Why your startup may not be as great as everyone says


One of the very first things we ask Israeli entrepreneurs who are hoping to break into the U.S. market is to tell us how their product or service is being received by their target market. What is the feedback? Are potential customers hungry for what the team is selling?

Validation, both of the broader vision and the early product itself, has to be a key focus for any aspiring entrepreneur. Testing your product and getting specific feedback is the only way to know if the company is on the right track or wasting its time chasing down the wrong path. However, even for seasoned founders who understand how vital market validation is to the success of their company, it can be all too easy to get distracted chasing the wrong kind of validation.

Not all validation is created equal. It is crucial that founders differentiate between meaningful validation and vanity “wins” that do little more than make you feel good. Fake validation is everywhere. Here are some common traps founders need to beware of.

Not all customers are born equal

Founders need to be careful about soliciting customers that are either too small or too big for their entry point into the market, or not even in the actual market segment they are targeting. If your early customers are different from those you eventually hope to acquire, then the things they ask for and feedback they provide will skew your short-term goals and put your business on the wrong path.

The best companies and founders are the ones that aren’t afraid to go out and get real, tangible feedback from potential customers.

This is especially common when targeting companies outside the U.S., where startups build long lists of customers in their home market that may or may not have the same set of needs as U.S.-based customers. But by the time these startups are “ready” to expand beyond their home country, they have a hard time selling investors and foreign customers on a product that has only been validated by unfamiliar brands in a small domestic market. Many times, these early customers do not have exposure to competing products in the larger U.S. market, or they have a different set of problems they are aiming to solve altogether, which sends misleading signals to the startup.

Securing customers is obviously crucial to any startup’s success, and can be helpful in shaping how a startup markets itself in the early days. Yet founders must be able to properly contextualize the pedigree of those customers, and always keep the long-term vision front and center. The product isn’t truly validated until you have the right type of customers validating your product.

Corporate guidance?

Large corporations are constantly looking for the next cutting-edge technology that will propel their next phase of growth. This is why countries like Israel, with its deep talent pool in AI, IoT, cybersecurity, etc., have become hotbeds for corporate innovation labs.

At first glance, this is a great thing for Israeli entrepreneurs because it gives them exposure and access to the biggest companies in the world. But proximity and feedback from these groups isn’t everything. Many of these innovation labs accept local startups into their program, which can obviously be exciting for those founders, especially at the early stage. The corporate will then aim to work on a pilot program with the startup to test their product, which could be beneficial for the startup. However, gaining just this one customer doesn’t always guarantee future success, nor does it truly validate the product.

Getting a pilot with a larger corporate can be a great opportunity, but diligent founders must also continue to pursue other pilots. First, pilot programs do not always translate to becoming real customers and founders need to avoid placing all their eggs in one basket. Second, the feedback founders receive from just one large customer may not be representative of the entire customer segment. Simply being in the innovation hub is often not enough by itself to signal long-term success.

All your startup friends say your product is cool

This one may seem obvious, but it remains just as pervasive as ever. It’s easy for first-time founders to drink their own Kool-Aid and get overly hung up on any positive feedback that’s heaped upon them or their product. An overwhelming number of new startups are created in heavily concentrated markets like Silicon Valley, which can make it difficult to find unbiased feedback outside the echo chamber.

It’s not only nice to be told your product is awesome, but it can become downright addicting.

This is especially true for startups that are just beginning to validate their product offering, or a specific piece of their technology. Afraid of approaching someone who “won’t get it,” we see founders chasing the feedback they want to hear, often from peer entrepreneurs, who will be excited by a piece of technology but obviously won’t be the ones who end up buying and using it as real customers.

By self-soliciting feedback from the wrong people, founders make the mistake of focusing on the wrong aspects of the product instead of taking it directly to potential customers in the market who will specifically tell you what they do and don’t like.

You just raised $10 million. That has to mean something, right?

Even raising a sizable round from VCs can be a form of fake momentum. Much has been written on the topic, but it’s easier than ever for some entrepreneurs in specific domains to raise significant capital these days. There are more seed funds out there than ever before. Valuations and deal sizes at the seed and Series A stages continue to climb. What this truly means is that bets on the success or failure of a startup are being made earlier in the life cycle of the company.

