Ok, so you’re driving back home after a mamak session with your friends. As you’re about to turn into the Kota Damansara exit of NKVE you suddenly get a moment of epiphany — you have an idea for a really cool website that hasn’t been done before, one of a kind.
You speculate that this website will go really, really far. It will make you billions of dollars after you exit and get acquired by Google. You can imagine yourself swimming in a pool with your future wife Ayda Jebat full of RM50 notes already.
After telling few of your friends about it (and always by starting the conversation with — “Eh, this is a secret ah, don’t tell anybody. I don’t want people to know about this and copy.”) you find yourself a co-founder who believe in your vision.
The both of you then start building wireframes on how the website would look like. You identify your target market and have a marketing plan in place. Since you worked in a management consulting firm before, your business plan slides exceed 30 pages.
None of you can code, so you source for a developer to build the really cool website. After a few phone calls and emails you finally found a freelancer guy who you like and has a good portfolio of clients.
Since you don’t want the website to look incomplete and to have ALL the features you want, the quote for the website came up to RM100,000 (50% upfront) and 6 months of development time.
But you believe in the idea. You believe that it will be worth billions. So what’s RM100,000? You will be known as the guy who pumped only RM100,000 to build an empire worth billions.
Both of you fork out RM50,000 for the 50% downpayment from your Public Mutual unit trust accounts and get the developer to start work. You need an office and a really cool working space (with pool table, ping pong table, piano, PS3) for yourself and your future employees, so you fork out another RM30,000 for that too.
In the meantime, before your product is complete, you prefer to not talk to anybody about your product — as you’re afraid you’d “lose the buzz” if you spilled the beans too early. Also, copycats are lurking around the corner. You don’t want them to copy your idea. First mover advantage has to be preserved!
Although your product caters to a specific target market — you feel that you’d be able to target and reach them easily via social media advertisements. Easy-peasy. Why waste time, petrol and money talking and understand them? Can Google what.
After 6 months, the product is finally complete. You can now finally execute that long-awaited launch. Time to roll out the marketing plan!
- You spend thousands on Google & Facebook ads to attract users.
- You hire a few marketing executives to sell the product to advertisers.
- You print thousands of flyers and distribute it all over Klang Valley.
- You hire a PR company to do a media blitz and a few events.
A few weeks in, a lot of hot air but not much traction.
“It’s okay, give it a while, users will come. Have faith”
A month in, still no traction.
“Maybe we’re doing something wrong with the marketing. Let’s pump moremoney in these areas.”
3 months in, still nothing.
Both of you get frustrated. You start to wonder — “Why la?!”
Nothing you do is working.
You realise that the anticipated Google acquisition wasn’t going to happen.
You have a difficult conversation with your co-founder and decided to abandon the venture. After punching some numbers on Excel, you realised you have burned close to RM200,000. Money spent and down the drain.
What went wrong? What could the two co-founders do better? Let’s break it down:
1. They didn’t validate their idea
Before even thinking of spending RM100,000 to build the product, you need to first validate the idea.
What does that mean?
You need to know whether the product you are building actually solves problems faced by the user/customer.
Deodrant is a good example of a product that solves a problem. I want my armpits to smell amazing. Smelly armpits cause me social problems. There is a very high chance my wife won’t come near me.
You can’t guess or speculate whether your product will solve a real problem. You have to go out there and test it out.
Question is, how do you test whether your product solves a real problem without spending a ridiculous amount of money?
Enter the concept of Minimum Viable Product. In short, what this means is you:
a) Do or build something minimal;
b) That is sufficient to test assumptions about your idea;
c) With the goal to learn as much as possible;
c) At the lowest cost possible;
d) As fast as possible.
Some examples of an MVP:
i) Talking to at least 100 potential users (NOT your friends) about your product, value propositions and ask them questions.
If a version of your MVP doesn’t have quite the traction you want, you can easily switch (or in startup lingo — pivot) to a different approach to your idea.
Since you didn’t spend much to build the first version of the MVP, your Public Mutual investments are in tact.
2. They didn’t understand their users
You need to know exactly what would make your users tick. You need to understand their preferences, characteristics, wants and needs.
In the above example, the two co-founders arrogantly thought that they knew everything about their users. As such, decisions were made based on guesses and what they thought their users wanted.
Say you’re a food delivery startup. It is absolutely essential for you to do deliveries yourself, at least in the first few months and talk to your paying customers. Ask them:
a) What do they do as a living;
b) What they thought of the whole experience;
c) What made them use your service and not others.
All these are vital information that you might be able to use to make better decisions and a better product.
3. They waited 6 months to launch
Waiting for a product to be built in 6 months is a long time. Speed is a neccessity when building a startup. The faster you validate your idea, the faster you can start getting paying customers.
Don’t worry about whether your product will look ugly at the start. Remember this: nobody will remember the first version of your product.
At TheLorry.com we have a saying: Just do. Think later.
This is how Facebook version 1 looked like:
Say you’d like to build an e-commerce product. Ask yourself, what is absolutely essential?
Perhaps the below features are critical:
a) A product page
b) A checkout page
c) Your phone no and email
You might not need, to validate your idea, the following features:
a) Coupon codes
b) Order tracking
c) An app
d) A virtual reality/augmented reality component
Cut it to the bare essentials, launch fast and learn fast. You can add the above features later if need be.
If you’re a first time entrepreneur, I hope the above was useful for you. I wish you all the best in the pursuit of your dreams to make the world a better place (that’s why you became an entrepreneur right? Not just to make billions right?).
Should you need to contact me, I can be reached via Facebook at Nadhir Ashafiq.