Hani W. Naguib
The Nile Valley Startup: A Proposed New Approach to Creating Evidence-Based, Value Focussed Startups
Updated: Apr 6, 2021
When we consider the word entrepreneurship, it is perhaps one of the most popular words right now. But, as observed, it means so many different things to different people. To young people in university or fresh graduates, entrepreneurship means future self-determination and all the possible freedom and glory that comes with it. To people working in development, entrepreneurship promises empowerment to solve the world’s biggest problems. To investors, entrepreneurship is the doorway to that next glorious IPO or exit and all the prestige that comes with it. Yes, entrepreneurship comes with the promise of something better, the possibility of more, the need to create, and the urge to make something better. But, entrepreneurship also comes with dangerous glamour, seductive celebrations of the “winners by any means necessary,” the short cut takers, and the short term result deliverers. What is usually referred to as hustling or hacking. So you are no longer an entrepreneur working on your future, starting today, you are now a hustler hacking your future, today! Within the context of creating a startup, when focussing on short-term results, you aren’t building the right foundations (company culture and infrastructure). Without the proper infrastructure ad culture being carefully developed, the company will suffer as it grows. Being preoccupied with making the startup look successfully progressing and achieving, in the now, will push entrepreneurs to divert scarce resources, time, and focus into achieving those coveted growth attractive numbers, even if it will push the startup over the cliff tomorrow. Why is this urge to get the “numbers” so critical for entrepreneurs? The answer is simple: investment rounds to increase valuation.
The challenge is a common language and finding a way to communicate ideas in a tangible form that is both understandable and measurable for both the entrepreneurs and the angel investors.
In that perspective:
Startups are seen as engines of growth at all costs.
Funding is celebrated as the ultimate evaluation/judgment on the potential of a team and a product.
Entrepreneurship is equivalent to hustling/hacking.
This perspective is currently the most common in the startup world.
A Different Perspective? So what if we can do better? What if we can share a different vision of the startup world? What if we decide for a moment to regroup, admit our mistakes, and decide to share observations and notes? What if we decide to make entrepreneurship a science and not a game? What if we decided to focus more on (value + customers) instead of (products + investors)? How would that perspective look like? Well, three main pillars I will suggest:
Startups are engines of Value.
Funding is Motivation to Progress.
Entrepreneurship is value focussed, evidence-based progress, and a national strategy.
Startups are engines of Value. A startup is meant to offer a more relevant value for a specific customer segment in the modern sense, and they do it better than existing big companies. That value is made tangible using reliable tech and an intuitive user interface and experience. In return, the customer will show appreciation by offering the company value back in terms of paying the price tag, positive word of mouth, or gladly contribute personal data. The entrepreneurs’ job is to discover that delicate profitable balance between value created for customers and value created by customers. That is the logic behind any startup. And yes, they should also understand the dynamics of how to grow but without compromising that balance.
Funding is Motivation to Progress The conversation between entrepreneurs and angel investors is usually focused on whether or not there is proof that the product/service will sell. The problem here is that this attitude doesn’t promote progress but rather stifle real progress and actually motivates entrepreneurs to attempt to hustle the investors to get the coveted ok on that anticipated big funding ticket. So what if entrepreneurs are given just a minimal amount of money to help validate value for the customer? A small amount is just enough to cover experimentation costs for a period of one to three months, depending on the type of startup. During this period, they are to follow with a mentor/coach to support validation activities, keep an eye on the founder dynamics, and report to the investors on biweekly intervals. If the entrepreneurs manage to find conclusive proof that the value proposition has potential, then they get a little bit more money and time to move to the next step of their validation. They keep at it until they have reached a point where both the entrepreneurs and the investors are happy and satisfied with the potential of the value offered for the customer and the value received from the customer. They then have a conversation about the serious funding to pilot the startup and go further with it. This system's beauty is that it allows both entrepreneurs and investors to have a common language around tangible proof from the real world with minimum investment and the least amount of time. If the proposed value is not showing promise at any point in time, a conversation about whether to “pivot” or “forget about it” can take place without opinions but based on facts and a clear view of the startup case.
Entrepreneurship is value focussed, evidence-based progress. Once funding has become a tool to motivate progress and startups are defined as engines of value, entrepreneurship transforms, peacefully and quietly, into a scientific endeavor. When investors are looking for tangible proof and not silly projections with the cool hockey stick graph, entrepreneurs will be eager to find the proof in a tangible way. It is goodbye to highly imaginative excel sheets and hello to validations from the field. That mindset follows a flexible, iterative process to increase tangible and insightful proof with the least possible effort and spending.
