Startup Advices for One Dollar and Investor Hedge Bet Theory
by Jennifer Xue
Starting out is never easy. And getting high-quality help is even harder, especially when you’re bootstrapped with zero cash. For $1, Ghacklabs provides help for startups. Just ask them a question on Ghacklabs.com. You only pay if you’re satisfied with the answer.
Founder Luke Fitzpatrick believed that good relationships and making people happy are key to startup success, including his own. In addition to answering questions thoroughly, he also throw in a lot of extras like introductions, partnerships, and pitch deck worth $300. He often features his clients in articles that he writes as well. When people love Ghacklabs, they will tell their friends.
Fitzpatrick had the “lightbulb moment” when he was answering many questions from startup founders on Quora. In his own words, “I had been answering questions on Quora. Continually startups would reach out to me and ask for advice. Before I created Ghacklabs, I had consulting with about 40 startups for free. I had the wrong assumption here. I believed startups were “too poor” to pay. So I helped them for free. Then, people wanted to pay me -then, it clicked- startups need help. You could say, I created this startup by accident.” In one weekend, Ghacklabs was born. He said that data from the questions and answers will be used to develop a book.
As a startup itself, Ghacklabs, is already making money. Before launching, they had pre-sales of $700, then they hacked up a messy prototype on the weekend and got sales the next day —current revenue is approximately $4000 after only two months of operation. Eventually, Ghacklabs would be turned into “the number one place” for startups. More on this later, Fitzpatrick insisted.
Luke is working on several startup “theories” (or “hypotheses,” which is the more appropriate academic term) and has been invited to guest lecture on these concepts at Sydney University.
A quick snapshot of Fitzpatrick’s startup “theories,” which challenges the “lean startup theory”:
First, full stack dilemma: Most full stack developers have a “build it, ship it mentality.”
Second, investor hedge bet: Give investors additional perks which offset some of the risk.
Third, lean startup lacks some essential agreements: Those are execution, strategy, raising funding and early stage startup marketing. Many startups believe if they do everything in the lean startup, that they will be successful. Unfortunately, this is not the case.
Fourth, early stage startup fundraising: Create an investor newsletter before you raise. We did this here (which you can also view on our home page —the “investor” green button).
Fifth, wavelength conflict theory: A marketing cofounder and a technical cofounder think differently; thus, operate on different wavelengths. Due to this, conflict often occurs in the relationship.
On “investor hedge bet” hypothesis, he said, “Startups often just take investors money, and do not focus on the most important thing: relationships. In order to create a hedge bet (safety net) for an investor, you should go above and beyond the relationship and see if there are any additional things that you can add to angel investors that make the early seed investment less risky. Or, in other words, create a win-win situation.”
He gave these advices to all startup founders out there:
First, surround yourself around people that are smarter than you. After a while, you’ll notice that you start thinking like them.
Second, the best way to get close to product market fit is to have coffee with influencers in your domain. Show them your product designs, get their feedback, and make changes. Likely, when you launch, they will share your product with their network. Mangoplate, a South Korean startup did this. The influencer blogged about their food app, and they got thousands of sign ups in the first week of launch.
Third, wise words from Sam Altman (Y Combinator) which we have adapted to our philosophy, “It’s better to have 100 users loving your product, than 1000 users just liking it.”
Essentially what Sam was saying that those 100 users that really love your product will tell their friends, so you’ll get organic growth through word-of-mouth referrals. On the other hand, if you have 1000 people just liking it, they will just leave your service and move on to the next best thing, thus leaving you with a user retention problem.
Fourth, develop meaningful relationships with investors well before you ask for their money. If you are going to raise funding, set up an investor newsletter on your website, so investors can subscribe to updates on sales, stats, metrics, etc). Luke is doing it with Ghacklabs, where you can subscribe as an “investor.”
Fifth, a lot of people talk about execution, but nobody really tells you what to do. Execution is really all about strategy, a logically way to get your product into the market.
Take Tinder for example. They partnered with college fraternities, held exclusive party and got people to sign up at the door. Or, Quora, which initially targeted investors in SF Bay before opening up their product to the general public. You have to develop a logical strategy that actually makes sense.
For now, Ghacklabs may just seem like a regular startup consulting agency. However, Fitzpatrick is working on the background to turn it into “the number one place” for startups to live on. Is it another unicorn in the making? Let’s watch Ghacklabs closely.
Jennifer Xue is the founder and chief editor of SiliconValleyGlobe.com.
Image Credit: Luke Fitzpatrick