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Startups and The Power Of Polarization

Posted by Dharmesh Shah on Wed, Sep 24, 2008

Startups, particularly those world-changing, curve-jumping, bet-the-farm kind are a tricky business.  The temptation for startups is, as Seth Godin would say, “to create average products for average people”.  The reason is simple, there’s a massive market of average people.  And, they want average products.  Nothing too controversial.  Nothing that makes them too uncomfortable. 

Guy Kawasaki, one of my favorite business authors addresses this in a recent article titled “The Art of Innovation”.  Here’s #4 from that article:

Don't be afraid to polarize people. Most companies want to create the holy grail of products that appeals to every demographic, social-economic background, and geographic location. To attempt to do so guarantees mediocrity.”

But, my advice would be to not try and “solve for the middle” — but strive to polarize an audience.  If you’re really looking to make a big difference, you want a group of people that passionately disagrees with your idea/approach/business.  Why?  Because when you’re doing something that polarizes, and you have a bunch people that passionately disagree with you, you have a chance to find people that passionately agree.  It is these passionate people that help fuel the growth and help spread your idea.  And curve-jumping companies almost always have an idea that spreads at their core.  Your enemy, as in many walks of life, are not the ones that hate, but the ones that are apathetic.

In short, have the courage to take a stand even if it means you’re going to make some people uncomfortable or annoyed.  Of course, you actually have to believe in the stand that you take, but the idea is that if you believe in it, push towards the edges even if it causes a big rift in your community.

So, let’s take a look at a small, recent example from my own startup, HubSpot.  I’m using the HubSpot case because I know it well and have been on the “inside” of (as a founder and Chief Stirrer of Pots).  It also just happened yesterday as part of our own internet marketing efforts.

The quick story at HubSpot is simple:  We believe there’s a massive transformation going on that is causing people to move from outbound marketing (advertising, direct mail, telemarketing, etc.) to inbound marketing.  Inbound marketing is about increasing the chances that people that actually give a flying flip about your offering will find you.  (Not to hunt down masses of people most of whom don’t give a flying flip and interrupt them with your message).  The idea itself is not that controversial.  But, this video that we created recently is.  It’s short, and sort of funny, so go watch it and then continue.

So, here was our issue.  When building this video we had to decide:  Are we really advocating that companies throw away all of their old marketing methods (including telemarketing) so they can switch to our way (inbound marketing)?  It’s just not practical.  If we asked people to do that, we’d risk losing a bunch of prospects that just wouldn’t take us seriously.  We’d risk a bunch of our prospective customers thinking we were a whole lot of clueless.  But, we did it in anyway.  Then, we went a step further.  When we created the associated blog article, we gave it a controversial title “Dude, Cold Calling Is For Losers”.  Now, not only are we making fun of people that are doing cold calling, we’re actually calling them losers.  Remember, we have 5,000+ people that are subscribed to this blog, many of them are marketers, and most of them likely do some sort of telemarketing. 

So, what do you think?  What are you doing to “take a stand” when it comes to the vision of your startup?  What was the last risk you took online?  Something that would really irritate a big batch of potential customers?  Share your experiences here.  I promise, we won’t hate you.

Apologies for those that think this is article too self-promotional.  I try to keep OnStartups focused on things that I think will help other entrepreneurs.  Often, my best exampes are from my own personal experience.  Nudge me back if I cross the line.

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8 Startup Insights Inspired By The Mega Mind of Seth Godin

Posted by Dharmesh Shah on Wed, Sep 10, 2008


I’ve had a really interesting and crazy week (crazy in a good way).  As many regular readers of know, I’m a huge Seth Godin fan.  I’ve read most of Seth’s books over the years and keep up with his blog.  He’s even been kind enough to comment on one of my prior OnStartups articles (“Why Your Startup Shouldn’t Hire Seth Godin”).  But, until recently, I’ve never had the opportunity to actually hear him speak in person.  This past week, I got to hear Seth twice

Most recently, Seth was a keynote speaker at the recent Inbound Marketing Summit in Kendall Square, Cambridge (MIT central).  Not only did I get to hear Seth speak, live and in person, I had the thrill of getting to have lunch with Seth and “just chat about stuff” (like getting some advice about my startup).  This has got to be the most thrilling thing that’s happened to me all year.  Very exciting.  [Interesting trivia:  Early in Seth’s career he worked in Kendall Square for Spinnaker Software].

