Startup Insights

In my last post we discussed putting in place your execution team. Now with your execution team in place (at least theoretically), this next series of posts will be focused on customer acquisition. For me, customer acquisition begins with marketing and marketing begins with messaging and positioning.

So what do I mean by marketing and what do I mean by messaging and positioning. For those of you comfortable with these terms, feel free to skip ahead. For everyone else, let’s take these terms one at a time so as to be clear. So ‘marketing’, we hear this term a lot, but what exactly is it? Well, this is actually quite a difficult question, because it depends on the stage of your company and it encompasses a lot of areas.

To make things easier to understand, let’s subdivide the marketing category into 3 areas: strategic marketing, customer-facing marketing (aka corporate communications) and product marketing. Here is a bit more information on each:

• Strategic marketing is focused on maximizing business potential for a company, including figuring out sector-based market needs, determining market size and growth rates, understanding the customer and their pain points, determining sales channels, market segmentation, etc.
• Corporate communications focuses on communicating important information about the company to the marketplace. It is generally concerned with developing market awareness, generating leads, and providing tools to sales teams and partners.
• Product marketing, like its name implies, is all about a product, or for a startup, the product. Product marketing is supposed to be about drawing together internal and market information to create killer products. This areas focuses on developing written materials for the marketing and engineering/R&D teams such as market requirements documents (MRDs), functional specifications, product requirements documents (PRDs), software requirements specifications (SRSs), white papers, data sheets, etc.

When we get to execution, I generally expect that the strategic marketing and product marketing is covered, since these areas should have been involved with why the markets/customers/channels were chosen and how the product was developed. What is missing is generally the communications piece since the team is usually just speaking amongst themselves and they generally understand what everyone is talking about.

Communications outside the company, however, is a different matter. The market needs a company to make a few things clear, and quickly. These things include:

• the company’s value proposition: what is so special about your company and how, as your customer, I benefit from working/engaging with you
• the product’s value proposition: what is so special about the product and how I benefit from working/engaging with the product
• competitive differentiation: why you and your products are better than the competition and why I should care (ie saving money, making money, being ‘cooler’, getting more friends, etc.)
• the company and product positioning: how do you fit into the market ecosystem, are you ‘premium’, inexpensive, enterprise, for kids/teens, serious fans only, experts only, etc.
• general company messaging: what part of the marketplace do you operate in and what is your brand about (ie innovation, trusted, hip/cool, etc.)
• general product messaging: what does your product(s) do, what is special about them (benefits/features), and why I should care (what’s in it for me)

This may look like a lot of marketing verbiage, but each of the bullets above needs to be no more than one to two sentences to be effective. People have short attention spans and are easily confused so keeping everything simple and concise is the easiest way to get your message across. What is generally hard about marketing is being able to communicate effectively what you mean with impactful, memorable phrases that use the fewest number of words.

Also, for startups it is generally important to position yourself as a leader. As we have generally seen in the high tech space, companies proliferate as the market emerges and then consolidate as the market matures (think of spaces that include Apple, Microsoft, Google, Amazon, etc.). Over time each high-tech ‘space’ is usually dominated by one or two players, so coming out of the gate indicating that you are leader is a good place to be to capture mindshare and attention.

So get cracking, if you haven’t done so already, and crank out some good sentences/phrases that enable people to really understand your company and your products (messaging) as well as where you play in the marketplace (positioning). And, as I mentioned, don’t forget about being a leader, at least in some area. With your core messaging in place, now we can begin to discuss lead generation and prospecting for customers.

Until next time, have a great day!

As I mentioned in my last post, once you have developed an execution plan, it is now possible to build out your team to make the plan a reality. Before I get to this point, though, let me mention a few things about startup teams.

Most startups begin with a visionary team — in essence a group of people who see an opportunity or product that most other people cannot see. For the startup to survive its early stages these people must often be very passionate about their company and/or product vision. If they are not passionate then they are often not willing to make the necessary sacrifices in time, money, and ‘pain’ that it takes to ‘birth’ this new enterprise.

The high failure rate for high-tech startup companies can often be attributed to insufficient passion among the founding team to see the company through its early, difficult phases. This is one reason that sophisticated investors often look for ‘strong passion’ and serious ‘sweat equity’ (unpaid time with long hours) among the founding team before they choose to invest in early-stage startups. They know from experience that without the ‘passion’ element the team or company may self-destruct before the company ever gains  traction.

