Steve Hoffman is the Captain and CEO of Founders Space, one of the world’s leading startup accelerators. Founders Space was ranked the number one incubator for overseas startups by Forbes and Entrepreneur magazines. He is the author of several books, including Make Elephants Fly, Surviving a Startup, which just launched, and The Five Forces. His other pursuits include Hollywood TV executive, game designer, manga rewriter, voice actor, animator, electrical engineer, studio head, and video game designer. He is also the host of two podcasts, Startup Supercharge, and Mentors & Masters.
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The biggest mistakes entrepreneurs make [2:38]
People don’t pay for nice products [7:24]
Ten reasons they don’t buy; one reason they do [13:44]
Justin Nassiri 00:03
Well joining me today in San Francisco, California Bay Area. My guest is Steve Hoffman or Captain Hoff, Captain Hawk. Welcome to me, I have your attention.
Steve Hoffman 00:14
It is fantastic to be here, Justin.
Justin Nassiri 00:16
Well, let me give our listeners a very abbreviated bio for Captain Hoff. He is the captain and CEO of founder space, one of the world’s leading startup accelerators. Founder space was ranked the number one incubator for overseas startups by Forbes and entrepreneur magazines. He is the author of several books, including make elephants fly, surviving a startup which just launched and the five forces. His other pursuits include hollywood tv, exact game designer, manga, rewriter, voice actor, animator, electrical engineer, studio, head and video game designer. He is also the host of two podcasts, startup supercharge in mentors and masters. And of course, in the show [email protected] We’ll have links to all of those books, podcasts and more. So maybe to start things off, Kevin up, how do you manage your time between all of that,
Steve Hoffman 01:13
so I don’t do it all at once. So a lot of that list you read off was my past history when I was a game designer worked in Hollywood, all those things. So right now, I’m still doing a lot, but I’m just running founder space, which is our global startup incubator, and I’m also an author. So I write books about all the different subjects that we teach, that we go really deep on. And of course, I’m a venture investor. So I invest in these startups. How do I manage my time, very efficiently. You know, I like like everybody who is incredibly busy, I prioritize. And I usually have one top priority at any time that I’m really pushing on. And I get that and I make sure everything else waits until I get that done.
Justin Nassiri 02:05
I really liked that I’ve tried to be more deliberate as I as I juggle a lot of things to whatever I do really try to be fully present on that rather than the temptation, which is trying to multitask and give a diffused amount of tension in multiple locations, which leads to frustration, and not the other person feeling happy either. Let’s start actually on the entrepreneurship angle, because you have a wealth of experience as an entrepreneur yourself. But as an investor and advisor, I’m just imagining you’ve worked with so many different founders. And I’m curious, because so many of our audience is entrepreneurs, is there anything that stands out as like common mistakes that you see entrepreneurs make that you really wish you could just fix, or message to our audience of things to be aware of?
