Building a software company is hard and it's not usually about the technology but the problems of stress, communication, assumption, and strategy exacerbated by the complexity of creating software that meets customer needs.

1. “It’s okay to be wrong.”
Learning from 25 years of software failures.
Good evening and welcome.
Thank you for having me.
I'm here because building software companies is hard and it's not usually about the technology. I think I have something valuable to help you.

2. What can we learn from our failures?
Building software commercially since 1992. Seen a lot of failure.
You’d think we’d be getting better at this. The evidence doesn’t seem to support that.
If houses were built the way we build software more people would live in yurts.

3. Why should you listen to me?
Well… MAYBE YOU SHOULDN’T.
But... I'm an Engineer, CTO
Advisor/Mentor to startups and SME's
Partner in Early Stage Investor & work with Angel investors
Unusually broad perspective

4. Who are we?
We’re all software entrepreneurs in this room.
We are looking to use technology, software, to solve problems and make the world a better place.

5. What do we do?
+ + =
Typically
we have an IDEA
we BUILD it
we SELL it
AND

6. Profit?
aaand PROFIT.
Unfortunately very often not.
The picture is not very good for software company survival

7. 75%
25%
Harvard Business School
Good data is hard to find. No clear agreement. But we can find patterns.
2012 report looking at VC backed companies.
75% dead within 5 years

8. 92%
8%
Startup Genome Report
Looked at over 3,000 software companies
Why higher? Software is a very complex problem
Tomorrows problem != Today

9. 60%
40%
Cambridge Associates
We can argue with the data, the methodology, and so on.
But.. BEST CASE: 50/50 survival rate
Are you going to be lucky?
What does this look like?

10. Why do we fail?
Terminal Lack of Cash...
The reasons broadly break down into:
INABILITY TO EXECUTE
INABILITY TO DEMONSTRATE VALUE (to investors or customers)

11. “At times of stress we focus on what we know.”
Charles Durlig
Stress
Forces that work against creating good software
1st Force is STRESS
Being an entrepreneur means stress pretty much all the time.
Search for a business model means stepping outside our comfort zone, yet...

12. “Confidence is good but overconfidence always sinks the ship”
Oscar Wilde
Overconfidence
OVERCONFIDENCE
Confidence is why we choose to do the things we do. If we listen to the first person who tell us that our idea is rubbish we don’t found a company and start trying to
solve that idea. But this same confidence that lets us get started can blind us to when things really aren’t working.

13. “We tend to be distracted by the voices in our own heads telling
us what the design should look like.”
Michael Bierut
Hidden Needs
POORLY UNDERSTOOD NEEDS
We may assume that we know or that our understanding is greater than it is.
HUMPREY’S LAW - People don’t know what they want until you show them what they don’t want.
Risk we have it wrong can be painful, we back away

14. “It is useless to attempt to reason a man out of a thing he was
never reasoned into.”
Jonathan Swift
Assumptions
ASSUMPTIONS
often have the power of facts in our minds.
Their arbitrariness quickly become hidden from us.
Unfortunately we tend to try and fit the data to our assumptions, rather than the other way around.

15. “Between what is said and not meant, and what is meant and not
said, most of love is lost.”
Kahlil Gibran
Miscommunication
COMMUNICATION
Business people and software people speak different languages.
This is compounded by our various assumptions and psychological issues.
Even if we ask for the right thing (!?) is that what’s heard.
We rarely communicate “why” and its the most important thing.

16. Stress
Overconfidence
Hidden Needs
Assumptions
Miscommunication
Five Forces
To recap
Feel free to tell me I am wrong but…

17. 1st Immutable Law of Software
Quality
FeaturesTime
Now I’d like to introduce what I call the 3 immutable laws of software development. If you break these you’re going to be in trouble. So, of course, everyone breaks them.
PICK ANY TWO
Anchor on the most important (e.g. in Medtech it's probably quality) then one of the others off.

18. 2nd Immutable Law of Software
Cost
Time
The later you fix something, typically the more expensive it becomes.
But the real point is that paying for features that don't add business value is ALL OVERHEAD.

19. 3rd Immutable Law of Software
Start V1.0 V1.1 V1.5 V2.0
You think
you’re done
here
Run out of
money here
Actually done
here
The search for a business model is between v1 and v2
You’re never done when you think you’re done. Humphrey’s law is at work again and it’s not until v2 that you have the product you wished you’d had at v1, i.e. the
product customers actually want and will pay for.

20. This is really hard!
Is it any wonder so many software companies fail?
Software is especially different: inventing the new.
Conquering these forces is very difficult.

21. Assumption Impact
Value
Balancing the Forces
Data
Strategy/Hypothesis
Respect for the 3 laws & balance of the 5 forces
Data is the key
We need to look for data to challenge our assumptions and make better decisions
So, what tools can we use to try and help us achieve this?

