You Only Get Five Tickets

Warren Buffett is renowned for his ability to wait patiently for the right investment opportunity to come along. Instead of spreading his capital across a wide range of investments, he loads up on the very few that demonstrate tremendous upside potential. That's one of the primary reasons he's been so much more successful than most professional money managers. To cultivate that mindset, he once proposed that investors imagine they only had five tickets for their entire lifetimes, and making an investment required the use of one of those tickets. Just think how much more selective you would be if your portfolio operated under those limitations!

Wesabe vs. Mint: Lessons Learned

Marc Hedlund recently posted a great piece on why Wesabe lost to Mint in the battle of online personal finance apps. As many of you know, Mint was acquired by Intuit in 2009 for $170 million. Wesabe, on the other hand, closed its doors several months ago. Hedlund was the product designer (and later CEO) at Wasabe, so his point of view is especially relevant. He points out, for example, that Wesabe launched almost a year before Mint, contrary to what a lot of people assume. He also makes it clear that Wesabe's failure had nothing to do with design or brand identity.

Second, Mint focused on making the user do almost no work at all, by automatically editing and categorizing their data, reducing the number of fields in their signup form, and giving them immediate gratification as soon as they possibly could; we completely sucked at all of that. Instead, I prioritized trying to build tools that would eventually help people change their financial behavior for the better, which I believed required people to more closely work with and understand their data. My goals may have been (okay, were) noble, but in the end we didn't help the people I wanted to since the product failed. I was focused on trying to make the usability of editing data as easy and functional as it could be; Mint was focused on making it so you never had to do that at all.

How to Validate an Opportunity for Under $2,000

One of the biggest problems entrepreneurs face is figuring out whether their idea has legs before sinking a lot of time and capital into it. Nobody wants to have their name attached to a giant smoldering hole in the ground. Traditional forms of opportunity analysis are helpful (understanding the economics of the business model, researching the market size, growth rate, competition, etc.), but sometimes you need to actually build something you can demo or, even better, test on prospective customers.

Adeo Ressi at the Founder Institute has a great video describing a quick, ten-step process you can follow to cheaply triage whether your business model is a winner.

Adeo Ressi on Product Development 08/19/2010 from Adeo Ressi on Vimeo.

Ressi's very first suggestion is to secure your company's domain name(s) (including common misspellings and TLD variations) and e-mail. Be sure to check out my earlier post on how you can quickly set these up for your business using Google Apps and Sites for only $10!

Some of Ressi's advice is less relevant to brick and mortar businesses, and it is no substitute for an in-depth market validation effort. However, following his steps can help you weed out inferior ideas before committing your team to a more intensive validation process (as described, for example, by Rob Adams or Steve Blank).

Success Cannot Be Pursued, It Must Ensue

The title of this post is inspired by a quote from one of my favorite books: Viktor Frankl's Man's Search for Meaning. Frankl, a Viennese psychiatrist, tells us his remarkable story of survival from the death camps of Nazi Germany. The book also lays out his personal approach to psychotherapy, which he developed as a direct result of his experiences during the Holocaust. Reflecting on his time in the camps, Frankl wondered why so many of his fellow prisoners simply gave up and succumbed to despair, while the few who remained were able to overcome disease, starvation and horrors beyond description. He realized, in nearly all cases, that the survivors were animated by a deep sense of purpose. In his case, it was a steely resolve to make it out alive and be reunited with his family.

So what does Man's Search for Meaning have to do with starting a business? You might think the lesson is about persistence or the need to have a mission statement for your company. While these may be important, but that's not why I'm writing this. Instead, I'm speaking to you, because I firmly believe that the very first step to launch a successful new venture is not knowing your customer (although that is indeed critical), but knowing yourself.