Thoughts for startups (no. 7)

"He never created a finished product. Finished products are for decadent minds. His was an evolving mechanism..."

Isaac Asimov, 1964

Related to the over-hyped start-up concept of the Minimum Viable Product (MVP), on which more later, but also related to the Japanese manufacturing concept of kaizen, or continuous improvement, which in turn draws on martial art philosophies (or the power of practice).

Your tech product isn't finished, and isn't going to be. Ever. You might stop developing it and people might carry on using it, and preferably paying for it; but it's not finished. There will always be some improvement, however slight, that can be made to some aspect of it. But more importantly you won't really start to understand what your product does and can do until you make it. Great that you came up with an idea, tweaked it around a bit before realising it. But until you actually have it in front of you, there will be features, UI elements, loads of better stuff to do with it that you couldn't imagine before; and that's nothing to what happens when you put it in front of someone else.

Another lesson to draw is that those changes should be evolutionary as much as possible, at least from the end user perspective. So it's great that you can get a 10% improvement in UI responsiveness by redeveloping the entire back end - but make that change without disrupting the end user. Thought of 6 great ways you could improve the UI? Make them one at a time. Because each is like a product in its own right; seeing the change in use opens up a whole set of possibilities about how the product could be improved.

So make your product work and then improve it; don't be a decadent mind.

Market size: what's totally addressable (dude)

For some months now I've been wondering how med-tech startups were able to claim such huge global market sizes, and then I read this post from EC1 Capital. If I understand the definitions discussed in that post, then I've been using tiny Total Addressable Market numbers where I could have used much, much, much bigger numbers. As in several orders of magnitude bigger.

Med-tech companies sometimes quote global market sizes in trillions of dollars, which can only be the amount being spent on health or medical-related activity. So the equivalent for TwoTen...

Our product is designed for primary schools, nurseries & families, so we could use the same logic to claim that it has a total market size in the UK alone of over $100bn. I think.

This figure is derived as follows:

the estimated cost to parents of bringing up a child to age 21

=£225k

divide by the number of years to get a per annum figure

=£10.7k

Multiply by 5.2m - the number of households with children aged 10 or under (our target age group)

=£55.7bn.

Add in primary school state funding (approximates to the primary school budget)

Average funding per school £4100, times approx number of pupils 4.4m


=£18bn (those are figures just for England rather than UK, so this total is low)

Total figure, which excludes nurseries and private schools to avoid any double counting of parental expenditure, is then

=£73.7bn

which in USD means our market size, just in the UK

=$118bn

An 18* multiple seems fair for extrapolating the global market size. Conveniently, yay! Turns out we're also targeting a global market worth trillions of dollars!

This huge number makes for an interesting contrast with the financial figure we would normally quote. It's from a report from analysts ABI Research, which estimated the global market for parental control software will grow to a rather dull

$2bn

by 2018.

Again, based on the EC1 article, I think it's appropriate to use that as a starting figure for TwoTen's global Total Addressable Market (TAM) -  a starting figure because it excludes revenue sourced from schools, nurseries, mobile partnerships and special use cases. But still, that means our TAM is around only 0.1% of the market size derived above.

So while it's tempting to emulate those med-tech startups and use the big number, ours was always the more realistic and informative, simply because we can grow to dominate that dull figure, as all of it is expenditure on what we do (only we're doing it better, of course ;) ). On the other hand we would never, ever take more than a tiny fraction of that hugely cool first number, which includes spending on food, clothes, housing, primary and nursery staff wages, etc..

Similarly the med tech market size figure contains huge elements of expenditure that they can't expect to replace; nursing staff wages, medicines, food, power, buildings; so their figure might look impressive, their TAM is certainly smaller - and if they can't find a suitable analyst report, they're welcome to just apply our neatly calculated 0.1%.

Stopping PDF encryption hurting your productivity

Here's how to get around copy and paste issues with text from a protected PDF. No programming talent required (which is good, is not a talent I have...). Sharing this knowledge may put me in contravention of some anti-consumer law somewhere, I don't know, it's a weird world.

Scenario: my partner was working on updating a report, reusing and updating material from an earlier report produced by a colleague. This earlier report was only available as a PDF and it turned out this PDF had protection enabled to prevent copy and paste. Now, I could either let her manually type out the material (amounting to quite a few pages of text) or I could find a way around it.

Simple it turns out to be...


In summary: convert the PDF to an image and feed it into an OCR engine. With care on the PDF to image conversion, and presuming a decent font/typography in the original PDF, the resulting OCR output should be near 100%.

There's a bunch of ways this can be achieved, what follows is the process I used (which should be more or less applicable anywhere, but was done with Linux on my partners XPS15). You should be able to more or less cut and paste the following commands to achieve a similar outcome on your own machine, once you've got the right software installed (tesseract and ghostscript).

First convert the PDF to an image (the TIFF format was used here as the PDF was multipage):

gs -o /path/to/outputfile.tif -sDEVICE=tiffgray -r720x720 -g6120x7920 -sCompression=lzw /path/to/inputfile.pdf

Then run OCR software to convert the image to txt:



tesseract /path/to/outputfile.tif /path/to/ocroutputfile

Done. One text file, simply and cleanly formatted, containing all the text from the protected PDF. All DRM can be defeated this easily - if you can see it, it can be copied.

