That’s exactly what the new and incredibly useful ProductPlanner does.  Consider Facebook’s Sign Up loop, for instance.  Once you’ve walked through the user flow in isolation, the elements that make the product so damn viral quickly become clear.

Put in terms of the finite state machine I mentioned, Facebook makes it a priority to locate all other existing users who might possibly be friends with the new user.  The app leverages Metcalfe’s Law to provide an immediate and exponential increase in value, hastening the transition from new user to casual or even power user.

But the real kicker, is even in a worst case scenario where the new user fails to find value in the service and immediately jumps to the dormant user state, he provides some value to Facebook since new users promote the service even as they sign up!

I’m extremely pleased with the way Fundamentals for Founders: A Practical Guide to Kick-Starting Your Business turned out, and feel it does an excellent job distilling the learnings from both my entrepreneurial and corporate career.

If you only have a passing interest in startup and aren’t remotely interesting in purchasing an ebook, then the blog might be a good place for you to begin.  We’re still learning at a ravenous pace, so definitely check back periodically for updates!

- Dan

For ease of reference, I’ve taken the liberty of re-posting Nihaar’s work below:

Youlicit’s User Attraction Model

Youlicit’s User Retention Model

Obviously, an entrepreneur should be concerned about every stage in the FSM, but since the devs are probably already crushed just getting the core feature set implemented, most startups will need to tightly focus their efforts. But where to place this focus?There’s a lot of hype given to startups with rapidly growing user bases.  I lean toward the old school thinking that the only measure of success that matters is revenue and I think Nihaar’s model does a great job illustrating why home-run strategies of “grow users first, worry about revenue later” are simply inefficient.

Lets use Animoto as an example.  They offer a free version of their video creation service and do a great job upselling from there to the full paid version.  In terms of the FSM, the free version would map to the casual user, whereas the paid version maps to the power user.  I’m not privy to their conversion numbers, but lets assume an even number of new users become casual, power and dormant users.

Now imagine a hypothetical scenario where Animoto has chosen to focus on growing their user base (converting web surfers to new users) rather than working to convert free users to paid users.  The number of new users acquired will increase, but a lower percentage of those will convert to power users.  All those new users most go somewhere in the FSM, and if they’re not becoming power users, then they’re turning into casual or even worse, dormant users.

With enough new users, you can still convert the same number of power users as the first scenario, but you end up paying additional customer acquisition costs to gain what are effectively low value users.

The specific link in the model will differ depending on your revenue model, but in general I think that startups ought to focus on the link that maximizes ARPU, rather than simply user base.

Renting proved to be far too expensive for the 3 months that we wanted the vehicle for, and leasing vehicles is simply unheard of in South Africa.  There were a few dealers that would sell a new vehicle with buyback guarantees, but it required a tremendous up front investment.  The only realistic option, I decided, was to find  a beater of a car that had some resale value so I could recoup most of my costs.

That’s when I met the Beast - 1.7 glorious metric tons of gold and vinyl shrouded German steel.

At the time, purchasing this 1988 Mercedes Benz 200 seemed like a great idea.  There aren’t a lot of cars you can find in the US or South Africa for R12,000 (equal to $1,600 at the time), and it showed less than 200,000 km on the odometer.  Plus, Mercedes is known for making cars that last.  What could possibly go wrong?

The Mechanic
The guy who sold me the vehicle was a mechanic, and claimed he had been maintaining the vehicle for its only owner for the past 20 years.  He was a friend of a friend, so I was inclined to believe him.  He also said he would ensure the vehicle passed inspection or cover any costs associated with getting the vehicle past inspection.

It took him 2 months and plenty of harassing on my end to finally get the Beast in road worthy condition.  When we were finally sitting down to sign the ownership transfer papers, I discover the cars records indicated the car was actually a 1981 vehicle.  Oops.

The Bureaucracy
All foreigners that purchase automobiles in South Africa are required to acquire a Traffic Registration Number with the Motor Licensing Board.  This effectively provides the government with an ID which can link the vehicle to your passport.  Time wasted: 4 hrs

In my first attempt to transfer ownership, the MLB official declared that the Beast’s logbook and papers were outdated.  Therefore I had to go to the police station, have an officer examine the serial number etched in the chassis and verify that the car hadn’t been stolen.  After that, I had to send the verification off to the provincial capital to get a new logbook authorized.  Time wasted: 6 hrs

Two weeks later, I finally got confirmation that a new logbook had been issued and I would be permitted to wait in yet another queue and have the Beast formally be placed under my ownership. Time wasted: 3 hrs

The Economy
By the time the Beast was officially mine, we would only have 2 weeks remaining in South Africa, which meant I had to pretty much sell it immediately.  With the time crunch, I was forced to accept the first offer I got - an unfortunate R8,000.  The kicker is that while the US economy had been sliding, the South African economy had been in a free fall, and the exchange rate had gone from 7.6 (when I first purchased the Beast) to 10.2 Rand to the Dollar.  After the ordeal, I had recovered a meager $784.

