Tuesday, September 20, 2022

How Find Ideas With Overwhelming Demand

From selling his gaming company Mafia Wars to Zynga, to starting Gigster and growing it to over $100M in revenue, to founding a bathroom renovation company and raising $24M to scale it to $1B+ - This is Roger Dickey!

Roger Dickey

CEO at Made Renovation & Investor at Untitled Labs

Hey, Hey!

Todays guest seems to have the cheat code for building successful businesses. Check out his resume:

  • Founded gaming company Mafia Wars which did $1B+ in total revenue and sold it to Zynga.
  • Founded Gigster which raised $32M from top VC’s and has done $100M+ in total revenue.
  • Founded Made Renovation, a home renovation company, that has raised over $23M from top investors.
  • Invested in 12 unicorns ($1B+ companies).

Make sure to follow him on Twitter at @RogerDickey

Let’s get after it!

On Today's Experts Session, we explore:

  • Who is Roger Dickey? From selling his gaming company Mafia Wars to Zynga, to growing Gigster to over $100M in revenue, and founding a bathroom renovation company and raising $24M to scale it - This is Roger Dickey!
  • Business idea: Here’s a database of 100+ ideas directly from Roger. 
  • How Roger Starts, Scales, And Sells Companies: How Roger came up with the ideas behind Made Renovation (Raised $24M), Mafia Wars ($1B+ in revenue), and Gigster ($100M+ in revenue). 
  • The Search Lab Playbook: The exact 6 step process Roger used to find business ideas with overwhelming demand and scale them to millions in revenue.
  • Wealth Building: We discuss where Roger is investing and the strategies he uses to compound his wealth.

 

Guest: Roger Dickey, CEO at Made Renovation 

Social: @RogerDickey

Video Length: 52 Minutes

Who is Roger Dickey?

October 2007 to 2011 - Selling Mafia Wars To Zynga: Curiosoft was Roger’s first start-up, where he learned the value of iteration. He launched 19 apps with a 5-day development window for each. The first 18 were flops. The 19th was a little Facebook game called Dope Wars. Zynga took notice and acquired the company. Roger didn’t want to sell but was worn down after the 4th offer in 2008.  Roger’s experience validates the saying in Silicon Valley that companies aren’t sold. They are bought.

As part of this exit, he stayed on with Zynga to help develop the next iteration of Dope Wars, which turned into Mafia wars which exploded across the platform. At its height, Mafia Wars had 100 million users and has generated over $1B in revenue. 

 

2011 to 2019 - Product X Idea lab to Gigster: During his time at Zynga, the company 10X’d and went public. Roger left Zygna to co-found the idea lab Product X. The lab developed 50 businesses in 15 verticals. It also began the process that ultimately led to the creation of Gigster, an on demand software development team, which was acquired by Ionic Partners, a private equity firm based in Austin. 

The Original Gigster Home Page - 2019

Roger stayed on as CEO until he realized that the company's shift to an emphasis on enterprise-level clients and the resultant time expansion of the sales cycle made him want to return to what he truly enjoyed, consumer facing businesses. After a nine-month search, a new CEO was hired.

January 2019 to Present - Untitled Labs to Made Renovation: 

Made Renovation Home Page - 2022

It was at this point Roger went back to the process of company creation that he knew worked, The Search Lab. By this point, he had a well-developed playbook (discussed below). He ran the offense he knew, and Made Renovation was born.

He is currently working on turning the company, which strives to make home renovations in the bathroom space a seamless experience for the consumer, into the next big thing. Before you scoff at their niche of bathroom renovation, just know that it is an $80 billion market.

How To Win, Repeatably: A Case Study On Building Mafia Wars, Gigster, and Made Renovation

To Win, Leverage A Search Lab: Roger’s experiences building Mafia Wars, Gigster, and Made Renovation resulted in him fine-tuning the process called the Search Lab. He didn’t invent the term, but he has certainly perfected the process. 

So…what is it?

Everyone is familiar with the skunkworks, or studio model, for start-ups. You get a bunch of gifted people together, raise a pile of money, and start spinning off start-ups. Atomic, for example, has launched 14 start-ups in the last year.

