What Make A Great Startup Idea? Published Author Podcast

What Make A Great Startup Idea? Published Author Podcast

Dave talks with Josh Steimle about startups, getting your startup idea our of your head and into action as well as the process of writing the book.

Transcript Talk Josh Steimle and Dave

Dave talks to Josh Steimle about Josh’s favorite topic, the intersection of startups and publishing. https://www.publishedauthor.com/episode0041-dave-parker-startup-book-steers-entrepreneurs-in-right-direction

Josh:            Welcome to the published author podcast where we help entrepreneurs, learn how to write a book and leverage it to grow their business and make an impact. I’m your host, Josh Steinway.

Today, my guest is Dave Parker. Dave is the author of “Trajectory: Startup ideation to product market fit”. It’s due out really soon. Actually, by the time you’re hearing this recording, it’s already going to be out. Now with a title like that, you would hope that Dave has some experience in the startup world, and he does. Dave has founded multiple companies over the past 20 years, and served as a CEO and board member for others. Most recently, Dave joined Code Fellows, as CEO in June of 2015, where he’s overseen the placement rate of their graduates climb from 20% to 90%. He’s been involved in a leadership role at Startup Weekend; he sold the company to TechStars.

Speaking of which not to self I need to get Bradfeld on this show one of these days, he’s a good one. Yeah. And just, that was just one of the six sell side and three buy side deals he’s been part of, his experience with startups covers the globe with over 10 years of experience doing business in Japan, and five in China place near and dear to my own heart. And this is the highly summarized version of Dave’s bio, so with that, Dave, welcome to the show.

Dave:          Hey, thanks for having me. Glad to be here.

Josh:            So I think we could probably talk for about two hours about your experience and your bio and background and everything that you’ve experienced. But what are some of the formative events of your life that made you who you are today? What should we go over?

Dave:           Yeah, I think one of the early things, you know, relatively fresh out of college, I joined the wireless industry, and the wireless industry at the time, you know, back when cell phones were big, and didn’t work, and they were expensive. And now they’re still expensive and small and cool, but they still don’t work very well. It’s one of the things that was interesting about that industry is we lived through, you know, a number of different business life cycles in just a very short period of time, right. So we had direct sales, and we had warehouse sales, we had corporate sales, we had product evolution change super-fast, technology changed super-fast.

So for me, it was a great place to learn a very entrepreneurial mindset from a very well-funded corporate perspective. And I look back on that time very fondly, like channel sales and direct sales and like all those things that you have to learn on the go to market side of any startup, was a great time, then made the shift from the telecommunications industry into the software industry in the staffing side of the business.

So my first foray there was launching into IT staffing and consulting and in really doing project based and Body Shop based work for large IT staffing firms, but that led to the first company where we were doing this, every month. My Microsoft rep would come to me and say, hey, how much software are you guys gonna sell this month and every month, I’d say we don’t actually sell software, we sell ours, like we do IT staffing, and people need to do a big migration from one product to a different Microsoft product. And we do that staffing. He’s like, well, what do you do about the software? I’m like; we don’t do anything about the software.

So after a few months of this, Josh, I literally said, hey, how many companies are there like us that are out there doing the same thing we do, but don’t sell software? And he’s like, pretty much everybody. That was how it started like, really? How many everybody’s are there? And it ends up there was about 42,000 reseller partners in the Microsoft ecosystem, and about 92% of them didn’t sell software.

So the first company we built was helping those companies sell software to their channel partners or their customers.

Josh:            Now, wait a second, how do you become a Microsoft reseller when you don’t sell software?

Dave:           So Microsoft, in those days, in that late 90s, the version was for every dollar of Microsoft product sold, there was $3 for services required to install and deploy it at the enterprise level. So we were a staffing company that did those sorts of projects. But we had this little Coffee Company, I think it was called Star something. I can’t remember the name. Oh, yeah, Starbucks, and we lost their business to another competitor who did sell software. And that kind of threw us over the edge. And I’m like, well, if we created a company that isn’t trying to compete with you on services, and just enabled you to sell software, would you do that? And that company, we grew from zero to 32 million in sales in about four years. And you know three people at the start to 150 people in four years.

                    So I mean, pretty much every mistake you could make on that one, you know, the scars are still there, but I still get twitchy every once in a while, right. And so, but yeah, lots of lessons learned in that one for sure.

Josh:            So where did that take you? Where do you go from there?

Dave:          We sold that company in 2002. So that was my first transaction into the M&A world I think I still have my M&A from A to Z book, mergers and acquisition from A to Z book on my shelf behind me. So sold the company, made the transition into the new company, didn’t stay for the earn-out, which has been pretty much, a trademark for me to sell the company. Now I’m done. I’m kind of done with the industry done with all the things you know about the industry. So that was the first of five of my own startups sold three of them close to home. At this point, since then, some of the feedback you read has been hard to deal with close next month; it’ll be deal number 13. So my 80% times these days is helping founders actually land the deal that they started. And my 20% time is still spent doing community development and community building work around startups because startups don’t have money to spend on expensive programming. And they really need to figure out like, is this idea, a great idea or not?

                    So one of the things I had a chance to do was work with Startup Weekend, which the parent company was Startup global. So a Startup Weekend plus Startup America with the merger. Brad Feld, as you mentioned, was on our board and Steve Case was on the board. Mary Grove from Google is amazing group of people, in my last four year there; we did 1265 events worldwide, for 74,000 attendees and 120 countries. That is a lot of crazy, crazy number of events.

                    But the big gap coming out of it that I noticed that was really what the book tries to address is when people would come out of that Startup Weekend event. And for those who don’t know it, it’s Friday night you come in and people pitch their ideas. There’s 125 people in the room, people stand up and say, hey, my name is Josh, here’s my idea, you should join my team, we’re going to do a demo by Sunday. And then you get a group of judges by Sunday evening that come in and evaluate the teams.

