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The Path

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There are a lot of philosophical divisions among entrepreneurs: bootstrappers versus fundraisers, platforms versus content, lean versus fat, et cetera. But one has struck me as particularly underappreciated: those who build user flows as a series of deterministic paths and those who don’t.

Paths are best understood in the context of user flows. In a path-driven business, each experience that a user — especially a first-time user — encounters is designed with the singular purpose of pushing a user to the next experience and perhaps collecting some information along the way. In the case of web businesses, each “experience” is a page. To generalize, a path is deterministic in nature; a subject’s destination on any particular page has been determined by the page’s design.

Free Awesome is a great example of a purely path-driven business. While there are plenty of links, there are really few options to leave the path, which presents the user with an alternating series of instant-win games and lead gen. This enables simple mathematical modeling and optimization of the business.

Don’t get me wrong — plenty of businesses aren’t driven by paths. General Assembly is about as far as you can get from a path business — we’re building value in a brand rather than a platform or cash flow — but we still think of large pieces of it in a path context.

But some of the best companies create products that feel like robust experiences but are actually just deterministic paths. Mint.com was a great example of this. While it felt like a comprehensive site, Mint really just guided the user down an inevitable path toward high-value lead gen offers, such as credit cards. That outcome was baked into the site’s raison d’etre at the highest level: users were ostensibly on the site in order to optimize their expenses and save money. So Mint would lead them down a path, collecting sensitive financial information along the way, with the eventual outcome of providing the user with an opportunity to get a low-APR credit card from Discover.

From a psychological perspective, Mint was brilliant. The “saving” component was the carrot hanging in front of the user the whole time. So when the user finally ended up on a page filled with the same credit card offers they get in the mail every week, they viewed those offers as opportunities to save money rather than just more ads.

Some entrepreneurs may look at path-driven thinking as limiting. After all, building your experience as a path discourages users from exploration and tends to focus the business on quantitative — rather than design-driven — decisions. It’s not for everyone. But I do recommend the path approach to many of the first-time entrepreneurs I meet for the following reasons:

Paths kill scope creep If you are designing your site as an experience that contains a bunch of different things that users can do, it’s awfully tempting to build yet another shiny thing for your users. This leads to scope creep, frustrating developers and pushing out timelines. When you are building a path, feature creep makes little sense: something either helps your user get to the next page or it doesn’t. Details can be A/B tested after launch.

Paths simplify evaluation As an early-stage entrepreneur, you want to figure out whether your idea flies as soon as possible. If you have a path, figuring this out is easy and requires little more than Google Analytics: either the conversion data adds up or it doesn’t. If you have a complex multi-dimensional user flow, it’s challenging if not impossible to figure out why the dog food isn’t getting eaten.

Paths end debates Passionate debates about design are one of the most painful parts of the early-stage startup process. As they simplify evaluation, paths make many of these debates far less necessary — if something is in contention, there is a clear quantitative conversion metric on each page to test it against.

I’m not arguing against design. But good design is hard, and design outside of the constraints of a deterministic path is really freaking hard. And if you’re a founder of an early-stage company, your job is already hard enough.

Written by Brad Hargreaves

August 14th, 2011 at 11:39 am

Entrepreneurship is the New Art

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I wrote several months ago that everyone should get funded, and the growth of philanthropy-driven angel funding will fuel it. A few things I’ve seen over the past week have taken my thinking to the next level.

It has become extraordinarily difficult to change culture through pure art. New forms of art are no longer shocking to mainstream culture as Pointillism was to the late 19th century or Cubism to the early 20th. Few know this better than Carter Cleveland of Art.sy, who made a powerful point to me last week: Those who wish to fundamentally change culture in the 21st century — and those who wish to fund those changes — must look toward entrepreneurship.

Over the past fifteen years, startups have been catalyzing global cultural changes that had previously been the realm of artists. Facebook is the perfect example, a company nominally driven by a desire to “change the way people interact”, a phrase that could just as easily be spoken by a conceptual artist. And Facebook has succeeded in changing the way over five hundred million people interact, whereas an artist with a similar goal would be lucky to be featured in a design magazine or score a cameo on the evening news. One could argue that it’s all art, but the medium has shifted from canvas to Delaware C Corporations. Fifty years ago, repressive regimes banned books and modern art. Today they ban Facebook and Twitter.

