Have you ever wondered what makes some startups successful and leaves others selling off their furniture? As an entrepreneur, I’ve always wondered how it happens.
I attended a lecture given by Glenn Winokur on marketing advice for high-tech startups. Winokur is the former CEO of Scalix (2004-2007) and COO of NetIQ, where he played an instrumental role in leading the company from initial product launch in 1996 to $300 million in annual revenues in 2003.
I felt like the lecture was written specifically for me because I’ve struggled with some of the early-stage startup issues he addresses. Glenn provides a lot of advice that comes from Steve Blank, who has a very interesting biography of his own and authored The Four Steps to the Epiphany.
What usually happens?
The typical high-tech startups follow a series of steps, something like this: concept/seed round, product dev, alpha/beta release, launch. The popular phrase is “build it and they’ll come.” But I’ve been in the situation where I built the product, I’ve spent enormous amounts of money on marketing, and nobody purchases. Why, after coming up with a seemingly perfect marketing message and product offering, is nobody buying? If you’ve been in a similar situation like that, chances are, you’re probably missing an important step.
Why do we skip this step, even though it seems so obvious and necessary?
It has a lot to do with an article dedicated to pressures associated with starting up. I can relate because there is always someone better, and you don’t want to feel like you’re not good enough to experience that success. And a lot of the pressure to succeed can really distract you from spending the time to build a great product that the market will accept and adopt into the mainstream.
If marketing efforts don’t seem to taking off as quickly as they should be, it might be an indicator that you’re not spending enough time with your early customers. After all, have you ever tried to sell something to someone who doesn’t want it? That could only mean one of two things: you don’t know who your customer is (this is called customer development), or you don’t have a good product (this is called product development).
Customer development and product development
People with interests and skill sets in product development are very focused on how well the product works, or how smoothly the code runs. It’s funny that I’ve caught myself spending sleepless nights developing a product, only to find that I scrapped everything and did something entirely different the next week. I made too many of the decisions on my product (it’s easy to do when you’re the entrepreneur), and didn’t really figure out what my customer wanted, or even who my most ideal target customer was.
Steve Blank has a process for customer development, and according to him, it should be done in parallel with product development. The customer development process is: customer discovery, customer validation, customer creation, company building. I think this deserves a separate topic for next week, since it’s something that a lot of us probably forget to do in our own startups, and it’s seen as the pre-requisite for becoming an explosive growth startup.
The biggest lesson to learn
The biggest thing I took away from this can be summarized very easily: you cannot build your products alone. That was my epiphany, and I understood why all of these successful tech companies around me were growing so fast. I was spending way too much time with my business partner “strategizing” and too little time with my early customers.
PayPal is a good example of a company whose early stage was very dependent on its customer feedback. I got to sit down and chat with Max Levchin in 2006, and he started with the concept of beaming payments securely over palm pilots. Turns out, people were suggesting it be done online. So they eventually focused their development on the online payments industry. And it took off!
We are indebted to our early evangelists/customers
I didn’t consciously realize it until now, but the successful startups I’ve read about use the voice of their customers to build their products, not necessarily their co-founders or developers. The very first thing I did when I joined a startup this summer was testing the product in person with the users. At the time, I thought nothing of it because what else were we going to do?
Well, what we could have done was sit around in a conference room by ourselves with a white board and just list the top features that came to our minds. That might have been a lot of time wasted. But we didn’t; we let the early adopters be in the driver seat. That startup, by the way, received $4 million in funding from Sequoia Capital last week. Their users today love the product that has been built because the early adopters made most of the decisions, not the people building it.
Another early-stage startup story where early adopters were listened to
The book Founders at Work holds detailed interviews with many of the most successful entrepreneurs of our time. Pick up a copy--or if you’re anything like me, just read the book in one sitting at the bookstore--and pay careful attention to how each one of these companies started. Here’s one brief story of a company that you’ve probably heard of:
Caterina Fake knew she was onto something when one of the engineers at her online game start-up created a cool tool to share photos and save them to a Web page while playing.
"It turned out the fun was in the photo sharing," she says.
Fake scrapped the game. She and her programmer husband, Stewart Butterfield, transformed the project into Flickr. In less than two years, the photo-sharing site — now owned by Internet giant Yahoo — has turned into one of the Web's fastest-growing properties.
About the author
Jared Tame is an entrepreneur who has worked with hundreds of clients on website design, marketing, and sales, and currently works with StartPal providing high-quality, low-cost website design and e-commerce solutions to small businesses and startups.