                    So people would come out of that event, Josh and I like I remember my startup Solvay, Josh, at the event, I want to leave our day jobs, we’re gonna start a company, we’re gonna go and I’m like, wow, like, before you do that. There are things you can know about a startup, like, and there are things you can prove out in advance before you make the leap and leave your benefits and second mortgage your house and all kinds of crazy stuff. And that’s really where the book target customers and the target reader is; someone who says, I have an idea, should I leave my day job? And the book really trying to say, if you were a seasoned entrepreneur and had done it five times, here’s kind of the way I’d approach it. Like, you don’t have to just like quit your day job. And because you have grit and resilience, but the reason the startup numbers are so rough is that people only have one idea. And they don’t do the due diligence in advance to understand whether it’s a good idea worth the investor time with them being the first investor, because that’s really the starting point. You’re the first investor. Is it worth your time? And how do you ask those hard ideas or hard questions kind of upfront?

Josh:            And how do you ask those hard questions when you’re so excited about your idea, you’re convinced it’s going to work.

Dave:          And, you know, we do teach that, you know, every, like, passion is important. I always tell people passion is important, but it’s not sufficient. You know, there’s this phrase in startup land that people are like, the idea doesn’t matter only execution matters, which assumes by default, that it is a good idea, right? Because if it was a bad idea, you’re just gonna fail faster. And I think failing faster is a really bad idea. And for communities that don’t have a rich uncle, or rich grandparent, or, you know, I grew up a son of a single mom on food stamps. So failure wasn’t an option, right? It wasn’t like, you’re like, oh, I have a safety net, I’ll just fail fast. I think killing bad ideas fast is a great option right? Which it allows you to take the framework of learning and understanding what makes a great idea, and then applying that to your next idea if this isn’t the only one.

                    But one of the things I wrote about in the book was there’s 11 frameworks for ideas that I wrote about in the book, but the basis for that chapter, I did this as a seminar. And somebody came up to me afterwards, Josh was like, oh, that was awesome. And you’re great and inspirational. And I’m so excited. But I don’t have an idea. And I’m like, part of me is thinking, how did you get in here? Like, that’s kind of crazy. But her point was she wanted to be an entrepreneur, and she wanted to be a founder. How do I think about ideas? So it ended up becoming a chapter in the book, that was kind of my way to do my own minimum viable product for the book content was, I’ve done it as seminars that we originally called six months startup. So every month, you had a set of deliverables. So you come for the content, you go away and go do your work for 30 days, and then come back and meet with mentors, and do that, okay, here’s what here’s what I did. And here’s what I learned right? And we had a self-check at the start of each program where they had to share their work with their table mates. Because one of the things in startup line is if you don’t make progress, you don’t get to talk. Because the mentors are super happy to help if you’re doing the work, but if you’re still just talking about the same thing you talked about 30 days ago, 60 days 90, the answer is everybody’s exhausted, just thinking about it right?

Josh:            So backing up for a sec, was there a specific moment when you thought I need to write a book about this? Or was it more of a gradual process of that information coalescing, and then realizing I kind of got a book here?

Dave:          Yeah, a couple things that were major factors. One was somebody came to me at one point and said, hey, can I have a copy of your financial model, in startups, there’s business models, or represent three different components of a startup. Revenue models and financial models represent how do I monetize what I’m building? And how do I put that into a forecast. So I can show a hockey stick on my chart on my pitch deck. So somebody came to me at one point and said, hey, can I have your financial model? I’m like, well, yours is a business to consumer marketplace. Mine’s a business to business subscription. Though they share some commonalities, they’re different.

                    So it started this weird process at the time that I never thought was a quest. It was never intended to be that but so I went to the CEO Crunchbase at the time and said, hey, before they had their API, can you just give me a list of every seed funded company in the last 18 months, ends up it was 2654 companies, which then we tracked into what became a five year longitudinal study, which was not the original intent. But the idea there was a how many templates would you need to make if you wanted to provide a template for every 80% of the startups? And the answer was 14, there’s basically 14 revenue models in tech. So services, subscription, metered services, like AWS, marketplaces like Alibaba, and eBay. And then the crazy ones, like when it comes to new media, which is an example of WhatsApp or Snapchat, so and then advertising, like you have a Ticktok, etc. So there’s basically 14 revenue models. So hopefully, your startup idea is unique. But how you make money is, is never unique. And there’s been very little changes with those over the last six plus years.

                    In fact, I’ll make sure I have the excerpt for you. There’s a free excerpt from the book that’s available on DKParker.com so that folks there if they want to get to just the 14 revenue models they can. So that was number one. Number two was I kept doing office hours for startups, and I’d start blogging about prompts that startups would give me because I’m like, I’m tired of talking about awkward co-founder discussions, like, can you just go read the blog post, it’s a two part blog post, go do this thing, then go do that. And then after a while, I kind of looked at 150 blog posts and went, hmm, that actually might be a book. So I started compiling them into the pieces, like a lot of your audience will, will do. And, and for me, some of them were like, oh, that was just me ranting about something in startup lander, or oh, yeah, that was actually really good. But you know, so and so added to that by adding this particular thing like Dan Shapiro talked about, should I take the express train or the local, right? Both of them gets you to the end game, but how fast you get there matters a lot, but you have to be willing to pay the price for the Express.

                    So there was a bunch of those pieces that I wanted to make sure I gave credit where credit was due. I think the other thing like you, Josh; I’m an avid reader, right. So there’s a couple years in a row that we did a challenge that we did 100 books a year. And the first year was like, okay, well, I want to 50 I’m gonna be like, what makes me well read. And then the second year, I was like, oh, my gosh, I need to cover the 50 books that I think is the most important 50 books in startups. And so you’ll find that throughout the book, I’ve gone to great act, or great, deliberate effort to really give credit where it’s due to the standing on the shoulders of giants, if you will, people who’ve written some amazing things.

