Ryan Says…

Another event report - this time I went to a talk on ‘Startup Decision Making‘ by Konstantin Guericke (LinkedIn founder and now Jaxtr CEO).

The event was hosted by BASES - if you want to hear about other events like this, sign up for the BASES digest (and also check the event listing on the right of this page).

Konstantin started out with his tips for making decisions in startups, which I’ll summarize here:

1. Separate decisions from uncertainties
2. Sequence decisions correctly
3. Look into when uncertainty is likely to be resolved
4. Gather information in the context of a specific decision
5. Get information only if it would change the decision
6. Don’t accept ‘no idea’ as an answer, bracket what you know
7. Which alternatives would you never consider
8. Have a clear standard measure of success
9. Use sensitivity analysis to focus on the key levers

However, Konstantin went on to say that when making decisions in the fast-paced start-up environment there are often many other factors to consider outside of this ‘ideal’ framework:

• You have to make lots of decisions in a short amount of time!
• Early decisions can have important ramifications
• You are dealing with real people who have real feelings
• Influence of the board of directors
• 80:20 rule - few decisions will have a large effect
• Organizational considerations (commitment, buy-in etc)

In a consumer internet business specifically

• You have amazing feedback channels (capture and analyze data about your users)
• This is basically applied market research
• At the same time, ethnographic research is important (get up and close with customers)

For the rest of the session Konstantin went through a few ‘business school’ style case studies on LinkedIn and Jaxtr, which made for an interesting interactive discussion. A few interesting points worth posting here:

• LinkedIn earns more revenues from premium services than from advertising (an interesting data point for all the consumer internet entrepreneurs out there trying to decide on a revenue model)
• Don’t limit your product to one ‘use case’ - let your users decide what they want to do with it, and see which market they take you into. Encourage ‘bottom-up’ optimization of your business based on users, rather than top-down control.
• It’s better if your growth and distribution is viral/organic rather than relying on partnerships (basically so that you control your own destiny)
• LinkedIn considered VCs to be their ‘canary in the coal mine’. VCs were big users of LinkedIn, and the LinkedIn team knew many of them personally. This, coupled with VCs tending to be outspoken meant that the team would hear very quickly if something wasn’t working well. VCs also helped seed distribution - if there are a lot of VCs in the network, then a lot of entrepreneurs will join, which leads to a lot of service providers (e.g. lawyers) joining etc.
• Social networks seem to be moving from a ‘tool’ to a ‘platform’. Many recently successful companies (e.g. YouTube) have leveraged social networking platforms (myspace). Note also that Paypal leveraged eBay’s platform.

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