7 Lessons from MIT Startup Bootcamp
Back in September 2017, I attended an entrepreneurship bootcamp run by MIT.
It was intense. For six sleepless days, we began new ventures and took them from conception to launch-readiness. We put our existing startups and projects on hold so that we could start something new without preconceptions.
It’s difficult to put into words the lessons I learned at bootcamp because, to say the least, they were profound. While it didn’t seem like it at the time, these lessons were life-altering.
I’ve penned down here the major takeaways from bootcamp. They’re by no means comprehensive, but hopefully they will give you a glimpse into MIT’s startup ideology.
Big Idea 1: Disciplined Entrepreneurship
If you make calculated decisions and can create a long-enough chain of them, startup success is controllable and repeatable. Luck does play a part, but make no mistake: this is not a lottery.
The idea contradicts popular hacker culture, where startup success is the product of reckless genius, boundless creativity, and an inspired burst of work.
MIT champions the counter culture: “Disciplined Entrepreneurship”. It’s much more reserved, even cautious, as a methodology. On the surface, it’s a framework of 24 steps that guides people through a new venture. It’s a helpful structure to follow in the chaos of a startup.
More deeply, Disciplined Entrepreneurship is about being in control of your startup’s path. It takes discipline because you constantly need to maintain the foresight, patience, and wisdom to make the right decisions at the right time.
By Day 3 at bootcamp, my team was the only one still doing customer research while every other team was already working on an idea. It was tempting to pick a random idea to work on, but we persisted in our research. Our patience paid off — we were one of the few teams that did not need to pivot. We realized later: this was discipline.
You have far more agency over your venture than you might expect. Your startup’s success is something you can consciously control with your decisions. That is the essence of Disciplined Entrepreneurship.
Big Idea 2: Make your sales as great as your product
No great product ever sold itself.
The Apple store is designed with the inclinations of its customers in mind: creativity, minimalism, and beauty. When it was first growing, AirBnB automated postings on Craigslist that would redirect users to their own site (and by the way, at one point the founders sold cereal boxes at one point to sustain the company).
If sales were a simple, offhand thing, incumbent companies would not be incumbent. Sales is just as complex and multilayered as product development.
At bootcamp, we were taught a few sales strategies. For example:
- Find a champion. A champion is basically a Trojan horse. It’s someone on the “inside” who is passionate about your product and actively influences your customer to buy it. In a B2B setting, this can be someone on your client company’s team. So don’t solely build a relationship with your end customer; also build one with the people who influence your customer.
- Benchmark. Find out what your customer’s budget is, what they pay for similar products, and their experience with similar products. Help your champion or customer understand where your deal sits relative to their alternatives, which can include buying competing products or simply not buying anything. By doing this, you make the purchasing decision easier.
- Chop up sales into small chunks. It’s easier and less risky for people to make small purchases than large ones. Because of this, the sale will also close faster, which is good for your bottom line. Just as you would make a software system modular, you can make sales modular too.
- Capitalize on unused budget. This only applies to B2B sales. Sometimes companies have leftover budget at the end of the year (if you have a champion, they might be able to tell you). Target the time frame where this unused budget would exist and keep your sale within the limits of that budget.
Takeaway: don’t underestimate sales. If you can’t sell your product, your startup won’t grow.
Big Idea 3: Think in terms of unit economics
If you want to accurately measure and model your startup’s finances rather than vaguely estimate, you need quantitative metrics.
Unit economics are these quantitative metrics; they are the mathematics of your startup’s finances. Here’s an example of three fundamental ideas from unit economics:
- LTV (Lifetime Value) — Monetary value delivered to you from a single customer over the total time they remain your customer. Generally, product value has a finite lifespan. That’s why people buy a new phone every few years.
- COCA (Cost of Customer Acquisition) — Cost of converting and retaining a single customer. It’s a lot more than just product development costs.
- TAM (Total Addressable Market) — Estimate of total market size, in terms of number of customers, not market valuation.
Some interesting insights come out of these three ideas alone:
- You want to maximize LTV. You can increase your price point or increase the life time of your product. High LTV is the reason subscription services exist.
- COCA includes every cost involved in acquiring a customer. It’s not only the resource cost of building your product, as many people think. It includes all capital loss that occurs when you are looking for a customer, including but not limited to: the cost of paying rent, buying ads, and even buying coffee to meet with a potential client. Customer acquisition gets pricey.
- Measuring TAM in terms of number of customers instead of market valuation forces you to think in actionable terms. If you know how many customers are in your target market, you can estimate how many people you can pitch to in X time, and how much revenue they can generate you based on Y price and Z time. If you only know your market size in terms of valuation, good luck.
One of the major benefits of unit economics is that you can start projecting your startup’s financials. Don’t get hung up on perfecting these models — you should be able to come up with a basic one in 15 minutes. They’re meant to help you roughly analyze the sensitivities and general behaviors of your financials (ex. how fast do we need to grow to sustain ourselves?), notprovide accurate forecasts.
Of course, there’s much more to unit economics than just LTV, COCA, and TAM. You can find more resources about it online.
Big Idea 4: Shut up and test it.
