The Startup Marketing Launch Process is Broken

**See updates at bottom posted on Jan 20, 2009**

Originally published March 2, 2008

The majority of VC funded startups fail and a large part of the blame should fall on marketing.  Specifically, executing a flawed marketing process during the startup’s critical customer traction stage.

Through running marketing at two startups for the full cycle from launch to IPO filing, I’ve discovered that success at various stages requires very different marketing skills.  It also became clear that early stage marketing execution was the most critical to long-term success.  Yet it is nearly impossible to get good at this critical marketing stage.

Why?  Because effective marketers don’t get enough repetition in the early stage to master it.  Any skills they do develop become rusty.  Stock option vesting periods lock them in well beyond the traction stage (typically four years).

I actually stayed five years in each of my last two startups.  In that final year I had very little time for hands on marketing; I was too busy with such things as managing a team of marketers, recruiting more marketers, meeting with the sales team and other executives, preparing for board meetings, traveling to conferences and trade shows, etc, etc…

I know that my skills are best suited to the earliest stage of marketing, but I wasn’t about to walk away from extremely valuable options.  Even after the options vest it’s still hard to walk away.  Beyond paying hundreds of thousands of dollars to exercise options, you also have to pay income tax on the appreciated value of those options.  If the company isn’t public, you can’t even sell the options to get the money to pay the tax…  Anyway, the point is that despite knowing I’m best at marketing during the early traction stage, I was compelled every year to let those skills get rustier as my options appreciated and vested.

My solution to the problem may seem a bit radical at first, but considering the billions lost in failed VC investments it deserves careful consideration.  Here it is: Startups should plan from the beginning to have different marketing leaders at different stages of the company.  One marketing leader to gain traction and kick start growth, one to manage growth until an IPO and one for post IPO leadership.  Considering the average tenure of a VP Marketing is less than 2 years anyway, this really isn’t that radical.  It’s just planning the transitions rather than making a bunch of disruptive firing/demoting/hiring decisions.

You might be thinking that a consultant approach would work here, but I believe to be effective the marketing leader needs to be totally immersed in the role.   Another common approach is just to force the early stage marketer out when they become less effective (the disruptive approach mentioned above).  If they have played a key role in the company’s success, I don’t believe this is a very ethical approach – even though it’s probably the best thing for the company.

So rather than forcing out the effective early stage marketer, have an agreement from the start that it is a short-term role.   I recommend calling it an interim VP Marketing role and planning for full time 3 to 6 months followed by another 6 to 12 months of advising (working with the longer term VP marketing).  This ensures full knowledge transfer and gives the company access to two sharp marketing thinkers during the very important second stage of the company’s growth.  Options will still be an important motivator for the Interim VP Marketing, but they should have a much shorter vesting period.  The total options allocation to marketers will be higher, but this approach should result in faster market traction, meaning less burn and less need for future dilutive rounds of funding.

It’s probably already clear that I am now specializing in this traction stage.  Xobni is my first assignment.  Of course everybody warns that it will be tempting to want to stay on (especially since Xobni is really picking up steam), but I am very committed to developing this approach over the next few years.

Another advantage of this approach is that it will hone my ability to identify great startup opportunities.   Even the best marketing approach can’t save a crappy idea.  The challenges and opportunities of each former assignment will be fresh in my mind when I look for the next startup to join.   I’ll try to avoid startups with key challenges that I could not previously overcome and try to join startups that have the types of assets that proved important in an earlier assignment.

This knowledge is also very valuable to VCs and I already have several that have asked me to help them assess new investment opportunities.   I’m expecting this will be my pipeline for finding new startup opportunities. Given the alignment of my interest with VCs in picking the right opportunities, they are willing to pay me to conduct a marketing viability assessments to dig into target customer’s need for the solution, real addressable market size and segments and any existing current demand for the category.  If everything looks good after this assessment, the VC can make a less risky investment and I can make a less risky decision to try to take on the interim VP marketing role (if a marketing leader is not already in place).

Update Jan 20, 2009: I temporarily removed this post several months ago with the intention of making a few edits and quickly reposting it.  Unfortunately it slipped through the cracks despite being one of my more popular posts.  My thinking has a evolved quite a bit since I wrote this post 9 months ago.  During that time I have nearly doubled my experience taking startups to market (despite being in startups for 10 years).  As much as the idea of interim VP Marketing roles sounded good at the time, it really limits my ability to help several startups and requires more energy than I could possibly muster (this is a very intense period in startups).  Instead I have shifted my focus to work alongside a long-term marketer and guide them through executing the key phases of going to market.  This approach has worked very well at both Dropbox and Eventbrite.

We still have a long way to go before the launch problem is fixed at VC backed startups, but there has been a lot of progress in the last year.