The Best Way to Get Your Startup to Market

Among all the uncertainties startups face, perhaps none is bigger than trying to figure out their go to market strategy.  Should they shell out big bucks and equity to a veteran marketer with domain and startup experience?  Should they take a conservative evolutionary approach or hit the market hard with millions in marketing spending?  Are there some key tasks to execute before aggressively acquiring the first customers?  With all the alternative ways to go to market, it’s no surprise that startups are constantly second guessing their go to market approach and/or their marketing leader.

Over the last few weeks I’ve refined my plans for helping startups address these challenges.  This is mostly based on feedback from several startup founders and VCs, but it’s also based on the time I had to reflect while on vacation.

To recap my “journey” to date, I recently finished a six-month interim VP marketing role at Xobni, which publicly launched its product in May of this year.  Xobni is considered by many to be among the hottest startups in Silicon Valley.  I am now a marketing advisor with Xobni. I limited the fulltime role to six months because of my belief that the first six months of marketing are the most critical to long term success of a startup.  I came to this conclusion following two previous startup roles where I ran marketing for several years from launch to NASDAQ IPO filing. 

It’s important to note that the most important marketing drivers were different in each of my last three startup marketing roles.  It was the process of discovering the most effective drivers that was the same, as well as the steps executed before developing drivers.

While at Xobni I also read “The Four Steps to the Epiphany” which supported my belief that there are patterns that most successful startups follow.  The author, Steve Blank, also reached this conclusion as the founder, CEO or head of marketing at several successful startups. 

As I mentioned in my last post, I plan to use a more leveraged approach with startups going forward.  Each startup must have a passionate, talented marketer in the marketing leadership position and recently raised their series A round of VC financing.  My role will be to help them focus their time and resources on the most impactful projects necessary to bring their company to market.  Because of my previous experience successfully navigating this critical stage, they will have the confidence (both self confidence and from other execs and board members) to aggressively execute an efficient go to market strategy, without most of the second guessing that so often wastes time and energy at startups.

The key development since my last post is that I’ve formalized two specific programs for bringing these companies to market (at different price points). The goal is to concentrate my efforts in the areas where I can add the most value in the least amount of time.  Both programs start with 2-3 days of intensive onsite progress assessment and planning.  Essentially we assess everything that has happened in marketing to date and plan the sequence of what needs to happen over the next six months.  Then we’ll review/refine the execution plans for each of the key projects for the next six months and consider external resources where needed.  Finally we’ll schedule weekly phone calls to monitor progress and help with key challenges.  The higher level plan will also include unlimited email Q&A.

Over the past several weeks I’ve been introduced to about 25 startups (primarily via VCs) that have the right profile.  Clearly this is a niche with a lot more need than I’m capable of meeting. Still, I believe my new approach will enable me to effectively work with up to two new companies per month (initially I’ll cap it at one per month). By limiting myself to companies that are at a very specific stage, I will be able to constantly refine and improve the approach.  Again, I’m focusing on startups that have recently raised their series A funding and have a talented/passionate fulltime marketing leader.  These companies should seek the right balance of conservative and aggressive execution.  It’s very easy to get too aggressive too soon when you have just raised millions of dollars.  But eventually you must be aggressive to realize your full potential. 

You may have noticed that some of my old posts are no longer available on my blog.  Because I view my service as a key competitive advantage for the startups I work with, I’ve decided not to provide this information for free to their competitors through my blog.  This was a difficult decision and hopefully my readers will understand.  I will still post general information about marketing a startup on my blog as well as assessments of effective drivers, but will no longer include detailed posts on process.  I may offer some webcasts in the future where it is easier to control the dissemination of information.   For anyone who is looking for specific reading materials on process, I highly recommend Four Steps to the Epiphany.  My approach incorporates some key element from this book, but obviously there are other things I’ve discovered through my own experience that aren’t covered in the book. 

I’m excited to start with this new leveraged approach at Eventbrite on Monday.

Advisor at Xobni – What Now?

Monday will be my last fulltime day in the interim VP marketing role at Xobni – then I switch to part-time advising.  Xobni’s progress is definitely on the highest end of my expectations when I went into the role.  I’ll miss my day-to-day interaction with the team, but will be on site a couple of afternoons per week to trade jabs.

