Interview by Kevin Ohashi of KevinOhashi.com
Adam Neary is the Founder of Profitably, a new technology company providing analytics for small businesses. The goal of Profitably is to allow companies to increase their growth and profitability by quickly integrating their financials from QuickBooks into Profitably and running the analyses that matter most. Not only do they provide a pretty user interface to help visualize businesses, they make recommendations based on the financial data that can be acted upon immediately.
Adam has a BA from Boston College where he studied English. After college Adam worked for a short span as a Wine Director before switching gears and launching himself into management consulting and heavy data analytics. His got his start at A.T. Kearney, a leading management consultancy, before launching the Business Intelligence team at a London start-up called Concentra. Finally, Adam worked as a Vice President at a leading turnaround/restructuring firm, AlixPartners. Through these years, Adam worked with most major industries including automotive, financial services, healthcare, pharmaceuticals and the public sector. Adam realized he was solving the same problems over and over in different industries. Profitably was born out of his idea that these common problems could be solved with an automated solution.
Adam has agreed to do a slightly different format of interview; we will be focusing on the real struggles facing entrepreneurs, specifically their adoption of the Minimum Viable Product (MVP) strategy from the Lean Startup movement.
First off, I want to thank Adam for being the first one to volunteer to talk about the problems in starting up with an unusual amount of candor.
When you started Profitably you went ‘all in’ so to speak. You quit your job and cashed out all your equity in your previous startup. Paul Graham writes “Statistically, if you want to avoid failure, it would seem like the most important thing is to quit your day job.” Why is this step necessary? I suspect almost all of us have that fear, especially with a family, how do you deal with it internally and with your family?
My wife, Deepa, has been great. She has seen me working in so many different environments, from large, traditional consulting firms to start-ups, and I think she really believes that I am at my best (and happiest) in a small, rapidly growing company, so there’s that for sure.
In terms of our going “all in” on this concept, I think it was necessary. There are a lot of founders I know who have tried to keep a day job while writing code on the side, and there just aren’t enough hours in the day. Particularly in my case, the consulting roles I have had put me at 100+ hours per week of work plus weekly travel all around the world. I have enough difficulty getting to the gym 3 times per week. But starting a company on the side? Forget it.
Getting a new business off the ground requires reaching a tremendous escape velocity, and for me that required a full time effort.
After committing to starting up, your next challenge was to bring in the best talent to work with you. You got Francis Hwang on board after a 3 month courting period. Why were you so focused on getting Francis? What made him stand out above all the other tech talent?
Famously, in retail your 3 most important considerations are “location, location, location.” Similarly, in startups and professional services, your 3 most important considerations are “talent, talent, talent.”
If you’re an aspiring entrepreneur, you need to take a hard look at yourself, figure out what you’re actually good at (better than everyone else, not just “interested in”), and you need to find world class talent to do the other things. For me, I can certainly write code, but I am great at heavy data analytics and management. So Francis was a natural complement. He’s one of the strongest Ruby [a leading web application programming language] developers in New York. For me, we needed the strongest technologist available to own that side of the business so that I could focus on what I do best.
You have a rather unorthodox recruiting policy. You’ve told us it’s impossible to tell how good someone is based off an interview alone. You use a 6 week project to try out new employees. What are the challenges of trying to screen people with an interview? Do you have strict requirements or do evaluate using your own personal judgment in every case? How do you deal with people who ‘interview poorly’?
Right. I helped my team at A.T. Kearney go from 12 to 50+ people in a couple years, and then I helped Concentra grow from 14 people to 64 in less than a year. In that time, I did a tremendous amount of hiring…and then firing in some cases. I learned how to interview better, but I also observed that there’s only so much you can glean from an interview. Once you’re in the trenches with deadlines and tough work on the table, everyone behaves differently.
So with all three of the hires we’ve made to date (and with 3-4 people to whom we didn’t extend an offer!) we’ve arranged a 6-week contract where we actually deliver something meaningful in that period, and it gives us a sense of what things look like when talk subsides and results can be observed. This is a key component of a “results-only work environment.” When you give people unlimited vacation, and they can work from anywhere, when everyone has the freedom to manage him/herself in the context of the team, it’s only results that count, and you can see that only when you get to work.
Besides, we’ve all got our own baggage, right? It may be the case that we bring someone in who is brilliant but just doesn’t work well with our various styles. Better to find that out up front, right?
You are following the Minimum-Viable-Product (MVP) strategy advocated by the Lean Startup movement. How did you decide MVP was the strategy you would use to launch Profitably?
I was enamored with the writings of Steve Blank and a few others. What they had to say really resonated with me, and they resonated with Francis, so it was an easy decision. Plus, we only had so much money to work with out of the gates, and we knew we would need to prove something before raising additional funds. So the product strategy coincided with our customer strategy, and they both dovetailed into our financing strategy. Everything was aligned.
What has worked well from MVP?
Well, as we suspected, each incremental release gives us more credibility and more to go out to customers with. That’s fantastic. Similarly, each incremental step with the product and with customers gives us leverage and credibility with investors, and that’s fantastic, also. You could argue that there just wouldn’t have been an alternative to MVP/Lean process for us.
