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Lean Startups & MIcro Ideas24:21 with Greg Winn & Jim Mayes
Last years FI Live "App it out" winners are back to share their experiences in making it in the start-up world. Covering topics such as creating little to no over heads to, why they removed managers. The talk will also discuss how to execute on small "micro" ideas and why you don't need the next "big thing" to make money and be successful
[APPLAUSE] How's it going everybody? 0:00 So I hope everybody's have been enjoying their 0:03 talks today, is that is that the case? 0:05 Yeah, no? 0:08 >> Nobody. 0:09 >> Yeah. 0:10 >> Okay. 0:10 >> All right, we're hopefully gonna ruin that for 0:10 you today so, let's get this train wreck started. 0:12 >> Yeah, actually just a second, how many people out there are developers? 0:15 Mostly, mostly developers? 0:21 Has anybody ever traded stocks at all? 0:23 Ooh, okay. 0:28 >> All right. 0:28 >> Cool, cool. 0:29 >> Awesome. 0:30 >> Alright, so our talk, as you can see here is Lean startup and Micro ideas. 0:32 So I'm Greg Winn, by the way. 0:38 Winn. 0:39 >> And I am Jim Mayes. 0:41 And we're basically developers who are who specialize 0:43 in building products and we're also occasional day traders. 0:47 >> Yeah, nice transition. 0:54 >> Yup. 0:55 [LAUGH] 0:55 >> So we've been working together for probably about ten years. 0:55 In the last four years, we're doing something kinda interesting. 0:59 We've been going into tech start-ups and building their actually 1:03 ideas and making them products and getting them to the market. 1:07 So it's a, it's a lot of building building brand new products. 1:10 >> Yep. 1:15 So you, you've probably heard of the new 1:15 thing going around, which is the entrepreneur residence. 1:17 So we're kind of like technical co-founders in residence. 1:19 So we come into a start-up to provide the technical operations side of things 1:24 for them, and we're on our third start-up doing this, working as a team now. 1:29 >> So one thing that we found to 1:35 do this very efficiently is actually The Lean Startup, 1:38 >> Yep. 1:43 So, so how many people have heard of The Lean Startup method? 1:43 Okay. 1:47 >> Oh boy. 1:49 >> How many people have actually read the book? 1:50 >> [LAUGH] >> okay. 1:52 >> Excellent. 1:55 >> All right, so we're gonna talk a little bit more about lean here in a minute. 1:56 But first, we wanna give a little bit of a little bit 2:00 of back story about us, and, why we're standing up here today. 2:04 >> So actually last year, like, Ian said, we had won the 2:09 the App it out contest, it's it's like a pitch-off, for start-ups. 2:13 So, basically, everybody submitted their, their pitches, and 2:17 it went to, in like an online vote. 2:22 And then the three best actually got to come here in 2:24 Vegas and present in front of a giant audience like this one. 2:26 >> [LAUGH]. 2:30 >> And then then there was actually three judges and they voted on the winner. 2:32 And so we actually won with a near perfect score. 2:37 >> Which is which is right there. 2:41 That's that's Jeff Atwood in the middle, who just put down his 9 2:44 vote and ruined our opportunity to have a, perfect photo of our score. 2:48 so, but, really all the judges were great. 2:54 It was, it was a good experience, we got some really good feedback from them. 2:56 They asked a lot of really good questions. 3:00 So we're, we're up here because we are the reigning App it Out champions. 3:03 >> Actually the, first app it out champions for two consecutive years. 3:08 >> Right. 3:12 Undisputed, mainly because there's no contest this year. 3:13 So part of the prize for winning the pitch 3:17 off was the opportunity to come back here this year. 3:20 Get on stage again, and talk in front of a, a giant audience. 3:24 [LAUGH] so, we though the the App it Out contest was a good opportunity for 3:28 us because we had an idea that we had been working on as a side project for a while. 3:35 >> So, at the time, we had seen a change 3:42 in, news media and, social media and their interaction together. 3:45 And so the way things used to work is, news media they'd go 3:49 out and they'd, they'd see an event and they would report on it. 3:53 Well, actually, what we had started seeing was a reverse 3:56 in that, so we had started seeing where people were 4:00 going and actually at the location the event was happening 4:02 and started posting on Twitter or Facebook, hey this is 4:05 going on and then the news would actually go on 4:08 your Twitter account and say hey there's something happening, going 4:11 on, so that actually become more of the actual story 4:13 coming from social media instead of just your standard news. 4:18 >> So social media was kind of becoming the source for news events. 4:21 >> So this is an example of one of the things that happened. 4:27 Captain Sully Sullenberger landed on the Hudson river here, like a damn boss. 4:29 >> Right, right. 4:35 >> Yeah. 4:36 >> Everybody remembers when that happened, anybody, okay. 4:36 >> All right. 4:39 >> So this is, this is an example of an event that, broke first on Twitter. 4:41 And then, traditional news media picked the story up from there. 