Many people are asking me “what now?”  Through fall I’ll be working with a few other startups using a more leveraged approach.  I’ll help them set the overall marketing priorities and then provide ongoing assistance refining their go-to-market strategy and executing more challenging marketing projects.   Each startup recently received their series A VC funding and has a smart and scrappy (but less proven) fulltime marketer.

This is a different approach than I took with Xobni, where I was exclusively focused for six months on laying the groundwork for the public launch (May 5th) and building on the post launch momentum.  By focusing on only one startup during this period I’ve been able to re-tune my startup marketing skills.  I now feel more prepared to effectively help multiple startups.

In classic flip/flop fashion of a politician, I’ve change my perspective on whether a part-time consulting approach will work.   Back in March I wrote (http://startup-marketing.com/2008/03/01/the-startup-marketing-launch-process-is-broken.aspx) that a total immersion approach is better than a consulting approach.  While this is probably still the case for the eureka moments of creating innovative customer acquisition programs, it’s less important for laying a foundation to maximize the impact of these programs and developing the overall go-to-market strategy.  If a startup has the right marketing director in place, they should come up with the innovative marketing programs needed to drive growth.  By limiting my time involvement, companies will be able to pay less overall compensation.  And it works out better financially for me as well, especially since I’ll be able to diversify my equity.

I’ve already committed verbally to terms with three companies, but put off figuring out the contracts until I completed my fulltime role with Xobni.  I also postponed meeting with other companies because it would cut into my time at Xobni.  As a result, I have several meetings teed up over the next few weeks with other startups.  I plan to cap my advising/consulting roles to four companies through the fall (in addition to Xobni).  Once I understand my capacity I may add more.

I’m definitely in need of a vacation and excited to be heading to Thailand at the end of next week.

Three Key Lessons From The Slide/rockyou Facebook App Fallout

Well it was only a matter of time before Slide and rockyou pushed things too far.  Facebook’s crackdown on aggressive viral tactics has exposed a key vulnerability of these businesses.  Facebook has banned some apps and shut down two of the three most important viral channels for others (invites and newsfeeds).  And according to this TechCrunch article the growth of these apps has been dramatically squeezed as a result.

Despite their mistakes, both rockyou and Slide should be recognized for their pioneering role in advancing viral marketing.  Through metrics and iteration both companies have achieved unprecedented user growth rates. This rockyou presentation from April ’08 (http://assets.en.oreilly.com/1/event/3/Design%20Learnings%20from%20Viral%20Applications%20Presentation.ppt) describes their growth as resulting from the “Rise of open platforms + laser-like focus on metrics and viral channels.”

But after today it’s clear that this growth sits on a shaky foundation.  I believe there are three key lessons all online marketers can learn from Slide and rockyou’s challenging situation:

1) Don’t get too aggressive.  When the key driver of your business is engineered virality, it’s tempting to keep pushing the envelope.  Eventually you will cross the line and become annoying – particularly if it can be perceived that you are tricking users into inviting their friends.  Some people will always be annoyed by viral tactics, but monitor this “annoyance” closely to ensure it is a very small minority.

2) Building your business on one or two social networks puts you at the mercy of these platform owners.  Slide and Rock You have worked hard to diversify their platforms, so they will probably weather this storm.  Rockyou even makes a good case on slide 8 of the presentation (mentioned/linked above) that they can help drive the overall growth of the platform.

3) Try to aggregate loyal users on your own website.  It may seem so 90’s, but I think this is one of the key issues with the rockyou and Slide business models. By not offering a compelling trail back to their own websites, they have very little control over their relationships with users.  At Uproar.com (in the late 90s) we used a viral widget with a smooth customer acquisition trail from our 40,000+ syndicate websites and even paid partner sites a bounty.  While this was more expensive in the short run, we “owned” the users and could work to extend their loyalty and lifetime value – ultimately building the biggest gamesite on the web.  This approach seems more sustainable and defensible than the current Rockyou and Slide approaches (though the growth rate was certainly slower).

Hopefully we can all learn as much from rockyou and Slide’s setbacks as we have from their viral successes.

VP Marketing Compensation at Tech Startup

While working on recruiting the next marketing head at Xobni (either VP or director level), I stumbled across a great blog post on the typical compensation packages for VPs of Marketing at Tech Startups: http://www.mikevolpe.com/bid/3858/.  I haven’t downloaded the actual report which may provide more data (you can see it here https://www.compstudy.com/).