NB If in another scenario if you needed the final output to be more nearly a copy of the original PDF you'd need to involve OCR layout functionality - but much of that's doable with Tesseract by changing the output format to hOCR. And then, if you really wanted to, you could use hocr2pdf to recreate the PDF...

Thoughts for startups (no. 6)

"Nine-tenths of tactic were certain enough to be teachable in schools; but the irrational tenth was like the kingfisher flashing across the pool, and in it lay the test of generals."

 T.E.Lawrence, Seven Pillars of Wisdom

A quote from that Lawrence, from his book that became the basis of the film Lawrence of Arabia. This is as true now in a business context as it was then and now in military campaigns.

You can't teach that vision element of strategy; an MBA can give knowledge that helps prevent mistakes, to understand laws and financial accounts, and provide tools to help you analyse how the organisation or a team or a product line are performing, and how that performance might be improved; so much can be taught in an MBA. Maybe a good MBA can help you to execute

But what can be taught is Lawrence's nine-tenths; but you need the vision, the deep inner understanding of your company's strengths and weaknesses, of what your product will become, of your market, the future. You need the irrational tenth

Thoughts for startups (no. 5)

There's a fairy tale, made famous by being included in a Brothers Grimm collection, called The Brave Little Tailor. A very, very short version goes like this:

There was a little tailor and the flies are bothering him. He strikes out and kills 7 with one blow. Impressed with himself he makes a belt inscribed with this achievement

"killed 7 with one blow"

He encounters a giant who, assuming the claim on the belt means men, challenges him to a competition of strength. The giant squeezes a drop or two of water from a stone; the tailor squeezes a rock (a cheese) and gets more drops of whey; the giant throws a rock a long distance, the tailor throws a rock (a bird) which disappears into the distance, etc..

Various other things happen and eventually he beats some giants who are terrorising a kingdom and gets half the kingdom in return.

The appearance of a great achievement becomes a great achievement, once the tailor is given a chance. But right at the beginning it all depends on him presenting his achievements to date in the best possible light. Let's call this his traction...

Awesome is as awesome does

There's a thing going around that the number of companies that receive investment doesn't alter the number that go on to be "awesome companies". To quote:

“The tech industry creates roughly 10 awesome companies per year... independent of...how many companies are funded"

 Mike Maples, Floodgate Fund

Putting aside that this is a very Silicon Valley-centric viewpoint, it seems there's some confusion between the term "awesome companies" and "companies that create awesome returns within the VC fund lifecycle". They are not the same. A truly awesome company is an IBM, a Unilever, a Honda, a Beretta; companies that stand the test of time, continue to evolve and grow by adapting their products to meet changing times and changing customer demands.

The global tech industry almost certainly can and does produce more than 10 awesome companies a year. Some of those will not be VC funded (which means you're unlikely to hear of them because they won't be riding the hype wagon), some will be funded by funds that are not playing the short term (10 years is short term, it's barely one economic cycle; Beretta was founded in 1526), and some will take no more than a solid seed investment round or two to become serious businesses.

Clearly we are limiting the definition of awesome here to that of great monetary value, which leaves aside awesome tech companies like Mozilla and Wikimedia, but even so it is not important  for "awesomeness" to have become a billion dollar business in less than 10 years; this only matters to people who have invested at valuations upward of $50m and whose investment fund is time limited.

A seed round that values a company at a few million needs only to reach a valuation of $50m in a reasonable time (a) to have made a serious, awesome, return for its investors and (b) where that company has achieved growth while being profitable (rather than following growth strategies of the "seek users at all costs" variety), then the investors could be taking annual dividends equivalent to their original investment value.

Which is, surely, truly awesome.


A version of this post originally appeared as an answer on Quora

Thoughts for startups (no. 4)

Maybe this is more one for the investment community than startups as such, but here goes.

The problem with elections as a way of choosing who should lead is that eventually those who get elected will be skilled in the art of getting elected and little else

That is loosely what Plato argues in The Republic - that those skilled in the art of persuasion are best at persuading others to vote for them, and hence that becomes the key skill for those who want to be elected. The skills that would make someone valuable as a political leader post election are irrelevant, because that is not how they are selected.

There is the same risk with this focus on selecting which startups to learn more about based on a 3 minute (or shorter!) pitch. It is hard to say anything really informative in 3 minutes, and hard to select what of all the things you could say about your disruptive startup[1] you will include. The best pitches will be delivered by those who have become good at pitching, good at choosing which things to say and good at saying them in a way that gets people's attention. The startups that deliver the best pitches become the startups the investors talk to.

But being good at pitching is not the same as having a good idea, being good at solutions, being good at people and project management, being good at building a business; so the selection criteria is wrong. Using this as a filter means investors can't expect to get to talk to the great startups, the next Google; they should expect to get "like Facebook, but for people who drive red cars" and other non-disruptors, with a team that don't have the right skills mix to deliver a high performance company, but can pitch better than a professional standup comic delivers one-liners. And then don't complain that the "quality of startups" that are coming through the filter is poor; fix your filtering process.

I don't know what a good filter looks like. The accelerators could be, but they too are limiting their entry based on pitches, as well as other very limiting criteria (age range and geographic location, for example, for any of the residential ones). But for sure 3 minute pitches are only a convenient, time efficient filter; they are not a good filter.

[1] Obviously it's far easier to choose what to say if you have a non-disruptive startup, but those are not the ones that make the big returns, are they?