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Saturday, 12 September 2015

Some things I learned from 3 days of talks on startups

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Today was day #3 of the 4-day long MaGIC Academy 2015 (also known as #MA2015). The MaGIC building looks like a college block¸ Google-inspired, surrounded by leafy trees. Next door, is a school called Kirkby College, and DELL is just across the road. For three days, I was among hundreds of entrepreneurs, mentors, wannabes, and busybodies who descended upon the MaGIC grounds to enthuse and muse about the world of tech startups. I met a good number of them, young and old, clued-in and clueless, fresh grads and balding "uncles", and pretty young women who looked like beauty pageant contestants. Smiling volunteers, interns and staff in MaGIC hoodie jackets sat at registration counters, waiting our arrival each day. Young Malay men and women wore black t-shirts with the words "Fat Boy" and ensured that the food queues were orderly.

It was yesterday afternoon that Ms. Cheryl Yeoh, MaGIC's CEO, gave a talk about "Startup Metrics", a talk that would puzzle many traditional MBA's. Where traditional MBA classes emphasize strategy, marketing, logistics, ROI, etc. the new world of tech startups looks like it will emphasize open rates and click through rates, number of website visitors and number of email signups, and purchases made through the startup's website. These numbers, Ms Yeoh said, would show how the startup was gathering "traction" and convince -- or turn off -- an investor. Website visitors, which sign up for email newsletters, would show "engagement", thus validating the ideas behind a startup. Nevermind that there may be no "product" in sight as yet. This, apparently, is what the venture capitalists want. This is what the accelerators want. And this is what the country wants. (Luckily, the CEO is young and pretty, only 32. I guess most of us would not mind sitting through her lecture.)

They all subscribe to the "Lean Startup" methodology (popularized by Eric Ries and Steve Blank). Failing fast, failing forward, and reiterating based on failure, is the preferred way of moving forward. The new entrepreneur must discover his customer's needs to ensure product-market fit. No need to pour precious time and money in development until the right direction (product-market fit) is identified. Product-market fit means customers. And thus, begins the startup entrepreneur's journey of discovery. He asks friends and family whether they are interested in a certain "solution" to a certain "problem". He asks them whether they would be interested to buy his fictional product. If so, the product has been validated -- at least, at the friends and family level. Then, begins the exciting journey of the new entrepreneur. It begins with mocking up and wireframing the app. Then, there should be a sequence of flows within the app, reflective of how they think the user should expect to use the app and interact with the app. (Oh, did I forget to mention that the new tech entrepreneurship is all about apps?) Once these are mocked up to satisfaction, software developers (employed by the entrepreneur) will get cracking on the app, converting the wireframe into something tangible -- an app.

But the journey doesn't end there. The app having been created, thus begins the arduous process of iterating and reiterating. If, at this stage, the entrepreneur has some money of his own, he funds the startup out of his his own pocket. That's called "bootstrapping". If he needs money, for whatever reasons necessary for the advancement of the product (i.e. the app) or marketing, he has then got to prepare a "pitch deck" for the potential investor. Money, it seems, is required, and it will be required in large amounts. But why? Aren't startups billion dollar companies like Facebook? The answer is that the company probably hasn't made any money, or too little money. It needs to get feedback and improve based on the feedback. Version 1.0 needs to get to version 1.1, 1.2, 1.3 and so on until 2.0. A part of the money goes to paying for the developers' salaries. Another part, perhaps, for "user acquisition" through Facebook advertisements, Google Adwords, and other avenues.

The idea of a startup is that startups should, ideally, become the next Facebook. It should attract a large enough crowd to generate profit in some way -- subscription, sale of premium products, advertisements, and others. When that happens, investors will "exit" the startup by selling off their shares to convert to cash. At the same time, the startup founders also increase in their net worth. They all do well, in the best case scenario. But what about the worst case scenario? Well, the worst case scenario is failure, and it is now being worn as a badge of pride in the startup community. "I failed my startup", they would say, proudly, like old soldiers telling war stories around a dinner table. After all, failure is always one of the possible outcomes of entrepreneurial activity. It's all right to fail. It's not all right to glorify it, though. Learn from it. Move on.

I was nonplussed why the word "patent" wasn't mentioned during the whole three days that I had attended the event. Isn't a patent a barrier against competition? But these guys, these young upstarts, don't need patents. They need startup inspiration. And they want to sweat startup perspiration. Somehow, I know that it's the right aspiration. You'll know it too, when you see the valuation.
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