Josh:            I love it when people do that, because as addicted reader, myself, I’m always looking for new books. And when somebody writes a book, and there are no references to other books in there, I’m like, kind of let down and a couple of years ago, I read Vern Harnish book Scaling Up and he must reference 50 or 60 books in there. And I thought this is a goldmine for just leading me to all these other books I should be reading. So I love that you did that.

Dave:          Yeah. It’s been fun. I think the reaching out to some of the authors at one point I was doing, you know how we all do blurbs for the books, right? So at one point, I reached out to a guy who I’ve been kind of a stalker with right I’ve been kind of a lurker on his site and his name. His name is Dave Berkus. And Dave is one of the early super angels. He’s based in Los Angeles, and he wrote a thing called the Berkus method, which was how do you value a company that has no revenue? So I reached out to Dave and said, Hey, Dave, you don’t know me, but I’m kind of a lurker. And I’ve been quoting your quote, so one of my mentors early in my career gave me a quote that said, where there’s mystery, there’s margin. So I went back to source the quote for the book because I wanted to use it as one of the titles and found that sure enough it’s Dave’s quote.

                    So I reached out and I said, you know, I’ve written about the Berkus method. I’ve quoted you in the book, and I know I don’t technically need your permission to do it, but I would love to get your permission. And he’s like, hey sure, up perfect. Send me a copy of the book and I’ll write your blurb. And so he sent me back a note about two weeks later, which for those of you who don’t know, blurbs are like you send these blurbs into the vortex and you hope that somebody writes you an amazing response.

Josh:            You send out 50. Hope you get one back.

Dave:          Yeah, for sure. And there’s some, you know, well, so you can arm twist a little bit, but to get a blurb, it’s not as simple as you’re passionate about it, but it’s not as simple for them. So Dave sent me back a note and said, “Hey this is awesome. I usually breeze these and write a blurb. But he’s like, I wrote it, I read it cover to cover. And it was awesome. And this will be the handbook for startup founders. This is amazing.” And I’m like, I called my wife. And I’m like; you’ll never guess what happened today. This was super cool. So that was the first blurb that came back. So it felt like, you know, an amazing thing. And Dave’s an amazing supportive guy.

Josh:            That’s got to feel pretty good, you know, coming from somebody who’s an authority figure like that.

Dave:          Yep, for sure.

Josh:            So, how did you get some of the other blurbs in the book, then?

Dave:          Well, some of them were folks that I wanted to go after. Because one thing that really struck me about it is I wanted it to be diverse and inclusive from the start. So when you look at the back of the book, so there’s this weird thing in venture capital, less than 2.9% of all venture capital investments, go to female founders. 3.2% go to white guys named Dave, which is just sad and tragic. Now, we’re not the culprit, because the white guys named Jim, they get more than us, just to be clear. So I wanted the book blurbs to be diverse and inclusive from the start. So I went out with that as a very clear objective and went after people that I knew that said, hey, I really, really would appreciate. So the back cover blurbs are Steve Case used to be my board chair, Mandela Schumacher Hodge Dixon, who runs a program called founders club, who is amazing, right, and trying to run for the president of our fan club. So an amazing group of people overall, that they really represented a good and diverse and inclusive perspective on the blurbs because that was important to me. So both outside cover and inside cover represented that, but it’s just outreach.

                    So the last thing I figured I wanted people to flip it over and go like, oh, yeah, here’s, you know, blurbs by six other white dudes, all named Dave. And there’s plenty of them. Like they’re easy to get, Yeah, but you have to work hard to get the other ones.

Josh:            Yeah. So when it came to putting the book together, you said you had these 150 blog posts? How did you organize everything? What was the process you went through to put these together and actually turn those blog posts into this manuscript?

Dave:          Yeah, so there’s some logical chapters that made sense. And then it came down to the process flow, I would say was part of the challenge. So one of the things that we did was we basically built it out as a seminar series, with the idea that after a Startup weekend, this is something somebody can hop into the very next month or week or whichever, and say, okay, I know now what I need to go do. And so there’s 29 deliverables based on the four different chapters of the book and I’ve published the deliverable separately, because I want people to understand like, you can read the book fast, that’s easy. But if you’re really trying to use it as a base case, to start a startup, then you actually have to do the work.

                    So we ran it as a seminar, tested out the content. Like I said, one of the chapters that I came back and wrote from scratch and hadn’t planned on writing was a chapter on ideation, which actually made his way into the title. The other chapter that I wrote about that I hadn’t planned on was a chapter on pricing, because people kept asking these really great questions. And I’m like, some answers are easy to give, when you’re doing a seminar, right? You’re like, Oh, you can pull the string on my back, I can give you the answer about that because I know the space. Some answers, you have to be thoughtful about and not be Cavalier as an author, speaker, whatever your role is outside of being an author. So when I came across those, I’m like, oh, that makes a lot of….., we should really write a chapter on that. So I kind of look for the holes first and then went back and started to bring the pieces together. And I was CEO in and out of a couple of these things at the same time. So it would be like, I’d worked really hard on it, and I’d stop, and it’d be like, super frustrated, because I’m still not done. And you know, I went out and was public fairly early about I’m writing a book, and people are like, oh, my God, are you not on like on your third book by now? And I’m like, no, it’s so agonizing.

