Internet & Mobile Usage

• 1995 saw global Internet penetration 35 million users, around 0.6% of the population. In 2015, 39% of us are online, around 2.8 billion.
• 51% of today’s Internet users are from Asia (with China at 23%), 19% from Europe, 10% from the USA, and 21% from the rest of the world.
• Vast growth in the mobile internet since 1995. In 1995, 1% of the world (80 million people) used mobile phones. Today, 73% (5.2 billion) of us do. And 40% of that number use smartphones.
• Internet User Growth +8%, Smartphones +23%, But Both Rates Slowing – India, Brazil, and China are leading the smartphone growth. Mobile-first content and apps built for these rapidly developing markets will likely become big businesses. Startups that work in the US may need to expand quickly to these markets when possible, or face entrenched local competition.
• Global internet usage, measured by data traffic, was up 22% last year. Mobile data traffic was up 69%, a deceleration from last year.

Internet Market

• The top 15 publicly traded internet companies totaled $17 billion in market capitalization in 1995; in 2014 they totaled $2.4 trillion.
• Of the top 15 publicly listed global public internet companies of 1995, only one is still on the list in 2015: Apple, which was #2 then and is #1 now – Microsoft seems to be missing but should have made the list

• The Top Internet Companies Are Platforms: 1. Apple. 2. Google. 3. Alibaba. 4. Facebook. 5. Amazon – The list of top Internet companies is dominated by platforms where third-party developers and merchants bolster value and network effect. Apple and Google’s mobile app stores, Alibaba and Amazon’s commerce marketplaces, and Facebook and Tencent’s socially connected app ecosystems adapt their flexible core platforms to a wide array of use cases.
• 11 of the top 20 are US companies. China has 6, Japan 2 and Korea 1.
• India Becomes A Mobile Business Target – Mobile traffic makes up 65% of total Internet usage in India. So it’s not surprising that large companies like Google and Xiaomi are making huge efforts to create cheaper smartphones that will attract buyers whose first experience on the Internet is on a smartphone.

Advertising

• Mobile advertising—just 14% of total digital advertising—still has room to grow, relative to how much time people spend on their devices. Print advertising in the USA is way over-indexed (18% of US ad spend, but only 4% of time spent in media. Radio and TV are about par spend vs time. Internet ad spend is 23%, but time spent is 24%. And mobile offers huge opportunity: just 8% of spend but 24% of time spent. Meeker sees this as a $25 billion opportunity.
• Things that both brands and consumers should be excited about: Ad formats and ‘buy’ buttons optimised for mobile. Notably, content spent on vertically-oriented screens as on mobiles, is now a healthy 29% of total time spent viewing screens of any kind.

User Behaviour

• Video Viewing Is Growing Fast, Especially In Vertical Portrait Mode – Vertical video ads like Snapchat’s are watched in their entirety 9X more than landscape video ads. That means video content and ad creators need to rethink how they shoot, including fewer long-distance establishing shots and more personal close-ups.
• The Average American Adults Spends 5.6 Hours A Day On The Internet – We now spend more time on mobile devices than desktops and laptops. The shift from using the Internet a few times a day for long sessions to many times a day for short sessions will have profound impact on what we consume. Bite-sized content and experiences are becoming favorable.
• Among US millennials, 87% say their smartphone “never leaves their side,” and 44% use their phone’s camera daily.

Drones

• The growth of drones is phenomenal and it is a global trend. Sales of drones are up 170% year over year, and usage spans everything from disaster response to infrastructure inspection. In the U.S., despite regulatory hurdles, more than 400 companies have been approved to operate drones commercially. Watch this space too, I say.
• Consumer Drones Are Selling, But Commercial Is The Big Opportunity – The 167% year-over-year increase in consumer drone sales shows lots of hobbyists, photographers, and videographers are getting into the flying gadgets. But top drone companies like DJI and Airware are building out drone systems that can save commercial businesses tons of money by replacing helicopters, planes, satellites, and dangerous human jobs.

