After almost nine years, today is my last day as an employee of Flurry. I will remain involved and on the board, but it is the end of a significant chapter of my life and the beginning of a new one. It is a bittersweet day for me.
I have been lucky over these nine years. Most start up companies fail in the first few months, many others in their first year. Not only has Flurry survived, it has thrived and now employs 150 people with a large and growing business. Today, Flurry is recognized as a central part of the mobile world and provides a clear voice for this new industry.
Along the way, I have been lucky enough to enjoy front row seats for the mobile revolution as it has changed the world. Starting in 2005, back when everyone believed the carriers controlled the world, Flurry has been at the center of mobile applications. Flurry grew up with the industry and as it changed so did we. When the Motorola RAZR became the hottest phone on the market, we were there. When the iPhone changed the definition of a phone forever, we were there. When Android was released as the first free mobile OS, we were there. When the iPad, Kindle and Nexus devices introduced us to the idea of a tablet, we were there. These important moments in the history of business were also moments in the life of Flurry, woven together like a tapestry to tell the story of this amazing revolution.
I am proud of Flurry and what we have been able to accomplish. I am proud of how many mobile developers we have helped to succeed, some of them beyond our wildest dreams. I am proud of the team we assembled and how we were able to do so much while still having so much fun. I am proud of the moments when we were faced with impossible odds and found a way to succeed.
My journey with Flurry has been amazing, but now our paths diverge. I leave the company in great hands with a promising future and will enjoy watching it grow from the sidelines. For the first time in nine years I will have a chance to catch my breadth, relax, and recharge my batteries. There are many adventures left to be had and I am eager to discover them.
So, what’s next?
I often have discussions with people who have a great idea and are thinking of quitting their job to pursue it. However, they have fixed costs (rent, car payments, etc.) and can’t afford to work for free. Instead, they want to raise some venture investment to fund their new company and pay them a salary. Inevitably, they are surprised at how hard it is and rarely succeed.
The problem that these potential entrepreneurs fail to see is that investors are looking for investments to make a return, not to fund your lifestyle. If an investor is going to invest in you it will be for one of three reasons:
- Investing in people (you). An investor might invest in you because of who you are and your track record of success. However, unless you have started and sold companies for tens or hundreds of millions of dollars, it is unlikely that investors will invest in you for who you are. The risk for new companies is too high for someone inexperienced who doesn’t have a product or a plan.
- Investing in your product. Investors will invest in products that have no plan (or revenue) but are growing like wildfire (Snapchat is a good example). The investor might not know you and you might not have a plan in place, but they see the product succeeding in the market and have faith that you can come up with a plan when necessary. This is exceedingly rare because the product needs to be so amazingly successful as to forgive the higher risk of not having a plan.
- Investing in a plan. The vast majority of venture investment is in a plan. A plan includes all of the other elements including people, products, marketing/growth, financials, etc. When an investor invests in your plan, it is because they see how their investment will help you achieve your plan and in doing so produce a return on their investment.
Now, before you spend weeks writing a 50 page business plan, it is important to understand what an investor looks for in a plan. The best plans are not determined by length, but whether you can answer the following questions:
- What problem are you solving? Explain who your customers are, what problem they have and how much money can be made by solving it. The bigger the problem the bigger the market opportunity.
- How do you solve the problem? There are many ways to solve the same problem, what is your solution and how is it unique? In many cases this is a demonstration of your product.
- Why hasn’t the problem been solved before? There are reasons this problem exists and one of them is that no one else has solved it. Why not? Are there difficulties that you have overcome?
- Why are you (and your team) the ones to solve it? While this is your plan, you need to give investors confidence that you can execute the plan.
- How will you beat the competition? Even if you don’t have competition today, you will at some point. How will you win when the competition attacks?
- How much money will you make if everything goes well? This is the most important question. Investors want to see a business that will become very valuable, very quickly based on the money it can make.
- How much money do you need? The final question is how much it will cost for you to build the business to a point where you’ve removed a significant amount of risk. Your plan, no matter how well formulated, has a lot of risk. Instead of giving you $20M now, they would rather give you $1M and see if you can eliminate some of the risk in the plan and then give you more. It is up to you to set realistic goals and estimate costs accordingly, and the investors will evaluate the risk profile from there.
Note that these are the questions for a seed level company, one that is just getting started. As your company grows, the questions you need to answer in your plan will change. Even public companies need to have a plan for their shareholders, who are their investors.
So, if you are looking to raise money for your company be sure you have a plan that justifies the investment. And quit your job first, no one wants to invest in your plan if you don’t believe in it enough to go all in.
When you are starting a new company you are, by definition, the underdog. Your market may have established competitors with massive resources, or maybe the market is new and unproven. As the underdog you are at a disadvantage in the game of business and if you play the game by the rules you will lose.
So, in order to win you have to cheat.
Cheating in business means having an unfair competitive advantage, something that competitors (and the market) can’t easily replicate. There are many kinds of competitive advantages and I’ve listed a few of them below.
- Technology. A technology advantage allows you to do something no one else can do. The technology could be some new kind of software, new production process or new mathematical model. Any technology advantage is really a head start because someone else will find a way to replicate your technology in 6-9 months. Yes, even if you have a patent. However, that 6-9 month head start is a lot of time to make use of your technology to build other advantages, or continue to improve the technology to extend the head start. Examples: Google, New Relic.
- Cost Structure. A cost structure advantage means that it costs you less to provide the same or better service than existing competitors (sometimes this is called a “new business model”). Maybe you outsource labor overseas, have volume discounts or have a better process that requires fewer people. Cost structure advantages can last longer than technology since established competitors often have trouble making fundamental changes to their business. New entrants won’t have that problem so you can expect other start up companies to copy your model quickly if it works. Example companies: Amazon, Walmart.
- Happy Customers. An existing base of happy customers is a huge advantage. Customer acquisition is one of the biggest costs for any business (especially marketplaces) so if you have already acquired customers it becomes that much more expensive for competitors to take them from you. However, they need to be HAPPY customers so you need to continue to invest in customer satisfaction to maintain this advantage. If your customers become unhappy then this becomes a liability quickly. Example companies: Uber, Etsy, Airbnb.
- Data. If you know something that no one else knows you have an advantage. The trend of Big Data is really just a translation of the data companies already had into a competitive advantage. This is the most maintainable of the competitive advantages since it is a lot like a trade secret – managed correctly your competitors will never know what you know. However, it’s also the hardest advantage to translate into revenue since you need to use it to create new technology, make your customers happy or improve your cost structure. In the best case scenario you can get customers to pay you for your data. Example companies: Facebook, Twitter.
There are, of course, many more possible advantages. The best companies have more than one of these and the struggling companies might not have any. I recommend picking out some companies you respect and thinking deeply about their competitive advantage; it is not always what you think.
When you are getting started it is important to know what your competitive advantage is or what you want it to be. Everything you do should make use of your advantage or help strengthen it. That is how you cheat, you use your advantage to compete and win.
This makes prioritization for your company easier because you stop asking the questions “What can we create?” and “What can we sell?” to “Where do we know we can win?“. Playing an unfair game is how you win and you make the game unfair by maximizing your advantage.