4:45 So there's this other thing that, it was news related 4:51 that we were also aware of from our trading activities. 4:53 And that said the stock market is influenced by 4:57 news events as well which makes a lot of sense. 4:59 But there's this branch of study in economics called behavioral economics. 5:04 And one of the main concepts that comes out of behavioral economics is 5:08 the idea that markets are not rational because markets are made out of 5:11 the actions of people and people are not rational, so in a ideal 5:15 world, people would base their buy or sell decisions on hard facts or data. 5:19 >> So, but in reality people aren't that rational, right? 5:26 They're they're making their decisions based on their 5:31 current mood or what's going on around them. 5:34 So, people were reacting, more than they actually act. 5:36 And so, yeah, so what we're reacting to is mostly news, right? 5:40 sorry. 5:47 >> Yup. 5:48 So basically, people were like, you know, freaking out 5:48 about stuff that's happening in the world all the time, 5:52 and that's, that impacts, how they buy or sell 5:55 things and that activity actually is what moves the market. 5:59 So with those two things in mind, our thought was that 6:05 if the market movements are a product of people's reaction 6:10 to the news and the news is now coming from social 6:14 media, then it stood to reason that social media would 6:17 not have the same types of indicators, towards predicting the market. 6:20 But more importantly social media was closer to the source. 6:26 So it was more real time and that meant that if it 6:28 had this predictive power, then it would lead the market more in advance. 6:31 >> So the next thing is that the 6:36 content on social media is much more accessible, right? 6:40 And it's actually in a better format for us to look at. 6:44 So it's possible to aggregate this content and then kinda decipher basically 6:48 the mood from which everybody's, you 6:53 know, having these conversations around these events. 6:56 >> Right. 6:58 And actually this this piece of code here is open source if anyone wants that. 6:59 >> There's the just. 7:03 >> yep. 7:04 [LAUGH] So we thought this was a pretty interesting idea. 7:04 We've been messing with it for a while, and then the App It Out came along 7:08 and that gave us a good hard deadline to accelerate the work that we were doing. 7:12 But also gave us the opportunity to begin thinking about this idea 7:18 in the form of a product, and how it could become a product. 7:21 And most importantly, it gave us a really big 7:25 opportunity to put that product out there in front of 7:27 a bigger audience, and try and get validation for 7:30 it, and see if it generated any interest for people. 7:33 >> Montage here. 7:40 >> Yeah. 7:41 >> All right. 7:42 [LAUGH] So, so to get ready for the App it Out contest we started pulling 7:42 together all the stuff that we actually had 7:46 had been putting together for a couple years. 7:48 We started building a compelling interface for the tool. 7:51 I also started thinking about what would soon become the actual product Cignal, 7:54 so it actually went down to the wire and we actually got everything done. 7:58 >> Yeah, we probably everything submitted just you 8:05 know an hour before the deadline, for the competition. 8:08 But what we had at that point was a very 8:11 clear vision for what the product was going to be. 8:13 >> So we know now the market's are more complicated than ever, so 8:19 one constant in making foreign investment decisions, 8:23 is the importance of understanding market sediment. 8:26 So that's really just the mood of the market. 8:30 >> [LAUGH] I'll do this one, you do that one. 8:32 >> Okay, thanks man. 8:35 We got notes separated on different computers. 8:36 >> Once again, we told you, we're not pros. 8:38 >> Yeah, yeah. 8:39 >> We warned everybody. 8:40 >> So [LAUGH] so for years the strategy has been to basically research 8:40 mainstream media for in, indicators of market mood, but recent studies have shown 8:45 that social media is actually more effective with this, so in fact most 8:50 high frequency trade systems are now using this in their their trade strategy today. 8:53 So we actually just saw this last year and this happened with the AP Twitter hack. 8:58 The Dow was down 140 points and, wow, and 9:04 200 billion in US stock market would just, had vanished. 9:09 >> This is all just two minutes. 9:12 What? 9:16 Yeah, that guy. 9:17 >> That's a lot of money. 9:19 A lot of money just disappeared. 9:22 >> So we know industries are using this 9:25 technology to make quick decisions, and actually Thompson Reuters 9:28 just reported this back in 2012 in their annual 9:32 report and Bloomberg just added Twitter sediment last year. 9:34 So, Derwent Capital, is the first that,uh, actually validated 9:38 the use of this and predicting the overall market. 9:41 So, they started a hedge fund around the technology. 9:45 It ran for about a month and did really, really well. 9:48 but, for a fund that beat the market 9:52 in it's first month, it was actually shut down. 9:54 And that's because one of it's largest investors told them that they could make 9:56 a hell of a lot more money keeping this in the hands of private investors. 