Innovation spaces

• Rather than reimagining the enterprise, entrepreneurs are changing segments of business processes. For instance: communications (Slack), payments, both offline (Square) and online (Stripe), analytics, customer communication and service, HR processes, and so on.
• Just-in-time services enabled by mobiles with sensors — driving directions, breaking news, emergency services, etc — are big drivers of mobile usage.
• You Can Now Get Almost Anything In Under An Hour – Taxis, hot meals, cooking ingredients, groceries, courier delivery, and postage pickup are all available on-demand. Traditional brick-and-mortar businesses will be disrupted if they can’t find a way to compete with convenience.

Messaging

• Six of the top 10 most used apps around the world are messaging apps. Messaging has become a platform not just for communications, but for commerce and computing.
• Messaging Apps Are The Portal To Mobile – The top apps by usage and number of sessions per day are messaging apps. These apps are where people spend the most of their time on mobile, making them a potential jumping off point for additional services like ecommerce and media consumption.
• Messaging is seeing a lot of change, improvements and growth, with multiple platforms seeing rapid growth. Apps that cater to single geographies, like WeChat (China), Line (Japan) and Kakao Talk (Korea), are not just pulling in large user bases, they’re also earning revenue in the high nine-figure range. These earnings come from the apps offering paid services, as well as being hubs for services like taxis and food delivery. Global mobile messaging leaders are following this example now, and if the trend holds, Meeker sees some of these leaders evolving into central communications hubs.
• Network Effect Makes Messaging Apps Hard To Topple – Apps that break away to become 100 million user-plus networks can enjoy sustained success, as it becomes tougher to convince people to try a similar service their friends aren’t already on.
• Asia’s Messaging Apps Show US Companies What To Do Next – WeChat and Line pioneered many features now coming to apps like Facebook Messenger and Snapchat, including video calls, payments, stickers, and media. More opportunities they’ve proven out exist in commerce, food delivery, taxi services, and development platforms.
• The next chunk of new internet users are likely to be feature-phone users currently, and are likely to first get online via messaging platforms.

Content

• User Generated Content Creation Is Exploding – Year-over-year, Pinterest pin creation is up 75%, Twitch video broadcasts are up 83% to over 11 million per month, stories written on Wattpad are up 140%, and Airbnb reviews are up 140%. 65% of Snapchat’s 100 million daily users create content per day. Content platforms have a lot to gain from strong creation tools.
• Users are increasingly the first source for news.
• With young Americans (12 – 24), the use of Facebook, Twitter, Google+ is declining dramatically. What’s growing? Visual-oriented networking via Pinterest, Instagram, Snapchat and the like. Millenials love their smartphones and 44% use the camera or video functions daily.

Security

• Cyber attacks are growing in size, complexity, and risk.

Work

• Millennials Make Up 44% Of On-Demand Workers – The generation that grew up connected to the Internet has now reached the point that it is about ready to drive the economy. Among the things they value most, Meeker says, are flexible work hours, and cash bonuses, though they still value training and development highest. Those first two should sound a little familiar: most of the on-demand services in the world are popular among workers for that reason.

After this year’s Pirate Summit we decided to launch Exec I/O, a new event format to connect startup founders with corporate executives. There are five main reasons we think this makes a lot of sense:

1. There is a very high demand from corporates to somehow participate in the startup hype. However, most have no idea what and how to do it. Others start to build the 1.452nd startup accelerator.
2. There is a lot of value in startup culture and startup innovation methods. Corporates should know and incorporate what fits for them.
3. Startups at a certain stage are looking for partnerships. A cooperation with a corporate often makes a lot of sense.
4. Corporates are a likely exit channel for startups.
5. And finally: There just aren’t any events that focus on connecting (solely) corporate with startup executives.

The first event will be on 2 December in Düsseldorf. We are very happy that international law-firm Orrick will host the event. Top notch speakers such as Jörg Sievert (Managing Director, SAP Ventures), Frank Thelen (Managing Director, doo) or Christian Blume (CEO, Cleverbridge) will speak at the event. You can find the full list of speakers here. More will be added shortly.

