Paying customers are the real angels

(Also published in Øresund IT’s newsletter)

There are many challenges for a start-up to survive its first years and develop into a new regional employer. Whether it’s in Sweden, Denmark, or outside the Øresund region these early endeavors are very much the same. Completing the product, building a strong team with an attitude to grow, or understanding a market full of real customers. Or the funding of the whole take-off operation for that matter.

For many entrepreneurs, however, the biggest challenge is getting to send a first invoice. Sales is naturally seen as a vital part of a company’s operation, and quite often also as an important milestone in the well-written business plan. The final proof that the product, team, and forecasts were correctly assumed and devised.

In surprisingly few cases paying customers are seen as investors and part of funding the early stages of the company. This is sad for three main reasons. First, the entrepreneur gets better at pitching to investors than to real customers. Secondly, investors seldom share the start-up’s interest in the product like the customer does. And thirdly, business angels and venture capital are quite a lot less interested in start-ups who don’t have paying customers. So there is little reason to regard paying customers as anything less than the supreme form of early investors.

There are of course a few minor problems with customer funding in early stages. One is that there is seemingly nothing to sell in the beginning. Another, that there is little or no time to sell (or build a sales organization for that matter) when most of the efforts are focused on getting the product ready for launch.

There is however, one thing that addresses these concerns. Experiences from working with concepts for creating new business, like Mobile Heights Business Center and Minc/On, all point in the same direction. When you focus your business and sales on real and well-defined needs, paying customers suddenly become a very realistic funding option. Especially when you go the extra mile and find out what the need worth solving is. An example: Instead of just a general need for shorter development lead-times, it could be enhanced as a need for faster prototype testing. And a 20% reduction of testing costs estimated to be worth 200k EUR per year. For an entrepreneur this kind of quantified need means more powerful opportunities.

Teknopol is, together with Innovationsbron, exploring new methods to do this in a systematic way. Connecting established businesses’ needs with start-ups’ solutions. The project is not primarily focused on coming up with new products or services. Instead it is providing entrepreneurs with opportunities to apply and tweak their existing skills and technologies to fit real needs. Thereby systematically increasing the possibilities for start-ups to deliver early and send that first invoice.

The methods are developed as we go. By continuously harvesting needs from large companies and presenting them to start-ups, we learn and iterate. So far the most interesting potential has turned out to appear between companies in different industries. We hope to see the same powerful opportunities across borders, including initial contacts with companies in Copenhagen and London.

So if you want, you may read this column as a call for needs from companies in the Øresund region that have answers to the following questions: What problems or needs do you want to address within the next 6-12 months? And for each of those needs, what would it be worth to you if there was a good enough solution within commuter distance?

If you help us get in touch with you, we will help you find and address your quantified needs. And help grow the Øresund region in the process.

My new mantra

I often tend to exhaust myself when developing new ideas. I really want to give the idea its fair chance to become something and there’s usually no lack of energy either. Creating new concepts and ideas really make me tick. The problem is that more and more effort goes into each new prototype. And every time I succeed the bar is raised for the next time. It’s not a completely sustainable approach.

When I came up with the idea for Minc/On (an idea generation concept where an entrepreneurial dreamteam solve a problem specified by a celebrity guest) it was one of those magic moments. When you put two and two and two together and it turns into the greatest idea since sliced bread. I was thrilled to say the least. A win-win-win concept for the guest, the incubator and the startups.

As the event came closer details fell into place. Celebrity chef Tina Nordström booked as guest, a dreamteam of entrepreneurs lined up to participate and Idélaboratoriet involved in the process design. We all felt this was a potential hit.

Expectations were building up too of course. On the week before the first event all spare time was consumed by making sure everything would work. On the very day I was so focused I actually had to remind myself to enjoy doing it and not just focus on all the things that could go wrong. I desperately wanted to avoid messing up the idea so bad we wouldn’t get to do it again. Although, frankly, that wasn’t very likely.

It went well. And again I was exhausted afterwards. So I took the opportunity to turn this experience into a new mantra: To do new things good enough to get to do them again, and bad enough to make it fun improving them.

Good stories are lean communication

I love good stories because they make things exciting. Worth listening to. Whereas non-story really just convey undeniable facts. Might be worth listening to but I never seem to get to the point where I find out.

Finding the stories in everything you do, can make the difference between just being good at what you do and actually knowing why you do it. So this is a blog about that. Finding the story in everything you do.

You know when you leave a cinema having seen a really good movie. When you’ve been taken on a trip where real world time is irrelevant and the world suddenly spins around an all-consuming dilemma. When the movie stays on as a warm feeling in your stomach for you to return to over and over again. The same goes for corporate messages. The lasting insight when you realize not just what a company does, but that they actually change the lives of their customers. It doesn’t take rocket science. Even toothpicks can make that kind of a difference.

You also know the feeling after you’ve seen a crappy movie, sometimes even if it’s dressed up in spectacle effects and celebrity cast. That’s usually when you comment on the credible acting and professional craft and the reason is often a badly told or non-existing story.  It’s basically a waste of good time and  communication effort. So don’t just tell people what you do and how good you are at it. Make them understand that you do it to change the world forever. Even if you just make toothpicks.

The philosophies of lean manufacturing (Toyota etc) and lean start-up (Eric Ries) are based on the idea to rid processes of waste and fill them with actions that create real value. All efforts that do not contribute to the changing of the customer’s life, should go. It boils down to understanding the problem and developing the solution. Antagonist and hero. Two important ingredients in a good story. In my opinion and experience there is no more valuable communication than well told story. Therefore: Good story is lean communication.

To be continued hopefully.