                    Um, so I did that. Got all the pieces together, tried out the seminar content, and then it got to a point, as you know, Josh you can’t see anything on the page anymore. You’re like; I’ve looked at this so many times. So I actually hired an independent editor, ex-Amazon guy and had him edit the book for me, because I’m like, I know there’s redundant content. I know I’ve said this thing, at least a couple times. And I don’t want to I mean, like if I say it twice, it’s good for emphasis, but if I say it three times, it’s just annoying. So I actually paid him to do the edit on the first go around thinking that I really should have that done before I handed it to the publisher. In retrospect, the publisher didn’t really care. But I felt like at least it would be ready to self-publish, if I didn’t find a publisher that I found that was supportive. And then they sent it through. They didn’t do a development edit, they just did an edit and final proof.

Josh:            Got it. So start to finish, how long was the process for you?

Dave:          Oh, my gosh, years. The actual writing process, I would say there’s probably three years of delivering the content and a lifetime of building the content as a startup founder. So like, a lot of these when I started the blog, I think, in 2008, as far as the blog site, and then I ran a founder Institute here in Seattle for five cohorts. So I’d go through office hours, and people would ask question, they’d be like, oh, I should read about that. And they’re still probably 70 prompts sitting in WordPress that I haven’t written to yet right. And so and I still do that today, when I do office hours I’ll come up and write. You know, if somebody asks a great question, I’ll turn it into a prompt as a headline, knowing that most of the time people are going to ask that question in the same way on the web. So like, one of the hot blog topics right now on my blog post is startup board compensation. And the reason was, everybody’s like, it’s just super opaque, right? So one of the things I found for me and the audience that I serve, and it’s really back to who your ideal customer profile is, your ICP is I’m really trying to get in front of what questions founders are asking that if they’d done it five times before they go like, Oh, yeah, no, don’t do that. Oh, pay somebody to help you fundraising? Oh, hell no. Like, you would never do that. So those are the questions I’m always trying to get in front of based on the prompt.

Josh:            So when I was starting my first startup, my first real company, this was about 20 years ago, there was nothing out there. I mean, there was like, some MBA books or something, or how to be a business person, but it was more like corporate stuff. There weren’t all the startup books that there are today. Now, there are quite a few. And there are some really good books out there for founders. What was the hole that you saw, or the need that you saw that still wasn’t being met that made you feel like there’s still a need for me to write this book?

Dave:          Yeah, for sure. Any right there, within the ecosystem of startups, having been around Startup Weekend, right? We had Brad Feld, who’s written about startup community and startup deals. And so there’s some amazing authors. And then Steve Blank was on my board as well. And Steve had written the startup owner’s manual. And four steps of an epiphany, right. So not only was it strange, because they were board members, right? And the gaps that I saw in the market was the right post inspiration. And if you think about startups is a continuum, on one side, you have inspiration, Startup Weekend, Shark Tank, Startup Grind, Right inspiration events, and public speakers. And then this other into continuing we have like TechStars, but going from ideation and finding product market fit and then getting into an accelerator can be a very long journey. In this the failure rate is 75 to 90% of startups fail. And most fail based on the CB insights data, because they built a product nobody wants, which means two things. It’s either not fun or engaging if it’s b2c, or it’s not useful if it’s b2b, and they won’t pay for it. So when you put those two things together on b2b or b2c, it means how do I know if this idea is something that people actually pay for or not? So that’s why the revenue model pieces are so important to basically nail down of like, listen, your idea was here, but every company like you, you know, I’ll meet with a company I’m like, Oh, so you’re a marketplace that gets a transaction fee plus a subscription fee. And they’re like, how did you know that? I’m like, is not actually rocket science right? Which was Steve Blanks first company, by the way that ended up failing.

                    So the big gap was really there. There’s lean startups amazing. If you have 1000 unique users every month or every week or every day on your site. If you don’t have 1000 unique users, what do I do?

Josh:            How you test that? Is there a group that you can test with?

Dave:          Yep, build, measure, learn is awesome. If you have traffic, if you don’t have traffic, the question is shit, how do I find traffic? So that’s really what this book was designed for. So it covers from ideation, what makes a good idea to product market fit. And I think the big thing for your audience there would be in the startup perspective, if you’re doing a services business, you don’t have to worry about product market fit other people sell the services that you provide. They’re just in different geography and different price points. So the question is, can I sell it and at what price? If you’re doing a product that lets you know, Snapchat or Alibaba or something like that, the answer is why, what if the customer actually cares about this thing that I’m shipping? And can I get their attention? And can I get a flywheel going, so that we can actually build a business out of it?

                    That flywheel effect and that lack of product market fit is the thing that’s kind of your very first milestone with a startup. So that was the goal here. It’s like, do I need to know how to run a board meeting? Great! Na that’ll be book two; so book two will be product market fit to exit. Because there’s a bunch of stuff you don’t need to know, in the early stage, do I need to know how to build a great culture? Well, if you’re a jerk, having great culture would be helpful. But if you’re an okay person, like culture, you can fix a 25 plus employees right after you know you have a business.

                    So I took all the stuff that was in the first draft of the book and said, Is it really important for product market fit? And if the answer was no, they went to book two.

Josh:            Got it? You know, they’re having a background with startups and entrepreneurship, there’s a lot of similarities between the process you go through to decide if you have a good business that’s going to have legs. And if you should write a book, if anybody’s going to care about that book, too, as you think through your book and the principles there. What are some lessons that we could take from that to apply to the process of becoming an author and deciding what books should I write?

Dave:          Yeah, I think a lot comes down to ICP and your ideal customer profiles who are you really trying to serve first? Right, especially if you’re reading a book in the business category. Versus I would like to read as a b2b versus b2c, right. So b2c is like, I’m reading a novel, and I hope that you find it engaging, and it takes you away, right on a beach somewhere. But if you’re b2b, and you’re writing something in the nonfiction category, in business in particular, then the question is, you really need to decide who your ideal customer profile is, and how you’re going to serve them well. So I had another author recently asked me like, so why did you do this? I’m like, well, I made a bunch of mistakes, and I can’t help you from, you’re gonna go make your own mistakes as a startup founder for sure. So I can’t help you necessarily navigate away from like all of the landmines, but I can help you recognize like, something smells weird, like and the smell doesn’t go away, maybe it’s me right? I can help you with that part of it.