The event is invitation only. You can apply here. If you enter “Lean Entrepreneur” as a referral code you will get 15% off the normal ticket price.

See you at Exec I/O!

Smaller companies – often referred to as startups – have grasped the opportunity and have or currently are disrupting industries. Zalando for example has entered a fairly mature ecommerce market in 2009 and hit 1€ billion in revenue in 2012. It is now one of the leading ecommerce players in several countries. On the other hand some of the biggest companies in the (German) mail-order business had to close down in the last years. Kodak invented(!) the digital camera in 1975 and filed bankruptcy in 2012.

Here is what is fascinating:

1. Big corporates have plenty of resources, a huge customer base, experts in market research etc. Why is it that they fail to innovate? 
2. Startups most of the time lack resources, a customer base, experts in market research etc. How do they come up with innovative, disruptive and eventually successful business models? 

Luckily both questions have been answered. Clay Christensen has described the answer to the first question in his book The Innovator’s Dilemma. Go read it, it is really good.

Steve Blank and Eric Ries have built a framework called The Lean Startup to answer the second question. Whereas the Lean Startup lays the theoretical foundation, the The Lean Entrepreneur – which I recently reviewed – explains the more practical side on how to disrupt markets and build a successful business.

What does that mean for corporates though? Turning a blind eye and waiting to be disrupted is certainly not a very smart idea. And many corporates are not ignoring change. As there might be a big discrepancy in perception to how fast the change will happen – most have so far underestimated its velocity – corporates know in general that they have to act. Most just don’t know what to do.

The most obvious way to take part in disruptive innovation is by acquiring or investing in startups. This is something corporates have been doing since decades. However, profitable investments are hard even for experienced VCs. Turns out that acquisitions are as  well for various reasons.

I have consulted several companies that are going through the innovators dilemma. Some of the companies that are aware of the dilemma are trying a third approach.  They want to connect with the startup world to learn how to build (incubate) new business ideas and get into the “startup game”.

This has led to a flood of incubators. Most of which will not be profitable because of mediocre management, war for entrepreneurial talent and lack of knowledge on how to build startups. However, on a broader scale I think it is a positive development. Corporates can learn plenty from startups. Young people can “test” entrepreneurship as a career path in a safe environment. If this helps more people to think and act entrepreneurial and more corporates to integrate elements of the startup mindset and method, I am all for it.

I have put together a slide deck which explains the innovators dilemma, how startups build businesses and what corporates can learn from them. It merely scratches the surface but it is a start for now. Tell me what you think in the comments.

If you like this presentation you might also like my other presentations.

To us the London trip was a great success and we are planning to organize them more regularly. The next one is already in May. On May 7 and 8 we will be visiting Barcelona.

I am very excited that Hermés Pique, Head Robot at Robot Media, will help us put together an arrrsome agenda and meet the key players of the local startup scene. The detailed agenda is currently being set up. As we cannot announce details just yet you can expect two days packed with

• meeting the best local startups
• meeting with bloggers and local influencers
• meeting top local VCs
• a lot of fun & networking
• great food (it’s Barcelona after all)

If you are interested in joining then apply until April 15 using this form. Arrr!

HubSpot has published a “culture code”. They published it partly as “manifesto” and partly as “employee handbook”. It is absolutely worth checking out.

Here are some of the highlights from the HubSpot Culture Code:

1. Culture is to recruiting as product is to marketing.
2. Whether you like it or not, you’re going to have a culture. Why not make it one you love?
3. Solve For The Customer — not just their happiness, but also their success.
4. Bankrupt companies don’t delight their customers.
5. Success comes through educating customers, not exploiting them.
6. Power is gained by sharing knowledge, not hoarding it.
7. Sunlight is the best disinfectant.
8. You shouldn’t penalize the many for the mistakes of the few.
9. We don’t have pages of policies and procedures.
10. Results should matter more than when or where they are produced.
11. Influence should be independent of hierarchy.
12. Great people want direction on where they’re going — not directions on how to get there.
13. Better a diamond with a flaw than a pebble without.
14. We’d rather be failing frequently than never trying.