So, here are some of the ideas and insights I gleaned from Seth, that I thought might be useful to other startup fanatics.  Although the core insights were inspired by Seth, I put my own lens/spin on it from the perspective of a startup.  All the really brilliant stuff is Seth, the mediocre stuff is mine.

8 Startup Insights Inspired By Seth Godin

1.  Resist becoming “average”.

This is my favorite insight.  At my startup HubSpot, we use the geekier term “regression to the mean” to refer to this phenomenon.  Basically, the notion is that over time, the world pushes you towards becoming more average.  Often this means doing what is “tried and true” or “proven.    Or, as Seth says, “creating average products for average people”.  For businesses in general, but startups particularly, regressing to the mean is a dangerous thing.  Why?  Because the “average” startup is not successful.    The only way to succeed is to not be average.  You have to go to the edges and resist the pull to the middle.

2.  Communicate Directly With Your Customers

You’re the founder/CEO/president/whatever of the company.  You’re doing your best to work on the company, intead of in the company (just like all those business coaches said you should) .  You may think you’re really important to the business.  In fact, you may even be really important.  It doesn’t matter.  TALK TO YOUR CUSTOMERS.  Whether you’re in the backroom writing the next Facebook/YouTube/Google/whatever or you’re more of an operations/finance person, you need to be have direct conversations with your customers/users.  There is no substitute.  For startup people, this is not particularly hard advice to follow (because someone has to talk to the customers, and there’s only two of you in the company, so there’s nowhere to hide).  But, you’d still be surprised at how often people avoid direct contact with the customer.  No, not you of course, but your co-founder.  For a great example of a successful startup that talks to customers, look to Jason Fried from 37signals.  He actually reviews and responds to customer support emails.  He’s a awfully busy guy too.  And, he’s got over a million users.  What’s your excuse again?  [Note to self:  write an article with notes from meeting with Jason Fried last week].

3.  Let Your Users Talk To Each Other

Online communities are all the rage.  But, too many of them are started because companies want to “build a community to establish ourselves as a thought-leader and promote rich interaction amongst our team and our customers.”  Blah, blah, blah.  It’s fine that you want to be a thought-leader and at the center of your universe.  It’s great that you want to start a “rich dialog”.  But, provide some mechanism for those that inexplicably find your offering “interesting” (hopefully interesting enough to actually pay you) to connect with each other.  Give them easy, convenient ways to connect to each other and then get out of the way

4.  Start a Freakin’ Blog

Yes, I know.  You’ve been meaning to do it.  But amidst the writing of code, and raising of funds, and meeting of minds and all the hundred other things you have to do this week, there’s just no time to write.  Heck, it’s just you and your buddy Joe, right?  And besides, you kicked off that a few months ago, wrote about some stuff, and only 4 people read it.  It just wasn’t worth it.  You have a business to grow!  But, you promise you’ll make the time.  Someday.  Once you get done with this product-release/funding-round/support-nightmare/pr-event/whatever you promise to try the whole blogging thing (again).  I’m here to tell you that you need to make the time.  But, don’t listen to me.  Here’s Seth Godin:  “You’re forgiven if you don’t get it…it’s easy to write the whole thing off…here’s what to do if you still don’t get it: Start a blog.”

5.  Stories Spread, Not Facts

Sure, I get that your shiny new startup with it’s shiny new software written in a shiny new programming language is going to change the world.  I get that.  But I, like most people, don’t want to hear about product.  I certainly don’t want to tell other people about your product.  But I love a good story, and I’m guessing others do too.  If you want your idea to spread, stop focusing on the facts, stop focusing on your offering and start focusing on your story.  Make it genuine.  Make it interesting, and as Seth would say, make it remarkable.

6.  Beware The Need for Critical Mass

I’m going to lead with a quote from Seth on this one:  “Failing for small audiences is a loud cue that you will fail even bigger with big audiences.”  Too often, startup founders talk about how they are pushing to get to “critical mass” and how “economies of scale” are going to kick in.  That’s all fine and dandy.  I get it.  I’ve been in the software industry for a long time.  But, is it absolutely, positively necessary to get to some “critical mass” before your business starts to make any sense at all?  Is that mass all that critical?  Does it have to be? 

