First,ten BUT...

Seth Godin's latest post "First, ten" highlights a classic start-up mistake, but for me misses an important step.
He suggests that you find ten people to use your service who "trust you/respect you/need you/listen to you...", that, " if they love it, you win. If they love it, they'll each find you ten more people (or a hundred or a thousand or, perhaps, just three). Repeat."
Seth Godin makes a key point here which we've seen many start-ups, large and small, all miss: if you require that your business grows virally, then all that spend on launch and PR is wasted if you do so when the product is not yet good enough to be viral by itself. That's not to say that PR etc. can't be great when you want to pour some petrol on that fire, but you're better saving up that fuel for when the fire is already spreading by itself.
However, I'd have to suggest some qualifiers. The test is not those "first ten", but whether those first ten start to "spread the virus" by themselves. That might well mean that they need to be considerably more than ten so that you can measure and understand them, but it certainly doesn't have to be ten thousand. Key to that viral spread is the communication from an existing user to a new one, and that's a tough barrier because the user chooses it, not you (how many different ways have you heard Twitter described?). My view is that Seth Godin's definition of the "first ten" might prove a little unrepresentative- they're clearly going to listen, and therefore give you the chance to communicate much more sophisticated and subtle ideas, you can "teach" new things, or even "un-teach" perceived wisdom. You could also get those first ten to think about what the service could mean to their lives and how they might use it, and it will be much more memorable. So I would suggest that the "first ten" test is necessary but not sufficient.
My suggestion, based on our portfolio, would be to aim for a larger group of people, grown gradually, and iterate the product, messaging and experience to the point that you start to see that demand is spreading "all by itself". Then go and get the petrol can!

An 11th Reason why startups fail

Tim Draper the legendary (Rhino riding!) founder of DJF has an excellent blog post on the reasons startups fail. I'd like to suggest an 11th reason though, which we see frequently:
"The average cost of selling is too high."
In particular, we see many companies where the need to communicate complicated messages, over a succession of meetings, and maybe customer trials too, is itself expensive. This is then compounded because the proportion of those customers that convert is not too great, and they take a long time to decide to start paying. Finally when a proportion place orders it doesn't cover the cost of all that customer engagement.
It's a shame that 11 reasons isn't such a tidy number!

Choosing an Entry Market Sector

A common issue I see with early-stage companies is over their selection of entry market sector. Obviously, all investors love their portfolio companies to have a huge vision to change large markets in a big way, and on occasion the best way to plan to reach that is to go straight to the big opportunity head-on. However, often that's going to be slow and hard, perhaps credibility is crucial, in which case it's really helpful to find a launch "beach-head" in the lines advocated by "Crossing The Chasm".
So where companies have chosen to use a beach-head, the next question is which one? If you just pick the "largest sector", or the one you're "most familiar with, you face a danger- the best entry sector is not always the obvious one. I think there's a different set of thinking about launch markets, where you highlight a slightly different set of factors as important.

Criterion	Ultimate market	Launch market
Scale	Ideally as large as possible	Manageable, but low priority in selection process
Differentiation of offering against competition	Important	Critical
Focus on customer problems	Can be more general- boxed product is easier to scale	May be helpful to have solution type sales initially
Unit sale	Very large or small is good- scalability is crucial	Ideally ~1 months burn- large enough to be useful, but small enough to avoid lengthy approvals
Mission criticality	Mission critical to the customer provides extra value	Ideally not too critical- hard to buy from a startup
Length of buy cycle	May be long	Short is incredibly helpful
Easy customer identification	Useful	Vital

I bet there are some great suggestions for improvements to this table- please let me know!

Littlewoods Subsidiary adopts Blue Prism Technology

Everyday Financial Solutions, a subsidiary of Littlewoods Shop Direct Group is to deliver business efficiency improvements with Blue Prism Automate.

It's great to see another endorsement for Blue Prism's technology- well done Alastair, David and the team!

"Engineers can't sell new technology"

Interviewing a potential CEO for one of the portfolio companies today was really thought provoking. He's run and grown technology companies and is a great engineer by heart, therefore I was really surprised when he told us that you "can't use engineers to sell new technology". My gut was screaming "no!", but on reflection I think maybe he had a really sound point. His argument seemed to come down to some prejudices about engineers which might have some grounding:

• Bright sales people can communicate the product well enough for bright engineers at the customer company to work out how/where to apply it
• Engineers have a tendency to dive too quickly into the details of the technology before really getting a good picture of the company's needs- so they don't give themselves the chance to listen properly
• Sales people in the front line tend to be more reassuring to the non-technical contingent of the customers and send the right messages about the nature of the vendor

I think his bottom line was that this kind of thing can be a cause of delays in customer take up of the offering from a new technology vendor. I'm going to chew on this a little, but there may well be something behind this thesis; what do you think?

Further thought

On dicussion with a colleague, we wondered if perhaps the distinction is:

Technically capable customer looking to understand how he can use your technology/product	Send a technically literate salesperson to first meeting
Technically ignorant customer looking for help understanding what he/she needs	Send a sales engineer to first meeting

The other suggestion the candidate made which I'd wholeheartedly endorse is that for early stage tech companies you can always afford to send two people to the meeting- so that someone is always listening.