The estimated reading time for this post is 9 seconds
Video interview with Bjoern Herrmann. Bjoern is the 26 year-old founder of the Startup Genome. One year ago he & his team set out to find a scalable way to accelerate businesses across the world. After releasing two research reports on success &
failure of startups that were downloaded 25,000 times he most recently released the first software product that is best described as a virtual mentor for now more than 13,000 software businesses. The published research has been adopted by more than 50 universities globally -including Stanford and Berkeley. Harvard Business School Professor Thomas Eisenmann called the findings an important contribution. You can try the product at Startup Compass Genome and learn more about the research at their blog. Before, Bjoern founded and led 4 for and nonprofit ventures in Germany, Bangladesh & the US. He also worked as an executive in Russia for one year for a mid sized marketing company. His personal passion or “leitmotif” is: unleashing human potential. His higher purpose is to strive to maximize the capitalization of every single individual. You can find Bjoern on Twitter @bjoernlasse
Transcript follows & video below.
As you know I’m totally a fan of Startup Genome Compass & I’m so, so glad that you guys have included the gender piece in that because I think it is so important to get some information about female startups & benchmark those as well. However I’d really like to know how you set this business up? What was your motivation? What’s your story behind this?
It all started about a little bit more than a year ago. At the time Max had already done a lot of independent research with Steve Blank in Stanford & had laid some of the foundation for what Startup Genome became later on. I’d just finished my last startup & we started chatting. We’d already known each other for a while. One of the things we were both very inspired by was the global explosion of entrepreneurship. Everywhere you could see startups popping out of the ground. It became so cheap to start companies. Even in Siberia or the middle of India, somewhere you have companies starting. And those by the way, even in Russia or India have huge impact on the local economies. So you have a lot of people that were working there, they were growing. So they significantly contributed to outgrowth & development of the local economy. However many of them failed very early on. So you had a huge failure rates & mostly because of self destruction rather than competition. It was mostly because they were companies that did mistakes that were avoidable. That’s when we started thinking, well what are the ways that we could help those companies be more successful in a scalable way. We were pondering with different ideas. Is it more people driven, like McKinsey for Startups or is it something that is more driven by software? Then we decided to go the software route & ended up with the Startup Genome Compass which is now a fresh product, but had done a fair amount of research to get there. We are still putting out a lot of our findings in order to help the ecosystem globally to prosper & to learn from the mistakes & successes of other businesses.
Ok. What have you discovered? What are the chief findings that you’ve discovered?
I think the chief finding is that most small to medium size businesses that are in our data set struggle the most with uncertainty. So their biggest problem is that they don’t know what are the right acquisition channels for me. What’s the base line? My costs for those acquisition channels? What’s the pricing that I should choose? Should I hire more people? A lot of every day questions, decisions that if they do them wrong, they might die! We found that we’ve translated this uncertainty which was fairly undefined into a concept which we call premature scaling. This concept basically describes that a company should only execute on certain things after they’ve validated that customers actually want what they think that they want. So for example, I built a new foto sharing app & I want to see that people actually want this. After validating with a number of customers that they want this, that’s when I start spending some money on customer acquisition or doing some PR. But not before this. I also don’t start hiring a lot of people before I’ve validated that actually anyone is interested in this. If people start doing this however, we call this premature scaling. This can happen in multiple different areas. So this is how we package & assess this uncertainty & based on this create a benchmark & action recommendations so a lot of people overcome this uncertainty. I think one of the key learnings for us, looking at how companies are more successful is very simple. The more & the faster you learn, the more successful you are. I think that’s really the key message because what helps you to overcome the uncertainty is learning more & learning faster. Knowing more about your customers, knowing more about your team, about your market, everything that is required in order to make this business successful.
Are there actual or pragmatic steps that we could do to action that result?
Yeah, we published 2 reports (link here & here ) that describe a lot of the key learnings & give you specific recommendations. Then we pushed out a fresh product that’s called Startup Genome Compass which is @startupcompass.co There you can assess your company, you get benchmarked & we give you a number of recommendations that you can use in order to be more successful. Specifically those recommendations could be: ‘Your conversion funnels are really bad. You should stop spending money on customer acquisition right away.’ or ‘Your conversion rates are really, really good. You should start spending much more money on customer acquisition because you should grow otherwise
someone else will do this.’
That immediately adds value to a startup to get that sort of overview, right?
Yeah & you can also use it as a way to get your stake holders on the same page & the team to show them this is where we are today, this is where we want to get to, now everyone let’s focus on just one problem. Or I can do the same thing with my investors & I can get them on the same page & help everyone to pull on the same string & not to give everyone recommendations based on their own version of the truth.
Now the reports come out of the information they put into the questionnaire?
That’s based on algorithms that you guys have put together, correct?
So here’s my question, because I guess I’m on the interface of humans & technology all the time, interviewing people. I wonder how you can also bring some human support or back up to that because algorithms are often
quite generalized, correct?
Of course, the algorithms are definitely not the same as having a human sitting there, working with you. But we’ve found that it’s a good way to first of all help you with a lot of everyday decisions. But then also to work better with your mentors. Many times today a mentor comes in once a month & first you have to get them up to speed & then many times they will miss out on certain things. Now you can just give them one report that gives them right away an image of the company. The image is in context by comparing you to your peers. It doesn’t just say 5,000 users it says 5,000 users & this is really awesome. Then based on this the mentor can say well it seems like user growth is not your problem, but maybe on your hiring side you have a problem? And this is where I can now help you to make a difference.
So it’s free for startups to sign up & I would gather then from my understanding of what you’re saying is that it might be helpful for startups to keep going back to put their information in at certain phases of the startup? Would that be correct?
And is that taken into account in your algorithm?
Yeah. So we’re looking at gathering more long term data which will allow us to give much better benchmarks & recommendations. We will also start implementing ways to collect data in an automatic way which will make it much easier. Right now you have to spend 45minutes just to get started. The goal is to reduce this time a lot by making it much easier.
Is there a continuity, so if I sign up with my startup tomorrow & I come back in 6 months when my startup is in a whole different place, is there a way of connecting my information that I’ve already signed up.
Yes we already do this partially but there is a lot that we can do definitely much better at leveraging those 2 data points & understanding the growth that a company goes through. And based on this actually give you much more value than just another snapshot of you that is comparing you to your other peers.
Incredible potential in that, really! Fabulous, you’re doing great work! And it’s so great that you’re doing now the gender piece. Have you managed to glean very much information? I’ve definitely been sharing it everywhere & we’ve had some great articles.
Yes, yes I saw it was great. And the gender piece is something that we started looking into & we have 4 researchers that we have from different Universities that are helping us to crank out a number of reports. So we get some support there. We are still also looking for good people who are interested in contributing to the research. On the women’s side, it will be very interesting generally. I told you a while ago, in general we see that there’s not such a big difference between the performance of companies that are led by women than to men. There’s some differences in the characteristics but generally it’s pretty much the same. So if someone decides to start a company, you’ve a fairly equal distribution in their performance. So I think one of the things that we will be able to contribute to overcome this myth of prejudice & to just show that if someone decides to start a company, you have always good & bad ones. But there’s as many good women entrepreneurs as there is men entrepreneurs.
Of course, I guess if you’re crazy enough to be an entrepreneur, it doesn’t matter what gender you are!
Fabulous. Look thank you so much & I really will support your work as much as I can. I think it’s fabulous & I’m sure it will really help the community. Thanks again for your time today Bjorn.
You can view the collaborative post with Startup Genome Compass @ Defining the X chromosome: the DNA of Women Led Startups & on Startup Genome’s blog