Can’t you make some kind of business out of something that looks a bit like this:

Mass You Have < The Magical Mass That Is Critical

Why do so many startups have these mythical, magical numbers (“once we hit 1,000,000, users rainbows are going to spontaneously pop out of nowhere and magic fairy dust will fall out of the sky and make our financials look sooo much better”).

7.  They Didn’t Call It the Industrial Gentle Change

It was a revolution, and like all revolutions, it’s neither gentle nor comfortable.  If you’re building a startup that really is going to revolutionize something, you’re going to have take some chances and make some people uncomfortabale.

8.  You Have To Start

To do anything, you have to start.  You can’t wait for the perfect situation.  The perfect idea (which doesn’t exist), the perfect business plan, the perfect timing, the perfect market, the perfect investor, whatever.  You need to get going. 

I’ll close with this quote from Seth during lunch:  “I’m impatient and shamelessly unafraid of failing.”

I’ve got lots more Seth nuggets and pearls of wisdom, but that’s all we have time for right now.  I need to get back to working on the next alpha version of Twitter Grader

So, what do you think?  Did any of the above insights resonate with you?  Any you just don’t agree with?  I’m not qualified to defend them, but that’s never stopped me before. 

Article has 22 comments. Click To Read/Write Comments

Startup PR: Tips For Getting Publicity Without A PR Firm

Posted by Dharmesh Shah on Fri, Aug 22, 2008


I came across a great article today by Jason Calacanis on the topic of PR for startups.  Jason Calacanis is founder and CEO of Mahalo, but you probably would better know him as the the guy behing Weblogs, Inc.  In any case, he’s accomplished, and knows a thing or two about getting visibility for a startup.Startup PR

I’ve always thought of myself as being really different from Jason (note: I’ve never actually met him).  He seems to be the classic extrovert and seems capable of really putting himself “out there” for his startup.  Though I don’t think of myself as lacking in passion, I just don’t have the gumption he does.

In any case, If you’re involved in a startup (particularly if you happen to be venture-backed), the article is worth the read.  However, the original article is over 4,500 words and on the off-chance that you’re lazy like me, here are some of my favorite points from the article:

1.  “My philosophy of PR is summed up in six words: be amazing, be everywhere, be real.”

2.  First time I’ve ever the heard of the term ceWebrities.  clever.  With regards to these ceWebrities, “these overnight successes are 10 years in the making.”. 

3.  “Be the brand…you must be in love with your brand and inspired by your brand’s mission to have any hope of getting press.”

4.  “Be everywhere…every single night I would go out and meet folks in the internet industry…while other folks went home to their families, I went out and made a family.”

5.  “Your job is to transfer the enthusiasm you feel for your brand to everyone you meet.”

6.  “Always pick up the check — always…everyone remembers who picked up the check

7.  “Set a goal of creating deep relationships with a small number of folks as opposed to running around trying to trade business cards with as many folks as possible.”

8.  “Be a human being.  The best way to get PR is not to sell someone on your company or product — it’s by being a human being.  Journalists hate being pitched…journalists and bloggers are, in fact, humans.”

9.  “Before meeting with a journalist, it is your job (as CEO) to read their last five articles in full…”

10.  “Your job as the CEO/founder is to create direct, honest and personal relationships with journalists.”

11.  “Attach your brand to a movement.” 

12.  “PR is, by definition a reflection of what you’ve done.  When a startup hits, it’s not one thing that does it, it’s typically many things working in concer.”

I'd summarize the advice and change the 6 words of advice to:  Be amazing, be passionate, be human.  What's your 6-word version?

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Spending Like Its 1999: Startup Burns $50k of VC Money on Crazy Contest

Posted by Dharmesh Shah on Tue, Jul 29, 2008


You remember 1999, right?  It was the day of the sock puppet and crazy, CRAZY marketing strategies.  By the way, before going too much further, I will confess that I actually bought shares back in the hey day.  Why?  Because everyone was doing it, and my wife and I thought the commercials was creative and funny.  Granted, my "due diligence" bar was lower back then, but I'd understand if many of my colleagues would revoke my angel investor license just for that.