I suppose it could have been worse, but I’m having difficulty imagining exactly how.

But our travel hasn’t been always been picture perfect.  In the past few weeks in particular, the fates seem intent on making me pay my dues for the incredible memories I’ve made thus far.

Strike One
One of my top priorities while in South Africa was spending a lot of time surfing.  The water’s relatively warm and on most days the break is easily twice the size of the best that the Atlantic has to offer.  Since I was only going to be in Durban for a little over two months, I went out as often as I could, regardless of the conditions.

One particular day, the water was incredibly choppy and I was the only guy on the beach.  I had been noticing that these peculiar jellyfish washed up on the shore from time to time, but this day the entire beach front was littered with them.  Hailing from Virginia Beach, I’m no stranger to jellyfish and figured I could deal with a couple of minor stings.

After being in the water, I felt a searing pain that was traveling from my calf up my thigh.  I reflexively reached down to brush away the jellyfish, only to come away with deep blue tentacles wrapped around my fingers.  Needless to say, they burned to the touch.  Still, I expected the pain would quickly fade and vowed to stay in the water.

Though my calf and hand continued to throb, I was enjoying the surf enough that I simply suppressed the pain.  After a particular violent wipe out, I came up staggering - it felt as though a horse had kicked the inside of my thigh.  I thought perhaps I’d been nailed by my board while thrashing around underwater, but as a numbness began creeping up my leg into my lower back, I started taking a closer look at those jellyfish drying on the sand.

I managed to drive myself home and do some quick searching online.  It turned out I had been stung by a Portuguese Man o’ War. I employed a number of different home remedies, and after 8 hours the pain and nausea would eventually fade.  I was a lot more selective about when I went surfing after that encounter.

Strike Two
The local transport in Zambia is quite an experience.  I counted a dozen seats in the van-style shared taxis, but I’ve been inside them with as many as 26 passengers crammed inside.  People are literally half hanging outside the vehicle and the driver will inevitably stop and pick up more.

At any given time of the day, the local taxi station will have thirty or more of these taxis milling around in a crowded dirt lot.  As you might imagine, its utter chaos.  After one particular trip to Victoria Falls, I was standing outside one of these vans, waiting for Sarah to exit after me when another car outside of the field of my vision backed into me.

It wasn’t moving particularly fast.  But the bumper just so happened to be level with my knee, and when the two met, it wasn’t the car that gave way.  Unfortunately, the angle of impact was such that my knee gave way sideways.  Did I mention that this was the knee that I had reconstructive ACL surgery on?

After a lot of ice and rest, I’m pretty sure I escaped without any lasting damage.  I’ve since done plenty of running, surfing and general physical activity without any problems.  But part of me will always wonder.

Strike Three
Driving back from Bulungula, the vehicle in front of us suddenly and very dramatically veered off the highway.  I immediately pulled the Beast over so we could offer whatever assistance we could.  The highway was at the top of a small rise, and the crumpled car had left a clear trail of torn earth in its wake.

There was at least one body that lie unmoving in the grass a meter or two from the smoking wreckage.  A woman was hysterically unleashing bone-chilling screams while struggling to open the mangled passenger-side door.  I noticed there was still a man trapped inside.  One good look at the door was enough to know he wouldn’t be able to exit from that side.  I tried the driver’s side, and found it opened easily enough.  The man within moved as though in a dream, so I ended up physically helping him out of the vehicle and sitting him down in an area free of shattered glass.

At this point, I had three realizations hit me in quick succession.  1) I had this man’s blood all over my hands.  2) I had a couple of small cuts on my left hand that I had received from thorny bushes while hiking at Bulungula.  3) At 40%, Kwazulu Natal has the highest rate of HIV infection in all of South Africa.

Later, I would learn that there’s less than a 0.3% chance that I contracted HIV.  Yet the remainder of the drive home will remain one of the most harrowing evenings of my life.