Mens et manus (Mind and hand) — MIT’s motto
I can’t count how many times my bootcamp team wasted time debating a question when none of us had real evidence to back up our arguments. It’s like scientific research — you can perform as many thought experiments as you want, but theory cannot replace experiment. You need both.
At best, we can make educated guesses using our logic, common sense, and experience. Oftentimes, our guesses will just be plain wrong. It’s not because we’re stupid. It’s because we don’t have a perfect simulation of the world in our heads.
When my team stopped debating about the best market segment to target first and actually went outside to find out, we discovered that none of the market segments we were debating were suitable. It was an entirely different market — a different geographic region and demographic — that ended up being most appropriate.
When you attempt to answer a question (ex. What should our business model be?), treat your answer as a hypothesis. You need to test it, whether through prototyping, ad campaigns, or customer interviews. Adjust your hypothesis as needed and keep testing until you have high confidence in your results.
You can’t change the world through thought alone. Sometimes we need to stop thinking and talking so that we can actually test our ideas.
Big Idea 5: Profit over Investment
Talk to anyone interested in startups and, more often than not, they’re more interested in getting investment than in becoming profitable.
Our priorities should be flipped. Focus on profit over investment.
Profitability is a dependable source of capital, and investment (and other external funding sources) is not. If your startup is profitable, it is financially independent. And if you are searching for investors, profitability credibly demonstrates that you can provide shareholders an ROI. But the opposite is untrue: having investment does not make you profitable.
If you hope to build a mature company out of your startup, you need to keep profitability in mind. Maybe you won’t be profitable for ten years, but eventually you do need to be. Don’t lose sight of that.
Use investment as a springboard for your startup, but don’t depend on it like a lifeline.
Big Idea 6: Learn strategically
Inevitably, you will need to learn new things for your startup. But you lack for time and resources, so you must learn efficiently.
Here are some learning strategies:
a. Dig deep online.
No, a Google search is not enough. Here‘s a sample of the sort of information you can find online if you dig deeply enough:
- Public disclosures (ex. contracts, records)
- Customs records
- Domain-specific theses and papers (ex. through an online database)
- Open procurement contracts
Sometimes this information has a paywall, but in some cases it can be worth the cost.
b. Talk to experts.
Most information in the world is undocumented, online or otherwise. Much of it you can only extract it by talking to people.
Just as you can interview customers to better understand their needs, you can interview subject-matter experts (ex. engineers, accountants) to learn specific things. Interestingly, we were told that retirees are a good source of information about particular industries and companies.
As a CFO at the bootcamp said, “some people can give you enough information to save you months of [independent] research”.
c. Identify unknown unknowns.
Ask yourself: “What questions haven’t I asked, that I should be asking?”
Ask experts: “If you were me, what would you want to know?”
By identifying what you don’t know, you can focus your efforts on covering your blind spots.
d. Be resourceful.
You may often find that the information you need is not within your immediate reach: maybe you don’t have the right network, or you don’t have access to the right databases.
You need to hustle for the right resources. In the example above, you can ask your network to connect you to their networks, or ask someone with a database subscription to share information. Be creative with what you do have to gain access to what you don’t have.
Big Idea 7: Disruptive innovation is unobvious
The innovation that most people think of is mainstream innovation — the in-your-face kind that you see in the news, like AI, blockchain, and whatever Elon Musk tweets. There’s no doubt that they are innovations, but there is a misconception that they are the gold standard. Mainstream innovation makes up only a tiny fraction of the entire innovation space.
At the bootcamp, we were exposed to the kinds of companies that fit Paul Graham’s (Y Combinator co-founder) hypothesis, that “…the best ideas look initially like bad ideas”.
One company was creating synthetic molecules for the perfume industry; another was creating a platform for mapping supply chains for multinational corporations; and yet another was using blimps to perform agricultural analytics. These are just some examples.
These companies aren’t hyped up like AI or blockchain startups. They don’t even seem interesting at first glance. But they are no less innovative, and add no less value to society. Some of these could even be the billion-dollar startups of the near future.
The lesson is that disruptive innovation is often the kind that you initially gloss over, only to realize its value after careful appraisal. It’s easy to miss, and that’s also why people with more experience tend to start more disruptive companies. They know deeply enough about a field to identify the subtle opportunities for innovation.
Just because mainstream innovations are heavily popularized, does not mean that your startup needs to create mainstream innovations to be “current” or “successful”. Starting an internet company has been hot for a few decades, but it’s exactly this gold rush that has led to the “just another app” startup dilemma we have today.
Innovation can be quiet, unexpected, and even anticlimactic. If you want to innovate, keep in mind: disruption occurs where no one is looking.
To end off this blog post, infinite thanks to the people and organizations who generously sponsored my trip to this bootcamp.
Thank you to my donors on Generosity.com: Hudhaifah Zahid, Tiger Zuo, Abdo Elhosary, Julieta Arakelian, and an anonymous patron.
And finally, a huge thank you to my sister and parents.
This incredible experience, and the lessons it taught me, would not have been possible without all of their help.
This article was re-published from Arthur's Medium page here.Nike News