Editor’s Note: The author is founder of WeKeep, a bookkeeping service for digital entrepreneurs and startups in the GCC. WeKeep is taking part in Startup School, a ten-week course run by Y Combinator. The online course that began on July 22 is completely free to attend for anyone. Deadline to sign up is August 4. Sign up here.
YC is arguably one of the most successful and sought after incubators; they were early investors in Dropbox, Airbnb and Stripe, to name a few. They’ve observed hundreds of startups and as a result, are able to recognize patterns and share advice on improving your odds of success. This is knowledge from people at the bleeding edge of innovation and investing. Don’t read everything in there as the Truth though. You must develop your own point of view, guided by their experience.
For all startup advice, there is equal and opposite advice.
— Benedict Evans (@benedictevans) May 29, 2019
Founders, Market, Product, Acquisition, Monopoly
The first lecture was titled How to evaluate startup ideas. Although YC looks for billion-dollar ideas, much of their advice can still help you understand whether you can differentiate yourself and build a business, even in a smaller market like our region. For billion-dollar ideas, you just need to be going after markets worth several billions.
Your startup must have an advantage in one of these 5 areas. I’ve done our homework below for WeKeep. Give your idea a try.
Founders: Do you have a rare deep expertise in a field, or a unique combination of skills?
At WeKeep, we are engineers that love accounting. This may not be a rare combo globally, but we’re betting that regionally it is.
In Startup School’s first group session, we’ve received the first batch of feedback from peers. Most of our peers said “they’re not excited about the problem WeKeep is solving”. Your initial reaction when you hear such feedback is to be disappointed, but I thought that was great to hear. Being passionate about an unsexy industry is an advantage – there is less competition and more room for innovation. Schlep blindness is a mini-moat.
Market: Are you in a market that’s growing?
In WeKeep’s case, the introduction of VAT in the GCC is forcing even the smallest companies to start doing proper bookkeeping. You’d be surprised how many SMBs are not doing proper bookkeeping (we got a lead from an auditing company that still does their bookkeeping in Excel). Once governments start doing audits and issuing fines, we think the market will grow significantly. In the medium to long term, taxation will become more complex hence more demand for professional bookkeeping.
Product: Is your product 10x better than your competition?
We think our product is much better than competition. But not 10x yet. WeKeep’s competition is:
- Founders or general managers who are still doing bookkeeping themselves.
- Traditional outsourcing companies who still do things the old way,
- Your in-house bookkeeper who’s not fully utilized and carries employment cost (visa, health insurance),
In the long term, we want to be 10x by automating 99% of the accounting process and cutting the price significantly. We’re not there yet.
Acquisition: is your solution good enough to allow you to grow by word of mouth?
Too early to tell
Kevin Hale from YC: “If paid acquisition is the only way that you’re able to grow your company, [investors] are going to discount that channel of growth greatly.”.
Bookkeeping is a referrals business, that’s why we have a generous referral program (1 month of free bookkeeping for each referral). We’re in the early stages of our startup so we can’t say we’ve found a sustainable acquisition channel yet, but our focus will always be to make our existing customers so happy with our service that they will refer us to their friends. Our product roadmap is mostly focused on that right now, rather than on automation and gross margins.
Monopoly: As your company grows, will you be more difficult to be beaten by competitors?
Are you in a “winner takes all” market? This is typically a large marketplace or a social network. Examples are Facebook, Craigslist, Upwork. WeKeep is none of that and that’s fine. Most businesses are not monopolies, and competing head-to-head with a similar offering in the same market can be a viable path. Think Salesforce and all their competitors (Zoho CRM, SugarCRM, PipeDrive, Hubspot, …), Uber/Lyft or Mailchimp/Sendgrid/Campaign Monitor. Big markets have room for several players.
Necessary but not sufficient
An advantage in one of the above areas is necessary, but not sufficient. Not sufficient because you still need to execute well, over several years. Also, there are several important considerations that I haven’t talked about. They are in the video lecture, watch it in full (27 mins).
Startup School: 9 weeks left
I’ll be posting updates on my experience with Startup School here, keep an eye or follow me on twitter to be notified.
This article was first published here and has been reproduced on MENAbytes with author’s permission.
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- From YC Startup School: How to evaluate startup ideas - July 29, 2019