Digging my own Ditch

I’m delighted to announce that on Monday May the 12th I became a father for the first time.

Hallam Rogers was born in Kingston General Hospital at 2144. Both mother and baby are doing well.

As you can see, he’s already an Aroxo fan!

 M.

A friend of mine mentioned something to me recently. He commented that a site he works with recently changed the text on their registration button from “Register here” to “Register for free” and, as a result, registrations shot up.

That really blew me away.

Clearly pretty small decisions can have an enormous and disproportionate impact.

This got me thinking and something else occurred to me, namely how a similarly small decision caused by search engine spam created the Web 2.0 phenomenon.

Back in January 1996, Page and Brin were busy building a new search engine. One that we now know as Google. Their starting point for this adventure was fixing the problem with the other search engines: that their search results were not very accurate.

There were two problems, firstly the search engines were happy to take payment from companies who wanted to appear in their search results and secondly the order of the search results was both arbitrary and easy for spammers to fool.

Companies which wanted to appear in the search results would just stock up their pages with the search terms they were interested in and, voila, in came the traffic. The problem was that the people using the search engine didn’t find what they were looking for. The existing search engines basically weren’t working.

This is where Google came in, they calculated the search engine positions by looking at how many other sites linked to the page, the text which the user clicked on, and how popular the referring page was. They built Google like this because (at the time) this had not been spammed.

This technique worked, web users were suddenly able to access the pages they were looking for and Google became massively popular. What also then happened is fascinating.

This decision encouraged genuine content producers to generate inbound links in order to get access to Google’s traffic. It drove more and more linking on the web, and instead of people getting annoyed about losing control of their content, they loved it. It drove greater sharing,
communication, and integration – the bedrock of Web 2.0.

This, small architectural decision has had a massive impact on the web, both its utility and its social impact.

I wonder whether Page and Brin considered this when designing Google?

Aroxo recently turned a major corner in its development, we moved from closed functional testing to using real live alpha testers, people who’d never seen Aroxo before.

Without doubt, this is one of the most revealing, painful, and valuable stages in creating your start-up, so I thought I’d blog about it.

When launching anything you want ensure that not only does it work, but people find it easy and natural to use. Your own functional testing should cover the first objective, your alpha testing should cover the UI.

At Aroxo we’ve employed four different techniques to get the system ready for launch:

Not only is each stage different but you get different learnings from it. I discuss each stage below.

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A really effective way of boot-strapping your start-up is to off-shore and out-source your development. But doing this also carries risks, how can you be sure that you are going to get a developer who’ll see it through and has the right experience? This post lays out an effective process to find the right developer.

From starting the search, to the first developer writing code should take around 3-5 months and there may be further delays whilst you complete your documentation. In this article I’ll talk you through what you should be doing at each stage, and what the objective of each stage should be. Here’s an overview of the process:

1. Build a long list of development companies
2. NDA all the companies on the long-list
3. Issue a Request for Information (RFI)
4. Analyse responses and short-list the developers
5. Issue a Request for Quotation (RFQ)
6. Analyse responses and select a preferred vendor and a spare
7. Negotiate contract with preferred vendor
8. Commence development based on your documentation

This is a long process, and therefore I’ve split it up into 4 sections, these will be posted each week for the next four weeks. Any regular readers can relax – the whole lot has been written in advance, so there won’t be any 1 month gaps in between!

Finding a great development company is one of the most important decisions your company will make. Changing developers mid-way through a development is near impossible and so it is important that you select a company which you are confident has the ability to see it through. The purpose of this 8-step process is to stack the odds in your favour by finding out as much as possible about the development company before you sign the contract.

At several stages I’ve included sample documentation to give you more guidance on what should be included. You can download these examples from the documentation bank on Aroxo.

Before we start, one word of advice. Running a vendor selection process will involve giving a large number of developers bad news (and only one company good news). When I first started doing this I found the process of giving bad news quite unpleasant. It is, but it is still important to do it. Vendors are used to receiving rejections, so they tend to take it more easily than expected and I also find that giving the bad news, along with some personalised feedback is always much appreciated.

Step 1 – Build a long-list

Before we start populating a long-list, it is worth spending a few minutes getting properly organised as running a vendor selection process involves a lot of time, organisation and communication. I find it easiest to run these off a spreadsheet which we’ll develop going forwards. There’s a sample vendor dashboard included in the documentation bank.

Building a long list involves populating this dashboard. The aim is to get 20-30 companies into the dashboard that satisfy your broad requirements for the type of system you want to build. You want to make sure that each company has:

1. Experience in building the type of system you’re looking for (if you think your system is entirely new, it almost certainly isn’t, there will be parallels which you can look for, even if those are purely functional elements)
2. Experience working with start-ups
3. Offices somewhere in the world you are happy doing business
4. Experience in the technology you want your system built in (if you don’t have a preference, then ignore this)

By far and away, the hardest of these objectives to meet is the first. You may need to contact many companies to determine whether they have built a similar application to the one you’re looking for.

In order to find companies, there are a few tricks you can employ:

1. Use your network – ask anyone you know who works in the software industry for 2-3 development company recommendations
2. Use referral companies to provide connections and act as a filter
3. Use associations to help pinpoint development companies
4. Use tools like eLance, Scriptlance and Rentacoder to find developers
5. Use Google to help find companies
6. When you’ve found a company you like, do a reverse search for their homepage on Google to see if they belong to any associations with links to other companies

You may need to look through a large number before you’ve found 20-30 companies which can meet the 4 requirements set out above.