Q: Why is this email four sentences or less?

A: http://four.sentenc.es

Appearance

I read a pdf version of the book so cannot say much about its “feeling”. As you can see it has a vivid cover and inside you can find similar illustrations as displayed on the cover.

The horizontal format needs a bit of getting used too. I got “lost” from time to time and needed to look for the ‘continuing’ column. It is a great format to display the  illustrations though.

Goal of the book

In the introduction of the book the authors state their mission for writing the Lean Entrepreneur:

1. To describe why our economy is primed for a new wave of entrepreneurship using new methods of disruptive innovation.
2. To provide you real-world examples of how entrepreneurs are creating new markets and disrupting others.
3. To show you how you can get started creating value.

So far so good. This mission – though fairly accurate after reading the book – is still quite generic  and could be the mission of many “Lean Startup” or “How to be a better Entrepreneur” books. What really makes this book stand out is its goal to be practical, hands-on and actionable. Also it focuses more on the (external) customer side of a business than on the (internal) development side.

“Most lean discussion and implementation focuses on product development processes (manufacturing, for example), if you look at the product from the customer’s point of view, they couldn’t care less about the product development process.”

Some general remarks about “The Lean Entrepreneur”

The Lean Entrepreneur builds upon models such as the Lean Startup method (described in “The Lean Startup“), Business Model Canvas (described in “Business Model Generation“), Customer Development, Design Thinking (as described in “Design Thinking“, and Discovery-Driven Planning. Also it helps to be acquainted with The Innovator’s Dilemma and The Innovator’s Solution by Clayton Christensen.

As The Lean Entrepreneur does not go into detail explaining those concepts (as there are those books mentioned above explaining them), it might be a good idea to be familiar with them. However, it isn’t essential to understand the book.

Target Audience of “The Lean Entrepreneur”

In general this book is useful for everybody that wants to start a business as well as all the stakeholders of the startup eco-system (including educators, government change agents, investors). However, it is less useful for

• Small-business founders that are executing a known business model (e.g. backery, retail, franchise) or are in a well-known market
• Solo practitioners (e.g. freelancers)

Also, it is not written to help an already successful small business owner become more efficient or for lifestyle business owners that are satisfied with current revenues.

Structure and table of contents

The book consists of 10 different chapters.

1. Startup Revolution
2. Vision, Values, and Culture
3. All the Fish in the Sea
4. Wading in the Value Stream
5. Diving In
6. Viability Experiments
7. Data’s Double-Edged Sword
8. The Valley of Death
9. Real Visionaries Have Funnel Vision
10. The Final Word

Each chapter has various case studies, illustrations and a “Work to Do” segment (specific questions to apply to your own startup). The foreword is written by Eric Ries, the author of the popular above mentioned book The Lean Startup.

The  Writing Style

It took me a couple of pages to get used to the style of writing. That being said, in general the writing is sharp and at times witty. The vocabulary – given you know the basics of the Lean Startup terminology – is clear and understandable.

Yet the writing isn’t always concise. Some chapters are a bit lengthy. However, not in a way that I have the feeling the authors desperately try to fill the pages. On the contrary, it quickly becomes obvious that they have deep knowledge about the topic.

And it might just be that combination of  the complexity of the topic, the abundance of information and the urge to be witty/entertaining, which makes some chapters harder to read then others.

The contents

The book provides new tactics for practical application of Lean Startup theory. It does this by describing over two dozen case studies of Lean Startups and gives focused advice on how to segment the market, create a Value Stream, interact with customers, and create experiments.

There is a lot of wisdom in the book. Yet, it is not a disruptive book in the sense described in the book itself (based on Christensens theory of sustainable and disruptive innovation). And it isn’t trying to be that. Instead the book is very practical and hands-on.

