Exploratory Project – Best Approach for Both Sides

UPDATE: I no longer offer an exploratory project.

I keep waiting for startup activity to slow down, but it remains strong. Several new VC intros to portfolio companies continue to roll in every week.  Still the best new source of interesting startup introductions is from the CEOs of the companies I’ve helped take to market.

Given the breadth of opportunities, I’m very focused on trying to pick winners.  Beyond the obvious benefits of more valuable equity, the other rationale is that I’ll get a bit more credit than I deserve for each success – but suffer more blame than I deserve for the failures.  Of course if I had the ability to take a company that would have failed and make it a massive success, I’d be asking for a lot more than $40,000 for a six-month go to market project.  The reality is that I’m trying to find startups that already have strong potential for success and help them reach even higher levels more quickly and with less burn.

While Series A VC funding is still flowing into startups, everyone recognizes that success is going to be tougher as businesses and consumers cut back their spending.  I became so concerned in recent weeks that I began passing on projects I’d have been happy to take only 8 weeks ago. 

It’s pretty easy to make a case for why startups will fail, but the winners find a way to succeed anyway.  Success is based on a combination of access to financing, market need, exceptional product and marketing execution, tenacity, and let’s face it – luck.  All these success factors are impossible to evaluate over a couple of lunches; and a full six-month go to market project is a big commitment on both sides. 

So a few weeks ago I decided to start offering a mini starter project I call an Exploratory Project. For a quarter of the cost of a full project and no equity I assess marketing progress to date, conduct some research into target customer needs/product satisfaction and run an all-day executive workshop to draft the startup’s ideal go to market approach.  This Exploratory Project gives both parties the opportunity to assess chemistry and determine the potential fit for a full six-month go to market project.  If we decide to move forward, the entire Exploratory Project fee is credited toward the cost of the six-month project.  And since there is no equity on the Exploratory Project, the contract is much simpler. 

I’ll probably go forward on a full six month project with less than half of these exploratory projects.  But even if we don’t move forward, startups still receive substantial benefit.  In this short assignment I essentially hand over the keys discovered through 11+ years and millions spent marketing successful startups (and help them avoid the many costly mistakes we made along the way).  While the six month project offers a more customized plan and guidance with execution, the exploratory project still provides a very actionable plan and defines metrics systems needed for the startup to focus time and resources on the highest impact projects.  The ultimate result is stronger momentum with less cash burn – which is well worth the $10,000 investment. 

But for those projects we do decide to extend to six months, I’ll be able to offer more focused execution guidance.  And because of the selective filtering, I’m confident these startups will be the most successful. 

If you are interested in discussing an exploratory project, contact me at sean (at) startup-marketing.com. Please note that the startups I work with have a full time person who’s sole focus is customer development (rookie OK, I can train), at least 1000 users, funding to last 12 months (about $500K for companies with cash flow, $1m for companies with no cash flow) and are still relatively early stage in customer development.

Eric Ries on The Four Steps to the Epiphany

I often recommend The Four Steps to the Epiphany as the best book available on taking a new startup to market.  However I’ve never captured the essence of the book as well as Eric Reis did in his blog post this weekend.  In addition to a great summary, he also relates the book back to his own experiences and provides practical guidance for applying the books lessons.  If you don’t have time to read the book, at least read Eric’s post.

The New Chasm – Flawed First User Experience

The first chasm most startup marketers face is not the well-known chasm originally described way back in 1991 (jumping from early adopter to mainstream users).  Instead, it’s the chasm from “click” to “gratification” experienced by website visitors.  In my direct experience with six startups and indirect experience with several others, it has become clear that the majority of new people that visit a website receive zero gratification.  In other words, they do not experience any benefit from the product or service being offered.  Without gratification, it is very unlikely they will generate transactions or positive word of mouth/virality. In fact, I generally assign a negative value to these people because any brand awareness created is saddled by the memory of wasted time and effort.

Most companies concentrate resources on the two sides of this chasm.  The product team focuses on creating a fantastic product experience for those who make it to the other side of the chasm, while the marketers are busy trying to stuff as many people into the top of the acquisition funnel as possible – often at a large expense.  The negative experience and wasted money happen in this no-man’s-land between the click and a gratifying experience with the product. It is into this chasm that the majority of online marketing dollars are lost.

My first startup marketing experience in online games at Uproar.com was helpful for developing skills in all three of these areas.  Games are all about engagement and we were able to surface this engagement early in the user acquisition flow.  In 1997 we introduced a syndicated widget/app that is generally considered to be the first of its kind.  This app appeared on tens of thousands of websites and “extended” our game play experience to these sites.  Users would visit a web page on the affiliate’s site which would automatically start an embedded animated trivia game.  Players with a qualifying score were given an opportunity to enter a weekly cash prize drawing.  If they didn’t qualify, they were asked to try again.  Only after they completed this gratifying experience did we ask them to fill out a registration form.  Upon completion of the form, they were told that they were now eligible to win cash prizes in other games on the Uproar site.  They would then see a list of games and the next prize in each game.  Once they entered the game and began chatting with other users, we had them.  They became part of the community and one of the “stickiest” sites on the web.  This approach was the key to becoming the biggest game site in the world prior to Uproar’s acquisition by Vivendi Universal in 2001.

Of course not all products/services can engage users like a game site does.  Still, there are important lessons that can be applied about surfacing your primary benefit early in the acquisition process and drawing users into the core experience.  LinkedIn and other websites have done a fantastic job with the “% completed” box that appears next to your profile.  Rather than having the barrier of asking for all the information up front, they ask for it gradually.

Free trials are another way companies have offered a gratifying experience before asking users to commit.  But with a software product, there are still several costly steps required before the trial begins.  These include the challenge/risk of downloading software and the time it takes to learn how to use the product.  If a company can sprinkle in a gratifying experience through this process, people will remain engaged. 

At LogMeIn we took it a step further and rewarded prospects for their effort with a completely free version of the software.  Prospective customers knew they would be rewarded for their effort downloading/learning the software even if they didn’t upgrade to the premium version.  This helped get LogMeIn eventually installed on over 50 million devices.

Another example is Tripit, whose process I described here

Can you think of examples of how companies have bridged the chasm between click and gratification?  If you’ve benefitted from this post, I’d appreciate it if you could give back to me and other readers by posting suggestions (in comments) of other sites that have effectively bridged this chasm.