9:59 So, if you're an individual investor, you have a few problems. 10:03 You have no access to market sediment, you've got no clear indicators, 10:07 no trusted sources and expert opinions 10:11 are often uninformed, ambiguous and manipulative. 10:13 The guy, walking dead frame so. 10:18 >> Okay, so, we decided that we wanted to try and change all of this. 10:24 So we created Cignal to read social networks in 10:28 real-time and interpret the mood of the conversations that 10:32 was happening there and then use that data to 10:34 try and predict what would happen in the market. 10:36 And we're seeing over 86% accuracy in predicting 10:39 the market up to three days in advance. 10:42 So pretty, pretty impressive results from just 10:44 a simple algorithm that we were using. 10:48 But most importantly unlike the technologies that 10:50 the financial institutions were keeping to themselves. 10:53 We wanted to make a product that 10:56 would be for everybody, whether you're making hundreds 10:57 of trades a month or if you only made one single trade ever, we didn't want 11:00 you to be an investing pro or 11:04 pay thousands of dollars for the research tools, 11:06 we wanted to make access to the sediment 11:08 data, sourced from the crowd, affordable and accessible. 11:10 Because the goal we had for Cignal was to empower all investors to 11:14 be able to make decisions independent of 11:18 a reliance on the traditional financial institutions. 11:20 >> So, we had some pretty ambitious goals for the product. 11:25 And when in the App it Out contest, I actually 11:28 kind of validated some of our core product ideas, right? 11:30 But now the real work actually had to start. 11:36 So, we needed to build the product and build the business. 11:38 and, wow, yeah, so we've, so we've been working on, doing that. 11:43 So the past four years we've been working at, you know, 11:48 random start-ups and, and helping them get their product to market. 11:51 And so we knew that the only way to do that is lean start up method. 11:54 Which we just talked about quickly. 11:59 >> So so we saw quite a few of you are familiar with Lee, but those of you who. 12:02 >> That one guy who read the book? 12:07 >> Yup. 12:11 But anybody who's, who's interested in building a product or 12:11 running a start up really should check out the book. 12:15 The problem with start-ups is that they operate in 12:19 an environment of high uncertainty and that makes them risky. 12:21 Risky like a new business is, but also 12:25 more risky because they have so much more uncertainty. 12:28 So a lot of that risk comes from all of the assumptions that we have 12:32 to make early on in a product before it gets in front of real customers. 12:35 So we make assumptions about that a person has a problem first of all. 12:39 We make assumptions about those people who have that problem. 12:43 We make assumptions about knowing the best way to solve their problem for them. 12:47 And then finally we assume that they're going 12:51 to pay for our solution to their problem. 12:54 So that's, that's a ton of, of assumptions 12:56 that, that have no real backing, at that point. 12:59 so, what the Lean Startup method does, is, it attempts to minimizes 13:01 risks as soon as possible, by testing them as early as you can. 13:06 And that testing process is what we call the build, measure, learn cycle. 13:11 And that's really just applying the scientific method to product development. 13:17 So you start with one of those assumptions, and you 13:21 think about it like it's a hypothesis in the scientific method. 13:24 So you build an experiment to test that assumption in front of real users. 13:27 You measure the results, and then you 13:32 learn whether the assumptions were correct or not. 13:35 And, from there you decide whether you need to go back to 13:38 the drawing board with something or whether you're on the right path. 13:41 So you just kind of repeat this cycle over 13:44 and over again until you've reached success or until you've 13:46 reached the point where you know that you need to 13:49 change your direction or just throw in the towel totally. 13:51 So that change in direction is what in Layman's is called the pivot. 13:55 And even even if you're not familiar with lean 13:58 you've most likely heard the term, product pivot before. 13:59 And you've likely also heard the term MVP, or Minimal Viable Product. 14:03 So the MVP is just that experiment, right? 14:07 It's putting your product together in its most minimal form, so that way you can 14:10 go out into the world and begin to 14:15 validate some of those assumptions that you have. 14:16 >> So we took really a lay of the land and what should be in RNVP. 14:21 So we had done this kind of thing before but usually the business 14:26 and marketing side of it had kinda been handled for us you know. 14:29 We mainly focused on the technical side. 14:31 So we recognized that we were gonna need some help. 14:33 So we actually contacted two other guys that we worked for or worked with 14:36 in the past and had a lot of experience in financial marketing and technical 14:41 analysis and we actually asked them to 14:45 become the additional co-founders of Cignal, but 14:47 anyway we still had no budget, a crap ton of work to get done. 14:49 And a lot of assumptions about how our 14:55 retail in, retail investors are gonna use our products. 