The Telephone - It's Still Good To Talk

British Telecom (BT) famously told us, "it's good to talk".

There are some things that are just better if done over the phone. 

Transactions and information transmission suit online and text, synchronous conversations work well on the phone or face to face.  Asynchronous conversations suit chat or text.

So far this year, I found the phone (voice) to be my channel of choice when; enquiring about holiday options, discussing sensitive work topics, ordering a taxi, speaking with my family arranging for a decorator to work on our house.

There are many high value transactions that are initiated over the phone.  High value, offline leads.  Buying a car, buying a house, booking a holiday, finding a tradesman, purchasing financial products.  Conversations convert.

Apart from talking, my phone has been my preferred device for the following activities; emailing friends, reading updates from family on their travels (Facebook / Blog), ordering groceries, renting DVDs, making bank payments, checking the weather, reading the news, tuning my guitar, finding out how to get somewhere, selling second hand goods, buying movie tickets, reading a book on the train, following content of interest (Twitter, Quora), taking photos, checking train schedules and using a calculator.

I may be stating the obvious but we are all becoming heavier and heavier users of phones.  We all have them, 62% of UK mobile phones are now "smartphones" and we generally have them with us 24/7.  17.4% of global web traffic comes through mobile devices.  49% of UK adults access the Internet on their mobile and the average household now owns more than three types of Internet enabled device, with one in five owning six or more.

Call volumes have been declining slightly but there are still over 233 billion minutes a year made (2012 data: OFCOM).

If my personal experience is anything to go by, I have moved transactions online where I find it easier to do so, however I will always use the phone for more complicated transactions or where a conversation is involved.

It's not surprising that investors have been piling money into mobile.  Latest figures show that in the US, in Q3 2013, venture capital investors poured $1.12 billion across 150 deals into U.S. mobile & telecoms companies, marking the largest financing quarter to the mobile sector ever.

As we look to the future, here's 12 2014 predictions  for mobile by app development company Goldengekko.

My 13th predication is that measuring all of the phone activity (on voice and in apps) will become increasingly used and understood by businesses  as they calculate the return on investment they get on their marketing where the response (call to action is a phone call).

In the same way that web analytics is now commonplace and understood by almost all businesses with a web channel, phone analytics will become known and used by all businesses that rely on the voice calls for their inbound leads.

It's very good to talk.

2000 to 2014 - ifyouski.com Stands the Test of Time

It's the ski season and if you are looking for a ski holiday you could do worse than check out www.ifyouski.com.  In fact, to be clear - I love this website!

It's so good to see her keep going, year after year.  Ifyouski.com was my first internet job.  I joined in August 2000 (shortly after they raised some money from VCs) and now, 13 seasons later, she's still shining.

Ifyouski nearly didn't survive.  It had c.£3m of investment and at one point we had about 50 staff. It imploded and was saved/bought by Online Travel Corporation in 2001 for a bargain (it's since been sold again a couple of times).  A handful of us kept our jobs.  I was one of them, together with Robin Wallace, Max De Grunwald, Rob Van Selm, Tim Barke, Susanne Hedges, Andy Hiseman, Tom Corcoran and Alan Whiteley.  Great team.

Ifyouski.com was a very useful website.  It still is.  It's a well structured fusion of holiday search with great decision support content (resort information, snow reports etc.)  So what happened to the £3m? Where did that go?

I was working in a Ski Tour Operator in 2000 and it was the height of the dot com boom.  I was excited by the chance to join an internet start up and whilst I didn't know much about startups or the internet, I knew a lot about selling and organising ski holidays.  I saw an ad, thought "Yup - that'd suit me" and I joined in a role which would these days be called Product Manager.  Back then such job titles didn't exist.

7 years earlier (1993) ex-Olympian skier, Michael Liebreich published a book on ski technique called The Complete Skier. A few years later he took it online as complete-skier.com.  It had ski technique content, resort information, snow reports, ski news.  It was just stacked full of great ski related content.  On top of this a ski chalet holiday search was added as a way of generating some revenue.

As it turns out, a ski chalet holiday search in 1999 was a very useful tool indeed.  It still is.  The British ski chalet business is fragmented with many small independent operators.  In those days, if you were looking for a chalet (say) for 8 people in a specific resort for a specific date from a specific airport you'd have to phone many different operators having read the ads in the Sunday Times travel supplement.  To have a website where all of the main operators were listed was fantastic because you could search across many operators at the same time.  When you'd found your ideal holiday you could phone the booking office (our travel agent partner) or make an email enquiry.  The travel agent made a commission on the booking which they shared with us.

Nice business model.  Going strong today.

What happened in 2000 was the company looked to build on it's early success in ski by raising money to launch new sites leveraging the same technology platform.  Instead of just ski, the plan was to open up into adventure travel (ifyouexplore), golf (ifyougolf) and scuba diving (ifyoudive).  And as well as doing this in the UK, we intended to launch in 3 other countries.  Instead of 1 market in 1 country we went head first into 4 markets in 4 countries.  Instead of nuturing 1 business model that worked, we developed 1 that worked and attempted to launch another 15 that we didn't know whether they would work or not. 

