Nov 12

What is the biggest enemy of a startup? Some insights at Redinnova

Last week, I attended Redinnova, the leading tech conference connecting the Latin American and global startup communities – for its first US-based event in New York City.

There were some great events, including the panel discussion ‘How Startups Compete with Corporate Giants?’ with Andrew McLaughlin (Entrepreneur in Residence, Betaworks) and Jack Hidary (Chairman, Samba Energy).

But one of the keynote speakers was Martin Varsavsky, an Argentine and Spanish entrepreneur who has founded seven companies in the past 20 years, including Jazztel Telecomunicaciones, Spain’s second largest publicly traded telecom operator and, Spain’s third largest Internet web site/DSL provider.

In his opinion, the biggest enemy of a startup is not competition, but indifference. As he said, “as an entrepreneur, you think you’re going to change the world, but then you realize that apart from some geeks, no one really cares about what you’re doing”.

He told us the story of his latest venture as an example: FON, the largest wifi network in the world. He defined the creation of the company as a process against indifference.

We’ve been profitable for 3 years and we’re very happy. But for the first 3 years, we almost went bankrupt because of people’s indifference. They didn’t care about our concept, , which was that if you share a little bit of your Wifi from home, you’re going to roam the world for free. We thought this was a gift to humanity, so we couldn’t understand why no one cared. But that’s the truth, no one did

So what happened? He had a flash of insight based on behavioral economics. The concept of opting in versus opting out. As he explained, if you ask people, ‘would you like to share a little wifi at home and roam the world for free?’, people will say yes, but then they won’t do anything about it.

Most people say they care about innovation. But at the end of the day, they don’t.

So what he realized is that he had to ask the opposite question: ‘You’re already sharing your wifi with others, would you like to sign off’? Once people see the benefits of a product, they won’t want to sign off. This is why Martin shifted from a B2C to a B2B company, and focused on striking deals with operators all over the world rather than convincing customers directly.

This story reminded me of what Steve Blank calls the ‘nastiest of all startup sins’: failing to understand what people really want and listen to their feedback from day one. This is why Steve’s mantra should be inscribed in any wannabe entrepreneur’s mind: “get out of the building” and talk to the only folks who really matter, customers.

Post written by Lila Pla Alemany (Columbia Business School, 2013)

Leave a reply

Your email address will not be published. Required fields are marked *