Posted by & filed under Customers, Funding, Product development, Startups.

4 out of 10 first-time entrepreneurs fail because they forget one of the basics: following their revenues and expenditure – cash flow. In established companies balance sheets and income statements are king, but for startups, it is all about following the numbers in their account: money coming in and out. It sounds very simple (and it is!), but still, I have seen way too many startups to fail because of it.

Here are the 3 common reasons this happens:

 

  1. Not checking your revenues & expenditure often enough

Looking at your finances is a tedious task. It’s quite boring, and you already have so many other important things to do. And let’s be honest: only a few of us are excited to look at the row of minus’, which is usually the case at the beginning of the startup journey. Thus we often decide to do it “tomorrow”. And more often than not, the startups notice the warning sign too late.

  1. Being too optimistic

You need to have a bit of crazy optimism when you are an entrepreneur, but not when you are estimating things like your expenses, funding needs and time x, y and z will take. Startups tend to make their estimates only a small portion of what they really are, which makes them very ill-prepared.

But why that happens? It is partly being overly optimistic & part not understanding how startups work. Things rarely work out how and when you want them to, and there are many variables you just can’t predict. The market, competition, and even the customers’ needs will change. As time goes by, you will also start to understand your customers better. All this means you will have to make adjustments to achieve better product-market fit. Startups usually pivot, i.e. change from plan A to plan B (or even to plan Z!) 3-5 times at the beginning. All this take time and money and push the time of your first sale forward. But expenses still start from day one.

That is why it is important to constantly check your cash flow and be realistic about the ‘whens’ and ‘how muchs’. When you do that, you know when you are going to be out of money and still have time to do something about it. It takes 3-6 months to get funding, investments, etc. so I can’t stress enough how important it is to knowing when you are out of money early enough. Too many startups come up to me less than a week before they were out of money and still believed they would magically make it. You can guess what really happened.

  1. Not understanding when the money is actually coming to your account

For some reason, many startups believe that when they sign a deal, their money-related problems will fly out of the window. But that is not how it works. It might take weeks, months if not even years before the money is actually in your account! It all depends on what you agreed. Also, not everyone pays their bills in time. Trust me, it happens more often that you’d think. There also might be other problems delaying payments like dealing with reclamations. But again: your expenses won’t wait. So remember: even though money is coming in, sooner or later, you might be out of money and bankrupt well before that! Ask yourself: when exactly we will get the money, and will we survive till then.

In my next post, I will give you more concrete tips on how to get your time frames and expense estimates close to reality.

 

Related post: 7 tips on how to ace your startup finances – cash-flow management

 

Posted by & filed under Customers, Funding, General, Programs, Startups.

This is a guest post by Maarit Cimolonskas from Feelingstream

Feelingstream is one of our portfolio startups (feelingstream.com). FeelingStream helps large service companies improve customer experience by analyzing customer messages and providing actionable insight on customer feelings using smart analytics. They participated in the first Nordea and Nestholma Startup Accelerator batch. Applications for the next batch is open: apply and read more.

Antti / Nestholma

You have a great idea, so you start it up.  Every founder knows that it’s hard to launch a successful startup. We’ve all heard stories about both startups who fail and startuppers who do it for networking. The truth is that turning a great idea into a profitable business is a difficult journey! Joining an accelerator might help you here and we wanted to put down some of the lessons we believe are relevant to do it.

Accelerator supports your startup

You want to start real business and accelerator advances your doings.

At the same time it equals a lot of work. It might happen that startups wait of being changed better after they join an accelerator. What actually happens is that they are given a better hook to catch a bigger fish!

Intense experience brings accelerated knowledge.

Be prepared that the way you think about the problem you solve may change more than once. The time you spent at the accelerator may come as being too overwhelming and intense at the same time. What it actually brings with is that you get faster answers about the business problem and clearer view about actual business impact.

Take the courage and start creating raving fans as soon as you can.

Profitable business means speaking to actual customers. To start relationships with your customers, you need to get close to their stories. And you need to listen what they have to say. It of course depends on the field you’re in, but the accelerator might as well serve as the gateway to your future customers.

 Accelerator should create as much value as you create value for customers.

Instead of choosing one that brings you more monetary value, go for the one that helps you get closer to your potential customer. Accelerators connected to certain fields bring you actual people with real cases. The sooner you get to know your customer, the better.

Know what you’re missing or where you need to improve. 

Even if your mind acts like sponge for knowledge, it’s good to understand that opinions are different and that in the end, it’s your startup that you want to turn into a business. Mentors are useful only if you know what you need their input for.

Develop and help others develop.

You’re in it together with the teams a lot like you and completely different at the same time.  You’re lucky to have other talented minds around you. They want to help you and giving feedback to other teams might just show you some advancement too.

These are our feelings after participating at the Nordea Nestholma Startup Accelerator. An intense time but what a ride!

Good luck and feel on!

Terje from Feelingstream

– Maarit, Feelingstream

Read more about Feelingstrem at feelingstream.com

Applications for the next Nordea Startup Accelerator batch is open: apply and read more.