So, without getting sidetracked too far, what types of difficult problems do founding teams often face that may lead them to abandon their enterprise? Here is a sample list, far from exhaustive, but it should give you a feel for what needs to be overcome and survived:

• unpaid 12-18 hour days, with no weekends, holidays or breaks, ever (at least for a few years)
• few ‘believers’ and many people that think you are crazy and destined to fail or at least waste a lot of time
• some interested customers who never seem to get around to actually purchasing or trying your product, but like to ask you to build things for free
• learning all kinds of things that you never even knew existed and may not be interested in (ie contract law, other computer languages, marketing theory, team management, stock option agreements, etc.)
• the need to mortgage assets, take out loans, reduce your expenses, stop pursuing other hobbies, spend less time with family and friends, etc.

All these types of ‘obstacles’ are balanced against a team’s passion and willingness to go on and push things forward. Additionally, it is this passion, that can attract others to become part of the team and join the ‘quest’ to overcome these obstacles in pursuit of a dream and/or financial reward.

A founding team’s passion is often it’s strength, one of its weaknesses is often that it is too small or inexperienced to take on the execution challenge. So for example, the team may consist only of business people who do not how to develop a software or hardware product or, more commonly, mostly technical engineers that don’t really understand the nature of business and do not know or really care to run a business. Even balanced teams that contain both business and technical people may have insufficient experience or contacts to strongly execute on the company’s plan.

As a result, the founding team will often need to complement its abilities with more knowledgeable and experienced business and technical people as the business matures. In order to do this, founding teams often leverage their passion and their execution plan to excite others about the financial and experiential potential of their venture. It is important though, that the team focus on hiring the ‘right’ people and not just try to hire any experienced talent that they may find.

Some key pointers in hiring appropriate people is to target at least one person for each functional area of your execution plan (ie marketing, sales, business development, etc.). Also, you should focus on people that have the following profile:

• Must have some startup experience (the more the better)
• Domain expertise and/or recent industry contacts are critical
• Willingness to roll up their sleeves and work hard
• Willingness to accept fair compensation and few perks
• Track record of strong, direct business performance and good network
• Strong ethical character with minimal interest in office politics
• Should show passion and excitement about your space/product
• Should be able to ask you good questions that you may not be able to answer
• Good references (at least 3)

The purpose of this checklist is basically to help you find some people who can provide you with value and who hopefully won’t end up taking advantage of you. Once you find these people, the challenge then becomes to excite and interest them enough so that they join your business. This again is often done with a combination of passion and the foregoing business analysis showing that your business has a great financial opportunity.

So now with the team in place for your execution plan, you are in a position to start making an impact on the marketplace and acquiring customers. In my next few posts, I’ll discuss customer acquisition in more detail starting with your marketing messaging and positioning.

Until next time, have a great day!

In my previous post I discussed sizing your marketplace. During that exercise we thought about the profile of your target customers and tried to understand the channels by which you could sell to them or interest them in your product(s). If you look at what we did during this sizing exercise you can see we created a high level estimate based on some top-down (market forecasts) and bottom-up (channels) factors.

An execution plan takes this exercise one step further by thinking more deeply about who your customers really are and how you can reach, sell, and/or aggregate them effectively. Really understanding your potential customers is important because, at the end of the day, they are the lifeblood of your business, be it B2B or B2C.

So what do I mean by ‘who’ are your customers. Well customers are people, so I am not just talking about market sectors, companies, or communities. I am really talking about important customer attributes that should predispose this group of people to being immediately interested in your product/solution/offering. So, for example, your ‘target’ customers could be Directors of IT at Fortune 500 companies, or 24-34 year old men with an income in excess of $50k per year.

