Steve Blank

The existence of a problem doesn’t mean there’s a solution to that problem. Wanting to create impact is great. But to do it, you need to actually have a sustainable business model.

I don’t recommend anyone become an entrepreneur. It’s too hard. It’s too painful. Starting a business is too risky. There are better ways to make a living. Yet I can’t imagine doing anything else.

One mistake was trying to build out too much tech too quickly. We thought that the tech was going to be the solution, that if we added more features, it would solve the problem. We were wrong.

Identifying a problem doesn’t mean you’ve automatically created a business.

And building a startup is not for the faint of heart.

The tools and temperament needed to get from startup idea to startup success were the focus of the guests on today’s Entrepreneurs are Everywhere radio show.

The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

Joining me in the Stanford University studio were

• Jeremy Johnson, founder of Andela, which embeds talented software engineers on the African continent into top engineering organizations worldwide
• Michael Eidsaune, co-founder of Carely, a software platform that facilitates communication among families caring for sick or elderly relatives

Listen to my full interviews with Jeremy and Michael by downloading them from SoundCloud here and here.

(And download any of the past shows here.)

Clips from their interviews are below.

Jeremy Johnson is an education innovator. Prior to founding Andela, he co-founded 2U, an education technology startup that went public in 2014. Outside of Andela, Jeremy serves on the board of the Young Entrepreneur Council and the education non-profit PENCIL and co-authored a book Education & Skills 2.0: New Targets & Innovative Approaches.

Before founding 2U, Jeremy developed Zinch, intended to be a virtual guidance counselor to help low-income students navigate the college application process. He explains why it didn’t get off the ground:

It was a great idea, but a terrible company. 

It turns out the existence of a problem doesn’t mean there’s a scalable or profitable way to solve that problem — or at least at the time.

The goal was to help low-income students better understand the college application process.

For the past 30 years great colleges have approached recruitment by creating a list of names from the PSATs and then sending out glossy brochures. Often they don’t think about it through the lens of what is the best way to spend or allocate resources to try to get better students. So while Zinch was trying to create an offering that would support low-income students that wasn’t where the majority of college recruitment dollars were being spent. So it was tough. We couldn’t charge the low-income students we were looking to help enough to keep the business going.

In the end we learned that wanting to create impact is great. But to be able to do it, you need to actually have a model that sustains it.

If you can’t hear the clip, click here.

The effort was a good learning experience, he says:

The beauty of trying things when you’re 21 and have no idea what you’re doing is that you get the chance to make a lot of mistakes really quickly and learn from them.

One mistake we made was trying to build out too much tech too quickly and thinking that the tech was going to be the solution, that if we added more features, it would solve the problem. We were wrong.

We thought, ‘Why don’t we think through all of the different potential users that might use a system and how they might want to interact with it?’

We tried to boil the ocean in the most literal sense.

If you can’t hear the clip, click here

Prior to founding Carely, Michael Eidsaune earned his MBA in finance and spent several years in investment management, eventually earning his level 1 CFA certification. He also worked for a time as a contract negotiator for the US Air Force.

The idea for Carely was sparked by personal family experience. Michael started the company with his father-in-law, working on it part-time, while he worked with the Air Force.

Since its founding four years ago, Carely has seen ups and downs. Michael’s vision and passion have gotten him through it:

I don’t recommend anyone do this. It’s too hard. It’s too painful. Starting a business is too risky. There are better ways to make a living that are much safer.

And yet, while I would never recommend anybody do this, I can’t imagine doing anything else.

If you can’t hear the clip, click here 

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An experienced team made all the difference to 2U finding success, Jeremy said:

We had a phenomenal early group of people that were brought together to try to address the problem.

You might look at it and say, “In some ways, that team is overkill for an early-stage company. These people are overqualified for what they’re doing.”

But it turns out that when you’re growing really quickly, having folks who have been through it a couple times before is really useful in the early days, even to make sure that you’re able to really grow effectively while maintaining culture. 

If you can’t hear the clip, click here

Andela selects and trains world-class tech talent from Africa and matches them with U.S. companies. Here’s how Jeremy came up with the idea for Andela, and why he decided to create the company even though he was still working on 2U at the time:

A good friend invited me to Nairobi to give a talk for the MasterCard foundation on the state of online education around the world. That kicked off this long conversation about how you might try to leverage this evolution of education technology to create scalable impact in places where tuition couldn’t be the driver of growth.