But I digress.  Today's article is about new ways startups are using to try and attract attention and -- wait for it -- eyeballs!  A software company in Cambridge, MA is running a "viral marketing contest" whereby they are giving away a total of $50,000 for bloggers, videographers (basically anyone with a video camera) and others into the "new, new marketing". 

Here's the article: 

Insanely Brilliant or Just Insane?  The HubSpot $50,000 Viral Marketing Contest

Now normally, I'd be having a jolly old time making fun of this startup with references back to every lame attempt at "marketing" we saw out of dot-com startups back in 1999.  There's just one problem.  It's my startup that's doing the crazy stuff!  Yep, that's right, my startup HubSpot, which recently raised $12 million in venture funding is giving away $50,000 of that in a viral marketing contest. 

I figured once people get wind of this, many of my friends, colleagues and bloggers are going to send me emails saying, "Dharmesh, what the hell?".  Actually, I might get an email from an investor or too as well, because we haven't run this by them yet.  I figured I'd try and pre-emptively answer some of the inevitable questions.

1.  Why do it?  Well, it's kind of simple.  We've been having great success with attracting leads (and closing customers) through our blog and other online channels.  Some of our most successful marketing efforts have been blog articles that went viral on social media sites like digg and reddit.  Last week, we tried to do a rough economic analysis and estimated the value to us of leads generated from these successful pieces.  It was high.  So, there's opportunity here.  Plus, we don't like spending too much money on AdWords.  It pains us.

2.  Why not just do it ourselves?  Well, frankly, because developing viral content that spreads like wildfire is a tricky business.  We have a team of great folks writing content all the time for our blog (including me), and sometimes we hit it out of the park.  But our guess is that there are folks much more talented than us that are capable of producing remarkable content (as Seth Godin would say).  We figured it's worth a shot trying to draw those people out.

3.  If it works, it could work big.  We're at a stage now where experimentation is reasonably cheap.  Instead of getting stuck in the rut of turn this dial a bit, flip this switch a bit, and crank out the customers -- we'd like to look for some non-linear growth opportunities. 

Oh, and if you're a VC reading this (particularly one of our VCs), we're doing the same thing in marketing that you do when looking for investments:  Pick projects that have potentially huge impact, even if they are a bit whacky and high-risk.  If we do a dozen of these crazy projects, if just one wins, we're golden!  Champagne and chocolate-covered strawberries for everyone! 

So, what are your thoughts?  Is this genius or desperation?  Would love to hear your comments.

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7 Uncannily Obvious Lessons From A Product Launch

Posted by Dharmesh Shah on Wed, Jun 04, 2008

A few days ago, my startup HubSpot, launched a new app called Press Release Grader. It's not our core product, but a free tool for marketers and PR folks to analyze a press release and provide suggestions.

The launch has gone exceptionally well for us (and by that, I mean, the uptake in the community is much, much better than we were expecting). Would put some stats here, but it'd seem a bit like bragging and the focus of this article is not on press release grader or its specific results, but things I learned from putting it out there.

Warning: As noted in the title, I have an uncanny knack for the obvious, and I like to focus on the fundamentals (which is a polite way of saying that you're unlikely to find any brilliantly insightful lessons here).

7 Uncannily Obvious Lessons From A Product Launch

1. It's Not Too Early To Release: I'm a really, really big fan of the "release early, release often" mantra. But, even I fell prey to the "let me just get a bit more done" mind-set. I could have released the product a few weeks earlier, and I should have done exactly that.

2. Be Ready To Iterate: I intentionally cleared my schedule of other major distractions so I could focus on the software and iterate, iterate, iterate. In the days after the release/launch, I iterated like crazy with multiple production updates a day. Not a day should go buy that the software doesn't get better for the users. Continue this as long as you can (maybe even weeks and months).

3. Provide Simple Feedback Mechanism: You don't need anything fancy. Just a place for users to click a link, type in some feedback and send it to you. That's it.

4. Respond To Feedback: This goes back to #2. You should be ready to fix the "obvious" bugs and add the enhancements based on user feedback (as long as they make sense). The magic of immediate user responsiveness is underestimated. I've had a couple of noteworthy bloggers write about Press Release Grader simply because of the rapid response-time. It's just good, clean living.

5. Track As Much Data As You Can: For a web product, I'd suggest that at a minimum, you track all the standard web data (this can be done via a web analytics tool) + any "inputs" that the user is providing.

