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The Agile Startup: Quick and Dirty Lessons Every Entrepreneur Should Know

Madanmohan Rao
26th Nov 2013
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The body of knowledge on startups using the agile and lean methodology now includes the new addition Agile Startup, by Jeff Scheinrock & Matt Richter-Sand.

Many challenges a startup can face have already been documented by a range of founders, authors and consultants, and this book captures 170 entrepreneurial insights clustered into six categories: pre-idea, idea, prototype, launch, customers/revenue, and scale. The book also has an online companion with additional resources.

Jeff Scheinrock is a lecturer at UCLA Anderson School of Management, and president and CFO of the venture investment firm Originate. Scheinrock has personally raised over $1 billion in venture capital, and served as the chief investment officer of a fund-of-funds, with trade credit from companies such as Intel, Microsoft, Panasonic, Tatung, Lite-On, and Seagate. Scheinrock. The book has the logos of Intel Capital and Originate on the cover.


AgileStartup

Matt Richter-Sand has a background in IT in the corporate and defense sector, before branching off into startups and investments in Los Angeles. He founded the consulting company, Agile Startup.

“Entrepreneurs are able to walk the fine line between being focused yet agile, and visionary yet reactive,” the authors begin. “Knowledge alone isn’t power, it’s potential power. Knowledge combined with action is power,” they explain.

Starting up is a mix of art, science and business. It involves the steps of questioning, observing, hypothesising, experimenting and analysing – with lots of creativity and instinct thrown in between.

“You must become a scientist and look at your startup as a science experiment,” the authors advise. I have summarised the authors’ startup phases and tips in Table 1 below; each chapter explains them in more detail.

The book is packed (almost half of it) with illustrations but not all of them add value and the book could be much shorter; more industry examples for the principles would have been a good addition.

Table 1: Agile Startup Phases and Tips

PhaseInsights
Understanding Agile PhilosophyHave fun! Understand and align with your motivation. Grapple with reality. Be prepared for highs and lows. Understand the scientific method. Focus on problems and not just solutions. Listen to customers and don’t worry about embarrassing yourself. Launch to learn. Fail fast and often; beg for forgiveness rather than ask for permission. Understand and contain risk early.
Understanding FeasibilityRepeatedly ask and examine whether customers will buy your product/service. Double your worst-case scenarios. Test mock-ups. Go beyond the idea to a product/service. Ask open-ended questions in surveys, not leading questions. Go beyond surveys to actual observations. Are you offering a cure, painkiller or vitamin? Think like a VC.
Customer and competitive strategiesRide the wave or create it. Understand the market and the customers’ pain points. Ask people “what sucks” about your product. Focus on core customer segments. Draw up a competitive matrix. Beware of fast followers.
Revenues and profitsDraw up a comprehensive business model (eg. inventory, sales, contractors, office costs). Examine hybrid revenue models. Balance variable and fixed costs. Get the minimum viable product into the market fast. Calculate how much runway you have left. Monitor KPIs.
MarketingGet the positioning right. Go to press only when ready. Use different strategies for old and new markets. Sell wants, but deliver needs (“emotion + reason”). Address customer needs not just product features. Test messages. Leverage guerrilla tactics (eg. Red Bull’s stunts). Create and frame customer personas. Promise but overdeliver.
Team buildingSign a ‘pre-nup’ with co-founders and partners. Find the right people, get them to the right positions. Align visions along the company’s evolution. Be prepared to move aside and let professional managers take over from founders in the scale stage. Design the vesting stages, amounts and periods carefully. Delegate but don’t abdicate. Form an advisory board.
The Startup PitchDevelop the tagline, one-liner, elevator pitch and full presentation. End the pitch with a call to action. Get used to rejections and learn from them. Strengthen the use-case scenario. Reiterate key takeaways. Stress the hot buttons. Fake it till you make it. Don’t dumb it down but aim for simplicity.
InvestorsShow traction, otherwise you are just a ‘wantrapreneur.’ Show your obsession with the company. Pick your investor based on portfolio match. Find the balance between money, power, control and lifestyle. Dialogue with serial entrepreneurs, startup experts and industry veterans. Chart key milestones. Use demos to pitch effectively. Fundraising alone is not a sign of success; valuation isn’t everything. Factor in long-term defensibility of the product with your team.
Building the businessNail it before you scale it: get the business model right. Jot your thoughts down to track key issues. Sharpen a sense of clarity and purpose. Manage meetings effectively. Be prepared for the worst, expect the unexpected. Be your own customer. Thing big, but also execute the smallest details. Design a short rallying mantra which is inspirational, aspirational, attainable. Evolve your metrics. Your network is your net worth. Leverage the underdog story, and a tangible enemy. Guard your reputation. Hire other rainmakers also. Be frugal but not cheap. Know when to quit, there is no shame in shutting down.

The authors identify five kinds of risks faced by entrepreneurs: product (will the technology work), market (will people buy it), financing (can you get off the ground and thrive), competition (are there fast followers/incumbents), execution (can you pull the whole thing off).

“The most important thing you should do as an entrepreneur is to turn assumptions into facts as quickly as possible,” the authors advise.

A solid customer-acquisition strategy is one of the most important aspects of the go-to-market plan. The value proposition must be 10X better than that of the competition, and a moat strategy will be needed to build sustainable competitive advantage (eg. via patents, secrets, speed, brand, cost advantage, regulations).

Marketing is one of the hardest things to get right in business, making it a common startup killer, the authors caution; marketing is as important as product development for a startup. “Luck is not a plan,” the authors add.

“Marketing that leads with emotion and justifies with reason delivers sales,” they explain. Customers buy with emotion, but also justify it with reason.

Entrepreneurs should factor in a range of parameters such as customer acquisition costs, customer switching costs, customer lifecycle value, length and cost of sales cycles, serviceable available market, and serviceable obtainable market.

In the entrepreneurial journey, it is important to get alignment with the team’s basic human needs: certainty, variety, significance, connection, growth and contribution. Startups offer employees a unique mix of flexibility, challenge, variety and the feeling of accomplishment.

“Investors are an indispensable part of the startup landscape, especially when it comes to technology companies,” the authors observe. Seed investments are usually less than $2 million; VCs typically want to own 20-40% of a company in exchange for a $2-10 million investment.

The authors also cut through the media hype about startups by explaining that almost 98% of startup work is monotonous and painstaking; there are many near-death moments; there is a strong sense of isolation; and there can be severe family pressures.

The average age of an entrepreneur is 39, and rather than physical age the most important success factor is emotional age and resourcefulness. Having sounding boards with mentors and other entrepreneurs is a big help.

“It’s not a startup until you build something, and it’s not a business until you sell something,” the authors conclude. “Building a successful business from scratch is nothing short of amazing. Start living your entrepreneurial dream,” they add.

It would be fitting to end this review with some of the useful inspirational quotes in the book:

Plans are useless, but planning is indispensable.” – Dwight Eisenhower

When you assume, you make an ass out of u and me.” – Oscar Wilde

Every business has two major functions: innovation and marketing.” – Peter Drucker

If I have seen further than others, it is by standing on the shoulders of giants.” – Isaac Newton

Simplicity is the ultimate sophistication.” – Leonardo da Vinci

Skate to where the puck is going to be.” – Wayne Gretzky

Fail fast, succeed sooner.” – David Kelly, CEO, Ideo

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