[Keynote Presentation] Dave McClure: Don’t Take Money From VCs, Focus on Customers
Dave McClure kicked off echelon 2010 today with his keynote presentation on Startup 2.0: A Silicon Valley Story with an optimistic tone that things are getting better and better for internet startups as everyone learns more on how to do it right.
With 1/3 of internet startups succeeding, Dave sees a promising future for internet startups. His theory is that Web 2.0 is more of a distribution story rather than a web story. Something that we have made great advances in over the years.
Dave proposes his idea that large venture capitalist are not suitable for internet startups because they are out of alignment with the ideas of these entrepreneurs. Large VCs are always running for the bigger numbers which is contrary to how internet startups should operate, which is learning to serve a smaller market. Also, since internet startups can now operate at a much lower cost, venture capital is not as relevant to them as opposed to industries with higher capital expenditures like clean tech.
Web 2.0 has an incredible leverage now, allowing startups to reach billions of people and millions of dollars. With proper distribution platforms like youtube and Facebook, internet startups have access to a larger crowd of users that earlier-year startups did not, increasing their chances of success.
To help internet startups succeed, Dave suggests that they stay in close proximity with people from the same business. Hence, the Silicon Valley story. Such an environment provides a rich learning-ground for up-and-coming internet startups. However, Dave mentioned that a Silicon Valley-like model can exist elsewhere, given the advancement of the internet and the lower cost of development, and it is possible to grow a successful business any where in the world with reasonable internet connection, a team who knows what they are doing and some angel funding.
Touching on the topic of product, Dave talks about forgetting about your product and concentrating on connecting with your customers. Learn what your customers want, instead of just coding what you want, as they are the people who will be paying you for your product. Design and marketing are very important to internet startups and Dave sees that most internet startups do not have these skills. The solution, find someone who does.
Keeping your startup lean also helps ensure success. Lean does not mean cheap. Lean means focusing on minimal product features before you start getting feedback. Optimize for user experience and distribution. Keep it simple and actionable. Dave talks about product development as a cycle. Developing a product involves stopping and getting feedback from customers and even back-tracking to get your product back on track. It is not a linear track of “continuous” development that does not satisfy customers’ needs.
The challenges for a startup are management, product and marketing. Startups have to decide on how to manage, measure ad get their products out to the customers and generate feedback and at the end, revenue. Always optimize for happiness, focus on how to make your customers happy while keeping yourself happy, earning money. Start with moving people from lower levels of happiness to higher happiness levels by beginning with low cost and high value. This, plus scale, will help get your product off the ground. When to stop developing on a feature and start working on a new feature? Its when things start leveling off. Use customer development to identify the next feature, always go back to the customer.
By concentrating on users and making money, use the formula of volume, cost and conversion. Expand your reach, convert them to what you want and figure out your cost. Once revenue covers cost and more, you become a business, otherwise you are just a startup. Unprofitable, unclear path. With the definition left to us by Dave, it helps clear our doubt on who we are right now. So what are you?
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