September 2, 2011
Ben Yoskovitz is a founding partner at Year One Labs, an early-stage seed accelerator in Montreal. Last September, he and his three partners accepted their first class, including recent graduate and now seed-funded Localmind. Yoskovitz is a serial entrepreneur whose recruitment-software startup, Standout Jobs, was acquired in 2010. From running startups to advising new entrepreneurs, he has learned a thing or two about how to succeed. Below are his thoughts on the lean startup methodology, why entrepreneurs are delusional, “vanity metrics,” and more.
TC: Why did you start Year One Labs?
Yoskovitz: I had just sold my company, Standout Jobs, and I wasn’t really ready to start another company. Ray [Luk] was doing angel investing, and he felt he wasn’t doing it as efficiently or as structured as he could. He had this idea of running an accelerator program.
TC: You use lean startup methodology at Year One Labs?
Yoskovitz: We sat down and started thinking about: what would this thing look like? How would we design it? Would there be a curriculum, or no curriculum? How structured or unstructured would it be? We were really interested in doing something that was structured, but not a school – that was an important differentiation for us. We very much liked the lean startup model and customer development, and so we spent a few months coming up with a model that is very much driven by lean startup.
What was different from a lot of incubators or accelerators was a very clear methodology of how we were going to walk companies through. It starts, in part, by how we structure the financing. We tranche the money out into three amounts. We provide up to $50,000 – it starts with $10,000 and the next is $20,000 and the final tranche is $20,000 – and it’s based on milestones.
The first $10,000 is a probe. People have an idea, or they come into Year One Labs and we brainstorm an idea. Before we do any actual development work, we go see if we can validate or invalidate that this is worth building. It almost always involves in-person interviews with people. It also involves some quantitative analysis, so some companies did surveys, whether it was on Facebook or putting something online and then driving traffic to it through Google AdWords. The conclusion of the probe is: have we identified the problem we’re solving? Can we solve it? Do we know who our customer is? Is it a problem worth solving? And what is the minimum viable product (MVP)?
Then we give the founders the $20,000 to build that MVP. And as soon as possible, we encourage them to put it in people’s hands. The lean startup model is basically just constant iterative learning. Are customers using it? How often are they using it? Are they using it the way you thought they would use it? You go through as many cycles as you can during that process.
If your MVP is working and you’ve proven that you’re creating some kind of value, now you need that third tranche of money to keep building and keep iterating but also to start scaling – start acquiring more users and ultimately start the process of fundraising.
TC: What stage do you look for companies at?
Yoskovitz: Extremely early – basically the idea stage. I would almost say the pre-idea stage. We’re genuinely making bets on people. Every investor will say that – and I think to a large degree it’s true – but the further along you go, the more you’re making a bet on the market or the traction they have. In some cases, we had guys come in with an idea that we thought was interesting, and they started down the road of validating it and invalidated the idea. The whole point is to do that, and find another idea worth working on.
TC: What is one thing you wish founders knew before coming in?
Yoskovitz: I wish they understood how hard building a startup is. You can read about it until you’re blue in the face, but until you’ve actually experienced it, you really don’t know. And I also wish they understood how hard customer development is for a lean startup process. When people come into Year One Labs and you say, “Go talk to 50 people who you think are your customers,” that freezes people right there. They’re like, “Wait a second, shouldn’t I just go into a dark room and code? Because I’m a coder.” A lot of technical entrepreneurs are not necessarily comfortable speaking to people. Worse than that, in some regards, is the fact that they don’t know how to do it. But that is something people can learn in advance. Side projects are a good way to start; do it rigorously through a customer development/lean startup process, and get comfortable with that and realize why that’s worthwhile.
TC: What else surprises startups about the incubation process?
Yoskovitz: This is unique to any place that’s not Silicon Valley or New York: the speed at which the rest of the world spins tends to be a lot faster than where you are. In Montreal, people tend to think too small and move too slow. We’ve had examples in Year One Labs where people started on a project and it didn’t appear like there were any competitors – even though I would say, “Trust me, there’s 100 people working on this right now” – and five minutes after they launched, there’d be ten competitors.
TC: What are some of the top lessons you learned from starting companies yourself?
Yoskovitz: Entrepreneurs in general are by and large delusional. How else do you wake up every morning and do this crazy thing and not pay yourself and starve and go through this struggle to create this thing that you believe is fantastic? In some ways it’s good being delusional, but it makes them not want to go out and get feedback. They just don’t want to know; they want to be right. But occasionally their eyes open up and they’re like, “Oh, what you [the customer] are actually saying is if I just shift a little bit, all of the sudden this is the best thing since sliced bread.” That’s very hard for entrepreneurs to do.
Having a process is important, whether it’s lean startup or not. It forces intellectual honesty. Is this a problem worth solving – can I be honest about it? Is this solution the right solution – can I be honest about it? It’s very easy to get caught up in the hype, whether it’s PR or raising money or acquiring tons of users. And I’ve gone through those phases of being completely delusional and not wanting to face reality.
A lot of entrepreneurs don’t actually set real goals, whether it’s user acquisition or daily users or whatever metric. Most metrics they look at always go up and to the right, like number of users. But that’s not really a key metric; that’s a vanity metric. But startups that are crazy successful are rare. Most startups launch and it’s not a dismal failure and it’s not a roaring success; it’s somewhere in this murky middle.
TC: Any other advice?
Yoskovitz: I would encourage people to find good mentors. Accelerators and incubators do a good job, and one of the key values they provide is mentorship. I look back on my past and say, “If I had a mentor ten years ago – somebody I could speak to once a week – how much would that have helped me?”
The other thing is: overall branding and networking for yourself are important – getting connected, meeting lots of people, publishing content, being active online. You should be participating in your tech community locally; you should be going to other tech communities like the Valley or New York. It’s not going to guarantee success by any stretch of the imagination, but it does open up opportunities that you otherwise wouldn’t have had.
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