Should Only Startups with Products Get Funded?

Should Only Startups with Products Get Funded?

The “trend” of startups without a well-defined product idea getting funding was discussed in a recent Forbes blog post. Here’s an excerpt: Having some kind of notion what line of business your fledgling company might want to pursue used to be a prerequisite to raising capital. Now, it’s a mark of hubris. You don’t tell the market what it needs; you gently offer it a series of options, which are less viable concepts than ritual sacrifices aimed at cultivating the favor of the start-up gods. It’s called “iterating.” The gist of the post is essentially this: if there’s no product, there’s nothing to invest in, yet people seem to be investing anyway and OMGITSABUBBLEWE’REALLGONNADIE!! (ok, I’ll admit my version has extra drama). The post doesn’t offer up much to back up the thesis that startups with no specific product idea are getting funded left and right (positioning Instagram as a typical startup is, in my opinion, bonkers) but it raises an interesting question – is there really value in a company that doesn’t have an offering? Suppose you invested in a company with a product, that later changes the offering significantly – does that mean you screwed up? Pivots aren’t new. Admitting we do them is. I’ve been involved in loads of version 1 product concept/development/launch exercises I’ve yet to see one where the offering didn’t significantly change after initial customer feedback. At what point in the product life-cycle these “pivots” occur however is shifting earlier and earlier as most self-respecting entrepreneurs have read Steve Blank and are now embracing the concept of early customer feedback and “customer development”. If...

Startup Marketing 101

I gave a keynote talk at DemoCamp Toronto last night that I call Startup Marketing 101.  In it, I covered the three phases of marketing for a startup within the context of a lean startup doing customer development.  Here’s the summary of my talk (scroll down for the slides): 1. Customer Development involves testing your offering assumptions and validating that a minimal set of features meets the needs of a specific market 2. Those assumptions are about much more than just product and include: customer, sales, demand creation, market type and competitive assumptions 3. Product/Market fit is about finding a match between a product and a market 4. From a purely marketing perspective, there are three phases to a startup: pre-product, early adopters and scale 5. Pre-product marketing is about starting a dialogue with your market, sharing your expertise, building relationships and building a list of people who may be interested in your product when it is available. 6. Once you have achieved product/market fit with a set of early adopters you need to worry about the following things before you invest in scaling the business further: The Ecosystem (training, support, software), Economics (pricing and sales channels), Pipeline Tuning (testing to make sure you are maximizing the effect of every marketing dollar you’ll spend), The Visibility Foundation and Messaging. 7. The Visibility Foundation – is about figuring out how non-users will observe that others are using the product. 8. Your messaging needs to highlight differentiated value for your segments.  You need to describe in very simple terms what you do and the benefits for folks in your segments.  Storytelling...

Beta as a Product Marketing Exercise

A recurring theme of my conversations with folks in the past week has to do with Beta products and what the goal of beta testing is really about, particularly when you are talking about bringing a new product to market.  My point of view on this is that beta testing is as much a marketing exercise as it is a development exercise. The traditional view of beta products is that Beta is about testing specific features of the product to make sure they work in the customer’s environment.   A better way to think about beta testing is to think about is as a period where you are testing the set of assumptions you made about the customer problem and whether or not your product solves that problem in a way the customer understands and values.  The shift in thinking has a big impact on both what you include in the beta product and what you do with your customers during the beta. Here’s a comparison of the two approaches: Traditional Beta Who Manages the Beta: Development Product: As feature-rich as time and money allows, but testing is incomplete.  Essentially the product you plan to release at the end of beta when testing is complete. Data Collected: What other systems are in the environment for compatibility or integration challenges, number of failures and the conditions under which the failure occurred, scalability, and usually some general feedback around ease of the use and the UI. When to Exit: When internal testing is completed (i.e. the Beta runs for a set period of time unless a serious unsolved defect is found), when...

Product/Market fit and Market/Product fit

In many start-ups the difference between success and failure is gaining a critical mass of early adopters that love your product.  A lot of this has to do with getting the right product for the market you are going after (Sean Ellis and others refer to this as product/market fit) but I’ll argue that it’s also important to think about this in the reverse and make sure you are going after early adopters that makes sense for your product.   What I mean by this is that before you’ve written a line of code, some thought has gone into defining, to a fairly fine level of granularity, who is in your target market and how you are going to reach them.  The way you construct your value propositions, your call to action, how you attract early customers and possibly the look and feel of your early product will be influenced by what you define those early segments to be. Some thoughts on what a great early adopter segment looks like: They place a big value your key differentiators – Your product will have benefits that only it can deliver along with benefits that customers can get elsewhere.  For example you are offering a product where the key benefits are related to simplicity, scale and cost reduction. Your customer research has validated that all three of these are important to customers in the space.   You think you beat the other products in your market when it comes to simplicity and cost reduction but nobody else offers scale.  The easiest segment you could go after is one where scale really matters because...