 07

getting to plan BI just finished the book Getting to Plan B. This is hands-down the best book for a startup I’ve read in the past year. It’s got just the right balance of theory anchored by real-world examples to make the lessons stick. It’s like basic anatomy for business and it shows you how to think about the all the organ systems involved, how they function together and how tweaking one ripples effects to the others. I’ll a do a brief review/summary here for anyone who is thinking of reading it, and if you’re in a startup this should be the next thing you read.


The core tenet of the book is that business planning is a misnomer, it’s more accurately business guessing. And companies almost never pick their destiny right on the first guess. The art of building a startup is the iterative process of zeroing in on the right formula over time. It’s all about making and testing hypotheses with empirical data rather than drafting a massive plan up front and clinging to that. If you’re familiar with software development methodologies this is the age-old “waterfall vs. agile” distinction. And this book is essentially the Agile Manifesto of business formulation that provides a creed as well as a framework for how to think about your business and conduct this iterative development.

The book is divided into two sections: the verbs and the nouns. The verbs are the processes you’ll use to hone your plan with each iteration. The nouns are the five models or “organ systems” to consider as you look at your business. First let’s look at the verbs:

The Verbs: Processes for refining the business

The ultimate goal is to zero in on the best formula for doing things that lead to the best outcome as quickly as possible. I’ll use Netflix (before it existed) as an example to demonstrate each concept.

  • Find Analogues: These are the parallels you can look to in order to answer questions without doing anything other than research. The idea here is to not reinvent something that’s already been proven. Find relevant design patterns from existing businesses either in your space or better yet, in a completely different industry (because competitors likely will have already considered your adjacent players). Glean what you can from what these guys have already proven and treat it as free brickwork in building your foundation. In the Netflix scenario this might have been looking to businesses like Columbia House or BMG for proving that people were willing to purchase media mail order via subscription service.
  • Find Antilogues: These are the anti-patterns to study- either the failures that have come before you or the businesses that are out there succeeding marginally but doing something wrong. Study their shortcomings and resolve to consciously do things differently. Again, this is freebie insight you get from analyzing the efforts of others – these bricks cost you nothing and allow you to work from the base of experience others have proven out rather than starting from dirt. In the Netflix scenario Blockbuster could be an analogue for its physical stores, per rental fee & late fees aspects. Another one might be Divx for how it attempted to rent DVD’s and then expire them using DRM technology. Basically anything that’s been tried and either failed or shows status quo thinking and can help you decide what not to do.
  • Identify your Leaps of faith: These are the important questions left over once you’ve applied the relevant analogues and antilogues- basically the stuff that keeps you up at night wondering if it will work. Presumably you’re going to be breaking new ground- these are the do-or-die questions that will determine the viability of your proposed business. The success of your plan hinges on proving or refuting these questions as soon as you can. In the Netflix scenario some key leaps of faith: A) would people ever embrace the mailed DVD approach or would they need the spontaneity of in-store rentals? B) Would the turnaround times be sufficiently quick to provide enough liquidity and selection in the catalogue? C) Would loss or damage from postal mail as the transfer medium add costs making the service unfeasible under rates the customer would accept?
  • Test them via Dashboards: These are the collections of metrics you monitor to prove or disprove your leaps of faith. For each leap of faith you determine the specific metrics necessary to test the validity of your hypothesis. For the Netflix LOF’s above some dashboards would have been: A) adoption as measured by signup rate, random surveys to determine % of movie watchers who used Netflix vs. traditional rentals over time B) avg time users held a movie, satisfaction ratings on selection quality, avg time movie was in transit C) user complaints related to loss or damage, inspection reports upon receiving returned movies.

The Nouns: The five models to consider

If you distill it all down, there’s five aspects of your business you need to refine. They’re all interrelated and tweaks to one will impact how the others function. None of this is rocket surgery when you examine them in isolation but it gets interesting when you see how changing one can allow you to play with the others for strategic advantage.

  • Revenue Model: Who/what/when/where/why/how will people buy your stuff? How often? At what price? On what terms? Can you think of more meaningful ways to sell the same products under different assemblies that will increase the perceived value and allow you to charge more?
  • Gross Margin Model: All about cost of goods vs. revenue – how low can you drive your COGS and how high can you kite your prices? What are the knobs you can twist on how you spend on packaging, manufacturing, delivery and sales to help your gross margin approach 100%? How can you hedge in scenarios of uncertainty using multiple product lines with mixes of different gross margin models?
  • Operating Model: How can you slim down your overhead? Is it possible to transition fixed operating costs to variable in the short term so you have the benefit of that cash early and optimize for profit later? What assumptions can you challenge and what can you cut out of your offering that is non-essential and can make you a lean athlete and give you a competitive advantage in your operating model?
  • Working Capital Model: Available cash as determined by Assets minus Liabilities. We all try to pay our bills at the last possible minute and collect our receivables as soon as possible but what are the real implications? How can being ruthless in optimizing this equation allow you to minimize investment required or make life difficult for a competitor? Can thin margins allow you to pass savings onto customers, create volume and allow you to negotiate better payment terms with suppliers giving you more cash on hand?
  • Investment Model: the cash and other resources needed to get things started, get to break even and to then grow. How can you stage rounds of investment to increasingly remove uncertainty and therefore raise the capital you need on better terms? What can be bartered, eliminated, deferred or substituted to reduce the needed cash investment up front? What culture can you instill early on by taking a spartan approach? How much of the pie can you keep in the early stages so you can splurge on giving your employees more options and retain more control in later stages?


