Market Sizing for Startups – Get Real!

I’ve had a set of conversations lately about market size estimates for startups and how to demonstrate to a potential investor that the market space you are in is attractive.  A few themes emerged in those conversations: 1.  Extrapolate but Don’t Invent – Emerging markets by definition don’t have perfect market size numbers associated with them.  That’s OK and investors generally understand that.  However, you should be able to show a range of numbers that make sense by extrapolating from the numbers that you do have.  For example if your market is a subset of an existing market, you can use the size of that market as a starting point, make a set of assumptions and then reason your way to an educated logical guess at a market size.  The trick is that the assumptions have to be practical.  You can’t say “The global market for software is $220 Billion therefore our market must be at least a billion!”  I’m joking (but only sort of). 2.  Believe the Numbers – Determining the size of a startup’s addressable market isn’t an exact science and you’ll never be able to figure it out down to the penny.  That’s OK but you have to believe that you are in the ballpark.  It sounds silly but if you can’t really convince yourself that the numbers are close, you won’t be very persuasive when you have to convince potential investors. 3.  Example Customers Count – Once you are armed with a set of numbers and an estimate of market size you need to talk to as many customers as you can to figure out...

Finding First Customers

The topic of what sort of marketing a startup should do to land the first few customers has come up a few times lately so I decided it was worth a short, simple post. Question: What sort of marketing should my startup do to secure our first couple of customers? Answer: None. Simple, huh?  The truth is that your first couple of customers aren’t customers at all, at least not in the regular sense of the word.  They’re believers.  They are going to be a crucial part of defining what your startup does and sells.  They are going to take an astonishing risk by being the first customer for a completely unproven solution in what is probably a nascent market delivered by a team that has likely never run a company before.  Even if they get the product for free, they’re investing time and energy getting users on the system, integrating it into their environment, and providing feedback to you.  They are going to have to be patient while you work out your bugs and deliver iterations and finish the darn thing.  And they’re going to have to do this while other people in the company (the ones that would prefer that they didn’t participate in your little startup experiment at all) complain and hope the project will fail so they can laugh like hyenas a scream, “I told you those guys didn’t know what they were doing!!” I’m a big believer in the power of marketing but no marketing will deliver this kind of a risk-taking life saver.  Nope, these customers are going to do it because they...

A Product Marketing Case Study: Rypple

I had an interesting chat with a startup and I wanted to share their story because I think that it’s one that product marketers and product managers could learn a lot from. The founders of this company were founders of a successful company called Workbrain.  Workbrain provided solutions for workforce management and grew to close to $100 million in annual revenues before being acquired in 2006 by Infor. When thinking about their next venture they went back to the human capital management space looking for unmet needs.  They hit on the issue of performance reviews and how much people hate giving and receiving them.  One reason this is true is because the end users (employees and managers) have different goals than the folks that own the process and buy the tools (Human Resources). HR’s goals of determining pay increases, identifying top/bottom performers, promotion planning, etc, don’t line up with an employee’s wish to get some timely feedback or management’s desire to give it when it’s needed. So the idea for their new company, Rypple was born.  Rypple allows users to is a tool get feedback from managers, peers or anyone else whose opinion they trust.  This feedback can be about anything from a person’s performance, to opinions on an meeting or input from a team on working together.  It’s easy to use – just put in your question, choose whom you want to ask it to and away you go.  Rypple is as remarkable for what it doesn’t do as it is for what it does do.  It doesn’t constrain people to a set of pre-defined questions, nor does...

Passion and Startups

I’ve been consulting for a few months now and one of the things I like about it is that I get to talk to and work with a broad range of companies.  I only deal with startups (generally less than $20M revenue) and it’s amazing to see the similarities and the differences between the companies. The thing I love the most is when you cross paths with a really passionate team.  You can spot these companies from a mile away.  Within 10 minutes of meeting with people at the company you know it.  There is an energy level that is impossible to fake.  People have religion about their product.  You get the impression the executive team wouldn’t even dream of doing something else and the rank and file have that crazy gleam in their eyes that says “We are kicking it in the butt.”   In my mind, when people tell me they love working at startups, what I think they really mean is that they love working at startups like this. The best part about these kinds of companies is that they power through bad periods.  A lousy economy, grumpy investors, demanding customers, big market shifts – these things happen to every company but the passionate ones have a reserve tank of juice to get them through.   At the end of the day this goes a long way toward making the difference between a company that’s OK and a company that is great. This kind of crazy energy isn’t exclusive to startups.  I can say the same about some of the teams that are driving innovative new products...