I built 25+ startups in the past 5 years. AMA!
I've been working as an independent corporate venture builder for 5 years now.
Building startups from nothing to PM-fit is sort of my business, except instead of VC money, we use corporate money.
Next to that, I’ve had 5 of my own side-projects & businesses (not all of them successful), and I closely coached and co-piloted an additional handful of startups at various stages of maturity, bringing the tally up to somewhere over 25.
As you might imagine, "90% of all startups fail" does not make for a great pitch to our clients. So we had to find ways to make the right 'bets', whilst still moving fast. In short, we focus heavily on lean validation.
IMO, there is no reason why indie hackers couldn't apply the same process & principles to de-risk their business and increase their chance of success.
AMA!
Hi Jelmer,
Thanks for doing the AMA.
Sounds like a very interesting process.
I have TONS of questions (sorry, but you said AMA!), so first off, I hope you don't mind, and second, feel free to skip some if it's too much! :)
What's the most challenging step of the entire process?
I assume you have some kind of pre-set workflows/templates for many of the processes. Which ones seem to be saving the most time or be the most efficient?
Do you usually do focused work on just one product (ideation, validation, planning, development, marketing etc.), then only move to the next one after it's ready, or do you work horizontally on multiple products simultaneously?
What goes into your ideation process? Do you always start it after deciding on a niche and doing market research?
Is there a minimum TAM you're aiming for? Or maybe a minimum pricing point?
Would you say the vision is to create "smaller", sustainable products or go on a unicorn hunt with each one of those products?
Do you limit the scope of the ventures, or try to keep it somewhat "smaller" in a way? (rather than creating products that would clearly require dozens of devs, sales teams etc.)
Just trying to figure if there's any balance between keeping the idea worthwhile yet not overly demanding.
Is there a specific type of products you're working on, or is it a bit of everything? (for example, web-based B2B-SaaS only, vs using a variety of product types, business models, etc.)
Any specific types of products you are actively avoiding? If so, why?
At which point do you decide if a product is "validated"? For example, you say you run landing pages before the products are even ready, but how much traction are you looking for before committing to it?
How many people are typically involved in the process of creating a product?
How long does it usually take to reach the hand-over stage? (I understand it's when you reach PM-fit, trying to figure what do you usually expect in terms of timelines)
How do you go about marketing? Do you mostly run CPC campaigns or use other channels?
Do you ever use one product to leverage another?
Once the products are launched and running, how much work do you still have to put in until it reaches PM-fit? (and once you do reach PM-fit, do you take a step back or double down on them?)
Do you keep some of the products under your own control? (instead of handing them off)
Hi Satch,
Thanks for the interest! I'll do my best to answer as many questions as possible ⚡️
IMO, doing Lean Validation will save you the most time on a macro scale, since you wont waste any time on building startups / products that are doomed to fail.
It is kind of a funnel, where we start with 100s of opportunities, but end up with a handful of startups. We cross off options through validation. Personally, I prefer to focus on just 1-3 startups at a time. And no more than 1 after MVP phase.
Sometimes clients already have their market research ready for us. In that case we can choose to go straight to ideation. Inputs vary, it's a brainstorm (divergent) after all. Sometimes it is as simple as taking an existing business model and making it better. Other times we imagine a completely new value exchange from scratch.
This completely depends on the client, or personal ambition for side projects. F.i.: Some startups are just launched to test and develop a new technology in the market, and are not meant to become huge cash cows on their own.
In the beginning we adhere to Jeff Bezos' 'two-pizza-rule': If you cannot feed a team off two large pizzas, it is too big. Product-level, we definitely try to limit the scope as much as possible, but corporates tend to think a bit bigger than we prefer ;)
Caveat to the team size: development of software MVPs is often outsourced (the benefit of corporate capital).
I've worked on startups in: Telecom, Banking, Mobility, Energy, Skincare, VR, ... . So very varied.
Personal taste, but I don't like B2B because of the slow sales cycles. It can literally take 2-3x as long to validate. With some exceptions of course.
If you're a solo-founder, or small startup team, I would avoid physical products. Margins are paper-thin and there is just so much more that you have to take care of and manage (production, packaging, storage, logistics, ...) and its much more prone to silly mistakes that put pressure on timelines. Drop-shipping is an option, but few do it well.
