Tech Capital Partners Blog

A few years ago, we (as a community) strategically decided that we would no longer have “pitch competition” events in Waterloo. Pitch competitions are events where a number of technology company founders/CEOs come together to “pitch” their companies to a panel of investors.

Canadian technology companies believe they might secure financing by participating in these events. The reality is, VCs don’t typically fund companies that participate in these events because the companies have already pitched (unsuccessfully) most of the VCs prior to the competition…

Rather than pitch competitions, we need events that provide support for our entrepreneurs. If we give entrepreneurs the education and tools they need to build successful companies, the money will come. We need to stop focusing on pitching and financing, and start focusing on education, networks and revenue.

There are some events in Canada that I would like to shine a spotlight on. These events are focused on entrepreneurs as opposed to VCs — which, in my opinion, is how it should be. Events like mesh, StartupEmpire and Entrepreneur Week provide opportunities for entrepreneurs to learn, build their networks, and develop strategic partnerships. I am also a huge fan of the “Camp” un-conferences (BarCamp, DemoCamp, StartupCamp, etc.) where entrepreneurs support and encourage each other.

VCs are at these events looking for entrepreneurs who are focused on building their companies. A couple of weeks ago, almost every VC firm in Canada was represented at StartupEmpire and the Founders & Funders dinner during Entrepreneur Week was packed with VCs — all of whom were working the room. Build a great company and we will be there (of course, by then, you might not need us, which is great).

I thought for my first post I’d share some points from one of the sessions I attended at Web 2.0 Expo a few weeks ago. The session was held by Todd Wilkens from Adaptive Path and while many wouldn’t consider the content to be groundbreaking, there was some real value in the approach presented by Todd when thinking about product strategy driven by user experience.

An important message during the presentation was: The Experience is The Product. What does that really mean? Well, in many instances the approach has been to think of the product as being built from the bottom up. You have Data, add a layer of Logic on top and and then a User Interface (UI) to facilitate user interaction. With experience driven product strategy this notion is flipped around. As always, you consider the problem you’re trying to solve but then focus on the User Interface (UI) and the User Experience (UX). Let these elements decide the shape and strategy of the product. This might seem like a basic concept but what Todd is really getting at here is that when we consider The Experience as The Product we understand the product from the user’s perspective. The user doesn’t see the logic layer and they don’t understand (or want to know) how things are working in the background. To them it is all magic, a black box, and all they interact with when using your product and the only thing they can truly evaluate is the UI and UX.

You might be wondering, is this concept that important and does it really matter? It does and Todd gave an obvious example of how the iPod experience was able to displace the Diamond Rio MP3 player in a rather short amount of time even though the Rio had a considerable head start, had more features, and cost much less than the iPod. You may have all the latest and greatest features but if the user finds your product/service too complicated and overwhelming to use you will lose them.

I should note that what constitutes a good User Experience is not necessary limited to flashy designs, pastel colours, rounded corners, etc. Take craigslist as an example, it isn’t much to look at but it focuses on creating a simple, ad free, and consistent user experience that has obviously worked very well across many geographies and cultures.

Whether you’re familiar with this concept or if this is the first time you’ve been introduced to it, hopefully you will begin to think of focusing on the user experience from a top down approach and remind yourself that there is merit in planning and continuously revisiting an experience-driven product strategy.

I really enjoyed Dave McClure and Hiten Shah’s Startup Metrics presentation at this year’s Web 2.0 Expo a few weeks ago. What really struck a cord with me was Dave’s 5-Step Startup Metrics Model.

We get to see a good number of web-based companies who, when they come to the section of their slide deck that deals with revenue or business model, say “At this point, we’re focused on building the community.” which sometimes means “We really just want to focus on building the technology side of the business.” or “Once we have a really big community, it will be easy to make money, we’ll just add advertising.”

My biggest issue with companies in the “focusing on building the community stage” is that many of these companies have no plans for actually building the community. We seem to be back to “if we build cool technology, they will come.” which is absolutely true if a site has a significant viral growth factor but why not build the site with this in mind… Use metrics to think about how you can build your business and then measure your efforts. The beauty of web-based businesses is you can see in almost real-time the impact of decisions you are making.

Dave’s model breaks startup metrics down into five categories (for more insight, strategies and tools for identifying and tracking metrics in each of these categories, I’ve included Dave’s presentation below):

1. Acquisition: Where are users coming from? Which channels are best-performing? Which generate the largest-volume? Which are the lowest-cost?

2. Activation: How are users engaging? What are your activation goals?

3. Retention: How do users come back? What are your retention goals?

4. Referral: How do users refer others? What are your referral goals? What’s your viral growth factor?

5. Revenue: How do you make money?

He also suggests that companies focus on Critical (key to the success of your business) Few (less = more) Actionable (if you don’t use the metric to make a decision, it’s not actionable) metrics. And, to make sure the company stays on top of its key metrics, each key metric should be delegated to someone to OWN.

How are you using metrics to make decisions at your company?

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