6. Don't Waste Time Coding Reports: Although you should track/store as much usage data as you can, don't waste time creating fancy (or non-fancy) reports just yet. Just capture it. Some simple mechanism to get a sense of usage is fine, but don't try to build ways to look at all the data you're tracking. It's a distraction. Focus on what will make the users happy. You can work on reports later.

7. Watch It Spread, Nudge It Along: You should be spending half of your time not just on coding, but on promotion. This includes watching who the product is getting picked up by across the web and who's writing about it. When people do write about it, thank them and offer to do something about their ideas and feedback. This works wonders. Even if you've got the luxury of business people (marketing, PR, etc.), stay involved. There's no replacement for being "plugged in" to the community.

On point #7, here are places I check to see what's being said:  Google (mostly blogs), Twitter, delicious, StumbleUpon and digg.  (I have a wee bit of an advantage because I've got some internal tools to help with this stuff). 

What lessons have you learned from releasing a product out to the wild? What will you repeat and what will you change the next time?

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Mediocre Marketing: How NOT To Describe Your Startup

Posted by Dharmesh Shah on Mon, Jan 28, 2008


I'm subscribed to a Yahoo! group that occasionally gets a post from recruiters looking for candidates for startups. Though I don't enjoy these posts (they're not relevant for me), I understand that recruiters have a place in the market too and they're just trying to do their jobs.

But, I was really disappointed today from a post I saw from a recruiter that was trying to hire sales candidates for a startup. It was strikingly ineffective to the degree that if I had not received the message myself (and didn't know that it was serious), I'd have thought it was a joke. Trust me, it's not.

Here it is (unmodified) for your amusement and education:

"Hot Start Up – Focused on delivering an innovative architecture that enables unique and disruptive technologies to address the severe inefficiencies in current online marketplaces. Several patents filed for innovative processes – Lead & financed by a team of well known successful entrepreneurs who have done it before and are now doing it again. A Great Company with lots of upside. Very serious about creating and maintaining the type of culture that creates success – Team Centric – Collaborative – A+ Players with Low Ego. Get in on the ground floor and join a winning team."

Here are my issues with this particular description (apologies for the sarcasm and snarkiness). It's not usually my style, but in this instance, something had to be said, and I think there are good lessons to be learned:

1. Opens with "Hot Start Up". It's good to know this, because I get so many notices from cold startups or lukewarm startups that I appreciate when someone helps me immediately recognize a "hot" startup.

2. "Focused on delivering an innovative architecture that enables unique and disruptive technologies...". This is compared to a scattered approach to delivering a pedestrian architecture that enables common technologies that help maintain the status quo.

3. " address the severe inefficiencies in current online marketplaces". Which, of course, is much better than addressing extremely efficient online markets.

4. "A Great Company with lots of upside." I can't tell you how many startups I come across that describe themselves as being mediocre and having little upside.

5. "Very serious about creating and maintaining the type of culture that creates success." Really beats all those startups that are frivolously maintaining a culture that prohibits success".

6. "Team Centric - Collaborative - A+ Players with Low Ego". We want to filter out the candidates that are loners and overly-confident B- players.

7. "Get in on the ground floor and join a winning team". Who would want to join a startup on the third floor for a team that's clearly going to come out in fourth place?

All humor and sarcasm aside, here's why I took time on a lazy Sunday afternoon to write this article: Whatever startup it is that this recruiter is trying to find candidates for is probably not going to get much value. The lesson here can be boiled down to one sentence:

When describing your startup, avoid being platitudinal. Be different. Communicate something meaningful.

Here's my litmus test: When making a claim about your startup, ask yourself if anyone would ever claim anything different -- or even better, claim the opposite. If the answer is a clear "no", your description is probably empty. Examples: Which startups are not innovative? Who's not looking to disrupt? Who's not creating a culture of success? Who's looking for B- players? Who's looking to build a third-place team?