It guides you through the day to day pitfalls of being an entrepreneur and offers practical solutions for many business challenges entrepreneurs face.

Some quotes from the book

Note: Many paragraphs of the book are quotable. Here is a random selection.

One of the first arguments of the book is that there are no visionaries, instead the vision is not as important as the drive to achieve it. This is a theme that is repeated throughout the book.

It’s not the vision that makes the visionary; it’s the driving force to make change happen.

As described there are many things in the book that have been said before and will not be new to the avid follower of popular Lean Startup blogs. Such as the description of Lean Startup in general.

Since what the startup is all about is unknown, one can’t organize let alone optimize employee activities around executing the creation of customer value. Instead, one must organize around learning. One must learn what the core value is; what solution provides that value; to whom it provides value; and how to market, sell, and deliver it so that the value is realized.

Or about failure and learning.

We are wrong before we are right. It’s the nature of learning.

And about scaling in a lean startup.

A lean startup is not ready to scale until the product itself is the best marketing tool.

The Lean Entrepreneur definitely has its strengths in the customer development chapters. Here is a quote about early adopters, market segmentation and knowing when product/market fit is reached.

Ironically, the way to go big is to focus small. You are more likely to discover what will go big by focusing on individual use cases. One of the biggest entrepreneur traps is to be all things to all people. Big companies get big by being a few things to a large number of groups of people. Although a plethora of feature requests might indicate a positive market signal, they are potentially fatal without knowing who they come from or why they are being requested.

And addionally about customer interviews and finding out whether you are really solving a customer need.

To truly understand a problem, you should not initially propose a solution. Otherwise, the reaction you get will be to the solution and not whether the problem exists.

Also throughout the book it becomes obvious that the authors don’t only have experience in helping startups “go lean” but they also give insights about the challenges corporates face who attempt to incorporate “lean practices”. Some of the insights are quite specific and valuable. And many things are quite familiar to what I have found in my work as a consultant. Here is one a bit more generic paragraph about big businesses and innovation.

Despite their best intentions of encouraging disruptive innovation, the very nature of asking, “What’s the ROI and when will I see it?” lures disruptive ideas toward sustained, modest innovation. To predict the market, you have to be in a known market. To disrupt, you must create new markets.

Conclusion

I really like that the Lean Entrepreneur is a very pragmatic common sense book. It doesn’t try to build up any complex theoretical models. Most importantly, insights are actionable and the templates and tactics given are useful. Overall it offers pragmatic and effient advice for entrepreneurs that act in an environment of extreme uncertainty.

It is noteworthy that it is not only useful for the typical startup entrepreneurs but can give good insights also for corporates who want to try lean innovation practices.

If you want to learn a scientific method for building a startup go read The Lean Startup. If you want to actually build your startup you should read The Lean Entrepreneur (afterwards). Whereas the former sets the mindset, the latter provides tools to execute on that mindset.  So if you are looking for a guide to get you started with your startup, this is your book.

On a more general note: It is essential to bring the lean startup methodology into practice. There are many events (e.g. Startup Weekend, Startup Weekend NEXT) trying to do just yet. This is the first book I have seen go into such practical detail. And it does that well. That’s why I like the book and that’s why I recommend you read it too.

Book resources

To get a glimpse into the book you can checkout parts of the first chapter of the Lean Entrepreneur on Google Books.

Below is a video of Brant Cooper talking about some ideas from the book. Obviously a one hour talk only scratches the surface.

And here are the slides from the talk:

There is one simply reason we built MailFred: We love the concept of Inbox Zero. And MailFred does help achieve just that. So we are really scratching our own itch.

Inbox Zero is a term coined by Merlin Mann, founder of 43folders. The basic idea is to have your inbox to “zero” most of the time (at the end of the day or at least at the end of the week). That’s not “Zero mails unread”, that’s “Zero mails I need to do something about (right now)”.

Every mail is an “action” item. Once a mail is opened/read there are five “purposeful” actions: delete, delegate, respond, defer, do. Choose at least one.