Steve Hoffman 02:55
I do. And so I would say, it depends on the stage of the startup. But at the beginning, one of the biggest mistakes, and I’ll give you three huge mistakes, actually, that entrepreneurs make, but they should stop immediately, they should fix immediately. Number one, in the very beginning, they spend too little time building the right team. And what I mean by the right team is a lot of times they will bring together people they happen to know onto their team, but what they should be doing is searching for just the right people, those people who are like superstars in whatever they need to get done. So their business can succeed. Because honestly, it’s really hard to launch a startup, it’s even harder to make that startup successful. And if you don’t have an A plus team, your chances of building like the next unicorn start to just explodes. virtually impossible, because even if you have the right idea, your your team is gonna fumble the execution, they are in somebody who’s going to pick up that ball and run with it. It’s somebody with a better team better organized, better funding everything in place. So the first thing you should do is spend 80% of your time building that team. Number two, huge mistake that entrepreneurs make is they don’t spend enough time with their competitors. They literally do not. They should be compounder users of their competitors products. First of all, every you know, new competitor has been out there experimenting in the marketplace, and ahead of you for a while. You can’t assume they’re stupid. They have figured out things things for marketing things for sales, there’s a lot of different stuffs you may have an innovation, something you’re doing that’s different, that’s much better than them. But that doesn’t mean you can’t learn from all the mistakes they’ve made and all the little tricks they have found out that works so you and you should know their products inside and out so you know exactly what they aren’t doing. What they aren’t delivering the customer with what things they’re overlooking. So in your product, you can make sure you have that. That’s number two. Number three, really, really important. The big one of the biggest mistakes entrepreneurs make is that they stick with the same idea too long. Now, most of us, we never want to give up, we you know, and once we start working on something, we invest our time, our emotions, you know, our money into this project, we don’t want to admit it’s not working, we don’t. So we just charge ahead, we think we can fix any problem. Now well, determination is a key asset of successful entrepreneurs. It’s not being determined, it’s not being, it’s not putting on the blinders and just focusing on this one thing. If you’re in a startup right now, and you feel like you’re Sisyphus, you know, in Greek mythology, rolling, pushing that boulder up the hill, only to have it roll back down. And you have to repeat the process over and over and over. If you feel like that, I will tell you, your business is broken, there’s something fundamentally wrong, that you’re not seeing really great entrepreneurs, they know that when they hit an idea, and it starts to go out a certain point, like if you’ve launched your product, and you’re six months into your launch, and isn’t taking off, it isn’t just taking off. If you’re not running after that Boulder, just trying to keep up, if you’re still pushing Do you need to re examine your business, because most entrepreneurs fail by sticking with the same idea too long. I have found that really successful entrepreneurs, they’ll try one thing doesn’t work, they’ll try another thing works work, doesn’t work, they’ll try another thing. They will keep trying until they hit that thing, where this explosion of energy just propels their startup. So if you don’t feel that explosion, and you’ve got all the pieces in place, then honestly, the demand isn’t out there for your product to demand that you need to make it successful.
Justin Nassiri 06:50
I like all three of those things. But I’m going to harp on the third one because I don’t think it’s said often enough. And I’ll share from my own experience. My first startup I raised $3 million from Google’s Chairman Eric Schmidt had all this tailwind and you know, drink my own Kool Aid and stuck with a product that was the wrong product. We had venture funding, so we didn’t really need money. And I think that that caused us to stay with a broken product way too long. So I love that you’re talking about this, how there should be this downhill effort. And I particularly want to harp on that for listeners, because I feel like we champion this idea of grinding, which I’m not I’m not against that it of course takes hard work. But sometimes grinding means like you’re you’re solving the wrong problem, or the pain point isn’t big enough, where you haven’t really touched on a nerve. So I really like the sense of like using that honesty of like, do we have this flywheel? Do we have momentum? And I’m curious if you have any advice for people, when to know because there is some aspect of pushing a boulder uphill when you’re when you’re birthing a new company? What’s the sense of like, when to know like, okay, it’s been long enough, there should be economies here or we need to pivot?