1.Make Value Less Abstract: Ideas are basically abstract notions of value that can be misleading, mostly foggy unclear concepts, and always intangible. What you need to do is actually to formalize your idea of value into value for your customer and value from your customer. In other words, in simple and clear short sentences, put together what kind of value you seek to offer to which customer. Then consider what kind of technology you need to make this value proposition tangible.
2.Research Similar Value: Evaluate how similar the value propositions (value for the customer) and tech needs to what is already existing in the market.
You will fall into one of four blocks on the Start! Matrix: Block 1: Existing value proposition, Existing tech needs Block 2: Existing Value proposition, New Tech needs Block 3: New value proposition, Exciting tech needs Block 4: New Value proposition, New Tech needs
3.Design & Prototype Value: Once you understand how similar you are to the market you intend to enter, and you find that there is a worthy opportunity, now it is time to understand how different you need to be from the perspective of your customer. Design your prototype of value for the customer and value from the customer, and prepare to test it in real-life conditions.
4.Validate Value For The Customer: Seek tangible proof of value (value=benefits (monetary/emotional)-costs (monetary/emotional)) for the customer. In other words, understand if the benefits you potentially intend to offer your customer outweighs the potential costs from the customer perspective. 5.Validate Value From The Customer: Seek tangible proof of value from the customer. In other words, understand if the benefits you aim to receive from your customer outweigh the potential costs from the business perspective.
Make Value Tangible At this point, your idea is no longer an abstract notion of value. You have a clear understanding of value for the customer and value from the customer. Now it is time to investigate how to materialize this validated value into an intuitively and reliably usable product or service. 6. Validate Tech Proof Of Concept: Create your first “ugly prototype,” a straightforward piece of hardware or software that is doing everything it is supposed to be doing. 7. Validate Tech UI/UX: Now that you have the engineering working, make sure to add the human layer to the engineering. In other words, make sure to add the UI/UX layer that would make the value as tangible as possible to the customer using it. Progress with Evidence: Progress should always be value focussed, evidence-based. So don’t progress unless you have enough evidence for the phase you are in.
Entrepreneurship As A National Strategy In almost a decade working with startups in Egypt, I noticed a pattern of motivations emerging, somehow defining entrepreneurship under two categories: Entrepreneurship to feed the family Entrepreneurship to feed visions
Entrepreneurship to feed the family This type of entrepreneurship is dominant in most interactions. Entrepreneurs, in this case, are starting businesses out of necessity. They follow an elementary logic: to survive tomorrow; I have to build something today. Many of the entrepreneurs are doing that because they have no other choice. This type of entrepreneurship is dominant; however, it is probably the less risky option to go for. In this case, entrepreneurs are not looking to break the norms, swim against the tides, or attract attention. They want to ensure a respectable way of going forward in life. So they start their own business and focus the most on short-term outcomes and how to make those outcomes as repeatable as possible. So risk-taking and ambitious imagination are not qualities these entrepreneurs can afford to embrace. They are replaced instead with cautious decision making and slow yet profitable progress. Entrepreneurship to Feed Visions The second type of entrepreneurship I meet in my interactions with entrepreneurs. It is less frequent than the first type, and the entrepreneurs, in this case, are doing this out of a passionate, ambitious vision of what the future could look like. For them, it is tangible, clear, and they are going forward, implementing it with all of their beings. They left great opportunities behind and took the ultimate risk of explaining the future for “now” centered mindsets. Not the easiest of tasks, I must say. These two types of entrepreneurship are essential to any nation. The first is focused on the now and the second on the future. We need both, as a country, as human beings, and as a planet. The first type will offer economies, jobs, taxes, and competitiveness in the now. The type will offer economies new technologies, new markets, and new revenue streams, leading to new jobs, taxes, and most importantly, competitiveness in the future. As a nation, we need to understand that it is critical to feed visions as it is important to feed families; simply because feeding visions today will feed families tomorrow.
The Nile Valley Startup is basically a simple idea. It is also the result of a lot of work conducted in the field with the hard-working Egyptian entrepreneurs. I am sharing it, with the aim to engage in a conversation with any of the stakeholders in the startup world. I am hopeful that it will inspire others to actually get off the autopilot mode and have a "what if" moment.
Thank you for reading.