At the same time, I’d gotten to know a young Nigerian serial entrepreneur who had become sort of a friend and mentee, and was building something similar to 2U but focused on Africa. Through those two experiences I became more and more familiar with the continent. As I was thinking through the notion of what would become Andela, my initial thinking was, “We’ve just gone public. We’ve got a lot of work to do. This is not something I can spend time on. I could potentially fund it and put the team together, but I’m busy.”

At the same time I thought, “This should exist in the world.” We put a small team together, funded it initially, put a pilot together. We were looking for four students for the program, four developers in training, and we ended up getting 700 applicants in a week.

We got that down to six finalists. I went to Nigeria to meet that first cohort, interview them and try to pick four from the six. I realized after half a day of interviews that each one of them would’ve run circles around my classmates at Princeton. 

If you can’t hear the clip, click here

Jeremy dropped out of Princeton to become an entrepreneur. Here’s what he says about founders going to college:

You’re never going to convince someone to work with you because you have a degree.

You’re never going to come up with a different strategy for how you approach the world. You’re never going to raise funding or bring in different teams by virtue of your degree.

A college degree is great if you’re looking to get hired. But if your goal is to be an entrepreneur then it’s a little bit different and folks care a little less about it. 

If you can’t hear the clip, click here

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Carely was built to foster communication among family members with sick or elderly relatives in a nursing home, assisted living residence or hospice care.  

At first Michael and his co-founder thought they’d be selling to individual users, but after talking with service providers, they realized there was a bigger opportunity:

I took our prototype – a PowerPoint presentation — out and sat down with several CEOs of a hospice organization, a nursing home, home-care company and said, “Hey, this is something we think we would use as a family. Tell me why it won’t work.”  

In doing that, we learned that the problem was more applicable than just our family — that lots of people were dealing with this idea of miscommunication and frustration wrapped around care giving.

We realized that there was a value proposition there for the actual industry. The providers of care actually liked the product and would pay for it because when a family’s not doing a good job communicating with each other around their loved one, it’s often the facility or the care provider that has to step in and play middleman to those conversations.

If you can’t hear the clip, click here

A pivotal meeting with nurses at Hospice of Dayton in Ohio helped them figure out what features to build:

It was a bit like leading sheep to wolves, and became one of our biggest learning moments.

The reality is nurses don’t have a lot of extra free time to learn a new system and to try something new. They wanted something that would help improve the lives of their clients’ families. They loved that part of the company. But they didn’t want to have to learn a new system and learn a new task and add something to their to-do list at the end of the day.

So we just said, “OK, if you guys don’t want that piece of it, we’ll leave it out.”

At this time, we hadn’t even built the product yet. We hadn’t invested any money into development, so we just didn’t develop that piece.

If we’d built the product first, however, we would have wasted months and thousands of dollars.

This is a perfect example of why it’s important to talk to customers. For the first six months we spent only a couple of hundred bucks.

If you can’t hear the clip, click here

Somewhere along the line, however, Michael and his co-founder stopped listening to customers. Here’s what happened:

We got the product out; we got paying customers.

We thought we figured it out. We assumed we had product-market fit and all we had to do was keep selling.

The problem was had the wrong business model at the time. Our revenue model was wrong.

We were charging a really high up-front annual fee to these providers and the end result of that was a pretty long sales cycle. It involved lots of face-to-face selling and it wasn’t enabling us to scale the product very quickly.

It took about 2 months to realize we needed a new pricing strategy, from, an average $5,000 to $10,000 a year per provider to about a $99 a month provider fee.

We tested the new strategy with several customers in the pipeline and it took our sales cycle from about 60 days to 1 week. Plus, it enabled us to scale much more quickly with much less effort.

But by then we were so far along our original path. My co-founder didn’t quite agree with the change of direction because it was going to involve us taking on some outside capitol.

I made the tough decision to go against what he wanted to do and it led to us kind of breaking up the company at the time.

If you can’t hear the clip, click here

Listen to my full interviews with Jeremy and Michael by downloading them from SoundCloud here and here (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Stan Gloss, co-founder of BioTeam; and Matt Armstead, co-founder of Lumos Innovation.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Want to be a guest on the show? Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com describing your entrepreneurial journey.

Filed under: Customer Development, SiriusXM Radio Show |