Steve Hoffman 08:10
That is the toughest question entrepreneurs face. You know, if I do my giving up too early, if I just stick with this a little longer can I get can it work? And I will tell you, I’ve been in that place because you you know, you know that these things are really hard to get off the ground. It’s never easy. And you hear stories like Airbnb where it took them several years, everybody said no all the venture capitalists, but they stuck with it. And today they are Airbnb, not some unknown startup that has failed. So these, but I, I will tell you, what, when you really know is you have to identify first your core customers like Who are those power customers, and you need to go to those customers early and often to engage them. And if you see those customers, and they’re using their product, you know, and everybody’s saying, Oh, this is kind of nice. Then you have failed. Like you can get all your customers to tell you you have a nice product in you have failed. Because people don’t really pay for nice products. They don’t stick with nice products, nice products don’t matter. Like Think of your phone just for example, you download an app and you look at it. Oh that’s kind of nice. You know, week later you forgotten about it. A month later you’ve deleted it. That’s what happens to nice products. So when you go to your customer, the telling sign and this could be in person like B if you’re a b2b company which is our our audience out there, you you can go to your customer it’s not like a consumer product where you can’t always talk to them at the beginning. You can actually go to them and if they don’t say oh my god, I need this like I have to have this today. You This is like when can I get it? when can they and when those core for customers, it doesn’t have to be a lot of them just stick with your product and come back and come back, then you know, you have something, if there are enough other customers like out there like that, it doesn’t matter, you can put in the hard work, you can grind, you should grind, right? To make this product go. But if those core customers are absolutely like the core ones fanatic about what you have, if you don’t get any fanatics out there, then you have honestly, no business like great companies are built by products that exert serve what I call extreme need, extremely, like you don’t build a great company and explosively growth company, unless there’s pent up demand. And that demand, the higher pressure that demand, the bigger the explosion when you unleash it. So all the rest is just figuring it out, building the infrastructure, making the sales, marketing, putting all those together. But the hard part for entrepreneurs is discovering demand. Like I tell people, you have to be a demand hunter in the beginning, like you can build the best product in the world and you did it like it can be perfect bug free, every feature imaginable, you know, integration with every social network would work and platform, whatever, it could be the best product ever. But if there isn’t that pent up demand, you have nothing. It’s not the product, it’s the entrepreneurs job is actually find the demand in their pockets of demand out there, all over that you that are always being new ones forming, you know, like these volcanoes underground, that you don’t nobody realizes because markets are shifting technology’s changing, you know, people have new needs, all the time trends are, are changing. So you have if you haven’t hit that demand, if you have a product that everybody thinks is nice, but is it really taking off, then you need to go back out and become a demand hunter again.
Justin Nassiri 11:50
I love I mean, there’s so much wisdom there that’s worst is people rewinding to listen to that. But I love this sense of being a demand Hunter. And what I think that is great about what you’re saying that’s also very difficult is to have the creativity and passion to bring something new to life. But then having the curiosity and vulnerability to recognize you may not have gotten it right. So by going to those core customers, being willing to hear them say like this is this is a nice product, like being willing to hear that. And I know, as a founder that’s very difficult. Like I want to think that this is great. And I might see that as an opportunity to tell them why they’re wrong and why this is something they should use more of. But I love this sense of the curiosity, of seeing like is this really a massive need. And I love that you talked about that pent up demand, it really does need to be something like that a core set of users that are so desperate for a solution that they do anything for this product. I think that’s brilliant, brilliant advice.
Steve Hoffman 12:51
In you don’t have to sell those people like those people don’t need to be sold. They don’t need to be educated on why they need that. So if you find yourself educating your customers, you’ve lost, right? Yeah, if, if a customer really needs something, you show it to them instantly. They’re like, Okay, I get it, like I want it.
Justin Nassiri 13:10
What’s interesting there, I’d love your thoughts on this, because it’s like, it feels like there’s a couple potential traps that listeners could get into. One would be maybe they have the right product, but they haven’t found the right audience for it. They haven’t found the audience that has that pent up demand. So it might be a mismatch there. It might be that they’ve got a great potential customer set, but they need to iterate on the product and get that right. Or it might be some combination there. But the price point isn’t right. You know, I think of like, as you were saying, I use type form a lot. I spend 50 bucks a month and I’m like, I wouldn’t be heartbroken if type form went out of business for this form builder, but at 50 bucks a month, it’s fine, I’ll probably use it forever. So there’s the sense of that it might be the price point that’s just off. And I’m curious you know, did that do those seem like three relevant buckets? Or is there potentially something else at play that someone might need to tweak to kind of get that product market fit?