Image source: Slideshare presentation by Merlin Mann (see below).

The implications of this approach are simple yet powerful. Acting directly on an email and doing the next step means that

1. The amount of how often a mail is touched is drastically reduced.
2. Clutter is removed from the inbox.
3. Mails are out of your head because they are where they belong. It just feels better, doesn’t it?

To get a basic idea of the concept check out the slide show from Merlin Mann:

If you have more time you can also watch this video with a presentation at Google from 2007.

What do you think? Do you use inbox zero? Why, why not?

I came with this talk and think I might have scared off some of them. It wasn’t really my intention, although I admit the title “Don’t become an entrepreneur unless you are insane” doesn’t really support that point.

I think it is important to get real about entrepreneurship. I want to cut through the hype and tell the story as I have experienced it and seen with other entrepreneurs.

What do you think about this presentation? Is it too harsh?

Lately I have been thinking that, whereas these are certainly competitive advantages they are not so important anymore. Also I would argue that they become increasingly less sustainable.

1. Money: There is an abundancy of money around. A competitor could go for a serious “money/resource war”. Look at the Samwer brothers for example.
2. Quality: (Product) quality is certainly a more long-term strategy. Nevertheless, to a certain extend (product) quality can be copied. Look at China. Eventually certain quality criteria become basic/expected features and loose their “advantage”. The only strategy against that is innovation. Companies that don’t innovate will eventually end up competing on price.
3. Speed: Speed is – especially in the web economy- probably the most important one of these three. However, timing is important as well.  It doesn’t do any good to be the first to be in a market that nobody cares about (yet). Also it shows that quite often not the first one in the market ended up winning it. Look at Friendster.

I believe in the age of increased transparency the above competitive advantages still matter. However, transparency fosters one competitive advantage which is hard to beat: trust.

Trust is very valuable. Yet, trust cannot be bought. The process of gaining trust is also very hard to speed up. Why? Because trust uses the only resource that is not scalable: time. That makes it a very sustainable competitive advantage.

Next to the time factor, gaining and maintaining trust is a lot of work. Maintaining it probably more so, since trust is a process and not an event. It builds on predictable and consistent behaviour. This is why authenticity and stability breads trust.

Obviously customers. employees, investors etc. will trust you if you are doing the right thing. Trust grows if you do it again and again. And this is only possible if you are truly passionate and if you do genuinely care.

Maybe it is a good idea to build your next business idea on trust as a central competitive advantage. It might not be easy but it may be very valuable in the long-run.

Above all, working in a trusting environment certainly feels good for everyone involved. And it is hard to argue against maximizing happiness.

I managed to get my hands on an early copy of what I hear is a “must-read” book: The Lean Entrepreneur. The book is written by Patrick Vlaskovitz and Brant Cooper and will come out in a couple of days.

Whereas “The Lean Startup” by Eric Ries has laid the theoretical foundation and described a more scientific model towards entrepreneurship, the “The Lean Entrepreneur” is all about actually doing it. Without knowing the book that’s already the first thing I like. The second thing is the name obviously…

Patrick, one of the authors, told me that if you purchase the book from their site until February 12th this year you actually have the chance to win several prices including a dinner with Dave McClure of 500 Startups.

I am really looking forward to read this book and will probably post my review in the next weeks.

At the end the ideas were pitched. However, like many pitching events, the quality of the pitches varied enormously. The thing is, a bad pitch can ruin interest in a good idea.

This holds true the other way around as well. Sometimes a good pitch can cover up a bad idea (I am not saying that’s a good thing). Especially because in those couple of minutes the audience and judges often cannot grasp the concept in detail with all its implications.

A pitch doesn’t make your startup better. A pitch makes your startup more interesting. It is an entry ticket to continue the conversation. Depending on the person you get interested it makes the pitch potentially very valuable.

Sure, Startup Weekend is a format, which doesn’t necessarily foster great pitches. There are usually a number of newcomers with little pitch experience. Also at Startup Weekend time is always tight. The pitch deck gets finished a few minutes before the presentation and pitch practice tends to get a lower priority than more “urgent” tasks.

