Jim Manzi: Focus on Delivering Value to Customers at a Foreseeable Profit.

May 25th, 2012 Sean Murphy

Jim Manzi, founder of Lotus and Applied Predictive Technologies has a great blog post “How to Succeed in Business by Really, Really Trying “on the limits of advice to entrepreneurs, in particular autobiographies sold as “treasure maps” Here are his opening two paragraphs

First, even though every guy who has done a successful start-up somehow feels he’s therefore become the philosopher-king of business, all experience is bounded. Any observations I make apply to venture-backed enterprise software targeting scale-up. Many of the things you would do for a biotech start-up or a consumer-oriented social media business, as examples, are probably very different. Further, there are companies that exist to sell products at a profit, and companies that exist to sell equity to investors. I only know about the former. The latter tend to flourish in the later stages of a bubble, and rely on a totally different set of skills
related to promotions, networking and PR.

Second, even within the universe of relevant companies, all “rules for success” are either obvious or incomplete. Each suggestion in this post will be incomplete, in that it will ignore inevitable exceptions and
complications. In other words, there are no rules for success. If there were, lots more people would do successful start-ups.

He then proceeds to offer some hard earned advice very applicable to bootstrapping a startup, in particular

Have a co-founder. Ideally, you should have high overlap in your view of the world, and only partial overlap in your skill sets.

I think technology startups require so many distinct skills that it’s difficult for one person to have enough critical experience to be able to persevere. Shared values and distinct skills would be my shorter phrasing for his recipe.

Seek blue water. Do something innovative enough that nobody else is even trying. This is the best way to get around scale advantages that others have over you. Since you don’t know what you’re doing yet, it’s better if nobody else does either.

One of the best ways to do this is find two or three people with distinct knowledge or expertise where the combination is novel. I think it’s often less a matter of new inventions or discoveries and more about unique or novel combinations or applications of diverse and seeming unrelated knowledge and technology.

Always assume an average amount of luck in the long-run, and terrible luck in the short-run.

Don’t be too pessimistic or you will end up wearing a belt, suspenders, duct tape, and a wetsuit to hold your pants up. But nothing new ever works so assume it will take a few tries to get a novel combination to a basic level of usefulness.

Focus on delivering value to customers at a foreseeable profit.

I think this is probably the core piece of advice. Understand who is going to pay you, why, and how much.

Treat revenue and (especially) profit are the best possible feedback on your ideas.

Of all the forms of encouragement that an entrepreneur can take advantage of, a customer’s check is irreplaceable.

Cash flow breakeven is the most important milestone your company will ever achieve.

I think this  is the watershed event in the life of a startup, not the first order or getting an investment but getting to break even. Once this happens you have an infinite runway for experiments to scale up, before then it’s only a matter of time until you have to reconsider. Breakeven normally requires focus on a niche unless you are very fortunate.

Entry Filed under: Early Customer Stage,Finding your Niche Stage