 Percentile   Cash Compensation  Stock Option %   
80%   $225,000  1.65%
60%  $200,000  1.25%
40%   $175,000  1.00%
20%  $160,000    0.75% 

Unfortunately Mike’s post doesn’t give many details on compensation by startup stage (I assume these probably weren’t available in the report either).  In my opinion pre-series A has more risk and should give the marketing VP more equity (all other qualifications being equal).  Also 1% of a pre-series A company is worth much less than 1% of the same company after the series C round (because of dilution).

Reading "Once You’re Lucky. Twice You’re Good."

I’ve been reading “Once You’re Lucky. Twice You’re Good.” by Sarah Lacy for the last few days and I’m really enjoying it.  It gives a useful overview of the whole Web 2.0 scene, but mostly I just find it an entertaining read.  It’s amazing how many influential Web 2.0 companies were connected to PayPal alums.   Slide, YouTube and Yelp were all directly connected, and Facebook has early investors that were alums.

The book highlights the value of the Silicon Valley ecosystem for starting new companies.  Without the help of startup vets, Lacy indicates that many talented founders would likely have been ousted from their CEO position by VCs.  Who knows if companies like Facebook would be at their current nosebleed valuations if a seasoned exec were running things?  The passion and vision of a founder often count for more than the experience of a replacement CEO.  Other times this isn’t the case.  Obviously when VCs push for a replacement, they firmly believe it is the best approach for the long-term success of the company.  But sometimes they’re wrong.

Reading about these successful companies has been both inspirational and educational.  It led me to begin an analysis of the fastest growing startups over the last few years and try to reverse engineer the source of their growth.  I’ve been verifying strong growth rates by looking at each company’s Google search trendline and their Alexa chart.  Caution: Sometimes Alexa doesn’t capture the real growth of a company because their pages are https or they are distributing a local application.  In this case, Google trends is a better indicator of user growth.

Most of the highly successful companies have relied on a key viral driver – either viral invites or a self replicating viral presence (think widgets).   I’m hoping to identify new growth drivers around which I can enhance my marketing skills.  I tend to find the shelf-life of many successful online marketing programs is limited, so it’s important to continuously refresh my knowledge.  I’ll post my findings soon.

@Calacanis RE: "The business model comes AFTER you get to scale."

I stumbled across this old post on Calacanis.com that Jason Calacanis wrote back in January.

http://www.calacanis.com/2008/01/02/the-three-business-models-that-make-twitter-a-billion-dollar-bus/

In discussing Twitter, he made some strong statements about when a startup should focus on business models. He recommends spending some time in Silicon Valley where the prevailing wisdom is that you should reach scale before obsessing over a business model.

I can see his point… Everyone can name a company like YouTube that was acquired for billions before they ever figured out a viable business model.

I agree with Jason that a small profitable business is not what VC-backed startups are all about.  It’s generally about bringing life-changing technology to the masses (say 20m+ users) as quickly as possible.  This is how multibillion dollar businesses are created.  And the Silicon Valley venture capital ecosystem exists to create multibillion dollar ventures.

Now comes the “but”…  Unless it’s viral (like Flickr, Twitter, YouTube, Skype…) bringing life-changing technology to the masses costs money.  A lot of money – think $50m-$100m in marketing to acquire 20m+ users.  Jason points out that an endless supply of capital makes this possible.  And again he’s right.  But a startup with $50m to $100m in venture financing will require a $1 billion+ exit to be considered successful.  These exits are extremely rare.  For a company that raises that much money, a more common scenario is an outright failure or an exit where employees and founders earn little if anything.

Wouldn’t it be better to have a business model that allows you to spend the same $10m several times over a few years? This limits dilution and still lets you grow into the 10s of millions of users.  It also offers a much broader range of attractive exit options. A self funding marketing program makes this possible, but it requires a solid business model and of course a product/service that people actually value.

I’ve been able to use self funding marketing programs to attract 40 million+ users across my last few startups. Many others have also used this approach to build valuable companies. GoToMyPC created the easy remote PC access category with this model.  Dell is another company that used direct response marketing to build a massive business.  Both of these businesses did it out of necessity – their cost per unit required a monetization plan early.