Just because a VC chooses to invest in a company does not mean that startup has reached the promised land. VCs are not your customers, and while capital they provide is a critical means to further the development of the business, it does not replace getting real validation from and selling to the target market.


Founders often misunderstand or overestimate the tangible impact that awards and PR recognition will have on their businesses. We see this all the time when entrepreneurs come bragging about some competition they won, or a top 10 list they were included in. Don’t get me wrong, awards are nice to have and they can help with attracting talent and hiring into your startup. However, founders need to realize that the value is capped, does not serve as real validation and is typically meaningless to investors and potential customers alike in their evaluation of the startup.

There are several potential traps on the journey to validation, and it can be easy to fall victim if entrepreneurs take their eyes off the prize. It’s not only nice to be told your product is awesome, but it can become downright addicting. The best companies and founders are the ones that aren’t afraid to go out to market and get real, tangible feedback from potential customers. If you’re not doing that, you’re simply making yourself more susceptible to fake validation that can derail your vision.

AWS Announces new bare metal instances for companies who want more cloud control

 Data Center Interior

When you think about Infrastructure as a Service, you typically pay for a virtual machine that resides in a multi-tenant environment. That means, it’s using a set of shared resources. For many companies that approach is fine, but when a customer wants more control, they may prefer a single tenant system where they control the entire set of hardware resources. This approach is also known as “bare metal” in the industry, and today AWS announced five new bare metal instances.

You end up paying more for this kind of service because you are getting more control over the processor, storage and other resources on your own dedicated underlying server. This is part of the range of products that all cloud vendors offer. You can have a vanilla virtual machine, with very little control over the hardware, or you can go with bare metal and get much finer grain control over the underlying hardware, something that companies require if they are going to move certain workloads to the cloud.

As AWS describes it in the blog post announcing these new instances, these are for highly specific use cases. “Bare metal instances allow EC2 customers to run applications that benefit from deep performance analysis tools, specialized workloads that require direct access to bare metal infrastructure, legacy workloads not supported in virtual environments, and licensing-restricted Tier 1 business critical applications,” the company explained.

The five new products, called m5.metal, m5d.metal, r5.metal, r5d.metal, and z1d.metal (catchy names there, Amazon)  offer a variety of resources:

Chart courtesy of Amazon


These new offerings are available starting today as on-demand, reserved or spot instances, depending on your requirements.

Image Credits: imaginima / Getty Images


Did New York lose anything with Amazon’s rejection? It’s complicated.

SEATTLE, WA - JUNE 16: An Amazon logo is seen inside the Amazon corporate headquarters on June 16, 2017 in Seattle, Washington. Amazon announced that it will buy Whole Foods Market, Inc. for over $13 billion. (Photo by David Ryder/Getty Images)

SEATTLE, WA – JUNE 16: An Amazon logo is seen inside the Amazon corporate headquarters on June 16, 2017 in Seattle, Washington. Amazon announced that it will buy Whole Foods Market, Inc. for over $13 billion. (Photo by David Ryder/Getty Images)

Now that Amazon  has said that it’s taking its ball and going home rather than deal with mean, pushy New Yorkers, outside observers are giving off the sense that the city (and its local politicians) are losing out for their recalcitrance.

They’re wrong.

New York City is running at about a 4.3 percent unemployment rate — higher than the national average of 3.9 percent, but a respectable number for jobs. Amazon’s promise of 25,000 jobs (high-paying jobs) may have reduced that number, but there’s no guarantee that those jobs would be filled by New Yorkers or Queens residents more specifically — and every indication that they would have gone to Amazon employees coming from somewhere else.

Remember, Amazon employees were buying real estate in Queens before the deal was even announced.

The response that New Yorkers are idiots for not giving Amazon (one of the most valuable companies in the world) billions in tax incentives to build an office tower in one of its boroughs is another sign of how the country privileges business interests above civic ones.

There are things that New York can do to boost its local economy without giving away the store to Amazon. There are incentives that could go to businesses already in New York to establish offices in Queens.

More importantly, local Queens residents had legitimate concerns about how their neighborhood would be transformed by Amazon’s entrance into the borough.