14:57 So no money, That's an understatement, But 15:01 there's basically three paths we can go down. 15:06 We can we can seek investment, we can bootstrap, or I guess we can do both. 15:08 Well, we figured that was the smartest thing to do, so we went both. 15:12 So we're gonna bootstrap while we pursued investment. 15:15 But seeking investment actually gave us a different take on things. 15:18 It validated our concept, one. 15:24 And it actually gave us a lot of feedback by talking to these people. 15:26 We also learned a lot about how funding works. 15:30 You want to give up a lot of your company long term 15:33 [LAUGH], to get a lot of cash for, your short term needs. 15:36 [CROSSTALK] Yeah, very little cash. 15:40 >> So at the same time we began to build, the product on a bootstrap budget. 15:42 And what we found out was that we could actually 15:47 get a lot farther with the idea than we initially thought. 15:49 So we leveraged things like Digital Ocean, for cloud 15:51 hosting stripe for, a payment gateway that's very affordable. 15:55 And, there's just a ton of goods and services out there that, now, 15:59 that are, really very affordable, and ver, very easy to implement into solutions. 16:02 So we decided to pursue that model of 16:08 bootstrapping as far as we could possible take it. 16:10 >> So we would do all the work we 16:14 possibly could ourselves, even things that were really kind of 16:16 outside our typical area of focus, and this was really 16:19 to avoid going outside and have to hire additional resources. 16:23 >> Yeah, just trying not to spend any money that we didn't need to. 16:27 So we still had a ton of work to get done as well. 16:30 And in order to get all that work done we 16:34 knew that we were going to have to keep things simple. 16:36 And really that meant removing any roadblocks 16:39 to the process that might slow us down. 16:42 So the first thing that we did to approach this was put off making 16:45 any decisions that we didn't have to make right then in that point in time. 16:49 And by that, we don't mean just putting things off, We mean being able 16:54 to recognize when a decision actually has to be made, And when you can 16:58 put it off until you have enough information to make the decision well, So 17:02 for example, with our architecture, we got the service that we needed for right now. 17:06 We didn't try and build the architecture that we 17:11 thought we would need months down the road because, 17:13 at that point in time, we really didn't know 17:15 what months down the road was going to look like. 17:17 secondly, we always try to keep a very clear picture of what our MVP was. 17:20 So we would try to avoid getting caught up 17:25 in solving any edge case problems that would complicate 17:27 things or building any of the nice app features 17:31 before we had built all of our must have features. 17:34 >> So typically the lean techniques can be applied to scaling up, 17:39 but they can actually be applied to scaling down into small products. 17:43 So, micro ideas are the things that are in your head, 17:47 that you might not think are big enough to be an 17:50 actual product, but your product ideas, you know, they don't have 17:53 to change the world, right, they just have to solve the problem 17:56 >> The other good thing about smaller ideas is 18:00 that they are not as intimidating to get started on. 18:03 A lot of times with a, with an idea it seems bigger to you. 18:07 You feel like you have to get all your ducks in 18:10 a row before you can even start work at all on them. 18:11 So the reason that we're, we're bringing up this 18:16 idea of these smaller ideas is that while we were 18:18 bootstrapping development on Cignal, we had an opportunity to 18:20 execute on a micro idea basically fallen into your lap. 18:25 And the micro idea that we had we turned into a service called lnkdto. 18:28 This idea came out of a conversation that we 18:33 had with a friend who worked at another company. 18:35 And this company that he was working with was a publishing network. 18:38 And this guy had just been in a, this conference call with 18:41 some outside vendors trying to get a solution for problem they were having. 18:44 And what they were trying to do is just surface which articles within 18:48 their network across their, you know, this network is like 200, 300 websites. 18:53 They wanted just a way to surface which 18:57 one of those articles were trending in popular. 18:59 So the conversation that he was having with the vendor and 19:02 the solution that they were suggesting didn't really feel practical to 19:06 him because it was gonna require them to go to all 19:09 of those site owners to get the solution integrated into their sites. 19:12 >> So hearing that, we, we instantly thought, 19:16 ok, there has to be a better way, right? 