This thought has been stewing in my head for a while, and Yuri Milner’s commitment to YCombinator drove it home. Yuri has fantastic returns — his three investments thus far are Facebook, Zynga and Groupon — but I’m convinced he’s playing by a different set of rules. Arrington first wrote about US startups as a vanity purchase for wealthy Russians more than a year ago, and there are surely enough wealthy Russians to fill DST’s coffers without forcing a strict focus on returns. But I don’t think DST is an oddball clique — rather, I see them as the model for the future a venture capital. A future in which super-wealthy individual limited partners are driving a fund that is based on equal parts vanity, philanthropy and financial returns.

This is a self-reinforcing trend: as more investors look to startups as a “Broadway-like” investment — that is, something that is just as much about status and cultural change as financial profitability — ever-adapting entrepreneurs will build companies that emphasize these kinds of “softer” returns. As the positive feedback cycle accelerates, we’re likely to see an entire class of investors and entrepreneurs styling themselves as patrons and interactive artists, respectively. This isn’t to say that these entrepreneurs will be building nonprofits; rather, supernormal returns are an integrated piece of the startups’ aesthetic appeal to culturally and financially savvy investors.

This is as long of a prediction as I’ll make here. I don’t think this is a trend we’ll see culminate in the next 5 or even 10 years — this one is going to take thirty years to fully play out and the effects will be felt for decades if not centuries. Entrepreneurship is the new art, and it is a Good Thing — both for entrepreneurs and our society as a whole.

Written by Brad Hargreaves

February 2nd, 2011 at 6:04 am

The Uncertainty Plague

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I had the opportunity to spend Thanksgiving week in Costa Rica, which was a welcome change in scenery from Manhattan. I’m not much for hanging out at the beach, so I found some time to talk to a few people involved in Costa Rican real estate and finance while I was traveling around the country. I was particularly curious about the startup community, which seemed to be totally absent throughout the country.

The difficulty I heard from everyone in Costa Rica was the same: while the country is one of the world’s oldest democracies and most stable Latin American nations, its legal system is frustratingly unfair and unpredictable. Property laws are Byzantine, and squatters have powerful — albeit vague — rights. Costa Rican citizens are explicitly favored in all legal disputes. Tax law is complicated and seems to be made up as you go along. Despite Costa Rica being the most developed country in Latin America, the uncertainty injected into the system by needless legal complications has made technology innovation extremely difficult.

Reports of the United States’ death as the startup capital of the world are greatly exaggerated. Our embarrassing lack of startup visas, bureaucratic burdens and high cost of labor are small inconveniences in comparison to the quality of the States’s legal system, which is largely fair and — most importantly — consistent. In the United States, I have a pretty good idea of what will happen in almost any legal situation. If my company goes bankrupt, there are centuries of precedent governing what creditors can and cannot do. If I want to sue someone, I know the costs and risks. Insurance is available for everything imaginable — mostly because our legal system is so sound.

Consistency is the most underappreciated driver of success in a product or service. This isn’t just about legal structures. Great brands are built through the delivery of consistent and predictable experiences as much as PR, pricing and growth strategy. As a consumer, Apple, Starbucks, Wal-Mart, McDonald’s and dozens of other successful brands will each give me exactly what I’m expecting to get from them. I simply don’t have to worry about the risk of getting something different or unexpected. Humans are naturally risk-averse creatures, and we’d much rather take something guaranteed than something that might be 25% better or 25% worse.

By removing the uncertainty around business law, the state of Delaware has prospered, generating over $750 million in revenue in 2009 from corporate services alone. The majority of entrepreneurs I know send Delaware a sizable check every year for doing nothing other than having less uncertainty around corporate law than other states — and anywhere else in the world. If this isn’t an example of a brilliant hack, I’m not sure what is. For doing something without any fundamental cost — providing a consistent legal framework — Delaware has created a massively successful business.

Ironically, having a stable, un-disruptable legal system around our entrepreneurs gives them the power to disrupt industries and aging business models. Until other countries develop the kind of legal infrastructure that will give innovators the certainty to know that their creations and profits are protected from corrupt officials, greedy politicians, populists and nativists, the United States will continue to produce and host the vast majority of innovative, billion-dollar companies and entrepreneurs.

Written by Brad Hargreaves

November 28th, 2010 at 6:43 pm