Posted by & filed under Customer development, Customers, General, Product development, Startups.

Your startup can only succeed if it can provide real value for your customers. Stop guessing what are your customers’ problems or needs and what they consider valuable. Here’s a framework to help you to really listen to your customer and learn what are the problems your product should solve.

Steve Jobs famously said, “A lot of times, people don’t know what they want until you show it to them.” It’s true that

your customers usually don’t know what is the solution or product they need, but they can tell you what is their problem. Tweet this

Let your customer tell you what is the problem. Don't guess.Take a look at the person missing the bus in the image. What is the product or solution he needs? An alarm clock, timetable app, marriage counseling or what? We can guess, but he can probably tell us in detail what are the problems that make him miss his bus. In other words, just talk with your customer. Once you understand the problems and needs, then it’s your job to be the visionary entrepreneur that comes up with the ingenious solution that the customer could have never envisioned.

If you make sure that you are developing products that someone actually needs, you will eliminate one the biggest reason for which startups fail. But every time we tell our startups to – as Steve Blank says – get out of the building and talk with the customers, they say that it’s hard to do. Based on our experience on working with hundreds of entrepreneurs, we’ve come up with a framework for the customer interviews. Use these five areas as your checklist for discussion topics when you are validating the customers’ problems:

  1. Needs and problems that your customers have
  2. Context for the problems
  3. Substitutes for solving the problems
  4. Value of the problems (time, money etc.)
  5. Other people that have the same problem

What is the most important question to ask from a customer?

My life's work remembered by my Mom (copyright Topi Jarvinen)As Rob Fitzpatrick said in his excellent book “The Mom Test” never ask for opinions from your customers. Ask for specific things that they know about – how they are currently doing things or have done in the past. These are things they know about, and most people like to talk about themselves.

Never try to sell your idea to your potential customers and get them to agree with you when you’re still learning about the problem. It’s really hard to get any reliable information this way, because they probably just don’t want to hurt your feelings. Just like talking to your Mom, right?

When talking with the customers, always let them to do the talking. Your job is to listen and learn. Never ask yes or no questions. Instead ask open questions that let them to describe the problems in their own words and tell you things you’ve never thought of.

The perfect question in most situations is

“Interesting, can you tell me more about it?” Tweet this

Here are some more examples of the kinds of questions we’ve found to be effective customer interviews.

Ask the customer to tell you what are their problems

A large part of business is focused on solving problems—real problems for real people. Grasp the real nature of the problem, and it can be simple to solve. You can do so by asking a few simple questions:

  • What are the difficulties you are experiencing?
  • What is the problem with [x]?
  • How often do you have this problem?

When you start talking with people, you have to teach yourself to hear the important message in their problem statements.   Try to understand:

  • What problems does the customer want us to solve?
  • What is the customer behavior or preferences today?

Remember that it’s not always the most visible and biggest problem that you must solve for your customer. In fact, all the seemingly smaller problems can lead you to areas that specific enough for you to solve. Listen to your customers carefully.

Understand the context in which problems occur

To do this you need to see customer feedback that spans beyond the basic.  You need to understand the context in which the problems occur. Questions such as these can help grow your product and your relationship with your customers.

  • Are there certain things that happen before or after the problem occurs?
  • Does the problem happen often or does it take a long time?

These should help you to understand if there are specific circumstances when the problem occurs. Also, your potential customers may have some real or self-inflicted limitations: common examples are be laws or industry regulations, language, personal preferences etc.

Try to understand how people are solving the problems today

The simplest way to place yourself ahead of the competition is by understanding customers’ needs and problems as well as by understanding what is your competition.  And your competition is not always another company. You may be also looking to improve upon an existing habit, custom or use of a product.

For example, an Indian entrepreneur just invented “edible spoons”. They work perfectly fine as spoons, and you can eat them with the food. The problem with conventional spoons was that they were a big hassle when it came to packing. He needed a substitute solution.

If there’s a real problem, people probably are doing something or using something to solve the problem already. Try to understand this by asking:

  • How do you solve this problem?
  • Is there current way good enough?
  • Do you wish there was something else available?

Then used this feedback to start to think about:

  • Who are the real competitors?
  • What are the current products not doing right?

Determine the value of your product based on their current and past actions and experiences

Nine out of ten startups fail. Most of these failures are not because of insufficient capital or poor marketing, but because they were selling something that nobody wanted to buy.

According to Fortune, most startups fail because “they make products no one wants”.  The solution to this is to focus on what your customers consider valuable. After all,

customer will pay for the value you provide, not for your vision. Tweet this

Asking your potential customer “how much would you pay for this” is not a good way to determine the value. How would they know? You’re asking them to predict the future. Instead ask about things they know about:

  • How much do you currently spend on a product for this type of need?
  • Is it a big problem for you?
  • How much time or money you waste because of this problem?

Remember, not every problem is worth solving with a new product. Sometimes the time savings, cost efficiency, new revenue opportunity, enjoyment or some other benefit of the new solution just doesn’t provide enough value to make your new product interesting. You need to understand this before you waste your time and money on a product no-one wants.

