Entrepreneurship, Startup, Uncategorized

Why Every Day Is the Best Day Of My Life

A friend of mine was going though some very rough times recently and asked me how I managed to be so positive all the time and why I claimed I was living the best days of my life. If you’re an entrepreneur, this post may not change your life, but I hope it can help you see things more positively.

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My Worse Year Ever
10 years ago in 2006, I was putting my company in bankruptcy and found myself in hospital w/ a severe case of exhaustion (burnout really) and early onset of heart disease and type-2 diabetes. I was also being sued by a bank and a commercial landlord for over $300,000 of unpaid business loans. In other words: I had hit rock bottom. Additionally my gorgeous girlfriend at the time had left me months before as things were unraveling (turns out, some girls don’t like rainy days, LOL!). So yeah: sick, broke and alone. A far cry from being worth $5 Million in company stocks 2 years before and jet-setting between Montreal, Geneva and Tokyo.

Health: Fixed!
Once I got home, I started seriously reading about health and nutrition. While I have never been a drinker of alcohol, I ate copious amount of meat and cheese (I loved cheese!) 3 times a day and never exercised. I discovered that several doctors and scientists had been able to reverse both heart disease and diabetes with a vegan plant-based diet. After just 14 days, I no longer needed medication and was able to exercise again, something I hadn’t done since college. I lost 50 pounds within a year and have never gained them back since. In fact, I started looking younger than my younger, meat-eating siblings. A pleasant surprise was realizing I was now wearing the same pant size I had when I was 25-years-old. Yay!

Business: Fixed!
I also started reading about bootstrapping and marketing. I discovered I didn’t have to borrow money or sell stocks in my company to have a successful business. I could develop a product and sell it directly to users and be profitable. Thanks to open source software technology and libraries, a single person could now create a product that would have taken a small team of engineers 10 years ago. The downside is that ambitious software projects could still take years, but the cost was virtually zero. Now that anyone can create a working product, the differentiator was now design and marketing.

Conclusion
Today, I’m healthy, in the best physical shape of my life, debt-free, I own everything I have, including the rights to my software and my work. And despite taking forever, I’m happy to work on a product that is useful to me and hopefully to countless others. Every day that I can keep doing this is the best day of my life. This is why I’m so happy and positive all the time — I know I could have been dead by now and every day on earth is precious and wonderful.

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Uncategorized

Marketing Is Your Friend

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Hands down, the biggest mistake made by new entrepreneurs is failing to learn more about marketing. Entrepreneurs are usually all about the products, and we often see sales & marketing as bellow us or uninteresting. After reading on the subject and attending various seminars for the past year, I come to see marketing as a surprisingly creative and fun aspect of entrepreneurship.
Amongst the dozen marketing books I’ve read, the best was “Launch” by Jeff Walker. It presents a marketing technique he calls Product Launch Formula (PLF) that boils down to:
  1. Offering free instructional material (usually video or short PDF/ebook) in exchange for people’s email address. You build trust and domain authority by teaching people.
  2. Grow that email list & interact with subscribers, asking them what they want in your product.
  3. Build or finish the product based on feedback from your list.
  4. Launch your product to members of your list.
The reason this has worked for so many people across many industries is because you are launching to a build-in audience who see you as a friend — not some faceless marketing chill. This means less rejection, better conversion rate (percentage of people who decide to buy) and a win-win for everyone.
There are plenty of other online marketing books, and most are based around this idea of giving something of value (no fluff) for free to grow your audience before attempting to sell them something.
This really changed the way I approach product design and now, I develop and do the marketing at the same time. Like everything else, practice makes perfect & I hope to make a successful product launch this summer.
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Entrepreneurship

The Product Demand Matrix

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The Product Demand Matrix is a tool for figuring out if your product or startup idea is worth pursuing. I first heard of it from Ramit Sethi in an interview he gave on Chris Ducker’s New Business Podcast 079 – How to Take Your Business Idea from ‘Zero to Launch’.