This was an expensive bet to make.  Expensive as we had about 50 people (although about 20 of them were interns).  In 2000, tech development was costly (we used an agency) and almost everything was proprietary.  We had to buy our own servers, write code from scratch (very few open source libraies existed) and create our own content.  We didn't know about lean startup methodology.

As it turns out the international businesses and the non-ski businesses didn't deliver a revenue stream fast enough.   Some parts of the ski business model simply did not transfer across borders or sectors.

The cash burn was crazy. Back in the dot com boom maybe this didn't seem so crazy.  However, unable to deliver the revenues, we were not able to raise further funding and the business was sold. 

All that remains now is the one business model that worked; selling ski holidays in the UK via a travel agent using online search.

The lesson I took away from that experience was that any new business model that a company attempts needs to be validated before putting too much investment into it.  Validation of the business model requires really understanding the customer segment(s), the distribution channels, the customer relationship methods, the proposition, the key activities and resources, who the key partners are, the cost base and the revenue model.

An excellent way to map this out is using a business model canvas.  A business model canvas allows you to capture on one page all of the above points.  You can highlight the parts of the canvas that you understand (the "knowns") and the parts you yet need to prove (the "known unknowns").  You can think about the assumptions you are making and then think about how you can go about testing those assumptions.  You then systematically run those tests and tweak the model based on the feedback. Once you really have proven all elements of the canvas to a reasonable degree of certainty, you're in a position to start investing money in developing this business model.  

I was lucky enough to work with some really great people at ifyouski.com.  Many remain true friends.  We had a real adventure and managed to leave a legacy which still keeps going today. 

The good news is for entrepreneurs today, lean start-up methods have made it easier to validate business models sooner.  More tools and platforms exist to support new initiatives and there's a growing workforce of talented designers, developers and marketing folks to call on. 

The Death Of A Startup

This week I met an entrepreneur who was at a critical point in her journey.  I use the word critical on purpose.  Her company was about to live or die.  Either she will raise more cash (or be acquired) in the next few weeks or she will pack it all in after 3 years of toil with nothing to show for her effort except some wisdom and battle scars.

She's got a great product, the future could be very bright. She's an amazing positive force despite the obvious stress. Circumstances have simply dealt her a bad hand in the last few months and she now needs a little light from lady luck. I will cheer loud and proud if she makes it.

Recently CB Insights published a report entitled "Startup death trends".  The headline; "Companies typically die around ~20 months after their last financing round and after having raised $1.3 million". The median time is 16.5 months.  

That makes sense.  Most investors will put enough money to buy a company enough runway for a year to two years.  Enough time to make a step change but not too much to over-invest.  After 16 months you're either ruling the world with profits to live on (unlikely) or needing more money (more likely).  If you have good indicators that your business model can and will deliver profitability, you have more chance of getting additional funding.  If you don't, death looms.

The article is well worth reading if you are thinking of starting a business, investing in or joining a startup.

Startups are massively risky.  When I interview someone to join a startup I make it clear... this company is a not yet profitable.  We've got a great opportunity (share the vision) but if we don't make, none of will have a job.  If you want job security, you won't find it here.

As a follow-up, CB INsights also published "51 Startup Failure Post-Mortems".

A quote stands out for me in particular...

Andy Young from GroupSpaces wrote, "…we most definitely committed the all-too-common sin of premature scaling. Driven by the desire to hit significant numbers to prove the road for future fundraising and encouraged by our great initial traction in the student market, we embarked on significant work developing paid marketing channels and distribution channels that we could use to demonstrate scalable customer acquisition. This all fell flat due to our lack of product/market fit in the new markets, distracted significantly from product work to fix the fit (double fail) and cost a whole bunch of our runway."

This I personally believe is the biggest risk to any tech startup. A startup is a quest to find and prove a viable business model.  Unless it's profitable, it's not viable.  An entrepreneur therefore has to really think hard about whether adding more cost to their business is going to help them uncover that business model sooner rather than later.  The aim should be to get to the viable business model with as little cash as possible.

Once a business model is validated, capital invested is then invested as growth capital.  That's a whole different challenge in itself.  However, taking lots of capital before the business model is validated and then spending hard basically adds more risk, not less.

The earlier you can prove the business model the better.  In simple terms that means having something that customers are willing to pay for and to be able to acquire customers in an efficient way.

What Makes A Start-Up Worth Investing In?

I saw in Wired magazine this month a short article about a company that had received VC funding via Seedcamp. One of the founding shareholders in Seedcamp is Robin Klein.

What I found very useful was a short list of checkpoints given by Robin on what he seeks in a start-up.

I've listed it here because I think it makes so much sense...

1. A team excited about what they're trying to achieve

2. A big vision with understanding of the issues involved in achieving it

3. A team that's already achieved a lot with very little

4. A differentiated product or service that meets a need

5. A project with global reach addressing a large market

There's one other point I would add for good measure; a business that can scale. By scale, I mean a business that will see exponentially increasing returns on the assets deployed as it grows.

Conclusion? If you are going to invest your heart and soul into a start up or join a start up team, make sure the answers to the above points are all "yes!"

Time will always tell course.

To the dealer, "I've made my bet and I'm sticking, thanks. I think I've been dealt a great hand".