Steve Hoffman 14:07
Yes, so those are right, it’s really when you’re engaging with a customer. Number one, every product has a right price point. And the price point is equates the correlates to the value you’re delivering like how important is that value to the customer. Now I like to say when you go to a customer, customers don’t buy your product for 10 reasons like they don’t come and say oh I’m getting this product because it does this this this this and this it has this feature this feature and this feature they go when people go to your get your product, there’s usually one core reason that they went to your product one thing that they really need it to do above all else. So if you go to them you need if you’re going to find the right customer like you were talking like Do you know how do you know you have the right customer like you could be you know, you could be This targeting customers that think your product is nice or pretty good, but pretty good never cuts it either. Instead of those ones who like see that we’re just like, right on. So first of all, when you market you have to experiment, you can’t just go to like one niche. And you need to, you need to run experiments everywhere. If you’re b2b, you need to go to a wide berth of customers, and try to figure out who really, really needs it. If you can’t find anybody, then you can’t find anybody. If your market all your marketing experiments, the different demographics and target groups and businesses fail, then you got to move on. It’s that simple. But we can go to messaging to which I know you’re really focused on in this podcast, messaging comes down to the one core thing that it does for the customer, not all the features, you don’t want to message about all these features and all these extra things, you need to zero in on what’s that one reason that they’re making this buying decision? What is the thing, you know, if it’s type form that you’re using, what does it do for you that none of these other products do that you just like, okay, I’ll spend 50 bucks a month this right. And usually, if you look at the market out there, it depends, your pricing can be pretty elastic, like, if you hit just the right need use case for this, this product, you can often go pretty high. But a lot of people do this through tears. So they’ll have, you know, the of the freemium model where for people to try it out, that’s basically great marketing, it’s free, but then they get those whales, those those users who like really, really, really see the value, and then they’ll have those extra features that a whale would need, and then they charge much more. So that’s how you can adjust your pricing. Of course, you know, for a simple online service, you’re never gonna be able to charge, you know, hundreds of 1000s of dollars a month. That’s just ridiculous. There’s some limits to it, but you, you can figure out those limits by running experiments. And I’m sure typeform did like to maximize the you know, the return and to price it just right, every startup has to do that. What is the problem though, is if you find people are choosing your product, just based on the price, as opposed to a competitor, like literally, if everything is the same, but you’re lower, and they’re coming to you, that’s a race to the bottom, that means you, you you aren’t offering really much of anything above and beyond your competitors. And that means you have to go back to the table and start innovating. Otherwise, your margins are gonna get squeezed over time. And it’s gonna be very hard for you to go out and acquire more customers. So I always I tell startups, kind of these are the fundamental rules you need to think about.
Justin Nassiri 17:42
I think that’s great. And I I really like this thought of 10 ideas why customers say no, one idea why they say yes, it really unburdens the entrepreneur to realize there’s that one message and then I love how you extended that to say, look, all of your messaging needs to be around this. And I also appreciate the the nuance of your answer on that pricing of not just thinking you know, I think I was in this mindset of one price. But realizing look, you can add a couple features that have a whale that then allows you to have a subsidized product for the masses. Like I love that that nuance there. I know that we’re at time. So let me let me close by saying you know in for listeners in the show notes, we’ll have links to all of Captain Hoffs material, but in particular survive in a startup, which is his newest book. But But Captain up let me give you space. What else do you want listeners to know before we wrap up? And how can they learn more about you.
Steve Hoffman 18:40
If you want to find out about meet super simple, go to founders space.com founders space, I’m there you can contact me we have tons of free content, startup kits, videos, all this material, my podcasts, everything is there. And I have a special offer for your listeners. If they want the 10 commandments of raising venture capital, they can go to the special URL founder space.com slash 10. Either the number 10 or t n and they can get it. Also if you want my book surviving a startup, which goes deep on this, just go to surviving a startup.com.
Justin Nassiri 19:19
And I was making notes of those as you were talking so those will be in the show notes as well, but I’ll just recap them in case you have a good memory surviving startup.com founder space.com and founder space.com slash 10 will get you the special offer for the 10 commandments of venture capital. Captain hop thank you so much for your wisdom. Thank you so much for taking the time to speak with me and our audience. And I hope our listeners will check out your books and your material as well.
Steve Hoffman 19:45
Thank you, Justin