As explained on the image above, you must position your product/startup idea in the appropriate box. Boxes are laid out in the following fashion:

  • Vertical: from low price to high price
  • Horizontal: from few customers to many customers
  • Top Left — High End — High price, Few customers (Rolls Royce)
  • Top Right — Golden Goose — High price, Many customers (Apple iPhone)
  • Bottom Right —Mass Market — Low price, Many customers (MacDonald’s)
  • Bottom Left — Labour of Love — Low price, Few customers (unprofitable idea)

The idea is to avoid any idea that falls into the box labeled “Labour of Love” as they are all unprofitable. If that’s what you want, that’s cool, but usually most people don’t want to be in the red box. See what I did here? Haha!

This matrix is not perfect: there are ways to end up with a “Labour of Love” despite the product being classified elsewhere. For example:

  • High End” product where the cost of production unintentionally exceeds the retail price. This could be caused by software development delays (software product) or a sudden hike of the cost of components (physical product). The software field is full of products that cost way too much to develop Vs the amount of revenue they could bring in.
  • Mass Market” product that relies on a fashion trend. The fashion ends and suddenly, the number of potential customers crashes down to near zero. The Rubik’s Cube is an excellent example.
  • Golden Goose” product that falls under increasing competition. The case of Blackberry comes to mind.

Also, price and customer count are the most basic metrics. You should obviously include feasibility and R&D time in your assessment of any new idea. For example, building rockets that can travel to Mars may be a great “Golden Goose” but unless you’re Elon Musk, I’d stick to something less ambitious.

Despite those shortcomings, I find The Product Demand Matrix to be a pretty good way to filter out bad ideas early on so one can focus on ideas that have a chance of becoming profitable. As they say: “Your mileage may vary”.

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Uncategorized

Can biological computers become a reality?

Great post by @Leahcanscience about the possibility of biological computers — with References! 🙂

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DNA used to encode cellular memory DNA

This post is the first in a series exploring whether it is possible to replace our current computers with biological computers. Of course, you could argue that every living creature is a biological computer. My question is whether we can take the tools our bodies use to store, transmit and decode information and produce more efficient, smaller computers.

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Uncategorized

The New Era Of Music Entrepreneurs

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Recently, we learned there will be no platinum selling (sales exceeding 1Milion units) artists for 2014. This news is hardly surprising as everyone knows, the music business is no longer what it used to be.

Some can choose to be alarmed but I see this as an incredible opportunity for self-motivated music entrepreneurs. We may have entered the era of the music entrepreneur.

You’d think hip-hop & rap artists would be hard-hit by declining music revenues since they don’t tour as much as those in pop or rock. Fact is they were always more entrepreneurial – selling drinks, clothing, shoes, perfume & electronics. Selling out was never a bad thing.

It’s those working behind the scene and/or collecting royalties who are most hit by declining music revenues: producers, session players, songwriters, label executives and their workers.

So music is like writing software nowadays: the only real cost is time. Those who manage to find the time can do it, the rest can’t.

Thanks to technology and automation, the cost of producing and distributing music has fallen dramatically over the past 20 years:

  • Recording + mixing is free: Mac + ProTools.
  • Music videos are free: a few GoPros + Final Cut.
  • Video distribution is free: YouTube, Vimeo.

Having established all this, we can deduce the following game plan for music entrepreneurs:

  1. Allocate time/resources.
  2. Create content using latest technology & automation.
  3. Distribute content for free as advertisement for selling other things: books, films, drinks, electronics, games, toys, perfume, musical instruments, etc.

In many ways, this is way more work than what music artists had to do decades ago. Yet this is exactly where lies the opportunity: real entrepreneurs see solutions where others see only problems and hard tedious work. How can you automate and/or streamline the recording and video production process? Can you use principles of software engineering (lean, agile, etc) and marketing (growth hacking, traction, PLF, etc) to get things done on a small budget? Those who can operate within those new constraints will thrive in this era of the music entrepreneur. Exciting times ahead!

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Uncategorized

Why Automakers Won’t Challenge Tesla

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Since the successful introduction of the Model S, pundits have been predicting the demise of Tesla Motors as soon as one of the big automaker would compete with them head to head. To date that has not occurred, leaving many to wonder why the big automakers are letting Tesla steal consumers (and mind share) away from them. In this post, I’ll attempt to answer that question.

Engineers Vs MBAs

Tesla is lead by three men: Elon Musk (CEO), JB Straubel (CTO) & Franz von Holzhausen (Head Of Design). Tesla is an Engineering-centric company very much modeled after Apple under CEO Steve Jobs. Under that model, a strong CEO with an engineering background (Musk) uses design and engineering to accomplish his vision. In this case, making practical long-range electric automobiles a reality.

