This article is the first chapter of The Entrepreneur's Journey, a collection of stories about startup companies and the entrepreneurs who built them. To continue reading about key startup themes and lessons learned, check out the entire series here in The Seraf Compass, or purchase the book on Amazon in paperback or Kindle format.
My favorite time of year in New England is early Fall. The heat and humidity of summer are gone, and the air is crisp and clear. Separating the cities of Boston and Cambridge, the Charles River is alive with sailors from several local universities and the Community Boating center. People jogging, biking, walking and enjoying the best of what Boston has to offer fill the sidewalks along the river. It was on just such an October evening in 1999 that I walked along the river mesmerized by the sparkling water and the Boston skyline. I was making my way to an entrepreneurship event at the Massachusetts Institute of Technology, better known as MIT.
About a year earlier, I left Advanced Visual Systems, my most recent startup. After a welcome break from the intensity of helping build a thriving company, I was looking to re-engage with the local tech community. MIT, recognized as a hub for innovation and entrepreneurship, hosts hundreds of tech events open to the public every year. Thinking back on that October evening, I was certain I would hear some provocative presenters speaking my favorite language, entrepreneurship.
Leaving the banks of the Charles River, I walked down Massachusetts Avenue to the main entrance of MIT. Like most universities looking to impress visitors with an architectural flourish, MIT’s main entrance has an unusual feature called the “Infinite Corridor”. This corridor is an 825 foot long hallway connecting several of the main buildings on MIT’s central campus. Twice a year, the direction of the sun’s rays aligns perfectly parallel with this hallway. The sun fills the corridor with light from end-to-end, resulting in a mini celebration of the university’s own “MIThenge”.
As I walked along the Infinite Corridor, I looked for signs to Room 10-250, the location for an evening event. MIT is well known for its somewhat nerdy approach to things. The naming convention for classrooms, offices and buildings is no exception. So, as you would expect, on the second floor of Building 10 you will find Room 10-250. The room is an especially easy lecture hall to find since it’s located under MIT’s iconic dome.
As I arrived outside the room, the hallway was abuzz with activity. Hundreds of would be entrepreneurs, students, and faculty were writing their names onto badges, and then making their way into the lecture hall. Finding a seat near the back of the room, I settled in for my introduction to MIT Enterprise Forum 10-250. Yes, the event was actually named “10-250” after the room it was held in… a perfect example of MIT logic at work.
Several MIT alums, looking to help colleagues and friends with challenges faced starting new companies, founded the MIT Enterprise Forum (the Forum) in 1978. Today, the Forum has twenty eight chapters located all over the world. And, in their words, their mission is:
“We inform, connect, and coach technology entrepreneurs—enabling them to rapidly transform ideas into world-changing companies. We are a global network of local organizations, inspired by MIT, and open to the world.”
The Forum is just one of many organizations launched at the university focused on helping entrepreneurs build successful companies. Arguably, MIT is the most prolific university in the world when it relates to entrepreneurship. Naming successful companies with an MIT affiliation is, of course, far too long to list, but some of the more recognizable names include storied brands familiar to most: Bose, Zipcar, Dropbox, Hewlett Packard, Raytheon and Qualcomm.
Back in 1999, many considered the Forum’s 10-250 meetings to be the premier events held by the organization. At a typical meeting, two companies would present their business plans to a small panel of local venture capitalists and industry experts. The companies were young businesses. Most had a product on the market and some early revenues. After a fifteen to twenty minute pitch, the panelists would provide feedback to the entrepreneur. Once the panelists finished with their comments, the meeting opened up to feedback and questions from the audience. Sitting in on one of these 10-250 events was highly educational, much like sitting in on a case study lecture at a top business school.
What impressed me most was the constructive feedback delivered to the entrepreneur. Since the VCs weren’t there to evaluate the company for an investment by their funds, they were willing to be very open and supportive with their comments. In other words, they told it like they saw it. Same with the audience. They were all there to learn, and when they could, give actionable guidance to the entrepreneur. That evening, I began my journey in learning how to listen to investor pitches, evaluate what I heard, and provide helpful commentary to the presenting team. I wasn’t an angel investor just yet, but in another year I would be. The Forum helped me build the skills I would need to succeed in early stage investing.
On that October evening, there was an older gentleman sitting a few rows in front of me. He had the look of a retired MIT professor with his rumpled tweed jacket and disheveled hair. Halfway through the audience participation section of the meeting, he raised his hand to ask a question. His question went something like this:
“In the early days at your company, what percent of your company’s resources did you apply to building a product and what percent did you apply to speaking to customers?”
Having spent time earlier in my career in a product management role, I immediately understood the significance of his question. Experience has taught me that too many entrepreneurs come up with a solution to a problem only to find out the solution isn’t interesting to the customer. If you don’t invest significant time in the early days of your business learning your customers’ needs and desires, you are most likely doomed to fail.
For example, before Christopher Mirabile and I hired a single engineer to build our portfolio management platform, Seraf, we spoke to dozens of potential customers. And, since we would use Seraf to help us manage our own investments, we brought deep personal insight to the challenges faced by our target customer base.
By getting out of the office and meeting with prospective customers, we discovered the answers to two very important questions all companies need to know before they embark on the costly path of product development and product sales. First, what core capabilities does your product ‘need to have’ before customers are willing to use the product? Second, how much are they willing to pay for your product? Our in-field market research served us well in guiding us to the answers we needed before we launched our product development efforts.
In answer to the question posed by the Forum audience member, the entrepreneur rambled on for several minutes about how complex his product was to build, and why he had to apply most of his resources on the engineering team. Yes, he agreed, talking to customers was important, but he felt customers often don’t really know what they need.
I remember the rumpled academic’s constructive response to the company founder. “I believe you have it backwards. In the early days, you should spend double your resources on speaking with customers and understanding their needs versus what you spend on building your product. Put yourself in their shoes so you will have a better idea of their top priorities.”
And there lies the heart of one of the biggest problems faced by startups... most people aren’t interested in your product. Too many entrepreneurs go off in a misguided way to spend, or worse, collect and then spend precious resources building something very intricate and elegant that no one is asking for.
One of the biggest challenges faced in the startup world is “Finding Product-Market Fit (PMF).” To achieve PMF you need a very strong and unique value proposition for a very specific customer. Marginal savings on a marginal cost is not enough to get customers to leave their good enough and familiar solutions. You need to find real customer pain for your product to be a priority with a large segment of customers.
Success in the world of startup companies is elusive, and can take repeated efforts. In this theme we explore the stories of two companies who eventually get it right after multiple attempts trying to meet the needs of their target customer. And, we recount the journeys of two companies for whom success remained just out of their reach.
Over the next few years, I returned to MIT on a monthly basis to sit in on the Forum meetings. My newfound colleague, the rumpled academic, was frequently in the audience. He never once failed to ask his question about talking to customers. The audience never tired of his coaching the entrepreneur to get out of the office and spend more time speaking to prospects. And, I will never forget the important reminder he gave me: you must understand your customer.