That’s not to say that local politicians may not have overplayed their hand. New York local politics is no stranger to graft, corruption, shakedowns or funny business (I wasn’t in the room for the negotiations), but it’s safe to say that “mistakes were made” on both sides.

In the long run, Amazon would have been a benefit to the New York economy — and had the company’s executives made a good-faith effort to listen to the concerns of local residents, perhaps it could have come out looking like a winner.

Because there are legitimate reasons to expect Amazon to be a benefit to the New York economy. As Noah Smith wrote in Bloomberg after the deal was announced:

Amazon will pay property tax on its new Long Island City offices. It will pay corporate tax — not just on its profits, but on its capital base. Its employees, especially highly paid ones, will pay the city’s personal income tax. Those taxes, of course, will be somewhat offset by the incentives that the city has promised the company — up to $2 billion, depending on how many people the company hires and how many facilities it builds. Those incentives were a wasteful way to attract corporate investment. But in the long run, the tax revenue New York City gets from HQ2 will probably far exceed the cost.

And that’s not even taking into account Amazon’s effect on surrounding businesses and property values. Other technology companies will want to move to Queens now that Amazon is there. Their employees will spend their money locally, buying everything from lattes to MRIs. Some estimates place HQ2’s local economic boost at $17 billion a year. Even dividing that in half, and even assuming that the estimate is optimistic by a factor of 2 or 3, it seems likely that the economic benefit Queens reaps from HQ2 will quickly exceed the upfront cost — unlike, say, Wisconsin’s ill-advised Foxconn factory.

Those benefits are true, but harder to quantify for a city like New York when taken against the impact those jobs and spending would have on the fabric of the local economy and the housing, transit and government services that new residents would demand.

The livability crisis that’s currently afflicting Seattle and San Francisco is evidence of how cities need to be careful what they wish for when it comes to the explosive growth of technology companies (and the attendant wealth that comes with it) in their metropolises.

In any event, the urban landscape of the U.S. is being radically reshaped by technology companies — creating cities that are haves and have-nots much as technology has bifurcated the national economy into digital haves and have nots.

As Mark Muro and Robert Maxim of the Brookings Institute noted in this piece for US News and World Report:

Scholars have for years suspected that tech might alter the hierarchy of cities, given its bias toward skilled workers. More than a decade ago, researchers Paul Beaudry, Mark Doms and Ethan G. Lewis showed cities that adopted personal computers earliest and fastest saw their relative wages increase the quickest. Now, there is more evidence – including in our own work – that digital technologies are contributing heavily to the divergence of metro economies and the pull away of superstar cities like Boston and San Francisco from more ordinary ones, with painful impacts.

Recently, Princeton economist Elisa Giannone demonstrated that the divergence of cities’ wages since 1980 – after decades of convergence – reflects a mix of technology’s increased rewards to highly skilled tech workers and tech-driven industry clustering. Likewise, Brookings research has shown that a short list of highly digital, often coastal tech hubs is growing even more digital and pulling farther away from the pack on measures of growth and income. What we call the “digitization of everything” is in this way exacerbating the unevenness of America’s economic landscape.


It’s far easier to make the case that Amazon’s decision to set up regional offices in Nashville will have far more positive outcomes for that city.

But making American cities compete beauty pageant-style and bend over backwards to appease a multi-billion-dollar corporation is pretty gross — and a poor read of national sentiment around the roles that technology companies play in modern American society.

As an example of how to expand in a city without invoking the wrath of the local community, observers need only look at how Google is expanding in New York. The company is planning to add 14,000 jobs in the city and has committed to $1 billion in spending to upgrade its West side campuses.

Ostensibly, Google is expanding its presence in New York to compete for the talent it sees coming from the city (or coming to the city) and because New York is strategically important. Amazon’s decision to forsake New York means that it’s losing access to that talent and creating opportunities for other tech companies to come in and take its place — or for local companies to retain their edge.

Here’s hoping that New York’s local tech community can supply Queens with those 25,000 jobs by building the next Amazon — and working with the community to do it.

These days it seems like Democracy is a religion that’s replaced God with money. The pushback against Amazon shows that New York at least is adding civic responsibility into that equation somewhere.

Image Credits: David Ryder / Getty Images