                    But also, startup founders shouldn’t be spending a big chunk of dough on stuff like validating their idea. So I really wanted to write something in a price point that says, hey, listen, you want to do DIY, you can, here’s how you do it yourself. I don’t know that, I’d suggest that you do it yourself. But at least it’s a place to start. So I think for any author, in the category of selling b2b, it’s really am I selling to corporate HR departments. So in the book I talk about it is an on ramp product versus the freeway.

                    So the question is, I know I want to get into the freeway, which is the scale version, but I’m at the launch version. So how do I get there? And the question is, what’s my go to market strategy? If I had to pick the market, it would be bottoms up from 10, 100-1,000. So what’s my 10 customer profiles like? How do I get to them? What’s my 100 customer profiles like? How do I get to them? What’s my 1000 customers profile like? Because at 10, It’s all you right? It’s hand to hand combat. At 100 hopefully, it’s more than just you, and at a thousand, it’s clearly more than just you.

                    But I think that ideal customer profile is really the question in the startup parallel would be am I selling to the corporate HR department because I’m going to save the business money? Or am I selling to the VP of sales and marketing because I would go make the money? And once you know who that target customer profile is your launch customer becomes a lot easier to predict. At scale, you can sell to everybody, you know, but at launch, you get to sell to a very niche ICP.

Josh:            This makes me think about Gary Vaynerchuk. Because Gary is super successful on social media. But a lot of his success comes from his success. When you have a million followers on one platform, and then a new platform launches, it’s really easy to transition over to that new platform. And he knows this and he’s open about this. But other people will look at this and say, well, Gary is doing XYZ, and he’s successful on this platform. Well, yeah, but he also brought over 300,000 people to see that and get started. So and you have three followers. So it’s a little bit different situation for you.

Dave:          Well, for sure. So in the business model realm equivalent would be Uber today has multiple revenue models, right? They’re a marketplace, they sell credit cards, they finance cars, they do Uber Eats, right? And I think every founder looks at it and says like, I see what I’m gonna be at scale. But you got to get through the trough of despair before you get to scale right? And that really comes down to what niche do I find so if given the analogy, so I’m a cyclist now over the last five years because I use an app called Strava right? Strava would say, if they were wrong, and they were first time founder, they would be like our app is good for anybody in the world that cycles. That would be our total addressable market. That’s not true. Their total addressable market is anybody in the world who cycles, runs or swims. Who’s obsessed about their data. Okay, well, that’s a much smaller market. And then if you look at their go to market strategy, their go to market strategy was they originally only launched on iOS right? Oh, and you had to have a credit card, which meant you were gonna be in USD. So now it’s not everybody in the world, right? It’s not bringing 300,000 people over; it’s starting with the three you have. So how do they launch? Well, they launched by going out to influencers who had followings using that as a halo effect, and then getting their attention and having them say, this Strava app, it’s like, super cool, like you should be using it, right. And I think the same thing is true for them. Like, as I think about the social media component, what I do is pretty geeky, and it’s not very visually interesting, right? So it’s not like posting it on Instagram gets like, that’s awesome. Um, you know, business models and financial models are, but within the accelerator community and the angel investor community, I’ve really positioned it as how does this revenue model impact your return on investment for angel investors?

                    And so April is a bunch of seminars on that topic for angel investment groups, so they’re like, oh, we’ve never thought about it that way, because the math is really compelling. So a services business is sells at 1x revenue. So if you and I ran a services consulting company, right, and it’s a million dollars a year in revenue, we will sell the company for roughly a million dollars, right and get paid out over three years. But if we run a million dollar a year subscription business, that business is going to sell for eight to $12 million. So if I’m an investor, I’m like, oh, I want to invest in one of those. Or can you guys pivot? Like, can you guys go from a services company to a subscription business? Because that would be good for me as the investor

                    So for me, it’s a question of who has the audience I already want to get to? And then how do I leverage that? And encourage your audience to do the same thing? Its congratulations. Yeah, Gary Vee can do anything because he has scale, right? But how do you get to scale? Well, you have to get through launch first, and they have to get through growth first. And then you have to write things that are interesting, and are something somebody else would want to repeat, right? So I’m probably better live that way than I am contrived that way. Like most of when people are tweeting out something in an event I’m doing, they probably capture more interesting stuff that I look at and go like, yeah, it wasn’t as interesting to me.

                    So founder Jim Mandela, who I mentioned, so did an event where they had me on and they sent me a cup. So kill bad ideas fast. Now, of all the things I said that day, it wouldn’t strike me that that was the thing that they would catch. But hey, right. I don’t care why they caught it. But it was kind of a cool, plus.

Josh:            It’s a good sign. And now you’ve got your quote on a coffee mug.

Dave:          It’s real, if it’s not a coffee mug is definitely real.

Josh:            The other interesting thing about scaling up is that it’s not what worked for Gary Vaynerchuk, or whoever else scaled up their business because they scaled up 10 years ago, it’s what is going to get you to scale up today, which is a different scenario. When you were writing your book, how much thought did you put into, hey; this is my experience over the past 20 years. But is this going to work today? Or is this going to work in three years for that founder? How did you deal with the challenge of what is timely right now versus what is evergreen is going to work forever?

Dave:          Yeah, I definitely talked about in the book is timely and timeless. So one of the things that we did was we talked about tools, because tools changes so frequently. One of the big service changes when I started writing the book was talking about things like Upwork, which was two different companies that are merged, right? Which kidding, remember the name of now, but today is Fiverr’s the alternative. So Fiverr and Upwork both provide different services. So one of the things that I did with that to make it evergreen is to say for you know, links to current resources, please, please come to dkparker.com/trajectory. So I can keep that as an evergreen component and keep people engaged with it.

