How To Grow Your Startup With Rapid ExperimentationLessons from a self-funded startup that grew through rapid experimentation.
ByRoss Cameron•
Key Takeaways
- There are two sides to having investors: their money does offer the potential to grow faster. But it also creates drag.
- In business, we must be willing to take risks, but we must also cut losses quickly.
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Many concepts get pounded into us from well before we're entrepreneur cubs. One example is: "Money doesn't grow on trees, so be careful with it."
Later in life, we learn about the wonders of leverage. In business school or elsewhere, we're introduced to the seductive benefits of bringing on lenders andprivate equity partnersto accelerate our dreams.
If we need to be careful with our own money, we learn that we better be doubly careful with others' money. We're continuously answerable to them, and they can sink our business.
When building Warrior Trading, I instead chose theself-fundedroute. I had been subject to anxiety attacks since I was young, and the last thing I needed was to skyrocket my anxiety by worrying about investors.
There are two sides to having investors: their money does offer the potential to grow faster. But it also creates drag. Startups funded by investors can find it difficult topivotand change course when needed. To me, self-funding has equaled freedom. Working within the constraints of my limited funds gave way to resourcefulness, creativity and innovation.
Related:How Entrepreneurial Creativity Leads to Innovation
Creating a culture of rapid experimentation
In my startup, I created an engine of rapidexperimentationto find products that matched demand in the active trading community. I had to be smart about where I invested my time and money, but I knew that quick experiments and quick decisions could lead to quick progress.
SaaS世界的概念minimum viable product。That implies a deliverable, an "alpha" or "beta" test that's at least semi-packaged for others' consumption. I take the concept further: When I start to develop a product, I want to see the most primitive product that performs at least one new function. You might call it "most primitive improvement."
I'll caution that rapid prototyping is not for everyone. You need a team accustomed tobootstrappingand thrives under that pressure. Of course, there is no other option for the self-funded startup. So, it comes down to assembling the right team for your company.
Related:What I Wish I Knew Before Bootstrapping My Startup
How rapid experimentation gives way to product iteration
My team engages with developing new products by testing a thesis. We have a belief based onconsumer behaviorand looking at the marketplace that there is demand for a specific product. We begin the development of that product, but instead of keeping it hidden until it's perfect, we put customers into beta testing as soon as it meets the standard of "most primitive improvement".
Here's something really interesting. Every single time we've done this, we getfeedbackfrom beta testers that we didn't expect. Whether it's a common request for a feature we overlooked or an element we thought would be highly valued but is not being utilized at all, we can quickly take this feedback and roll it into the next release.
I find this process especially exciting. One might even say, thrilling.
The final product will often look and feel much different from our initial mockup, but that's a good thing. We will have created a product that is an exact match for our target customer.
Throughout my years in the investing space, I've seen companies backed by investors spend incredible sums of money building platforms that sadly completely missed the mark in terms of delivering what traders are really looking for. I believe this happens when development occurs in isolation from the intended users.
But truth be told, rapid experimentation does not always lead to a success story.
Rapid experimentation helped me pull the plug on a doomed project
A few years ago, I wanted to see if it was worth starting a free service for traders similar toTwitch; in other words, a platform where people can easily stream their trading activity but where they're in a tighter community of active traders. We got a few dozen people streaming at first, and they, in turn, had modest followings. But it didn't take long for me to come to a difficult conclusion. Twitch and YouTube are successful because they attract a massive audience, attracting advertisers.
My new platform was too niche. Even though it was free, our total available market was too small to bring in the advertising revenue we needed to keep that platform running. No amount of product iteration was going to change these dynamics, but the good news is that I was able to pull the plug while we were still in the early stages of development.
I wrote off that project as a loss. But everyloss is a lesson。在硅谷有一种说法:你不勒arn until you ship. I would expand on that to say: Ship fast. Fail fast. Ship again. Just like in trading, in business, we must be willing to take risks, but we must also cut losses quickly.
A few takeaways:
- Think hard before seeking external funds for your venture.Self-funding doesn't earn commissions for anyone, so you hear less about it, but it can potentially take substantial pressure off you.
- Focus on ROI, but also focus on ROT: Return on Time.Rapid experimentation, along with rapid decision-making, can not only save money but can gain you a first-mover advantage. You can be on version 4.0 — or be done with an unworkable experiment — before the competition has finished suiting up.
- Be proud of the money you raise and even prouder of what you rapidly ship.Many fortunes have been made with external capital, but even more great, young businesses have been snuffed out by the constraints and risk-aversion that the capital brought. By all means, do a round of high fives if you close a round of financing. But save your biggest celebrations for when you rapidly confirm your failed experiments and ship your newest winner.