You’ve probably heard the mantra ‘know thy customer’, well by knowing your customer in detail you can create an execution plan that spans marketing (awareness, lead gen, pricing), sales (benefits, value proposition, and differentiation), and product development (functionality and features). So consider two examples:

Example 1 (B2C)

Let’s say I want to develop a casual game and would like to maximize its potential. By studying the marketplace I can quickly see that casual games have generated the best outcomes on social networks like Facebook and MySpace. Paying customers for social games on these networks tend to be in the 18-44 age range and women tend to spend more than men. So with this information, I can now come up with the following high-level execution plan (the real plan would have more detail, like time-lines and more specifics):

• Marketing: use viral channels on the social networks to generate traffic
• Sales: free game with virtual goods for generating scale and revenue
• Product: should appeal mostly to women, but also men, in the 18-44 demographic

Example 2 (B2B)

Let’s say I want to develop a security solution for the enterprise. By studying the marketplace I can quickly see that high security solutions for cloud computing with a low total cost of ownership is a ‘hot’ market space. I can also see that both IT managers and enterprise application managers at Fortune 500 companies should be interested in this solution. To be interesting, pricing should follow the cloud model (monthly subscription) and will need to be high enough to generate $500k-$1 million per customer per product lifetime. So with this information, I can now come up with the following high-level execution plan (the real plan would have more detail, like time-lines and more specifics):

• Marketing: employ webinars, speaking engagements, industry events to generate ‘buzz’ and target customers at key early adopter brands
• Sales: target high profile Fortune 500 customers to get ‘brand’ recognition, discount at first but then build up sales in the ‘enterprise’ price range
• Product: core should be defensible and contain innovative security IP, fill out as a platform with key features for customers and APIs for ecosystem

With this execution plan and the market sizing you now have a pretty good idea about how realistic your business concept is and what your growth prospects are. The next really important point is going to be building out your team to make good on this vision.

Until next time, have a great day!

In my last post I made the point that by better understanding the marketplace for your ‘great idea’, you will be able to qualify and quantify the future opportunity for your business. So how exactly do you do this?

First, in order to blossom and thrive, it is important that your idea be relevant for a lot of people and/or companies. In the consumer (B2C) high tech marketplace, this usually means millions or billions of people (think mobile phones [Apple], advertising [Google], social networks [Facebook]). Less than this size and the impact isn’t significant enough to generate a critical mass of ‘buzz’ and excitement. In the business (B2B) high tech marketplace, this usually means hundreds of millions or billions of dollars in revenue (think computer hardware/software [Intel/Microsoft], enterprise applications [SAP/Oracle], and middleware/services [IBM]).

Now your specific market is probably currently in its infancy (since you are a startup) so it is unlikely that you will have high levels of consumer and/or business interest at the beginning. Instead, you need to pull out your crystal ball and forecast growth rates and interest over the next 3-5 years based on trends and drivers. For this task, the key information analysts like Gartner, IDC, Forrester, Frost & Sullivan, and others can be very valuable.

Ok, so let’s say that you now know that your business is entering an explosive marketplace with all the right numbers, trends, and drivers in place, is this good enough? Actually, no. There is significantly more work to do. What you have determined is the Total Available Market (TAM), however, what you need to know is how much of this market is actually going to be interested in your technology (SAM or Served Available Market) and how much of this market you can actually access.

So let’s look at this a bit more closely. Let’s consider that you are developing an application for serving location-based ads on mobile phones. The TAM will be the world of all mobile phones (huge, billions), while the SAM will be all mobile phones with GPS capability (primarily smart phones, so hundreds of millions). Now though, let’s look at the competition and your channel to market. In the US the competitors are quite large, they include Google and Yahoo and Microsoft (and soon Apple), while at the same time you will need significant relationships with advertisers.

So what could look like a multi-billion dollar opportunity via the TAM, actually may turn out to be a very modest or niche offering because of the power of competitors and the company’s inability to gain mindshare with advertisers. So here we see it is not just about the business proposition and the technology, it is also important to consider the ecosystem, the size and technology-savvy of competitors, and the company’s relationships.

Ok, well that’s it for today. Next I will take a look at the execution or go-to-market plan.

In the meantime, have a great day!

As I promised at the end of my last post, I am going to show you that there is a methodology to creating and running a successful startup. So ‘keeping my promise’, this is officially the first post in my ‘successful startup methodology’ series.

As you might know, startups generally begin with a ‘great idea’, so let’s start with the idea.

It is a fact of life that some things are better than other things, this is just something we get accustomed to with time. Interestingly, startup ideas follow the same rules. That is, some ‘great’ ideas are better than others.