Josh:            Which is also a great way to build your email list?

Dave:          Yeah. So in really getting people to just on that note, one of the things that I always tell folks, especially in the startup side is, every month you’re going to go do customer interviews and ask people if they care about your idea. And with every interview, at the end, you should say, hey, can I keep you on my monthly customer update. And the monthly customer update is this is what we thought, this is what we did, or this is I’m sorry, this is what we thought this is what we learned, and this is what we’re doing about it. So every month there’s a monthly update that goes out. But that allows you to build up a list of folks over the next 12 months, right? So when you do have a product, you’re ready to launch, you’re like hey, I have this List of, you know, one of my list is currently 1300 right on email.

                     One of the groups that I run for trajectory startup is a meetup group right, It has about 1100 or 1200 on it. So you’re spot on, you have to start where you are, build that up, right? Don’t look for vanity metrics, look for engagement, right? Because that’s what you’re really after, and then you have to do it with a level of frequency, This is probably the biggest challenge for me, because there’s stuff I’m like, you know, what am I gonna post this week? What am I gonna write this blog this week? If I don’t write anything on my blog on a monthly basis, I’ll get three to 4000 readers? If I do, right, I’ll get four or 5000 readers.

                    So the question of engagement then becomes a question of what you want to do as an author, to engage your community. But you have to build the community before you try to ship the book. Because that’s building the community comes first, not second.

Josh:            So right now you’re in the middle of your launch for your book, as we record this, your books coming out in about two weeks, by the time people are listening to this, it’ll already be out there and available on shelves. What has gone into your launch plan? How are you managing that?

Dave:          Yeah, I tell you that publishers in general, it really is up to you to take on the role of being your lead marketer.  Right, so you put a lot of work into the book, I know a lot of authors are like him handoff and good luck. And it’s in distribution. And we hope it sells well.

                    For me, I’ve got and really done a bunch of because we’re still in lockdown from a pandemic perspective. So no one’s out doing book tours, not that I think they were particularly effective. But for me, I’ve been scheduling a bunch of both podcasts like this, scheduling a lot of seminars. So I’ll do a one hour seminar for Angel groups and accelerator groups and venture capital portfolios. And that one’s been the easiest one would be like, Oh, my gosh, that’s great, we’d love to have you. And we’ve done a free excerpt for the book that takes just the revenue model component, and makes it available for people for free. Which is another way to capture email addresses as well; so that’s been pretty much the process there.

                    Once we get it launched, the audio book will come out slightly later. So we just finished the recording of that last Friday. If anybody thinks that’s glamorous, they will correct you right now and tell you it is it’s a solid half day of learning curve. And then as soon as you got it in the can, you can basically read anything from the book after you’ve like committed it. And it’s like, and you’ll just be like on it. But it’s a bit tedious, you know, mine would have been eight and a half, nine hour book. So it took about 13 – 14 hours of total time, right to do the recording. So definitely worthwhile doing, so we’ll have basically two launches, the book will come out, then the audio book will follow. And I would encourage you to think about it in terms of I’m now diving into theory. So you can correct me if I’m wrong, Josh, but thinking about the launch as the first year, not as the first week, right and really being a series of events that keep it up and coming and fresh. And people liking it on Instagram or Facebook or Twitter, whatever your immediate social media choices for me, it’s mostly Twitter is my audience.

                    So that’s really the plan is, do a bunch of seminars give away a bunch of content for free. If people find it intriguing, point them to the website to buy, you’ll have some challenges there. If you’re going through distributor, they’ll want you to post five places to buy that you can buy an Amazon or you can buy this, I actually set up I’m in the process of launching a e-commerce site with a single publisher that will go through the process, so I want to know what my closing ratio is. So if you get to the site to buy, I can’t afford, you know, whatever Jeff does on Amazon-land. But for me, if you get to the site, and you want to buy the book, I don’t really want to send you away, I want to know what my conversion rate is.

                    So we have signed copies of the book in one distribution partner, you can do them yourself. But if you do it through publishing, and you want to be on a list, just know that you what you ship yourself doesn’t count, it has to go through the distribution channel in order to count. So lots of mechanics that are kind of head scratchers very, you know, 1930s 1940s Prohibition era, you can’t ship it direct because it’s alcohol. No, it’s a book, but it has in order to make the list it has to go through the distribution partner.

Josh:            It is such a complicated process. By the time you get done with this book, you feel like I have absorbed so much knowledge about the publishing process like now I need to do something with that knowledge before it goes to waste. Which brings up….

Dave:          I thought about a start up there and the answer was no.

Josh:            Oh, yeah. But you might have also thought about, well, now that I know how to write a book, maybe I should do another one. Do you have Ideas for other books in the works?

Dave:          Yeah, there’s actually three in this series. So trajectory startup ideation, Product Market Fit, trajectory scale up, product market fit to exit, because there’s lots of mystery around like, how do I prep for exit? And since I spent most of my time doing that today, and then the biggest one, I’ve been surprised by Josh, is, I’ve done a seminar series in Kansas City, and somebody reached out and said, Hey, would you come do this seminar in New Orleans? I’m like, that’s fine. And they said, it’s for a different audience. And the audience in this case was services businesses, they were 15 of them. They were part of the economic development. They’re serving the African American community. And I’m like, well, I love to work with startup founders who don’t look like me. That’s kind of first and foremost. But I’m like, they’re in the services business. And I kind of know this lane of startups. And one of the revenue models is called productize the service. So the idea there is how do I scale a services business, automating the front end process of acquiring customers and the back end process of lowering my cost to deliver.