But even startups with zero marginal unit cost can benefit from this approach. Critical mass should be the goal of a VC backed startup and an ROI driven aggressive marketing plan is one of the most reliable ways to get there. This even applies if you are “a player with unlimited access to capital.”

UPDATE: Funny timing…  The same day I posted this, Jason made a related post called “Traffic buying strategies–a complete education on every detail.”  In it he acknowledges that he may be missing a “huge opportunity”.  He goes on to ask “What I’m wonder is, are there ways to buy decent/real traffic for .01 to .03 per visit. That would be $10 to $30 per thousand, so that we could possibly break even on buying the traffic.”  Here’s a link to the full post:

http://www.calacanis.com/2008/06/05/traffic-buying-strategies-a-complete-education-on-every-detail/

More Freemium and Startup Marketing Thoughts

Same excuses for a lack of meaningful blog posts recently…  But the good news is I’m nearing the end of my immersive interim VP marketing role, and will soon transition to a part time advising role.  This should free me up to spend more time with the blog.

Until then, here are three very raw startup marketing thoughts that have been running through my head lately…

  1. Freemium will be a dominant business model in software and online services. It is easiest to execute when disrupting large existing categories with strong demand.  It is more challenging to execute when growing a new category through aggressive marketing spending. Getting all the pieces right will dramatically improve your ability to market and grow a freemium business.  Premium only is rarely a viable option – you will eventually lose to the company that introduces a freemium model in your category.
  2. Early stage marketers that aren’t looking at the full business picture likely won’t be successful.  Most of the obvious marketing levers are irrelevant without the right business model, product/market fit, tracking systems, etc. Early stage marketers need to spend time perfecting the whole economic picture.  Marketing might not even be the right title to give this role, but the marketing function is a critical component.
  3. The traditional Silicon Valley rift between engineering and marketing is shrinking.  The increasing importance of analytics in marketing means effective marketers can more easily connect with mostly left brained engineers. Additionally, some of the most leveraged online marketing activities require close coordination with engineering (such as viral marketing and conversion optimization). The trend of great marketers coming from engineering backgrounds will likely accelerate (and no – I don’t have an engineering background).  Still, all tech marketers will need to have a good balance of right brain and left brain talents.

I plan to expand these thoughts in future posts.

Startup2Startup

Dave McClure organized an excellent gathering at the first Startup2Startup dinner tonight.  The evening started with a great presentation called “Speed: the ultimate startup weapon” by serial entrepreneur Mike Cassidy.  Then each table had an organized round table discussion on critical startup topics.  The guests at each table were prearranged to ensure a good mix of veteran entrepreneurs, first time entrepreneurs, angel investors and VCs.  This was followed by casual mingling.  The whole evening was fun, educational and very collaborative.  I saw some old friends and met some great new people too.

Xobni Meet LogMeIn

I was excited to log into Download.com today and see that LogMeIn and Xobni were both featured in “Download News and Updates” (back-to-back).

An Outlook add-on getting big buzz (Xobni Story)

I joined Xobni after 4.5 years of running marketing at LogMeIn.  I love to see both companies featured on Download.com together!

On similar note, this appeared in the Xobni forum today:

it would be great to be able to turn off animation of the app – so that when you click it just “pops” to the next screen instead of pushing (wiping) across – I access my email using logmein remotely and the animation makes it painfully slow to use.

Xobni Launch In New York Times

It’s a very exciting night over at Xobni.  We just pulled the trigger on the Xobni public beta launch.  This coincided with a great article hitting NYTimes.com announcing the Xobni launch:

http://www.nytimes.com/2008/05/05/technology/05xobni.html?partner=rssnyt&emc=rss

Of course the Microsoft Yahoo fallout is stealing some of our thunder, but it’s still amazing for a 14-person company to get our launch covered in the New York Times.  Huge kudos to Sutherland Gold for getting us the New York Times (Jeff Bonforte was right – they are awesome).

The biggest credit goes to Matt and Adam for founding a great company and the rest of the engineers for executing an awesome product.  We still have a lot of work to do, but we’ve had an amazing private beta with very passionate and helpful users.

On the marketing side, Xobni already kicked up a lot of interest before I arrived.  My goal has been to ensure that we harvest this interest and build on the great momentum.  Now that we’re publicly available for anyone to download, we should really be able to optimize conversions.

I expect great things from Xobni and I’m proud to be part of this incredible team.