Welcome to another edition of StartupHeat, home of The Mindful Startup Formula!  I offer practical guidance, resources and tools for new founders who want to start a startup.

Startups are hard, but when you apply mindfulness to your entrepreneurial journey, you can minimize the risk and maximize the signal.  Feel free to send me your questions and I’ll do my best to offer actionable perspectives.

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Separating Signal from Noise (and Why the Process Is A Startup’s Best Friend)

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Picture of Heath Butler

Heath Butler

IMAGE CREDIT: artist Anna Marinenko

The startup seascape is full of helpful resources flooding the market with data and metrics that can potentially help your business, from market analysis to walking the customer journey. But how much data is too much? How much is just useless noise that’s masking valuable signal?

Last time in StartupHeat, we discussed the importance of analyzing your market and how your business model depends on doing so with great care. Now we’re going to revisit something we introduced in one of our first posts on the blog, Why Mindfulness May Be the Most Important Entrepreneurial Tool for Every Founder: how to separate signal from noise.

Defining Signal and Noise

Quite simply, signal for a startup is information that is relevant and meaningful within a real-world context in which you as a founder strive to meet your business objectives. Noise is any data input that obscures the signal and, thus, diverts you from your objectives – i.e., noise is irrelevant information and a distraction.

In that earlier blog post defining mindfulness, we gave the example from Jon Krakaeur’s book, Into Thin Air of how that ill-fated climb ended in disaster because the participants let their emotions cloud their judgment. In that example, the team overlooked clear logistics, time, and weather data in their exuberance to reach the summit. The most relevant data was the fact they had yet to reach the “point of no return” in time to summit before bad weather was likely. The noise was the team’s emotion, which led them to take too great a risk.

According to tech and venture capital-focused startup lawyer and author of the Silicon Hills Lawyer blog José Ancer, signal can also be viewed in terms of what key information your startup sends to investors that tells them whether your company is credible, gives them evidence of your chances of success, and helps them determine if your venture is worth their attention, much less the risk of supplying capital.

post 11_flooddata1400.png Another example of signal vs. noise we’ve often referred to on StartupHeat is falling in love with the problem rather than falling in love with your solution. When we interviewed Joe Alapat, co-founder of automated IT management and security software provider Liongard, he told us the first core value of the company was “Listen and Learn.” Rather than assume they know everything and that their solution will suit every customer, Liongard places heavy emphasis on sitting down with customers to learn their pain points and how they hope to use the product. Then Liongard takes that feedback into consideration when developing – improving – their solution.

“Embedding ourselves with the customer was probably one of the most pivotal things that helped us early on – really engaging them, not hiding out and going off and building the product in a black box,” said Joe. “So we had regular weekly checkpoints with customers where we actually were taking the product to them showing them, even when it was raw and it was it was ugly and just saying okay, we’ll just work with this here.”

Early on, Liongard removed the noise of arrogance and hypothetical assumptions that would have kept them focused on their product rather than being open to receiving signal right from the customer. That signal is valuable feedback about what pain customers really feel and the type of solution they really need.

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Signal and the Mindful Startup

As mindful founders, part of your everyday mission is to eliminate the noise in order to zero in on signal. And the best way you can do that is by being mindful and following these three tips:

  • Win the Talent War: Remember that professional pedigree is a strong signal to investors. When you’re an unknown quantity, investors will give more credence to the strength of your executive team than your product. Build an experienced team that has “seen the movie” – in your messaging, you should be able to explain why having experience and expertise in particular areas on your team matters. While a great idea and product are awesome, you will never monetize the idea if you don’t have a great team that can execute.

In his book, Good to Great, Jim Collins preaches “Who First, What Second” to help business executives understand that every investor will tell you that a great team and OK idea are 10 times better than an OK team and a great idea. As Collins explains, a great team will figure out how to pivot the OK idea into a solid business even if they have a mediocre product.

All businesses have bumps in the road, but startups are known for pivots in their product or service value proposition, business model, pricing, and other critical components of the business’ operations. This is because the startup is trying to ultimately achieve product-market fit, which is a stage all businesses need to reach to ultimately be successful. If the team hasn’t “seen the movie” and doesn’t have the collective experience to make the necessary pivots at the right time, the business could go under no matter how great the idea or product.

  • Court Raving Fans: There is power in cultivating invested and committed customers. This group will tell you everything you need to know about what your offering must look like to ease their pain. As we outlined in our post on The Mindful Startup Formula STAGE 2 – MVP to Revenue, moving beyond a few “innovative” users to building a critical mass of early-adopter customers will help get you to the Revenue and Sustainability of STAGE 3. These customers will provide valuable user feedback on your product as well as insights and word-of-mouth from industry leaders and innovators within that network.

The key to finding, cultivating, and converting prospective customers into raving fans is mastering customer discovery. Your prospective customer is in pain, and it’s your job to fully understand that pain. Your customer is thinking about: what is the root cause of this pain, how frequently does it happen, what behavior is represented by the pain, what are the emotions before and after the pain episode, and what would a solution look like that would remedy the problem?

To master customer discovery, your customer has to believe your desire to solve their pain is greater than your desire to make a profit from them buying your solution. Your efforts to continuously learn, develop, and iterate on the product; measure the results, validate (or invalidate) assumptions, and discover what needs to be added, changed, or deleted are critical. Visionary innovator, teacher, and “Lean Startup” guru Steve Blank offers an excellent customer discovery case study here.

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  • Follow the Data: Build a consistent flow of data and feedback into everything you do. Feedback loops come in various forms. As a founder of a company and the chief visionary, you need enterprise-level feedback loops to manage the business, like the one anchored by Liongard’s 5 Core Values (Listen and Learn, Adapt and Automate, Execute as a Team, Focus on Visible Progress, and Teach). Feedback loops are the epitome of mindfulness and can help solve most problems a startup might experience in areas from recruiting to product development to marketing and sales.

If you’re a functional leader, your feedback loop needs to be a lot more tactical and channeled to the inputs you need to ensure your output meets the departmental goals and objectives. Venture capitalist Tom Tunguz wrote in a recent blog that when we measure startups and businesses, we’re trying to detect when a sustainable positive feedback loop has been established, and then we pour as much gasoline into the growth engine as possible. Ideally, when every department within your organization is looking for the signal within their feedback loops, amazing things can happen for your enterprise feedback loop.

While building an early-stage company, reality and a deluge of business data come at you hard and fast. In the midst of what may seem like daily chaos and life moving at breakneck speed, you quickly learn to appreciate the value of and ability to separate signal from the noise to stay on course…

Or your business may simply get pulled under by the current.

Next up on StartupHeat, I’ll talk about the stages of startup funding. Until then, stay curious, focus on the signal, and make mindful decisions on your journey to success!

Until next time, stay curious, focus on the signal and make mindful decisions on your journey to success,


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