Archive for February, 2010

I’ve spent a fair bit of time involved in startups. I love working with passionate people intent on launching ambitious businesses. There are two things startups could be known for, having a huge amount of passion and an inverse chance of success.

These factors almost certainly have a close relationship. People who start tech businesses are generally passionate individuals, they have an idea and they are gunning for it. It is this passion and self belief that drives them to risk income, time and sometimes reputation in their ventures. Unfortunately sometimes passion, self believe and certainty gets in the way of a healthy portion of doubt and some market research.

It always pays to verify your idea as much as you can before you start. But even with all the market research done there is still a reasonable chance of failure. The question is what are you likely to fail at? There are two stages most tech business go through, building the software/site and getting successful customer uptake.

Building software is complex, but lets face it how many companies failed because they couldn’t build the product? A few of course, but most tech startups bomb because they fail to get customers on board. There are many reasons this happens. The most popular being the company fails to successfully market the product, another being that the market is not as hot as originally thought. But history has taught us that even with a good product and good marketing some sites make it and some don’t. There are thousands of failed social media sites and only one Facebook. When you are dealing with customers and the net there is always an element of luck involved.

The classic way to bomb a tech business is to spend a massive amount of time and money on the product then fail in the market. The smartest way to mitigate against this market risk is to flip the process around. Do the product marketing first. It is after all the piece which is more likely to fail.

Instead of spending the majority of your time and money upfront building a product start by proving you have a market. Build the equivalent of a Hollywood set (just a cardboard building front), then move straight into the marketing to see if you can bring anyone to your cardboard door.

How can you market a product or site you don’t have? It’s surprisingly easy, here are some rough examples.

Example 1. SaaS Software

Put up a beta site showing some screen shots of functionality which will be in the final version. Then get customers to sign up to a beta program or to register to find out more. When they sign up send them an email saying either the beta is over subscribed or they are now on the list to get a free version when the software comes out.

Example 2. Web Site

Advertise that your site is coming soon and show some of the content or deals which will be included in the build. Then get people to sign up for a free something, or register to hear when it launches. You can play with this to make it compelling.

I’m sure you get the idea.

Set yourself a target number of visitors. When you hit this target you have done the hard bit and proved there is a market for your product. At this point you can proceed to build it with the confidence that you are about to launch a product/site to a hungry audience.

You may not always be able to fake it so blatantly. A hybrid approach may be necessary where you build something cut down. But what you are creating is the illusive fail fast business.  If you cannot reach your market you have failed quickly and cheaply.

Online Advertising

Another way to test ideas is to try out different online advertising methods. Buy some Google Ads and see how much it will cost to get people to your web site. Then gather stats about how many sign up. You now have the raw data to see if the idea can be supported with online advertising.

Iterate Fast

In a traditional software business the product is developed first. When the product fails to get uptake the product is changed at great expense and the marketing kicks off again. This may happen several times until the product succeeds or more likely the business runs out of money. The brilliant thing is when you fail with a market test you can spend a few hours changing your screen shots, add some more features to your pitch and see if that improves your situation. You may be able to quickly move your product into a receptive audience and succeed.

It may take time to plan how to apply this technique, but it is very powerful and has the ability to save massive amounts of time and money. Enjoy.