                    We did a whole seminar on that and found that there was actually a super great audience where people are like, wow, that’s amazing. And I’m like, actually, it’s not that amazing. We do it all the time in the tech world. But if you don’t run the business the same way that there are pieces you can use from best practices, obviously. And the irony of it is that I was on a board of company that was the services business like that. And I’ve been on their board for like, 18 years, and they are like, oh, yeah, we’ve been doing that all the time, Dave? I’m like, oh, my goodness, Genie, Genie would think about a completely different audience.

                    So some of its repurpose content, a lot of it’s very new content. And then after that, we’ll kind of see how it goes right? It’s a to your point. It’s a long process. And then by the time you’re done, by the time it actually gets into distribution, and if you pick a publisher, I only signed for one book with this publisher. They wanted to sign for three. My answer was, and the reason would be, and unlike the book successful, you’re going to write me a check on the advance if the book’s not successful, you’re going to publish it, or I’m going to self-publish. And they’re like, Yeah, pretty much. So but it’s good process.

                    Choosing a publisher was an interesting process as well right? So we had two different ones who ended up with a hybrid publisher with a much economics that were much more favorable than a traditional publisher.

Josh:            Who are you working with that is a hybrid publisher?

Dave:          So yeah, Benbella books is the publisher, Matt Holt is the imprint. So Matt is my publisher. He came from Wiley. So he had the traditional Wiley background in business books and actually been Brad’s publisher, Brad Feld publisher for some of Brad’s books. And so we need to, he knew the market he’s the publisher behind Traction, Gina Whitman’s book. So he knows the market, which was nice and refreshing to text to somebody who actually knew kind of what it was I was talking about. Because it’s this pretty niche, right? In the startup plan, it’s not a general business inspired book versus very Tony Robbins like, so it’s very different world.

Josh:            Yeah. So I always like to ask with hybrid publishing. How did you decide on that versus self-publishing versus traditional publishing? Because I’m guessing you probably could have gone the traditional publishing route and gotten a traditional publishing deal, you certainly could have gone the self-publishing route and said, Hey, I’m gonna do this all myself, I’m gonna have 100% control on everything. So why hybrid publishing? Why did that appeal to you? And for some of our audience, they’ve never heard of hybrid publishing. Yeah, so tell us a little.

Dave:          I’ll breakdown all the three, so in the broadest sense, the traditional publishing realm, I would say my publisher thinks of themselves as a traditional publisher with different economics. So in the traditional publishing realm, not to give away any numbers from Wiley and specifically, but some general ballparks. The publisher basically, I would say traditional publisher is your financier and your marketing agency. And then they also send books through a third party printer.

                    I don’t know how good they are at those other two things. Like are they really a good investor? Maybe, right? Are they really good at marketing? Maybe it’s like the jury’s still out. So I think there’s a lot of things around best practices that you as an author just need to plan on taking control of yourself to make sure you have the best shot at succeeding, whether that’s speaking in this, you know, back in the room sales, etc.

                    So in a traditional publishing world, they may give you 15 to 20%, maybe 25% of the royalties after all the expenses are taken out. So in that case, you’re gonna get paid twice a year on the book sales, but they’re still gonna look for you and your platform. And the definition of your platform is, how big is your social media? How big is your email list? How much outreach can you do? How much can you basically sell yourself? So a hybrid publisher or what Benbella is that the publisher has been around a long time who have just changed the economics to be more in favor, or more aligned with themselves and the publisher or the author. So in that case, the economics are much better for the author.

                    Still typically no advance or upfront payment, you may get that they may do the audiobook for you, they may not. In my case, with the first go round, I was super negotiated with two different publishers settled on Benbella, I was happy with the terms, and really was counting on them to help me navigate through the process, I had already paid for an editor. So it was one of those things where I’m like, it was kind of a sunk cost. So if you can afford to do that, and you think you know, your ICP really well, then you can self-publish and do Amazon and ebooks and you don’t have to do the traditional method.

                    For me, it was kind of a, I needed help. I knew I needed help on some of the things because I just didn’t want to learn the business. Because I already had a business I know and as far as learning a new one, as much as it’s interesting to figure out what’s wrong with it. It’s not a business, it’s gonna make you a lot of money.

                    So the question is figure out the way you can get the best economics out of it. And then that’s published, you self-publish, I’m sure you have people who’ve talked about that on the on the podcast, because there’s, there’s lots of tasks, you just need to go knock them down yourself or hire somebody on Fiverr to help you with. And that one was done in the level that was pretty tedious for me. I’m like, I don’t want to go learn that piece of the business is not given them the rest time I spend selling companies, it wasn’t such a great use of time.

Josh:            Perfect, by the way, so we’ve got five minutes to the hour, I would like to ask you a few more questions if you have time. But if you have an appointment on the top of the hour or something…

Dave:          You’re good, okay.

Josh:            Was there any point during the writing, publishing process when you wanted to give up when you felt like you know what, I don’t know if I actually want to finish this project?

Dave:          Oh, my gosh, so many times. I think probably when you go public, right? When you tell people, your friends that you’re writing a book, and it’s still not done, and they’re like, how’s the book going? And you’re like, like it’s not going great. So what kept me coming back to it was whenever we do the seminar content, I’d like oh, yeah, people really, this is super valuable. And people really get it. And so keep in mind for me, if at the end of month four 50% of the people just under 50% usually quit the course right? Because I’ve basically given them enough like how’s your startup gonna make money? What’s your product roadmap? How expensive is it to build? Like, I’ve loaded them up with all the hard questions. And about the end of month for 25% will be like, yeah, you know, this isn’t a good idea. And I’m like, congratulations, yes. Like, I saved you three years of your life not pursuing a dumb idea. That’s like, super amazing. And in about 20% of those people come back for a future cohort. Right, that’s the rewarding part. You’re like, good, you killed that bad idea. And you went back and found a new idea. And now you’re starting over, or I’ve had, you know, to VC funds launch out of some of the first cohorts we did at the program a few years ago. Right. So they decided not to be a startup founder, but they decided to be an investor, which is awesome, too.