Starting to become a broken record, but: It depends. We usually benchmark against data we buy / find online, or that exist within the client company. So let's say the conversion rate of product x is 1.5%, then we might use that as a benchmark (including a safety factor of 50-200%).
Our startup teams are 4-6 FTE.
9 months at the shortest, but maybe 12-18 months on average.
One benefit we sometimes have is that we can leverage the corporate's comms, marketing and PR channels to boost our launch. Other than that it's mostly FB ads, yes.
Absolutely! One of the major benefits corporates have is that they're already established. Sometimes we just leverage the name, or marketing channels, other times we actively package products together or create up- / cross-sells.
PM-fit is difficult to measure. A better indicator would be profitability (given no growth). The amount of work, again, varies. One of the benefits of validation or working with pre-orders, is you already know your unit economics work. Which makes it easier to scale your efforts. But sometimes there is simply no pull and you have to be honest with yourself and kill it.
Unfortunately no, but I think we will see more Skin in the Game models happen once corporate venturing becomes more widely adopted as an innovation strategy. What does happen is team members get hired to become full-time employees of the startup, and usually there is equity involved in that.
Thanks for all the questions. Hope this helps!
Jelmer, thank you so much for the detailed answer, I really appreciate it. Hope it wasn't that bad! :)
That's great stuff, got a lot of thinking to do following to this AMA
Hi @JelmerPe, thanks for making yourself available.
Q: What are the steps going from no idea to first 10 paying customers?
Cheers!
Hi Chris,
Ideally, (assuming a B2C model) we already have our 10 paying customers before we have a product. But completely starting from scratch it would look like this:
Market research: Find a market, submarket, and niche we want to operate in, based on VC volumes, market size & growth, & 'trends research'. Then look at which players are already active in the market to see what is working already. At this point we would also set goals on how much market share we want to capture, at what revenue & profit margin + a 'deadline' (f.i.: 5 years from now)
Problem Definition: Depending on the available data in the market research we might: a) interview potential customers to find their problems / challenges, or b) already have a problem defined.
Ideation: We run a 1 week ideation workshop where we go from problem to venture concept, which includes a target audience, value proposition, a revenue model, key benefits & features, and a super high level roadmap (how are effort & money invested over time).
a) We set up a landing page with an e-mail signup (interest list) and drive traffic to it with ads to see how interested people are in the value proposition.
b) We set up a 'fake' product page with a full check-out & payment flow, and tell people we're out of stock as soon as they try to pay, or say that we haven't opened yet but they can sign up for the interest list. At this point, we would have proof of at least >100 "paying" customers.
Additionally we might do more customer interviews to optimise the value proposition.
After that we would go to:
5) Closed MVP / Alpha
6) Beta
7) Launch v1
8) Grow to PM-fit
Really interesting to read these comments. Thanks for taking the time to do this AMA!
Thanks for reading, Brandon!
Hey Jelmer, interesting career! How do you go about handling all of the data from your research? Do you have to present your clients with reports etc.?
Thanks Ric!
Usually we have two main research documents:
Working document that we as a team work in to compile all of the data.
A summary of the process and key outcomes (rather than all the raw input) for the client.
After the research phase there are weekly reports to the client, that are a combination of process and key business case metrics like CAC, CR, AOV, etc..
Interesting, mostly digital businesses then?
Ah yes, the infinite google doc? I'm part of a team that assesses the commercial potential of scientific discoveries for Universities.. We use a similar system.
I just wrote a post on IH about a system I've started to build to help facilitate this process, if you're interested. You're perspective on it would be really valuable :)
Hi Jelmer, that's a very interesting approach to building startups. What would you define as "an independent corporate venture builder" Do you have a team that is a ghost startup for hire? What happens when you hit PM? Is there a hand-over and you walk away?
Hi Jamie, thanks for taking an interest!
I'm independent in the sense that I am technically freelancing, but I do most of my work as a subcontractor for 1 agency, who provide the rest of the team (growth, design, ... ).
Once we approach PM-fit we start a recruitment & hiring process to replace ourselves. So there is a hand-over, but not necessarily back to the client.
Sometimes we take a chair on the board for the year after, but not necessarily.