What hasn’t worked well from MVP?
Well, emotionally, it’s very difficult to put your baby out there on display before it has any of the features that you know will come down the road. For all the talk about MVP and Lean, I think entrepreneurs are more comfortable with “vision” types of things that customers, investors, and other stakeholders.
Specifically, lots of people are going to look at a minimum viable product and say, “that’s it?!” You have to be ready for that and capable of communicating the roadmap and the vision, but that’s a lot tougher than actually doing it and showing people the results, which takes time.
There’s a great entrepreneur out there named David Cancel, who is the CEO of Performable. I’ve been very impressed with David, and he has a great presentation out there in the cloud in which he sort of implores entrepreneurs to JFDI (“Just &@#$ing do it!”). There’s way too much talk in the startup space and not nearly enough action, and the MVP process can lead to a bit of both. The good news is that you’re actually out there building a product, building something real. The bad news is that once you’re done, you’re filling in the gaps with the story and the vision until the code catched up, and that’s an exhausting process.
You mentioned investors approve of the MVP strategy but it leaves the founders in an awkward position of a ‘stop watch begins’ the minute you launch. How does this affect the founders? Do you think there is a better way it could be done? Are some investors more understanding than others?
My opinion continues to change on this, so if you asked me in three months, who knows what I would say. The bottom line is that there are going to be investors who say, “Well, you launched 3 months ago and you have x users,” and I will want to reply, “Yes, but if we hadn’t launched a minimum viable product and rather waited 6 months, we could have had 3x users after only 3 months, but that would be 6 months from now!”
But just saying that, I am pretty sure I confused myself. The bottom line is that at any point in time, investors care about traction and the growth rate of that traction. So if you launch in Jan and it takes 6 months to get to x, it’s not really that different form launching in March and taking 3 months to get there.
Ultimately, it’s not going to make a difference. When you ask someone for money, they’re going to need social proof that people care about your product. If you charge for your product, they’ll need proof that people are willing to pay. If you don’t, they’re going to want to see the raw adoption, and no amount of talking around that is going to bridge a gap when it comes to traction.
You’ve told me it’s incredibly hard to talk to small businesses without a product to show them. Some close the door if your product is ‘too minimum’ for them. Do you ever talk to the people who turned you down for various reasons again? Do people ever change their minds or is it generally a one shot opportunity with small businesses?
Small business owners are very busy. Fact. I would have expected them to be more open to a business owner willing to write customer code for them for free, but the reality is that people are even wary of good deals. The best thing for a small business owner is a product that does what is promised backed by as many raving fans as possible. If you’ve got those two things, you’re set, and the rest is noise.
But to get there, it’s as difficult as they all say it is. In our experience, it’s a one-time shot with most. They are willing to invest a certain amount of time to try you out, and that time varies by individual, but once you use that time up, you’re done.
So we try to learn what we can and push for a “why” every time we get a no, but often enough…you don’t get that “why,” and that can be very discouraging. But sometimes you do, and that feeds the product process, and you keep pushing forward.
How do you evaluate launch timing with an MVP strategy? It seems to go against the philosophy of releasing something as soon as possible. However, we often attribute timing of a launch to success, “they were there at the right time.” What do you do if you believe you have a product that’s too early for the market but at an MVP stage technically?
I think when people say that a product arrived at the right time, they mean that in a more macro sense. Youtube arrived with great timing, even though similar products were launched a year prior or five years prior or whatever. But Youtube’s “launch” one or two months in either direction might not have mattered as significantly. Some startups take a “stealth” strategy and hide their technology in advance of a giant buzz-filled launch, and the media loves that sort of thing, but I have trouble getting excited about that. If you’re product is awful, a big launch can be a disaster (or certainly a waste of resources). If your product is amazing, it won’t need the hype.
At the same time, it depends upon your priority. If you’re dying to get an early exit and put your feet up, that kind of thing can drive great results, or if you live for the media coverage and love seeing your name in lights, same story.
In my case, we’ve got a team dedicated to building an amazing product, and if we can solve our customers’ most urgent problems, the rest is going to work itself out. My view would be to launch, get a little press for credibility (we launched at DEMO and got great coverage), and then get back to work.
So far, what has been the biggest challenge for you and your company while adopting the MVP strategy? Would you choose to use the MVP strategy again for another startup? What would you do differently the next time around?
I think our biggest challenge, quite frankly, has been on the customer side of the MVP process. I think that we have gone through the motions talking to tons of customers, but I am not confident that we’ve let it drive the process enough. I don’t think we’ve found 100 individuals who are dying to pay for precisely what we’re developing, and that we’ve abandoned all the other components.
It stands to reason that if we found those people then it would be easier to do so, and this gets back to our conversation around people not wanting to talk until the product is ready. It creates a chicken/egg situation where our market doesn’t want to talk until we have a product, but we don’t have a product until we have conversations.
But that’s quitter talk, in my opinion. We could have worked harder at the customer dialogs, and we’ll need to in 2011 if we’re going to go from where we are to were we want to be.
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