SocialBias :: a Digital Abstraction of Michael Parkatti

Post #4 is up at The Globe & Mail Technology site.  Full text below:

If you read Jessica Livingston’s book about the narratives of past successful startups, Founders at Work, you realize that perhaps the most common underpinning of any entrepreneurial success is perseverance. Expecting the unexpected graduates from a trite cliché into an everyday reality.

What kinds of things can you expect to go wrong? First, this week my computer decided to start crashing on a bi-hourly basis. I wanted to blame the hardware, but after some trouble shooting I realized it was because of the operating system I was perhaps defending beyond a reasonable doubt: Microsoft Vista.

Do you:

• a) send it back to the manufacturer and perhaps lose 3-4 weeks of productivity
• b) listen to the fanboys and finally buy a Mac
• c) wipe your hard drive clean and install a distribution of Linux, the free open-sourced operating system, and make it work?

If you are a cost conscious entrepreneur, the correct answer is c). I lost a couple of days setting it up, but I’m actually quite happy with my installation of Ubuntu, a user-friendly Linux distribution. Once you make the plunge, you realize that there is an open-sourced alternative to any commercially available software.

What’s another thing that can go wrong? You could have your laptop bag stolen from the subway, which is what happened to one of my housemates this week. After spending a day spent hounding it down, he realized that it probably wasn’t going to turn up. One trip to the Apple store and $1299 (U.S.) later, and he’s the proud owner of a MacBook that he didn’t exactly ask for. Imagine every file you’ve ever worked on suddenly disappearing at the exact moment you needed them most. It’s just another thing to deal with.

Probably the most unexpected thing we’ve had to deal with this week is a significant and material change to our product idea. Did I mention that there are only six weeks left to finish it before the three Demo Days in mid-August where we make our pitch to investors?

We were planning on launching what we had built some time this week. After four weeks, the site was almost completely built — it was simply waiting for some final testing before being pushed live.

When we started using our website, a couple of things occurred to us. Firstly, we weren’t in love with what we had built. When you’re not passionate about your product, it’s something that you can’t ignore.

Secondly, our product didn’t have a clear business model. One thing Mike and I agreed on when we started this process was that we didn’t want to create a website entirely dependent on mass amounts of page views and advertising dollars to succeed financially. I think some web entrepreneurs have the golden ticket mentality, where they build something fun and hope the world flocks to their door without having the slightest idea of how to make that product into a sustainable business.

If I have to choose between building a website that could only succeed through a speculative acquisition or building a website that could potentially sustain itself through offering a clear value proposition, I would choose the latter. And that’s exactly what Mike and I have done.

Our previous idea was simply proving an interesting hypothesis. That’s something that one of the early speakers told us to avoid — specifically, working on a research project and not a business. You have to ask yourself:

• 1) what does this website do
• 2) how could that activity make money?

Without a clear answer to number 2, how can you say that you’re building a business and not a research project?

It’s much too easy to delude yourself while answering these questions. The easy answer to provide someone when they ask about your business model is to say that you’re exploring many different future avenues to revenue, including advertising, subscriptions, micro-payments, referral fees, freemium, etc. In reality, you need to plausibly equate one activity on your website into a direct route of accepting money.

Business isn’t a game, and I think some web entrepreneurs treat it that way. Your investors’ money shouldn’t be used to prove your own personal hypotheses — if you don’t have a solid idea about what your product actually does and why it’s valuable, you are setting yourself up for a massive failure.

We realized that one specific aspect of what we were building was more compelling than the whole. Distilling that one thing into an idea seemed to make a lot of sense. It’s given our product more focus, flexibility, and makes it more valuable as a stand-alone piece of software.

This also has the effect of transforming our company’s identity from a consumer website into a productivity web application. Instead of launching our site and hoping for the best, we’re going to launch a product we can sell. The key performance metric instantly changes from traffic to dollars.

In the end, which would you rather have?