Ultimately, you need to reflect on the answers to your potential customers’ questions by asking yourself:

  • How do my customers spend money in these types of situations?
  • How do my customers spend money for similar needs?
  • What do my customers see as valuable?
  • Is it a real problem or just a small annoyance?

Meet other people—never assume everyone has the same problem

Make sure your startup is offering solution for a problem faced by a sufficiently large number of people. Simply ask your prospective customers, “Does someone else have this same problem?  Would you please introduce me to her?”

Never start building something if it doesn’t have a big enough market. And you have to figure out what is big enough for you. Usually, the best bet is to aim to dominate a niche market and grow from there, as Silicon Valley VC Peter Thiel said in his excellent book Zero to One. Just make sure that there is a market where you can provide enough value.

Make talking with customers your everyday habit

Tweet this
The bottom line is very simple.  Talking with customers before developing new products will help you to build something that actually provides value that they are willing to pay for.  When you understand what is the problem that needs to be solved, you’re well on your way to becoming a successful startup.

And don’t stop there! You need to talk to your customers all the time – even when you’re running a billion-dollar business. As entrepreneur and VC Mark Cuban said:

It is so much easier to be nice, to be respectful, to put yourself in your customers’ shoes and try to understand how you might help them before they ask for help, than it is to try to mend a broken customer relationship

Topi Järvinen @topij

 

Posted by & filed under Customers, General, Product development, Startups, Technology.

We crowdsource innovations, product development, R&D and customer interactions. We are not replacing anything, we just provide the wisdom of thousands of people at the cost of fraction of a internal development team.

We follow the Lean Startup methodology, but from our strategic partners perspective it looks more like design thinking. We have copied some of the best practices from Google, Stanford and the ideas of analytics-driven and customer-focused product development. We go way beyond just posting the separate ideas on yellow stickers on the wall. Together with startups, we provide our partner companies ready and validated concepts to choose from. Post-it notes are excellent combined with some research and validations, but in most cases it really takes companies nowhere today. Average successful startup has 4-7 pivots. Consumers’ behavior changes faster every day and teams should learn and adjust the product based on the learnings. Only very seldom can we nowadays have step-wise process, but several simultaneous processes affecting each other with fast changes.

We bring customer and developer insight from over 500 persons per project. Because it’s their own business, they have done a lot of research themselves. What company can afford to mobilize such a huge amount of people for innovating, product development, R&D and customer interactions? Certainly many big companies do it all the time, but the expense is 100 fold compared to an accelerator program.

One has to let loose a bit to succeed in the future. Nobody can control the consumers – predicting the future usually goes wrong. At least with faster implementation of learned behavior and needs, organizations could provide more competitive products. If you plan for years to come and focus on implementation, that’s a sure way to fail. If you react based on learnings from open collaboration with your business ecosystem, you still can fail or succeed. However, if you fail, the failure is minimal compared to old school operations.

By opening up company’s ecosystem, learning is faster, financial overhead and risks are lower, and the number of of new product ideas is far greater than before. And we are talking about validated ideas, because quantitative assessment is crucial for us. I have to say that I am a fan of  Mika Aaltonen’s work at Aalto-Strax.  One thing they point out is the idea of not defining what success will look like in the future. Every company should be prepared to keep the door open for unplanned successes. Working with fast-moving and creative startups is one of the best ways to stay on top of the change and take advantage of the new business opportunities.

I was lucky enough to get a co-founder with solid scientific background from research backed by the Finnish Academy. Topi has also developed 100+ products for the biggest companies as well as for startups. Together with him we are creating a product factory producing learning and new revenue streams to large corporations. This creates also a laboratory and a collaboration environment inside the large corporations for the startups. The end-goal is of course to create the next airbnbs, twitters and facebooks. A win-win-win factory.

Antti Kosunen (twitter.com/AnttiKosunen)

 

Posted by & filed under Customers, General, Startups.

Topi Järvinen

Nestholma Mentors’ Voice, part 4: Topi Järvinen. In the coming weeks we’ll showcase mentors that will be active in the Yle Media Startup Accelerator Program. We’ve already featured Will Cardwell, Antti Kosunen and Pentti Mansukoski. Check back soon to see others.

Who are you?

I’m a product guy. I’ve done tens of products and services in many different types of companies (multinational telco, digital agency, startup). My strength is in combining technology and business understanding and passion for learning everyday about how to do thing better. I’ll focus quite a bit on helping the startups to make sure their product solves an important problem that the customers are willing to pay for.

Why the Yle Media Startup Accelerator is important?

Nestholma’s accelerator program with Yle and Elisa is a great way startups to learn from two important companies. They will have a unique opportunity to meet and connect with the experts and decision-makers that want to help the startups. They’ll also get daily help and tools for making their idea and product ready for international growth

What is one important thing for every startup to keep in mind?

Your goal should always be to something that someone is willing to pay for. Don’t be afraid to be wrong or adjust your thinking based on customer feedback. Very few people make money by being visionaries without listening the customers.

More about Topi in LinkedIn