 

The “search fund” is on the opposite end of the spectrum. Instead of wandering around in the creative desert, you get private equity on board in the $30 to $40 million range with a CEO candidate and look for one company (think a chain of hotels, restaurants, or an older revenue generating SaaS company). Once you find it, buy it.  Install the CEO. Rinse and repeat. 

A “search lab” is a hybrid of these two approaches. There is a defined CEO of the future company. In this case, it is Roger. Raise some money ($1 to $5 million), and then run the playbook below to find the right idea. This is a deep process that results in experimenting with ideas for a year or more in some instances.

Founders come in all shapes and sizes. More importantly, they come with different temperaments as well. If you don’t want to risk the next three years of your life on a eureka idea that came to you in the shower while you were hungover, the search lab playbook may be for you. If so, keep reading, and let’s get down to specifics.

Here’s the process Roger actually used 3-times to find businesses with overwhelming demand. 

Step 1: List Your Criteria And Objectives - Document what you want out of this business and a few criteria that this business must meet before you decide to commit to it. For example, a few criteria might be:

  • Is an internet based business (e.g virtual)
  • Must be able to grow with paid acquisition via Facebook, YouTube, TikTok. 
  • Is interesting enough that I could build it for the next 10 years. 
  • Has the capability to be a $1B+ business (e.g is a BIG market).
  • The initial product an be built for less than $20,000
  • Won’t require me to work on weekends
  • And so on…

Develop a list of dealbreaker criteria. Make sure you spend 30 minutes to 1 hour thinking about this…it will be incredibly important later in this process.

Step 2: The Idea Maze - Roger and his team deploy a ‘matrix approach’ to ideation. There is a simple spreadsheet they have created. The vertical rows are different verticals they are interested in exploring. Classic markets like real estate, construction, health, etc. The horizontal rows are different types of tech categories (e.g., AI, no code, Saas, Marketplace, micropayments). 

Market x Approach Idea Matrix

Now generate as many ideas at the intersection of these two axis: Market and Approach. To put your efforts into perspective, Roger and his team used this process to generate approximately 1,000 ideas.

You can also do the same process using best in class companies you respect. 

Business x Approach/Market Idea Matrix

Step 3: Close The Universe Using The Criteria Filter - Once you have the law of large numbers on your side, close the universe. Pick a number of ideas you discuss each day and start debating them. Use the criteria you developed in step 1, to either modify ideas, or remove ideas from your list. 

The goal is to whittle the idea list down to a manageable number (5 to 10 ideas). Can you see how this process can take a while? 

Once you have your small data set, write a ‘one-pager’ for each idea. A one-pager is a simple business plan or pitch deck limited to one page. This forces you to hit the main points, but the page constraint prevents you from going down rabbit holes and wasting too much time. 

In each one-pager you should include: 

  • Problem: The specific problem you’re solving 
  • Solution: The specific solution and how you will fulfill it
  • The Customer: Who, specifically, is your customer. How many of them are there? Where do they hangout? How can you reach them?
  • Growth: How you will grow this business (e.g Paid marketing, SEO, Outbound Sales, Inside Sales)
  • Unit economics: Document the price of your service and how much it will cost you to fulfill it.
  • A Test: How can you validate demand for this idea quickly, with as little cost as possible.

The creative process is a messy one, but you don’t want it to get out of hand.

With your 5-10 business plans in place, start the debate process again. Now that you have done some research and have some data backing these decisions, you may find that some of them just don’t meet your needs. 

Find the best 2-3 one-pagers, and you are ready to proceed to step two—time to bring these ideas to life.

Step 4: The Prototype Phase - Take your favorite idea and turn it into a reality. 

Give yourself 2 to 6 weeks to build the “test” that you outlined in your one-pager above. Again, constraints are your friend here. Not enough time, and the prototype will not be robust enough. Too much time and you may be wasting time on an idea with diminishing returns.

What a prototype is not: A minimally viable product. It is a preliminary model of your idea whose sole purpose is to generate data in the form of feedback. Think of it as a ‘mini-me’ version of an MVP. We want to establish a baseline to measure off of for the next phase.