19:18 And so what when into pathing is that, 19:21 actually what ended up bugging this guy so much 19:25 is, is that we, we gave them this new 19:28 solution like, okay, you know, here, here it is. 19:30 This is what we thought of, right. 19:32 He is really mad because he, he knew that 19:35 this company would not be able to execute on that. 19:37 It just, don't get me wrong, they had a great dev team, it's just 19:41 that their, their company was kind of stuck in, corporate tar if you will. 19:44 So they're unable to make quick decisions and move, you know, like a, like 19:49 a start-up, basically textbook case for a start-up to pop up and solve the problem. 19:53 So we created lnkdto, a customisable widget that 19:57 displays content on your website or by social shares. 20:01 Actually also has an API that you can send one or 20:04 many URLs too and get back JSON result of other shares. 20:07 >> So so we were able to build a 20:12 proven concept of this idea over a single weekend. 20:14 We spent the next week productizing it, building the marketing site for the MVP. 20:18 Within another week, we had sold our first subscription for it. 20:22 Then the next month, we were able to up-sale a customer on it. 20:26 So just the first two months, we had brought in enough 20:30 revenue to fund operations of the service for the next three years. 20:33 So anything after that point is just pure profit. 20:37 >> So why did we do this? 20:42 I mean, besides the obvious So the easy is quick and easy, right? 20:44 It's small and manageable idea we can execute on really quickly. 20:49 It also had an immediate market fit, right? 20:53 We knew, you know, there is somebody that needs it, yeah. 20:56 So, and we also wanted to kind of prove we could execute on 20:59 an idea as a start-up at a large corporation with a bunch of resources. 21:02 Couldn't get together and and, and execute on it. 21:07 But most importantly, is that it actually fed our development of Cignal. 21:10 So all, all the profit went towards our main goal. 21:13 >> So what we're kinda hoping to to get across to 21:19 everybody today with these examples that we're giving you is that. 21:24 By leveraging the lean methodology you know, 21:27 there's, you can really reduce the barrier of 21:31 entry to, beginning to start to build your own products or own start-up today, right. 21:34 So you don't have to have this like, next game changing idea, 21:40 you don't have to always risk it all to build a product. 21:43 You can gain a lot of experience, from building starter small, or smaller 21:47 start-ups or smaller products, before you go out there and swing for the fences. 21:51 The barrier, again the barrier for entry is low. 21:55 There's a lot of services out there that can reduce cost. 21:59 The risk is low if you use a meth, you use a lean methodology. 22:02 And the rewards of doing this can be disproportionally great. 22:06 Like the instance with with lnkdto. 22:09 It was very easy, very low effort and it 22:12 had brought in a great amount of revenue very quickly. 22:14 So if, if you have an idea that you're uncertain how 22:18 to get started with, you know, look, look to the lean methodology. 22:21 Start with the part of it that you know, and then 22:25 figure out ways to test to learn the things you don't know. 22:27 So as for Cignal, we're continuing to basically follow that same process. 22:32 the, the lean strategy and experiments of do 22:37 more experiments around the value of our product. 22:41 And one of the things that we're still trying to understand, even better, is how 22:43 individual investors can put the information that we 22:49 have to use in their personal trading strategies. 22:51 So, to do that, we've actually just rolled out a new 22:56 feature in Cignal, that adds a gamification layer to the product. 22:58 So now we're letting users come in and 23:03 look at the sediment against the NASDAQ market. 23:06 And then make predictions about what they think is 23:09 gonna happen to the price over a period of time. 23:11 Then we award points based on how accurate your predictions are. 23:14 >> So, you can also actually share that on Facebook or 23:18 Twitter and kinda brag about your results or your, performance really. 23:20 As you see here, I shared one mistakenly, 23:25 I lost seven points in my awesome prediction but. 23:31 >> So don't follow his stock tips. 23:34 But even more exciting we're also finally opening the 23:39 door to our free membership tier, in the product. 23:43 And that's been a big part of the vision for Cignal from the beginning. 23:45 We wanted to really make this stat accessible to people. 23:48 So now, anybody can go and sign up for the free account and 23:51 get access to the cinema data, and also, you know, make these predictions. 23:54 So thank you guys very much for letting us ramble on today. 23:58 If you want to know anything more about Cignal, or you want 24:02 to talk about Lean, feel free to get in touch with us. 24:05 Follow us, on Twitter or anywhere >> As well as email. 24:09 >> Yup >> Or you could also fax us. 24:12 >> Yup. 24:14 >> Thank you very much we appreciate it. 24:15 >> [LAUGH]. 24:17 [APPLAUSE] 24:17
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