In contrast, the rest of the auto industry works in committees with CEOs who have never build any product. Most CEOs in the auto industry have an MBAs or sales background. A notable exception was Ford’s Alan Mulally who started as an engineer at Boeing. These are Accountant-centric companies. GM’s Bob Lutz (the father of the Volt) wrote a book about this entitled “Car Guys vs. Bean Counters: The Battle for the Soul of American Business“. You get the idea.

This explains why they are taking so long to go into pure electric cars: the risk is too great on paper. In other words: it doesn’t make sense to a bean counter. Currently, they are making decent margins from having optimized the ICE power train. Starting from scratch with a new technology stack where they would have to lose money before they make any is not an appealing proposition.

Worried Ecosystem

Then there’s the issues of the ecosystem. This includes auto dealers, assembly sub-contractors and the supply chain.

For auto dealers, profits from parts and repairs is an important percentage of their profits. Electric cars have fewer parts to service and they can’t even charge for software updates to the entertainment system since Tesla does all this for free. Also, selling electric cars requires dealers to answer more questions from inquiring customers. It’s much easier to just sell them another ICE car customers are already familiar with.

For assembly sub-contractors, there would simply be fewer of them needed. Canada’s Magna International took the initiative to design & manufacture the Ford Focus EV, but it doesn’t look like Ford is interested in producing another pure EV anytime soon.

Save thing for the huge industry providing replacement parts for ICE cars. Customers are unlikely to need replacements for electric motors, inverters and batteries like they currently do for the thousands of moving parts in a ICE car. Only those selling cosmetic aftermarket body kits & accessories would continue to thrive.

There is no doubt the ecosystem around the automakers would need to change dramatically if EVs were to become more popular. Currently, there is no clear way to cleanly move from one ecosystem to another.

Pioneers Have Arrows On Their Backs

Nissan/Renault CEO Carlos Ghosn is paying a high price for being an EV pioneer. The Nissan Leaf is only now starting to sell in decent numbers and Nissan is looking at offloading it’s battery design to LG Chem in order to increase profitability. Lots of arrows in their backs for being EV pioneers.

So it’s not like other automakers don’t know how to make electric cars: they simply don’t know how to do it profitably using their existing infrastructure. They would love to be green, but don’t want to be in the red doing it.

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Entrepreneurship, Startup

The Problem With Investors

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Life Is Not a Shark Tank or a Dragon Den

A friend of mine who is a 1st time entrepreneur asked me why I thought that taking investment was a bad idea. I gave her a bunch of short answers, but wasn’t able to elaborate too much since this was done over Twitter. With this post, I’d like to attempt a more cohesive answer.

You see, most people who have never owned a business or had a startup have this idea from watching Dragon Den  (Shark Tank in the US) on TV, thinking this is how startups are done: an entrepreneur gets an idea and must find investors so he/she can bring a product to market. The reality is that it’s just one of many ways to achieve your goals. That is if your goal is to a have a successful, sustainable enterprise with you as owner.

What Every Investor Wants

Investors want to make money selling their shares of your company. I know you’re thinking “Duh! Captain obvious! What else is new?”, but I find that this basic notion escapes many new entrepreneurs. That’s because the implications are unpleasant: the only way investors will make money is if you sell your business or go public so they can sell their shares. This is called a liquidity event and even the most patient investor will expect you to provide one as soon as possible.

You don’t want to sell your company or don’t think you’ll ever be big enough to be listed on NASDAQ or another public exchange? Then don’t take money from investors.

My Story

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Early in my career, I took investment because I thought it would be a quick way to get a pay check until I got the business off the ground. I was anxious to show to family and friends that I was successful because, you know, some people are writing checks to invest in my company, right? That regular pay check was nice and the valuation was such that I was was a millionaire on paper. Unbeknownst to me at the time, I had one foot caught in the endless hamster wheel from hell.