Examples: 

  • Landing Pages: An example is a landing page that you run ads to to see if you get a good conversion rate
  • Cold Emails: You send cold emails to potential prospects to guage their feedback and actually try and sell them “the thing”. 
  • No-Code With Minimal Features: code the basic feature, but make everything else derivative. Code as little as possible.

Step 5: The Validation Phase - Let the experiment run. Take your prototype from step 4 and get it infront of people. Show them what you’ve built and ask them for a commitment (either time, money, or an introduction). 

Get these early adopters to try it out. From a tactical perspective, they are in the best position to give you feedback on the nuts and bolts operation of what you are trying to do. More importantly, from a strategic perspective, realize that if you cannot get them to adopt the product, its unlikely the rest of the world will.

A good way to know when to stop is if you’re continually getting commitments for your idea - either people are buying “the thing”, or are willing to spend an inordinate amount of time with you to continually test and iterate on the prototype. 

Move back and forth between stages 4 and 5 until you have “overwhelming demand” on one of your ideas. To make this tangible, lets say that mean that over 50%+ of the people you talk to really want to pay you for your idea.

Step 6: The Expansion Phase - Here is where the rubber meets the road. You feel good about what you have, the metrics are solid, and your core group of users absolutely love it. Now the question is can you expand its adoption beyond the small group of loyal fans you created in the previous steps?

This is where things can get expensive. You either have to put your money where your mouth is and build up the product, or spend money on sales and marketing to grow it. This is why the validation phase is so critical. Spend as much time as you can in the validation phase until it is undeniable that the business is something people really want. 

Business Opportunity: What Uber Black Wants To Be.

Context: Regardless of what Uber’s $1.7 Billion marketing campaign tries to tell you, Uber Black is only marginally better than Uber X. There is a market of people who would expense the ride if there was a nicer car as well as a professional driver who was willing to wait a bit before driving off and claiming you weren’t there. It may not be a unicorn, but it is a multi-million dollar, cash-flow idea.

Idea: An on-demand luxury car service that fills that gap between current ride-share offerings and limousines.

How To Build it: Very simple build with little friction to stand up an MVP. 

I’d start by creating a simple deck that outlines your “on-demand luxury driver” service and general sales packages available to potential clients. 

Then, go on linkedin and look for CEO’s, Real Estate Agents, Investors, anyone that could benefit from a dose of luxury and get them to sign up to commit to $500 to $1k a month in “rider credit”.

Keep doing this until you polish up your pitch and begin to see customers saying “yes” to your idea. This is called pre-sales. 

To fulfill it, you can lase a Mercedes S class (~$1,000-$1,500/month) and a secure garage ($500 to $1,000 per month). A cheaper way to test this could even be to rent one for a few weeks for about $250/day.

At first you’ll be doing the driving, but over time, you can hire a professional driver for about $5,000 to $6,000 per month.

Each ride is ~$50 to $100. You would need approximately 80 rides a month to break-even. Thats only 3 rides per day at $50 to $100 per ride. Scale from there and then expand into new markets.

How Roger Builds Wealth:

Opportunity vehicles: Home Runs

  • Gigster (exit to Ionic) & Mafia Wars (exit to Zynga)
  • The Search Lab Process to create viable Start-ups
  • Made Renovation - Current project (and next exit)

Roger has embodied one strategy from the very beginning: The Long Ball. If it does not have home-run potential from the beginning, Roger does not give his time or attention. He takes massive swings because there are a lot of zeros on the curve for founders.

Investment Portfolio: Skews Conservative

  • Real Estate - Roger does not believe you should have a portfolio in this vertical. Instead, invest in a fund that handles the due diligence and maintenance of properties. 
  • “Fantasy Football Equities” - Pick a few medium size companies that interest you and watch them for a year. Once you get a sense of the ebb and flow, jump into the ones, you feel comfortable with. Roger has 8-10 bets going in the market at any time.
  • Rolling Angel Funds - Roger believes this is an underappreciated asset class. If you are not familiar with the concept, it is a series of investment vehicles offered on a quarterly basis to LPs. Instead of a round that has a defined time period, rolling funds stay open. This allows projects to get off the ground with less capital than a traditional angel investment because there is always the opportunity to market to subsequent (and existing) investors. Returns of 8 to 15 percent are not unusual.

I hope this got you thinking. See you next week!