Here's my (hypothetical) rewrite of the original description:

Our founders made a bunch of money on their prior startups, which were hugely successful. We've got enough money to file for patents, have an admin answer the phone and pay great salaries and commissions to those that join the team. We're building a financial services product that isn't disruptive, but helps the CTOs of banks not change their existing systems, and feel better about it. Turns out, people are willing to pay to not be "disrupted". It doesn't last for ever, but there's a bunch of money to be made in the meantime. If you're looking to work in the basement, answer your own phone and change the world, there are lots of other startups out there. If you want to make real money now but still tell your friends and family that you're a high-flying risk taker that just joined a startup, call us. Johnathan, our administrative assistant will answer the phone.


My version is not as flattering as the original, but at least it says something.

What do you think? Am I being overly harsh here? Do you think the original would actually work? Would love to hear your thoughts in the comments.

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Startup Marketing: Be The Lesser Of Two Necessary Evils

Posted by Dharmesh Shah on Fri, Jul 27, 2007

Before I offend any of you or scare you off, when I say "necessary evil", I'm speaking in a broader sense about things we simply don't like.  I am not suggesting that you actually be evil.  Google has demonstrated quite well the value of not being evil (or at a minimum, the value of stating that you don't want to be evil).

So, what do I mean when I say startups should try to be the lesser of two evils?  This is easiest explained by an example.

Necessary Evil:  Taxes. 

Most of us hate taxes.  It's not just the paying money part, it's the preparing (and the dreading of the preparing) that makes this "evil".  But, for most of us, it's something we *have* to do.  So, when a company like Intuit comes along and offers TurboTax, it falls into that category of "lesser of two necessary evils".  Of course, you don't have to buy tax preparation software.  But, you do have to file taxes.  Intuit took the necessary evil of having to figure all the stuff out yourself (or hiring someone to do it) and being less evil than the other things you could do.

To re-emphasize this point:  I don't think any of us gets up one morning and decides we want to buy tax preparation software.  We recognize that there is a necessary evil that needs to be addressed and we pick the lesser of the evils (which varies from person to person). 

My point is this:  If you're building a startup (particularly a bootstrapped startup), it is much cheaper to try and market something that is necessary (even if it's evil).  There are lots of entrepreneurs that go after fun ideas like music sharing, YASG (Yet Another Solitaire Game) and consumer internet type stuff.  There's nothing wrong with these ideas.  But, I think there are a disproportionately high number of people pursuing these ideas simply because they're so much fun.  The number of stories we read regarding these fun ideas is also disproportionately high (we don't ever hear about the thousands of entrepreneurs that were not successful pursuing these ideas so we get a distorted view).

So, if you're a first time entrepreneur and are actually looking to build a nice, profitable, sustainable business (and having a decent chance at doing so), I'd advise looking for a market that has a number of "options" to address some necessary evil -- and strive to be the least evil of them.  It's not the only way to start a company, but I'd argue that it's not a bad way, and a reasonably pragmatic way.  And, I'm all about pragmatism.

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Startup Marketing: Big Bang vs. Darwinian Evolution

Posted by Scott Stephenson on Mon, Jul 16, 2007


Broadly speaking, I think there are two types of marketing approaches. 

The first is what I'll call "Big Bang".  This was very popular in the 1990s, particularly for venture-funded startups.  In this approach, the sequence of events goes something like this:

1.  Have idea
2.  Raise Capital
3.  Code like crazy in "super stealth mode"
4.  Hire VP of Marketing to plan big launch
5.  Hire PR agency to launch
6.  Launch!
7.  Success!(?)

I'm not a big fan of this approach for one simple reason:  I don't think it works all that well.  As a developer, I think this is a wee bit like trying to write a 200 page specification document, develop the product, and expect to release something that works and makes users happy.  It just doesn't work that way.

The second approach, the one I do like, is more like Darwinian evolution.  This is where you start as early as possible, experiment as much as possible, as efficiently as possible and respond to feedback as quickly as humanly possible.  Keep doing more of what works, and less of what doesn't.  In my experience, this works really well.

So, if I were working on a startup (which it turns out, I am), I'd lean towards a strategy that looks more like this:

1.  Have idea
2.  Bootstrap / Beg / Borrow
3.  Tell the World
4.  Release product to the unsuspecting
5.  Get feedback
6.  Iterate, iterate, iterate!
7.  Success!

