Seedcamp is the first startup accelerator created in Europe and is based in London. Since 2007, it has specialised in accelerating innovative early-stage technology companies. It provides startups not only with training and mentoring, as many accelerator programs do, but also with the first venture capital (£75-200k) to test their business model.
A large part of the 430 start ups that Seedcamp invested in to date, no longer exist because they could not find a business model that would allow them to grow rapidly. But among these 430 start ups, there are seven "unicorns".This is the name given to the companies with a valuation above the"mythical" one-billion-dollar mark, such as Hopin, Wise and Revolut, which received their first investment from Seedcamp. Investors who entrusted their money to Seedcamp's management between 2007-2019 saw their funds multiply 7.1 to 9.5 times. Not bad. Seedcamp's investment model is high-risk, high-return, and it works.
Seedcamp is looking for interesting startups across Europe. In May 2014, in the middle of the economic crisis and while the Greek startup ecosystem was still in its infancy, Carlos Espinal, Seedcamp's manager, visited Thessaloniki to get to know the city's start ups. His visit was an initiative of George Gatos, organizer of Open Coffee Thessaloniki, which since 2007 has been the meeting point of the Thessaloniki start up community.
During his visit, Espinal ran a workshop on the typical mistakes made by founders of innovative businesses, everywhere around the world. Mistakes that almost all first-time entrepreneurs -regardless their age-, but also experienced entrepreneurs with previous successes, fall into. Mistakes to which we are all vulnerable, due to human nature. It is the job of those who invest in early-stage start ups, such as Seedcamp, to discern the founders who are less prone to these mistakes or who learn faster than usual. In the early stage of a startup, when there is no track record and growth indicators yet, there is nothing else that matters more to an investor.
What are these critical mistakes? Choosing the wrong partners? Not clearly defining obligations and expectations between partners? Not setting the right goals and schedule? No, it is none of these. Because what's the point of doing all these things right if we're building on the wrong foundation?
1. We fall in love with our idea, before we confirm itsmerit
2. We imagine needs instead of eliciting them frompotential customers
3. When talking with customers, we sell, rather than askto learn
4. When we ask, we ask the wrong questions
To open our minds to this problem, Seedcamp trainers recommend a short but excellent book by Rob Fitzpatrick called "The Mom Test", subtitled "How to talk to customers and learn if your business is a good idea when everyone is lying to you".
The first thing an investor or advisor asks to early-stage founders is what have they learned so far from their potential customers. Almost always, the answer is "I asked them if they liked the idea and they said they would buy."
Many people advise not to rely on your mum to tell you whether your business idea is a good one. Valid advice, but in complete. Better not to ask anyone if they think your idea, is a good business idea. At least not in those words!
"What do you think of my idea?" is a bad question that invites acquaintances and strangers to lie to you. When the conversation starts with a description of your idea, you will push your own people to protect your feelings. Your mom, for example, cares about you and is willing to lie to anyone, even yourself, in order to protect you. The same goes for friends and co-workers, who want to protect your relationship. On the flip side, lies are just as ready to be told by those who are not your people. Any stranger, as long as they don't commit in a way that costs them money, time or reputation,will tell you that your idea is great, if that's what you were ultimately asking to hear.
It is our responsibility, as entrepreneurs, to discover the truth about where maximum value lies. And the only way is by asking good questions. Questions that even our mom couldn't answer by lying.
To have conversations that pass "The Mom Test," Fitzpatrick suggests:
1. We talk about the lives of the people we are facing,not our idea.
2. We ask about specific things that happened in thepast, not general opinions or possible future events.
3. We talk a little and listen a lot.
Ultimately, the best way to find out if people are really interested in oursolution/product/service is to delay talking about it, as long as we can. At least during the first conversation. Attention: The point here is not about secrecy to avoid having the idea stolen from us (an anxiety that first-time entrepreneurs suffer from often, and almost always unfairly). The point is to not lead the conversation.
Fitzpatrick gives examples of questions that lead to useful conclusions and others that don't help at all.
· "Do you think it's a good idea?"
· "Would you buy such a product?"
· "How much would you pay?"
· "What features would your dream producthave?"
The above questions lead to answers that are misleading, because they start with the founder's vision and end with a guess about the future. The potential entrepreneur becomes increasingly convinced that he or she is right about an opportunity that may not even exist. In the end, he may end up wondering why no one (not even his mom) is buying what he created, when he was so methodical in his market research.
· "Tell me about the last time this happened."
· "Tell me about the process/steps you arecurrently following".
· "How many times has this happened in the past Xamount of time?".
· "What were the consequences?"
· "Where does your solution need improvementtoday?"
· "Why is it important?"
· "What is this costing you today?"
· "What other solutions have you tried in thepast?"
· "Have you already budgeted for an expense to finda solution?"
· "Who else should I talk to?"
· "Is there anything else I should ask?"
Youwill have noticed that none of the useful questions are about what the newproduct should offer. As Henry Ford, the creator of the mass-produced car industry, used to say, "If I had asked people what they wanted,they would have said faster horses."
People(usually) know what they need, but not necessarily what the ideal solution would look like. That's the job of the entrepreneur to suggest.
The only foundation on which to build a business with rapid growth potential -what we actually mean when we talk about "startups"-, is a deep understanding of the customer's needs, desires, priorities and constraints. Creating a solution that innovates and out performs as an alternative, is the next step. And the only way to get that foundation early on is to ask the right questions.