We are all pretty familiar with the venture building process for most startup ecosystems; on one side of the table there’s business-people: investors, advisors, realists. On the other side, you have idea-people: entrepreneurs, founders, visionaries.
In the fall, I sourced founders at a seed fund in Hong Kong. I was in the investor camp.
In the spring, I designed pitch decks at a product design startup in Portugal. I was brainstorming with founders.
This summer, I’m in Chicago at the center of that investor-founder relationship. This unique blend of worlds is called Prota Ventures, and it’s awesome.
Prota’s a mix of visual designers, web/mobile developers, and marketing geniuses all running small experiments building ventures (not limited to startups) and making data-driven decisions on where to continue investing resources. Most of my co-workers have 10+ years of experience in their respective industries, many have successfully exited from companies they’ve founded.
We have a weekly partners meeting in which I have to remind myself to unfurl my brow. WYSIWYG, ERP, git client, 404 link building? I offered to take meeting minutes. This log of conversations has been an invaluable learning resource, and hopefully a value add for the partners.
Venture Building: What it Entails
Believe it or not, I’m actually doing more for Prota than just taking notes during meetings. I’m actively running tests on projects within Prota’s portfolio. My first assignment was prompted by a question from Will Little, Prota’s Managing Director (head honcho), “Was wondering if you’d be interested in starting a company this summer?”
Will elaborated that I would be working with Startup Rocket (SR) – Prota’s web-based software product to help founders get their idea off the ground, research, build a team, and the like. I would be a guinea pig in SR’s private beta.
I dove in and, 4 hours later, we talked through my wide smattering of ideas/problems ranging from germ control on airplanes to an augmented reality application to improve the form of your deadlift.
Choosing a Venture
We landed on software for gyms. We talked about pain points that gyms face. I reflected on my experience working the front desk at L.A. Fitness last year. An overriding theme came to emerge — a lot of fitness tech is antiquated. For instance, take gym member authentication. As a savvy, poor undergrad, I learned that I didn’t need to pay for a month’s membership when I traveled home to see family over semester breaks, I could just steal my Dad’s barcode and swipe in. The majority of gyms still use this barcode authentication process. The alternative to swiping your barcode is standing in line, providing your cell number, and waiting to be manually checked in.
That sounds like a problem, doesn’t it? Broke 20-somethings beating the system at the expense of gym efficiency. Not to mention, if we examine other authentication processes in our daily life, they are much more advanced. Your phone unlocks by a fingerprint, your car starts via a button, your mac authenticates by your (apple) watch.
Testing Your Idea
Later that day, I was cold-calling and knocking on doors. I went into all kinds of gyms – MMA, rowing, cycling, strength training. My question: “What do you like and dislike about your gym’s software(s)?” Not one person said: “I’m sick and tired of members finding authentication loopholes.” The chief complaint was “I pay too much for my solution.” Big surprise there. Going deeper, managers indicated that most of their software’s necessary widgets came at a steep additional expense.
My hypothesis was clearly not reflected back to me. However, the Steve Jobs quote popped into my head: “People don’t know what they want until you show it to them.” On the other hand, Gary Vaynerchuk was telling me, “The market is the market is the market.”
I referenced the Startup Rocket framework and clicked on a module called “The Value Hypothesis.” It read: “Briefly describe the value you will be providing your customers and how you will measure it. Frame the value in terms of a hypothesis that can be proven or disproven with data.” Clearly, Steve Jobs was a snowflake. It was time to embrace the reality that my hypothesis was disproven because managers just did not voice a need for a new authentication procedure.
I know it seems obvious, but without a voice of reason to guide your decision-making, you can easily get frustrated and give up. If Startup Rocket has taught me anything about venture building, it’s to quickly identify the writing on the wall and move on. Let’s brainstorm a new business idea, test it in the field, and then effectively utilize our findings to do it all again tomorrow.