Step 2 – NDA everyone

You’re a start-up (I’ll return to this point later), so an NDA offers no protection. If you’ve got funds to sue a company then, frankly, they would be better spent fixing the mistake with a new developer. However, it is still essential that you NDA all the vendors, even though you are not going to be providing them with any confidential information (other than of your existence, just yet).

First thing you’ll need is an actual NDA. There are plenty you can download for free on the web, so I’ve not provided one. Read it to make sure that you are comfortable with everything included in it. If you’ve selected a lawyer at this stage, ask them to provide an NDA, but don’t pay them to write out a new one.

Email it to all the developers on your long-list and ask them to fax or scan signed copies back, make sure there’s a deadline for return in your email. When you receive one back, open up the Vendor Dashboard and update it so that you don’t forget you’ve received it. Then print it out and file it.

When you hit the deadline, ignore any further submissions, if the development company can’t meet this simple deadline they are not going to meet any further deadlines.

In the post coming next week I’ll detail how to write and issue and RFI and then short-list your developers.

Ok, so you’ve got an idea, you’ve got a limited budget and you want to start your own company. To keep control of costs you’ve decided to off-shore the development. Now what do you do? How do you go from idea to launched system?

In this post I’ll detail your first steps towards launch. By the end of it you’ll know how to build a mock-up of your business idea and write the most important document you’ll write for the company: your functional specification.

For a simple system this process should take you a month. For a complex build there will be a lot more research and your mock-up and functional specification will be big, budget 3 months of full-time work.

You may also find it useful to look at my overview of starting-up post, first in this series.

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The aim of many entrepreneurs is to take a business idea and convert it into a professional and functioning business on a low budget. This is typically called “bootstrapping” and it is fraught with potential pitfalls and dangers, but when done well can really help get a company going fast, professionally and without the founders having to give up much (if any) equity or bankrupting themselves.

Over the next 5-6 posts I’ll outline the process which I’ve now followed at several corporates and which I’ve honed to work with my own start-up, Aroxo. I’ll discuss what skills you’ll need, how to write your requirements, how to source developers and designers, how much to budget, how to agree a development contract, how to manage your vendors, how plan your release, all the documentation which you need and much more.

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Techcrunch recently reported that eBay lost $1bn of market cap. Combining this with reports from some sellers that “eBay is broken“, it is clear that it’s time to take a closer look at just what is happening with eBay.

Firstly, some facts sourced from eBay’s quarterly reports:

1. eBay’s subscriber activity rate has declined from 41% in Q1 2005 to 35% in Q2 2007
2. after a few quarters of fast decelerating growth, the number of listings it carries has actually fallen 6% in Q2 2007 (compared to Q2 2006)
3. the average cost of a listing has risen from $1.72 in Q2 2006 to $2.31 Q2 2007 – a 35% rise
4. eBay has announced it is launching a range of user-generated content services (such as blogs and wikis) as well as filling a few proposition gaps by launching services such as Gumtree and “kijiji” in the US market.

The chart below details some of this.

My source data is available here.

Before I go on, an important disclosure

I am a co-founder of Aroxo which will be a major eBay competitor when we launch in October 2007. I’ve sourced all the data above directly from eBay, although I have performed some calculations on these data myself. You can see what I’ve done here.

With that in mind, what follows are my opinions based on what I see happening in the market.

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A couple of days ago I struck on an idea for a new search system which would consistently produce results more relevant than Google. So in this post I’m going to detail the process I used to get this idea in the first place and others like it.

I don’t believe that ideas “just happen” or “pop into the head”, I’m very much of the view that we develop them with repeatable steps. This is what this article is about – how to generate ideas.

I started thinking about this by noticing that most good business ideas can be traced back to a source (which I call their “idea genesis”) in one of three ways, in this post I examine those three ideas, and then explain how I use them to generate new ideas, including the Google-beater I mention above.

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There’s a lot of talk about “Web 2.0″ on the Internet at the moment, in this post I try and cut through the hype and look, pragmatically, at what entrepreneurs need to do to use Web 2.0 to build exciting and valuable propositions.

In this post I’m deliberately looking at the impact which Web 2.0 has on users which makes it so appealing to a certain segment of the population. This information will help entrepreneurs know what to build into their propositions in order to take advantage of the opportunity today to steal a march on older style Web applications.

To bring the post to life I’ll be demonstrating how the principles I’ve uncovered can be applied to a classic Internet application – corporate email. I’ve arbitrarily chosen email as it is a example of an application which has not substantially changed in the last decade, by applying some of the Web 2.0 principles outlined below we’ll see how its feature set can expanded to make it more inclusive, fun and sticky.

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I recently finished a new book called Founders At Work by Jessica Livingston (available here on Amazon).

This book is a series of interviews which Livingston conducted with 32 different entrepreneurs and as such represents a very original resource for would-be entrepreneurs. The list included the stories of companies such as Paypal, Hotmail, Apple, Excite, Yahoo! and many more.

As a regular reader of similar literature, on balance I enjoyed the book. However it was by no means perfect. As the text is a verbatim repetition of her interviews, it is often difficult to follow and you quickly find yourself reading the book for one or two hidden gems of advice in the text. The interview with Steve Wozniak is a perfect example of this, there are several pages of text which describe how Steve worked tirelessly to reduce the number of chips on his circuit board designs. Whilst stories are ancedoctally interesting, they consume a significant proportion of the text and detract from the valuble lessons which we entrepreneurs would benefit from. They make struggling through the book a challenge and certainly make it harder to draw out the key lessons.

Whilst I would recommend that anyone who is in the process of starting up an online business would do well to read this book, frankly the nature of the text means that some effort and commitment is required to really draw applicable conclusions from it. The book would really have benefited from some sort of analysis performed by Livingston which helped guide the reader to the key lessons from each of the founders.

Overall – OK.