So how do you know if one idea is better than another? Well, it matters what you are trying to accomplish with your idea, but as most startups are businesses, ideas can be separated along the lines of which ones can create great, financially successful, businesses soon (say in 3-5 years time).

This is in essence what venture capitalists (VCs) do all day long, especially the seed and early stage VCs (closest to the idea stage). What they do is, they look at hundreds or thousands of ‘great ideas’ each year and select which ones they think will be ‘home runs’, that is, really successful, like a Google, Apple, or Salesforce.com.

So, if you are going to dedicate your life (at least for a while) to an idea, it is prudent to try to understand if it is a really good business proposition. This is often NOT the first step that most high tech startups take, they are often all about THE PRODUCT, and so this is why most startups aren’t usually financially successful. The best startup is one that is based on an idea that you can be really passionate about AND has great business potential. In this way you can attract talent, customers, investors, etc. and live out your dream.

Well, let’s see, even VCs are wrong most of the time about which companies will be successful (the majority of their investments fail to provide a positive return), so how do you figure out if you have great business potential? That is a good question and there is clearly no single or right answer. Instead, there is an approach that I follow, it’s called the New Paradigm Framework, which increases your chances substantially.

Step 1 in the New Paradigm Framework is to understand the market for your idea. This is often easier said than done in an early market, but I’ve found it is best to ask yourself a few questions:

• First, who are the people or businesses that will adopt my product/service or spend money on it (target markets)?
• Second, how quickly will these target markets grow (will be there be a lot more people in the market next year or the year after)?
• Third, what is the competition in the marketplace and why is my offering better (what/who can people work with if they don’t work with me)?
• Fourth, how will I gain access to my customers (what is the channel)?

If you can figure out the answers to these questions then you are making a pretty good start to understanding your startup idea’s market potential and therefore to figuring out how great your idea really is. In my next post, I’ll take the next step and show you how to use the market information you gathered above to qualify and quantify the business potential of your idea.

Until next time, have a great day!

This is my first blog post for Startup Insights. If you are an entrepreneur, are working in a startup, or are interested in starting your own company you may find some interesting insights in this blog. My name is Jorden Woods and I have spent most of my career either as an entrepreneur or working with/for startups. As a result of my 15 years of experience in this world (primarily in Silicon Valley), I have picked up some wisdom that I would like to share with you.

This first post will be about the entrepreneurial experience in general. This overview will enable you to benchmark what you are experiencing and see if it is in line with the general path for what it takes to be successful. I would like to make this an interactive blog, so if you would like me to comment or post my thoughts on a specific topic, let me know.

Like you might already know or maybe someone told you, founding a startup, especially a high-tech startup, is one of the most challenging undertakings you can ever enter into. Businesses, successful or otherwise, require a lot of different skills, hard work and dedication. Many of these skills you probably didn’t learn in school, skills like sales or marketing or negotiating a lease for office space, and so there is a lot of learning that takes place in a compressed time period.

You might know that 90% of new businesses fail during their first year. It is even higher for high-tech startups. A high-tech startup, unlike a franchise or small business, often deals with technology, concepts, or products that no one has ever seen or thought about before. As a result, there may be very few people who might understand it right away, have had experience with it, and who will understand what you are trying to do. Entrepreneurs not only go it alone a lot but they also need to do a lot of educating, convincing, and evangelizing.

Startups generally start small, but the ideas are big, so the hours are long (60 hours+ per week) and everyone needs to wear a lot of hats. As a result, titles and hierarchy don’t mean much in the early stage because everyone needs to work in areas outside of their job description. For example the CTO may be part of the sales team and the CEO may code the web site or clean up the office at the end of the day. This may be self-evident to many of you, but it is surprising how many first-time entrepreneurs don’t realize that this is totally standard  (in essence, nothing special).

Most people feel that because they are inventing a new product or pioneering a new technology that everything needs to be invented from the ground up. You might remember the ‘new economy’ during the dot-com boom. The interesting thing, even though it may not be evident immediately, is that there is actually a methodology to running a startup successfully. Though it may seem boring at first, it can actually be quite comforting to know that you can apply a framework or a methodology to your business that will improve your chances of being successful.

In my immediate follow-on posts I will comment on this framework and things you can do to give yourself an ‘unfair’ advantage in the race to achieving your dreams.

Have a good day and I’m looking forward to sharing some more thoughts again soon.