Harvard found that 75% of VC-backed companies that launched between 2004 – 2010 got “experience” rather than rich.
What do the companies do differently to “opt-out” of joining the 75% club?
They don’t think their customers are idiots. That’s it. Enjoy the rest of your week.
In all seriousness, why does almost everyone in Silicon Valley think that their customers are idiots? Why does almost everyone in Silicon Valley think of marketing and distribution as the red-headed stepchild of their business? You need traction, but can’t be bothered to get it.
Pop Quiz: What is the only committee Steve Jobs ever chaired at Apple?
Answer: The Marketing Committee. But, I guess you don’t want to be the next Apple (this might be ill-timed with iPhone sales in the dump, but the point remains).
You hear of businesses being “market-driving” or “market-driven”. A quote your often hear spewed by “market-driving” companies comes from Henry Ford.
What a bunch of horse manure. It hasn’t been confirmed that Henry said it. Also, Henry didn’t exactly pioneer the leap from horses to cars (he was a fast follower), but let’s not let the facts get in the way.
Let’s pretend that he did say the quote, and he did invent the automobile.
Did they really want a faster horse, Henry? Did you ask them why they wanted a faster horse? Did you ask them if they liked the idea of something that does the same job as a horse, but you don’t have to feed it in the winter?
Couldn’t be troubled could you? You had it all figured out.
Here’s the thing: even a blind squirrel finds a nut.
It’s similar to the idea presented in Fooled by Randomness. In the case of money managers, it’s the idea that with so many people playing around in the market someone has to get lucky and hit it big. They are actually wearing clown shoes.
Things get interesting when you look at the folks who are the best-in-class for decades. It starts to become very hard to explain away their success as luck. Guess what you find when you look for commonalities between these people. They have done their homework. Whether it’s research on a company, correlations or patterns.
Big success “market-driving” start-ups that only tell the market where to go are the money managers with the big red shoes. With enough ideas out there someone has to have blindly picked the right one. But those are the lucky ones. What about the ones you don’t read about?
They stick their head in the mud and keeping “driving the market”. They keep going until they are almost out of air (money). When they come up for air (money) they are finally willing to ask questions:
Visionary: “Mr. Market, what are you willing to pay for?”
Mr. Market (VC, Angels, and missed customers): “Too late son. You only have 6 months of cash in the bank. You’re done.”
What can you do to prevent this while still being innovative?
It’s simple; split your resources evenly between distribution and product. I said simple, not easy.
Yeah, but what do I know? Nothing.
What does Marc Andreessen know? Lots.
“The number one reason that we pass on entrepreneurs we’d otherwise like to back is they’re focusing on product to the exclusion of everything else. Many entrepreneurs who build great products simply don’t have a good distribution strategy. Even worse is when they insist that they don’t need one…”
This quote comes from Traction by Weinberg and Mares. It’s probably the best book on early marketing and distribution for tech-startups. They have some great ideas on how to attack distribution challenges.
Some of the advice I find generically useful is the bullseye strategy. Allocate a $1000 and a month or so to the three distribution channels that, based on your research and testing, are likely winners. The winner of the three gets your focus. Whip that horse until you reach the finish line.
According to Weinberg and Mares, “Traction trumps everything.” But is traction a function of something other than just a marketing channel? Read on.
They suggest four common reasons that you can build something people want, but all you get is “experience”:
1. Build something they want, but you can’t make the dollars and cents add up.
2. Not enough customers in that market.
3. They want it, but it costs too much to get it to them.
4. You got a widget, but about 10 other companies have the same widget.
Something Weinberg and Mares neglect (in their defense it’s not a topic that is about distribution channels) is how to not fall prey to bullet points 1, 2,3, and 4 (???) when going-to-market.
What is this magical potion? Where are the unicorns (see what I did there) in this fairytale?
Well, it isn’t magic. It is what LinkedIn did to find out how to make serious money, and what Optimizely did to get consistent triple-digit revenue growth.
It’s called having a monetization strategy before you launch your product. Yeah, you read that right, before. And if you’re not doing it, you’re the one who believes in magic potions and fairytales.
How do you do it? Patience young grasshopper.