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%.

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...

Thoughts for startups (no. 1)

Thomas Paine, British-born philosopher, French revolutionary and US founding father wrote any number of useful sayings, but I think this one is particularly apt for anyone trying to start a business that's on the leading edge:

"Perhaps the sentiments contained in the following pages, are not YET sufficiently fashionable to procure them general favour; a long habit of not thinking a thing WRONG, gives it a superficial appearance of being RIGHT, and raises at first a formidable outcry in defense of custom. But the tumult soon subsides. Time makes more converts than reason." 

Commonsense, 1776

So for our startup, TwoTen, getting people to see that "family protection" when it comes to Internet filtering makes no sense, because age-appropriate is utterly not the same as "not adult". Not so much a formidable outcry, but definitely some denial - though the same people would object to film certificates being changed to simply "adult" and or not.

Thanks to Alex Kablanian for prompting this post.

What we can learn from monkeys (part 2)

If, the saying goes, you take enough monkeys and typewriters then given enough time it is statistically probable that they will reproduce the entire works of Shakespeare. Not a word or a phrase at a time, but each play as a coherent whole. The chance of the letter "n" being pressed, out of the 46 keys on our typewriter, is 1/46, the same for "o", the same for "w", for " "[1], for "i","s"," ","t","h","e"," ","w","i","n","t","e","r" and so on until we get the complete and excellent opening line of Richard III:

"Now is the winter of our discontent made glorious summer by this sun of York"

The probability of this occurring with just one monkey is 1/46*1/46*1/46 and so on for the number of characters (76). To be more specific, the probability of creating just this first line is

1 in a number far too big to even write out in normal numbers (46^76)

Hmmm. Ok, to bring it down to numbers worth writing out, let's just look at the first two words "Now is", a total of 6 characters, which the chances of one monkey randomly tapping out is

1 in 9,474,296,896 (making the odds of winning the UK lottery jackpot of 1 in 13,000,000 seem positively likely!)

But with enough monkeys and enough time it becomes more and more likely that not only will one them tap out those opening 6 characters, but also the opening 76 characters, and even the all of the large number of characters that is Richard III, all the rest of Shakespeare's surviving plays and even the lost ones (although I'm not sure how we would know the lost ones had been correctly typed out...). By combining an infinite number of monkeys and typewriters, it would not be statistically significant that the monkeys produced the complete works; if you started with nothing and in 6 weeks someone delivers a typewritten manuscript the fact that infinite monkeys were involved means that statistically it would be not unlikely i.e. not *mathematically* improbable that the manuscript has been produced by pure random chance by a bunch of monkeys with typewriters.

Arthur looked up. "Ford!" he said, "there's an infinite number of monkeys outside who want to talk to us about this script for Hamlet they've worked out."[2]

So here our ever helpful monkeys are helping teach us something about statistics; that they are a dangerous source of truths. While not mathematically improbable, this truth is heavily dependent on a few highly unlikely things, like having an infinite living space in which to house infinite numbers of monkeys with their typewriters.

This becomes even more of an issue when numbers turned into statistics to be used by politicians and news outlets and those others with an agenda, who all too often mistake correlation for causation, using statistics to demonstrate why some new policy or other is needed or why a current one should be changed, when (1) not understanding that statistical significance is mostly about having, or assuming, the right amount of monkeys and that (2) the fact that two measurements correlate does not mean one caused the other. News outlets in particular also have a tendency to reproduce statistics as the agenda-pusher would have them reproduced "the murder rate in the country has gone up 10%" (was 10 in year 1, 11 in year 2); the same numbers could just as easily, and probably less misleadingly, have been reported with a more qualitative statement such as "the murder rate in the country was stable".

It is this misuse and misunderstanding that help give rise to the saying "Lies, damned lies and statistics"[3]; but everyone is at it. Internal "news outlets" (news inlets?) are equally prone to misleading messages of the types "90% of users rate the IT support service as 4/5 or higher", which is more precisely reported as "of the people who got around to filling out the satisfaction survey when their helpdesk ticket was closed, 90% rated the service as 4/5 or higher". A statement that would be further informed by the information that the survey defaults to 5 and you have to change it to anything lower; then take into account such truisms as people are more likely to complain than praise. Eventually a qualitative statement would work out to be more useful "the IT support service is making very few people angry", which if new software is being rolled out is good news indeed!

Qualitative statements are seen to carry less weight than ones laden with numbers, which in organisations is probably the fault of the CFO; this seems ironic, given the quantity of assumptions and informed guesswork that is the basis of corporate accountants...

In the end remember this: statistics just provide information in a numerical form. What it all actually means is a matter of interpretation. In other words don't be mislead into believing the numbers are not just another qualitative measure...

[1] Although surely the space bar is so much bigger it would be more likely to be pressed? Damn these complications and assumptions...
[2] Douglas Adams, The Hitchhikers Guide to the Galaxy, with a little help from the Improbability Drive
[3] Said by someone, some time in some form: http://www.york.ac.uk/depts/maths/histstat/lies.htm