22. Assumption
Mapping
by Bland
Assumption mapping is a tool created by David Brand of Pre-Coil.
It helps to reveal our assumptions and, critically, identify which assumptions could have significant impact on the business if we get them wrong.

23. Desirable
ViableFeasible
Do they want this?
Should we do this?Can we do this?
Assumption mapping is a process of asking ourselves a set of questions designed to establish what we know, what we don’t know.
There is a clear mapping to the Business Model Canvas through desirability (VP & customer segments), viability (costs & revenue streams), and feasibility (activities,
resources, & partners).

24. important
unimportant
unknownknown
We map the assumptions we have discovered across the two axes.
The key is quadrant 2. We have to figure out those assumptions we’ve made for which we have little supporting evidence but which have an outside impact if we’re
wrong.

25. Value
Proposition
Design
by Osterwalder & co.
The Value Proposition Design canvas was developed in response to the relevant parts of the Business Model Canvas being too high-level and not focusing enough on
jobs, pains, and gains (Ulwicks Jobs-To-Be-Done). The key is to focus on the search for market fit.

26. jobs
pains
gains
pain relievers
gain creators
products
&
services
Value Proposition Design -> create market fit.
By focusing on high value jobs, pains, gains => product/service creates VALUE.
Assumption Mapping DESIRABILITY
START with the CUSTOMER

27. Low-Hanging
Fruit
Sustained
Competitive
Advantage
Bells
&
Whistles
Disaster
difficulty
importance
TCR Matrix
This is called the Tottenham Court Road (TCR) matrix.
This relates to the VPD in terms of what is important (high-value jobs, pains, gains).
It relates to development in terms of difficulty and developing long-term competitive advantage.
Business People should determine importance NOT difficulty, leave that to your technology people!

28. Impact
Mapping
by
Gojko Adzic
Impact Mapping is a strategic planning tool.
Where agile methods are very good at telling you how to build things they are relatively less useful at telling you what to build. IM is that tool.

29. Why?
Who?
Who?
Who?
How?
What?
How?
How?
What?
Mind-map with fixed structure
Why=Goal Who=Actor How=Behaviour What=Feature/Story
We can read the map forwards & back. Who/How are interface.
ASSUMPTIONS/HYPOTHESIS/TEST

30. Add £2000
MRR by August
Sales Person
Marketing
Assistant
Invite More
People
Generate
Interest
Share Links
Faster
On-Boarding
Here we establish that inviting more people is likely to have more impact than generating interest. At this point we don’t even need to look further in there. Instead we
expand “Invite More People”.
Goals should be SMART.

31. Strategy
Tracking
by me & others
There are many different tools. The one I use is Strategy on a Page by Deri Llewellyn-Davies but the principle in all cases is the same.
You need a small set of KEY performance indicators that tell you whether your strategic hypothesis is right or, more importantly, where it is wrong.

32. Strategy is a matter of asking 5 simple questions: Where are we now, Where do we want to be, What has to change for us to get there, How will we make this change,
How will we measure progress & response to feedback?
The one least actually asked is Q5.
This goes to the heart of assumption mapping & tracking.
Business, business model, is a hypothesis that we must test and search for. We need DATA!!

33. £200,000 MRR £75,000 MRR £15,000 MRR
10,000 users 1,000 users 250 users
£5.00 ARPU £2.00 ARPU £1.50 ARPU
We must pick KPI’s that test our hypothesis.
If the number doesn’t move it tells us something is wrong. It doesn't say why but prompts us to ask the question "What have we assumed that is wrong?"
We then have the opportunity to go back and ask WHY?

34. Impact
Mapping
Assumption
Mapping
Value
Proposition
Design
Strategy
Tracking
If you adopt these tools you will have powerful weapons with which to tackle the five forces and the three laws.
Nobody can guarantee that you will be successful but these tools will give you your best chance.

35. I’m asking a lot of you
This is a lot to take in.
Implementing any one of these tools could take time that you feel you don’t have.
CHOOSE ONE AND GIVE IT A TRY!

36. Assumption Mapping
http://precoil.com/precoil-resources-page.html
Impact Mapping
https://www.impactmapping.org/
Value Proposition Design
https://strategyzer.com/books/value-proposition-design
Partner
Mower/Valdemarin
m@mwrvld.com
http://mwrvld.com/
Fin - Thank You For Listening
Founding Partner
Activate Capital
matt@activate.co.uk
http://activatecapital.co.uk/
Matt Mower
To return to the subject. It’s okay to be wrong.
As long as we master how we go wrong and remain vigilant to the reasons why.
THANK YOU :)