                    So those moments of inspiration kind of keep you going. But yeah, there was a number of times where you’re like, I should just quit right? If anything, I feel like I probably wrote the introduction three different times. And when we’re doing final edits, I had a group of pre readers right. And one of my pre readers, Dan came back to me his good friend. And he’s like, you know, the first three chapters kind of feel like the introduction three times, and I’m like, Oh, right, it was kind of the, because that was that I needed the inspiration of that opening chapter to kind of get me kicked off because that was the hard part for me was section one was giving people context, section two and three was, here are the mechanics of what you need to go do. Here’s deliverables, here’s the revenue models. Here’s the wrap up. But that section 101 was the hard section for me for sure.

Josh:            You know, total tangent here. But you mentioned the rate at which startups fail. Do you know of any data out there that measures how many entrepreneurs are successful eventually, because of course, their first startup, their second startup, their third startup might fail. But I would be curious to know how many entrepreneurs who try to launch one startup eventually become successful with some startup out there.

Dave:          Yeah, there’s no math on it. So Kauffman Foundation probably does the best math within the US. CB insights, does the best on company formations, but they’re not on startup, they don’t track founders. Which is a bummer because I think a lot of founders you know, end up being CEO or VP of marketing or so if you’d pick a trajectory of your own career path, you would probably say, I wish I had chosen the idea. But it’s like when I joined a startup, and then the startup failed. Like, I wish I knew the stuff in the book to apply to that startup job. Because I would have said no to that job, like it was a super interesting job. But in retrospect, I can go like, Oh, yeah, that idea. Like the 1700 Groupon copycat is a great example of like, oh, yeah, I should have known that idea would fail, right? Or what questions I’d want to ask about cash flow and revenue model, where they’re like, oh, they got a great technology.

                    So yeah, I haven’t seen much math on them on the founder data, but I’d be super fascinated to see it because I bet like so, in Startup Weekend, we had 74,000 attendees of my last four year that we ran the program. We had four, sorry, two unicorns come out of the cohort four years earlier, one in Spain and one in Brazil. Right, so it was this weird, sort of like, did they work on the same idea they worked on in Startup Weekend? Mostly no right? They just got inspired and met co-founders. So we always thought of it as a pickup basketball game for startup founders. Like will you go to the NBA? No, with that team, right. But you might, but it’ll probably be with a different idea and a different team.

Josh:            Yep. Well, yeah, I want to find that data too. And if somebody is listening out there, and they’ve got data, or know where we can find it, let us know. I’d also love to find that same kind of data with respect to authors, because again, writing a book is kind of like doing a startup, you start a book and you realize, this isn’t the book I should be writing, I should be writing something else. That’s why failure is such a poor word. Because if you figure out you’re starting the wrong business, or you’re writing the wrong book, and you start over, that’s not failure, that’s progress, you’re still on your way to success. Failure would be to continue running that business or writing that book, after you already know it’s really not what you should be doing.

Dave:          Yeah, zombie startups are probably that example for us. So I think one of the things, you know, I slight contrast with you, I’ve had a company fail. And my definition there is did the company return shareholder equity? And the answer was no, in which case, it failed. And people were like, well, but you learned a ton from it. I’m like, Yes, I did learn a ton from it that but separating out what you learn from it from the you know, like, so, you know, writing a book is a very isolating or solo process, right? Whether you’re a motivated dude, whether you go public about it or not, is part of the for me, I had to go public about it, because I needed the outside motivation.

                    When you do a startup, and you raise a million dollars, then people are like, you raised a million dollars. So now they expect to return on that investment. If you do it in your head, right? Or you spend three years thinking about the same idea, like just don’t spend three years pursuing the same idea if you’re not making regular progress on your book or the startup in 30 days, in your deliverables, you’re like, I didn’t actually write anything this month. Well, okay, so give yourself 30 more days, if you get 60 days in and you didn’t do anything, the answer is probably you don’t think the idea is very good. In your heart, you’re like; I’m kind of not committed to it. But I tell people, I was gonna write a book, you know, does this look like what I think it was gonna be? Kind of, and kind of not like it turned into two pieces, it turned into the aha, for me was, oh, what founders really need to focus on is just this part, right? Because there’s a whole bunch of stuff you can learn later, right? Because you have a whole different set of questions to ask and I think the same thing is true with writing.

                    Do you need to figure out if you’re going to self-publish, or use a hybrid publisher, a traditional publisher, whatever my publisher calls themselves, write a great book right? And then you can figure out what to do with it. But if you if you get in your head about all the stuff you need to do later, I always tell people, it’s like buying, you know, colored file folders and staples. Right it’s busy work. You were busy today. Did you accomplish anything for your book or your startup? No.

Josh:            I think that’s a great place for us to wrap it up. Dave, thank you so much for being with us here today and giving us all this wisdom. I think we need to have you back in the future for another hour or two, maybe a year in the future, then we can do a retrospective and say how long ago and what’s happened since then. And how’s your second book coming along? Where’s the best place for people to find you?

Dave:          So they can find the book and me at dkparker.com or on Twitter. So Dave Parker @SEA, for Seattle. So happy to connect and let me know how I can be helpful.

Josh:            All right. Thanks so much, Dave, for being with us here today on the Publish author podcast.

Dave:          You bet. Thanks.

Josh:            If you enjoyed this episode, don’t forget to subscribe. And if you want to spread the word, please give us a five star rating review and tell your friends to subscribe to. We’re available on Apple podcasts, Spotify, and everywhere else you listen to podcasts.

                    And if you’re an entrepreneur interested in writing and publishing a nonfiction book to grow your business, make an impact. Visit publishedauthor.com for show notes for this podcast and other free resources.

The End.

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