Fostering Student Innovation

In the weeks leading up to the deadline for YEI's Summer Fellowship application (January 18th), we've asked past Fellows to share their advice for starting a company - and applying for the fellowship.

By Max Sutter

As an early-stage entrepreneur, you are faced with a daunting task—the task of turning an idea into a sustainable business. 

From day one you will run into difficult questions that need answering and you will probably find yourself bombarded with advice and suggestions, whether from enthusiastic friends, concerned relatives, supportive mentors, or any of the hundreds of books on entrepreneurship.  However, you cannot begin to answer these difficult questions or take any of these sage suggestions until you know exactly how they apply to your company. 

To try to manage a business without completely understanding its goals, its customers, and its potential for success can be worse than useless—it can be completely destructive to the venture.
 
The only way to gain such an intimate understanding of your company is to build a prototype and measure its performance.  Until you have a working prototype, you cannot truly know your value proposition, your target market segment, or your growth strategy.  Any research done prior to building a product is bound to be based on hypotheses, assumptions, and abstract market or demographic data.  A prototype, on the other hand, gives you hard data that relates specifically to your company. 

On one level, the process of building a test product forces you to work out the bugs in your technology while encouraging further innovation and improvement.  It also lets you start comparing yourself to your competitors in terms of performance, pricing, and unique features.
 
Most importantly, however, a prototype is something you can show to customers so you can start getting real feedback.  Customers may not love your first attempt at a product, but the sooner you learn what it is about the product they do love, the sooner you can stop wasting your time on everything else.  The continuous flow of this type of customer feedback is what will allow you to build your idea into a streamlined, successful company.  It will ultimately determine what you’re selling, whom you’re selling it to, and whom you’re going to sell to next. 

This knowledge, backed up with concrete data, is what makes the difference between a few people with a cool idea and a company that generates real solutions to real problems.

Max Sutter is a 2011 YEI Fellow and the cofounder of Scaled Liquid Systems.

In the weeks leading up to the deadline for YEI's Summer Fellowship application (January 18th), we've asked past Fellows to share their advice for starting a company - and applying for the fellowship.

By Kate Harrison

There are many parallels that can be drawn between entrepreneurship and the movie Field of Dreams, but one aspect is distinctly different: If you build it, they might not come. Or, more accurately, they might not come by themselves or as fast as you hoped they would.

Like many enthusiastic and inexperienced entrepreneurs, I fell into a classic trap: development obsession. In my case, the product we were developing was a complex website that merges information, vendor listings and e-commerce together in the green wedding space. I was—and still am—trying to create a green version of a site called The Knot, with less time, money and experience, but with all of the whistles and bells. I understood when I began that it could not be done all at once, and that if I waited until it was complete to launch, it never would. So I embraced the popular tech mantra “publish early, publish often” — which is what we did.

In the first two years of the company, we rolled out feature after feature, constantly moving the site closer to my vision. It was exciting and productive, but in retrospect, I wish I’d known that the coin that tech mantra is inscribed upon has a flip side, which reads: “market early, market often.”

I assumed that if the site were as amazing as I knew it would be the traffic would somehow build itself. In part, I was misled by the fact that site traffic was growing rapidly in relative terms. In two years, we grew from a few hundred visitors each month to over 15,000, with almost no advertising. We saw 700% growth – but in numeric terms we just moved from tiny to small. I’ve spent many sleepless nights imagining where we would be today if I’d known enough to take advantage of all of the pr and marketing opportunities presented to us along the way!

The truth is that in business, more really is more. That means that as soon as you have a viable product, you must market it.  You may have heard this advice before; I know I did. But what I did not understand was that you have to build your marketing efforts like you build your product: passionately and systematically.

Effective marketing requires testing, and that takes time, focus and money. So here’s my advice to you: brainstorm the top ten ways you could market your product and then come up with a systematic, and preferably inexpensive, way to begin testing the various channels. It may turn out that Google ads are less expensive but don’t convert as well as Facebook ads. Or that buying traffic doesn’t work at all and affiliate referrals are the best way to scale your company.  You won’t know until you try and you need to run these tests for a while to get good data.

The good news is that marketing can pay off quickly. The bad news is that there may not be a silver bullet for your particular product. I kept hoping we would find one channel that would be quickly scalable – a money in/customer out equation with endless possibilities. So far, I am still looking.

If you do find this Chimera, hold on tight, because you are in for the VC ride of your life. However, most of you need to plan on building your businesses using many channels. That means figuring out new and creative ways to leverage the assets you have built while continuing to improve your product over time. The good news is that there are many paths to success and if you follow this advice early, you have a good chance of getting there.

Kate Harrison is the founder the The Green Bride Guide, a comprehensive and credible resource for eco-friendly wedding ideas, product and services. She was a YEI Fellow in 2009.

In the weeks leading up to the deadline for YEI's Summer Fellowship application (January 18th), we've asked past Fellows to share their advice for starting a company - and applying for the fellowship.

 By Alan Carniol

Starting a business is really exciting. But at Yale, entrepreneurs often make the same mistake, one that kills businesses before they ever sell a product.

