It’s been three to four years since Eric Ries’ “Lean Startup”, Steve Blank’s “Startups’ Owner Manual” and other cool, related books enlightened the business community, and I am surprised that not that many startups use the approaches outlined in the books or even really understand them.
My role at Kaspersky Lab is to drive new product development, but I also serve as a mentor to the young companies on our startup program. In this capacity, I’ve learned that new startups need useful advice on how to cope with the greatest challenges they face on the road to success.
This has led me to develop my own version of the essential principles for startup success, drawing on examples from our startup program.
Kaspersky Lab’s involvement with startups began in 2014, when we decided to run a three month Security Startup Challenge (SSC) together with Mangrove Capital Partners and ABRT Venture Fund. The aim was to share with young security entrepreneurs our knowledge of and expertise in the cybersecurity market in order to help them grow successful startups and launch solutions that addressed hot cybersecurity issues.
SSC is not just a traditional acceleration program, it is also a competition for startups. This makes it completely different from a standard accelerator-incubator. Further, SSC is a global program. We selected participants from 34 countries around the world and presented them with a great opportunity.
The startups are guided through the program by a team of mentors drawn from the partner companies. The young businesses have to progress rapidly as every week we track what new things they have learned about their customers, how they apply what they’ve learned to product and business development and, most importantly, how this is reflected in their key growth metrics.
It is amazing to see how much the startups have accomplished during the program — and 11 of them came to MIT on 13 August 2015 for a chance to win the top prize.
The prizes for the most promising startups were awarded to: Excalibur from Slovakia (1st place), Pipe from Germany (2nd place), Cyber DriveWare from Israel and ZeroDB from the USA who shared the 3rd place. Each team was awarded a share of an $80,000 (over three million pesos) prize fund as well as post-program support for the first prize.
The many things they have learned and are learning are important to every startup, regardless of sector or business model. So I wanted to share with you my observations on what these key principles are and why applying them successfully can help startups to skyrocket their businesses compared to others.
Don’t fall in love with technology….but love the fast failures
I mean it. Let me explain why. Do you want to spend five or six years of your life making almost magical stuff, filing patents and feeling proud of yourself, only to learn that your technological masterpiece (no sarcasm intended) is not just something that nobody buys, but which nobody even understands? I made this mistake in my startup once. It was not funny.
So here is the recipe for success. Reach out to your potential customers for feedback from day one. Pitch to them what you are trying to do, then over time show them mockups, clickable prototypes, etc. Do whatever you can to discover more quickly whether what you are planning to create is at all interesting, and, if so in what form it is interesting.
The sooner you learn what people actually need, the faster you can fail, recreate, change or redirect your efforts, and the faster you will achieve success. Actually, there are no failures, only results.
For example, one of the SSC teams applied customer development techniques to their project. In less than a month they found out, using techniques such as cohort analysis and direct interviews, that customer engagement with their solution fell into the category of “a spontaneous, non-recurring need”, and was therefore not high enough.
To get the use-cases right they needed to commit almost as much effort as they had already invested. So they decided to put the project on hold and invest in another team product. That was a good, data-driven result that was arrived at quickly, and which could drive them to more rapid success in their second project.
Don’t assume things about your customers, learn them
When you create a product you know what you’re doing, right? You understand the problem, and sometimes you even “eat your own dog food” and use your product yourself. So you know your customer. The surprise is that you… are just one of many. And the ‘many’ are all very different. They may need just three of the 10 core functions of your program.
Moreover, they want those three functions in a far simpler form than you expected. What does this mean for you? It means that you can serve many more customers with an order of magnitude less. Or if you can’t save on effort, you can do what people actually want.
We had an interesting example of this in the SSC. At the start of the SSC, one of the project’s primary customer personas was someone who took pictures at parties but wanted to ensure they stayed private. To us this seemed very niche.
So the team monitored the behavior of this persona group and found that they stopped using the product within a couple of days. That was a sad fact, but an important thing to learn.
The team then conducted a lot of interviews to understand what kind of digital assets people wanted to keep private, and amended the focus persona and value proposition.
After this the sign-up rate accelerated beyond their expectation and customer engagement increased by over 2.5x.
Don’t wait until you are not ashamed of your early product, but rush to the customer
We are proud of another SSC project: a B2B venture that provides an extra layer of security for servers managing extremely sensitive data for large enterprises or organizations such as governments or banks. From this description you can see that we are looking at a sales cycle that could possibly go on forever.
And of course the product quality requirements will be extremely high. There are startups that don’t dare to approach customers before they clean up every last ‘bug’, but these guys are great. Their product is not yet completed. But one and a half months into the SSC they secured commitments for four pilots from banks and governmental organizations.
Their code is about to pass the pilot criteria, and their bank accounts are about to receive the revenue from their first customers. It rocks.
Don’t dwell on the fact that security isn’t sexy, think about engagement
One of the key challenges for companies working in the field of security (especially B2C), is that protection is something people need, but don’t want to think about. And if they don’t think about it, they don’t buy it, end of story. In short, security is not sexy.
But what we have observed in the SSC is that you can make security interesting for a user if you approach it creatively. The key is engagement. You have to imagine scenarios where users would actually want and value interaction with the product often enough to appreciate and remember it.
For example, one of our SSC projects allows you to do away with the need to enter and keep passwords. Instead of master passwords and other stuff that well-known password managers already offer, all you have to do when asked to enter your password at your workstation is to tap your phone. The users engage with this product many times in a day. When a product gets slick enough, you simply won’t want or be able to stop using it.
Trust is the missing link, when security is a core value
Another issue for startups connected with security is customer trust. What if your app is just a trick to steal my passwords, private photos, and privacy? And do you know what? Participation in an accelerator program partially solves this problem. Because it adds extra visibility, references, and therefore trust.
And another thing that makes SSC interesting is that you don’t have to be in the same place for three months. This means that anybody, from anywhere in the world, could feasibly and economically participate in the program. We come together twice for a five-day period and that works for virtually anybody.
As a startup, you’ll be able to work with and learn from the success of other participants, the crème de la crème of startups from across the world. SSC had teams from Slovakia, Singapore, Israel, Russia, US, Germany, India, etc., are all working together, sharing expertise and success. A global exchange between the best entrepreneurs.
And that’s not all. There are many more small and not-so-small tricks that you can learn and fast-forward through participation in accelerators. Go for it!