Since I had a partially working product at the time and 20 pre-paid clients, I should have continued selling software slowly and hired only if there was too much work. Instead I took in 2 million in investment (it was 1999), the market changed (3d software went from costing 30K to 3K!) and I had to close everything down because there was no way in hell I would have sold enough copies to repay the 2 million — not with 15 employees and an expensive multi-year office lease. The company finally went bankrupt and I was left with six-figures in debt (had guaranteed a few loans) and a nice case of extreme burn out. Worse of all: My invention didn’t belong to me. It belonged to the shareholders. Never again, thanks.

Raising Money: The Endless Hamster Wheel From Hell

A startup is basically constantly running out of money. That’s the nature of the beast. This means that once you’ve spent the money from the 1st few investors, you’ll have to look for more money, which is a full time job. So forget about building products or coding — you’re now in the business of not going bankrupt, so the 1st few investors don’t lose their money. This means that you will need to hire people to do the actual engineering, production, whatever you have to do to get the product out because you sure as hell won’t have the time to do so yourself because you’ve got 20 investment presentations the next week. And having a payroll is a sad, sad thing because guess what? People like to get paid — usually twice a month. Like, on a regular basis and stuff. Feeling tired and want to take a break? Not now because there’s payroll to meet. Shoot me. Now.

All kidding aside, this hamster wheel from hell is responsible from countless cases of depression and even suicide amongst entrepreneurs. Early last year, entrepreneur Jody Sherman committed suicide rather than face the prospect of his startup Ecomom running out of money. By all account, Jody was a well loved leader who just couldn’t stand the idea of failing and having to restart from scratch in his late 40’s. He was tired of the wheel and couldn’t get off.

A Better Way: Bootstrapping

Usually, a commercial startup has 3 phases: R&D, product/market fit and growth. You spend time developing the product (R&D), find a group of early adopters willing to pay for said product (product/market fit) and then grow from early adopters to a wider, more general group of consumers (growth). So basically the whole deal is to get more and more people to pay for your product. The sooner the better.

In the past, the cost of each of those phases was so prohibitive, entrepreneurs had no choice but to raise outside financing to get started. Nowadays, there are so many free or semi-free options for developing, marketing and distribution, many choose to develop on a their own dime and use growth hacking (free social marketing) techniques to get the word out.

So what if you could develop the product on your own and are able to contact consumers directly? Consumers would see your product and accept to pay in advance in return for a copy of an initial run. What if nobody wants your product? Then you’re not panicking because investors are wondering what’s wrong — you simply iterate on your product until you get something that valuable to someone. With investors breathing down your neck, there no place for mistakes or misfiring — it is their duty to replace you before the company goes bankrupt and they lose their money. Employees won’t help because, you know, they like getting paid more than they like you.

With bootstrapping, you work on your own schedule and spend all your time working on the product and interacting with consumers who in turn tell you how to shape your product to attract more consumers. You don’t have to think about liquidity events or how your investors will ever get their money back.

Same Effort

The truth is that raising money continuously is the same effort as finding new clients continuously. Except that when clients pay you, they are not taking a piece of your company — they are helping you grow your business. When investors come to you before you have sold your product, the money may seem too hard to resist. Free money, right? Nope — just a glimpse of the hamster wheel. Simply sell them a copy of your product and tell them you will call them if you ever decide to raise money. This way, the door is not close and you get more clients. Win-win.

Of course if you are trying to build the next Facebook, Twitter or Apple (all public companies), kindly disregard the previous paragraphs. But if you want to a slow but realistic way to build a startup, bootstrapping is the best way.

DHH Was Right

So,  you may be thinking: “But, everyone is raising money!”. Wrong again. David Heinemeier Hansson (DHH) of Basecamp has been arguing for bootstrapping since 2003. “Sell your product to consumers for a profit“, he tells us. Basecamp/37-Signals even had a serie of interviews called “Bootstrapped, Profitable, & Proud” to profiles companies that have over one million dollars in revenues, didn’t take VC, and are profitable. I wished I had followed this advice 15 years ago.

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My current startup Lessonator has been years in the making and only now getting clients + revenue, but I’m much happier with the slow pace and the ability to run things as I please. Also I’m able to use the same code base to spinoff another project in 3 months instead of years. One developer, several revenue streams and no headache — that sounds a whole lot more fun to me. And this time, I own everything so even if things go south, no one can take this away from me.

I sometime missed the interaction with my old team (specially when debugging alone), but I quickly get over that when I think about the crazy payroll I had to sustain and the stress that came with it.

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