Many entrepreneurs begin with a couple destructive myths and end up spending their time working on the wrong things, until they run out of money or time. First, they think angel investors and venture capitalists will give them money if they put together a strong business plan. They won’t. Second, they think that if they sit and just think through all of the difficult challenges of the business, then the business will work. It won’t.

Rather, before an angel or venture capitalist will look at your business, you need to have built and tested your product. It doesn’t have to be perfect, and it doesn’t have to be pretty. It just has to work and have paying customers. This is easier said than done.

Most of the time, your first prototype won’t work right. You will need to revise and rework the product.  This will take more time than you expect (everything takes more time than you would expect when you are starting a business). So building and testing your prototype needs to be where you spend most of your time.  And the rest of your time?

Rather than think about challenges, you need to focus on how you can acquire enough customers to make your business work, which can require a lot of infrastructure. For example, if you are building a product, you need to prove it works and can be built, estimate production costs, determine how to commercially produce it, and secure retail channels to reach customers. If you have a web business, you need to build the website (or app) have users test your website and feel satisfied with the experience, so that you can put in place strategies to acquire the customers you need.

By keeping your eye firmly on earning that first $10,000 in revenue, using only the money in your own pocket and the legwork of yourself and your business partners, you can keep your business on a focused path to success.

Alan Carniol is a 2009 YEI fellow and the founder of InterviewSuccessFormula.com and Career Cadence.

In the weeks leading up to the deadline for YEI's Summer Fellowship application (January 18th), we've asked past Fellows to share their advice for starting a company - and applying for the fellowship.

BY ALENA GRIBSKOV

Staring down the YEI Summer Fellowship application a few years ago, I remember feeling alternately confident and unbearably intimidated.

It was the first time I had ever put myself “out there” as an entrepreneur – the first time I had taken my lifelong fascination with creating new things and building organizations (both usually related to writing, editing, or publishing, since I had grown up with a pen in my hand) and turned it into a “business.”  It was easy to feel overwhelmed.  What did I, a Yale undergraduate, know about starting a company?  How could I ever compete with the hordes of business school students I knew must be applying?  Even many of my own peers likely had more experience with the nuts and bolts of starting a venture!

At the same time, I knew that I had a unique perspective into the industry I was targeting.  With years of first-hand experience starting my own magazines and a series of internships in each part of the publishing business, I felt confident I had identified a way to capitalize on legacy publishing houses’ slow response to the digital revolution.  And thus, my venture, “Blind Pig Media,” was born.

My cofounder and I dove into answering the YEI Fellowship application questions.  Who were we? Duh! What was our business? Easy! We spun out some jazzy sounding copy and passed it back and forth.

Then the questions got a little more tricky.  A business model?  What was that?

What do you mean, how will we make money?

Advisors?! We just started, how could we have advisors?

We struggled through the application, combining my knowledge of the publishing world with her marketing savvy, crossing our fingers that the resulting answers fell somewhere near the realm of “right.”  In the interview a few weeks later, we similarly tossed out the best-sounding answers we could come up with, having no idea what they were looking for.

And, amazingly, we were accepted into that year’s Summer Fellowship.

Long story short – that venture was a huge learning experience (read: admitted failure), but it steered me to where I am now, part of the YEI staff and responsible for the Summer Fellowship Program, helping student entrepreneurs avoid the mistakes I made.  And I now know what I didn’t know then: that the way we approached our application was probably the worst possible way to address our uncertainty.

Early-stage entrepreneurs, as virtually all YEI applicants are, often don’t know the Right Answers to the application questions.  You’re so focused on getting a prototype out there and proving that customers want this product, that it’s all but impossible to know for sure what your business model will end up being, who your potential competitors and acquirers are, what the equity splits will be.  And you know what?  YEI staff and the members of the Operating Board who make the selection decisions, know that this is frequently the case.

So how do you prepare?

First, know what you don’t know – and that it’s normal not to know right off the bat.  If something on the application is confusing, your first step should be to do a bit of research.  Wondering what an elevator pitch is?  Google it – you’ll see it should be a pithy explanation of the business.  Don’t know how companies like yours make money?  Find out.

Then, use the background you’ve found to give your answers context.  If you’re able to give a definite answer that you feel confident in, great!  Saying “We intend to invert the publishing industry’s typical model on its head by doing x, y, and z, and generating revenue from x rather than z,” is a great start. (And looking back, I think this is where my team’s expertise in the industry let us get away with not handling our lack of knowledge in other respects in the best possible way.)

But remember that it’s OK to acknowledge uncertainty, since that’s what starting a company really is about.  If you can say, “We are exploring business models similar to those in digital music, where consumers pay per song, rather than the traditional publishing model of…” That’s a strong answer – you’ve done your research, stated your hypothesis, but recognized that you don’t yet have the Right Answer.

After all, that’s what the summer is for!

Alena Gribskov is the Communications and Program Manager at the Yale Entrepreneurial Institute.  She was a YEI Fellow in 2009.

In the weeks leading up to the deadline for YEI's Summer Fellowship application (January 18th), we've asked past Fellows to share their advice for starting a company - and applying for the fellowship.

BY VICTOR WONG