Isolate the leaps of faith and develop the metrics that test each independently: We’ve been intuitively testing hypotheses and adapting our business at JumpBox based on feedback since day one. What Plan B helped me fully absorb is the benefit of unraveling knotted hypotheses that involve multiple leaps of faith and thinking about each individually. Think of some unknown in your proposed business plan with a seemingly-straightforward question like “will people buy durian-flavored lemonade?” and I bet you can decompose it to constituent questions of “will people buy lemonade that’s a) purple b) tastes like durian c) branded with a durian fruit image on the cup? This is a simplistic/silly example but the point is the more you can tease apart the variables the better you uncover the true drivers.

Think about how you can unlock more cash: The gross margin, revenue and operating models all affect your working capital model which then dictates what you need to do investment-wise. The more ways you can find to free up cash (whether by improving your gross margin, reducing operating costs, getting your customers to pay you in advance, extending terms on accounts payable, etc) the less money you have to raise and the less equity you have to give up. This of course should be common sense but the examples in the book of Costco, Go and Skype hammered these lessons home and showed how you can not only grow your own business but actually suck the oxygen out of the room for others and create impossible living conditions for your competitors.

The importance of the dashboard: We already monitor key metrics in our company but Plan B hounded importance of aggregating these figures in one place and snapshotting them over time so you can see unequivocal evidence (and substantiate it to others if necessary). Traditional business intelligence systems are too heavy for most early-stage startups. But free online tools like yahoo pipes & dapper feeding a google spreadsheet can give you much of what you need. Of course if you’re slightly more technical there’s ETL and data presentation JumpBoxes that can give you even more control over your dashboard ;-)

Sources for inspiration of analogues and antilogues I read magazines like Wired, Fast Company and Inc and I find the stories of the companies interesting but Plan B gave me a new way to think about the companies covered in these articles. It’s impossible not to start envisioning what their underlying working capital model must look like and start thinking of them as an analogue or antilogue. I love books that peel back the translucent film on life and allow you to look at something in a completely new light and see it more clearly – this book absolutely does that. It makes reading these magazines take on a new “treasure hunt” aspect and gives leisure reading a very real prospect of producing insights that can be put to work. Awesome, just awesome.


The only major deficiency I see with this book is that it hovers at a strategic level and never dives under the water to give truly tactical advice on how to do the dashboards. The dashboard is arguably the pivotal piece in all this because it’s how you determine if you’re right. The book has a section towards the end that helps you with “what do I do next?” but it never presents example dashboards to demonstrate how they work in practice. I would LOVE to see a paperback workbook complement to this novel. Even better, I’d like to see Komisar & Mullins team up with someone like MindTouch and include a CD complete with a functional piece of example software that shows a real dashboard referencing live data in spreadsheets, a site, a database, a CRM system, etc.

On a tangent, this is precisely the type of thing we want to enable by allowing an author to bundle working, data-filled JumpBoxes on CD with a workbook. I can easily envision including JumpBoxes for MindTouch Core, Snaplogic, SugarCRM and MySQL and then having them pre-filled with actual data and referencing Google Spreadsheets, a live web site and Excel files to show how an actual dashboard works in practice. Rather than talking abstractly about measuring nebulous things like support efficiency and sales conversion, it would be great to be able to see exactly how this works. Those physical examples would bridge the last mile here – the piece that’s missing which allows you to close the book and open up your laptop and apply dashboarding to your own situation. If the authors happen to read this, let’s talk- I’ll help you write this workbook and give you full working examples that anyone can use in minutes to play with a live dashboard in action.


A good book gives you theory backed by concrete, practical examples that demonstrate the concepts and emblazon them in the memory for later recall. A great book gives you this material but in a way where you can’t help but look around and start seeing the world differently. I found myself constantly thinking about other businesses and our own through the lens of these nouns and verbs. The biggest benefits to me have been to help disentangle my thinking where there are multiple leaps of faith wrapped upon one another. It’s also helped me clarify how the interplay of the various models and how deeply attaining the holy grail scenarios of negative working capital and 100% gross margin can liberate and propel a business.

Of all the books I’ve read on business and entrepreneurship, if I had to recommend just one it would be a tossup between this one and Innovator’s Solution. My head is spinning with thoughts and I feel like I’ve only retained maybe 30% of the material so I’m inclined to turn to page one and read it again. I’d say towards Eric Ries’s challenge of developing a working theory of entrepreneurship, Plan B comes about as close to a bible as any I’ve found so far.

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