However, also at “pitch events” with an application process and plenty of time to prepare pitches often aren’t polished. From time to time they simply suck. At Seedcamp I have seen that pre-pitch training can help a lot. We also did pre-pitch training at Pirate Summit (Disclaimer: I am member of the board). That’s an area we can and should still improve.

I believe pre-pitch training is merely a band-aid and not a real cure. Why don’t we do this more professionally? Apparently I struck a nerve with my tweet today asking for just that.

We need to improve pitching skills. Who wants to build a pitch school. #SWCologne

— Manuel Koelman (@manuelkoelman) January 27, 2013

For me it is not that much about the preparation for the next pitch. I am thinking about a mindset. “Pitching DNA” if you will. It is about story-telling. It is about summarizing an idea in a concise and compelling way. This is something that could start in schools (or even Kindergarden  ).

The good thing is: Francis Dierick from StartupStay will launch PitchCademy soon. It really gets my hope up that we might see some structural approach towards learning how to pitch. The need is definitely there.

PS: The invite code for PitchCademy is “startupstay”.

In many pitch decks the only “business dynamics” that can be found are the most obvious ones in the “financial section”. Entrepreneurs tend to write a table or build a fancy graph with their financial forecasts. Usually that includes revenue, costs, EBIT etc.

Interestingly these forecasts are often displayed in a very accurate way e.g. “in 2016 we will have a revenue of 7.025.231 €”. That obviously is a lot of crap. No entrepreneur actually knows what their sales will be. Not even for the next month (unless they are 0 €). Please stop pretending.

The truth is, forecasts are a lot of guess work based on assumptions. Most often these assumptions are based on an idealized world. Have you noticed that financial forecasts go nothing but up? That’s certainly not what is happening in the real world.

The problem is that these seemingly exact figures give a false sense of security. They are often build using elaborate Excel models.  After a while of fine-tuning your model, you start thinking: “Yeah I got it now, this is what it’s going to be like”. I know what I am talking about. I have been there too many times.

Also building these models can be a lot of fun and it is easy to get caught up in fine-tuning it. The more you fine-tune, the more it will reflect the real world, right? Maybe. Maybe not. Quite frankly, it doesn’t matter if you are a bit more accurate about your revenue in 2016. Why? Because you will most probably be doing something different then. Yes, you will pivot. Most (if not all) young startups do.

That means: In 2016 you probably won’t be earning your money with what you think you will be earning it. There are just too many factors you cannot influence nor predict. You cannot model the real world!

What is important at an early stage is to know your business model and the business dynamics that drive it. It is e.g. important to understand what drives revenue/cost. In the early stage most of the time it is all about understanding who your customer is and how you can reach her. Depending on your business, stage etc. example questions could be something like this:

• How do I get users?
• How much does it cost to get users (user acquisition costs)?
• How many users come back? What drives them to come back?
• How many users will pay for my service? How much revenue does a user bring?
• How many users will refer my service?
• etc.

Hopefully you are measuring (most of) these dynamics. However, some answers you might have to estimate.  That is okay. With your answers you build your model. Then you can use it to get insights about what drives revenue/cost etc. However, instead of looking at absolute numbers look at dependencies e.g.:

• If I increase my conversion rate by 1%, what would happen ro my revenue?
• If I reduce marketing spend, what would happen to profits?
• If I can keep customers longer, what would happen to referrals?
• If more people came through referrals how much more money could I spent on marketing?
• etc.

This can give you a good sense about where to focus on next. After all, it doesn’t really matter if your model predicts 7, 15 or 20 million  € in revenue in 3 years. What matters is to get from 0€ revenue to 1.000€ revenue and from there to 10.000€.

You aren’t there yet. Fantasizing about how much money you are going to make in 5 years doesn’t make you any money now. Building an elaborate model doesn’t get you new users.

Put away your forecasts and models and focus on making progress and getting traction.