I'd like to spend a little bit of time on the middle parts of the above sequence.  What I think really works today is discussing the idea with your potential market as early as possible.  Ideally, this should happen before you've written your first line of code.  Less ideally, you can wait a week or two.  The easiest way to do this is to start a blog.  You can use one of the free services out there (just make sure to register your own domain name).  This way you get commenting (market feedback) and RSS subscriptions automatically.  Then, post like crazy and do everything possible to get feedback. 

In parallel, put the most minimal version of the software imaginable out there as soon as you can.  If you're not embarrassed of your product and are not scared to death when users start banging on it, you waited too long.  Get it out there.  Yes, people are going to point and laugh at your product.  Yes, they're going to ridicule you for building something that has a laughably small set of features, most of which don't work.  It doesn't matter.  GET IT OUT THERE! 

From there, your marketing and your product should evolve in tandem -- organically.  Don't even think about advertising, PR, launches and other marketing stuff.  All of these things will simply distract you from the real problem:  figuring out what customers want.  As many failed startups have learned, marketing a product that nobody really wants is awfully expensive and frustrating.  Even the perfect marketing strategy (if there is such a thing) is unlikely to work.  On the other hand, even naive, unsophisticated marketing can work wonders when everybody wants the product.

So, don't get lured into believing you need some super-sophisticated marketing strategy with a big launch to create a mega-hit product.  You don't.  If you don't believe me, think of five startups that you really admire and that you think were big hits.  Now, do some quick research and figure out how much time/energy they spent on a big-bang launch to "release" their product to the world.  Chances are, the launch came well after the product was already out there and somewhat successful.

What do you think?  Have you mastered the art of launching a successful software product?  Are you a PR person that is gravely offended at my suggestion that startups shouldn't really plan formal launches?  Would love to read your thoughts in the comments.

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Startups: Are You A Trusted Adviser Or A Responsive Assistant?

Posted by Dharmesh Shah on Fri, Jul 06, 2007

We've all heard the cliche "The Customer Is Always Right".  Those of us that have actually been in any type of business and had real interactions with customers for more than 2 days have learned that this statement is factually incorrect.  The customer is decidedly not always right.  The real question then becomes, when (if ever) should you act as if the customer is always right -- even when you know he's not.

My simple mind addresses this with one simple question:

Are you a trusted adviser or a responsive assistant?

My best analog for the trusted adviser is a doctor (or an attorney -- all lawyer jokes aside).  If you're doing something really stupid, a trusted adviser should know better and has a sufficiently strong relationship with you to smack you upside the head and tell you you're being stupid.  They're the expert, and that's their job.  The fact that you're paying them money has little influence on the relationship.  They don't think of you as a "customer", and they know you are not always right.  On the other hand, a responsive assistant is someone that does what the customer wants because they don't have (or are not perceived to have) any special skills or talents beyond the customer themselves.  They're not experts, they're time-savers.  There's nothing wrong with either of these types of businesses (and both product companies and service companies can be categorized this way).  Problems arise when you think of yourself as one type and act in the other.

I've met many startups that are faced with this dilemma (especially in the early stages).  My current startup, HubSpot, is a decent case study.  We're in the internet marketing software business.  Our target customers are small businesses.  The problem that we have at HubSpot frequently (that I think many of you might have as well) is that customers often ask for things that are clearly not in their best interests. 

All modesty aside, most startups are experts when it comes to understanding their domain and their product offering.  In most cases, our understanding is much higher than that of our customers.  I'd like to think that's why customers decide to license our software in the first place.  We eat, breathe and live this stuff.  As it turns out, customers don't always recognize their own limitations or they don't trust you enough to let you push-back on their requests.

Here are the things that I think influence this dynamic of the trusted adviser (and why so many of us end up sometimes getting treated as assistants instead).  Here are some of the questions that go on in customer's minds when they try and decide whether you are a trusted adviser:

How Customers Decide If You're a Trusted Adviser

1  What's in it for you?:  Will you benefit somehow by directing me to your line of thinking?  For example, by denying my request are you reducing the amount of low-margin business you get from me?  Raising your level of profitability is not my problem, it's yours.  If you're going to make more money by guiding me in a certain direction, I'm going to be concerned.

2.  Do you understand me?  Perhaps in most cases, what you're telling me is the "right" thing.  But perhaps my business is different in important ways.  You may think you're giving me the right advice, but you're really not.  Do you really understand me and my business such that you can give me great advice and steer me in the right direction?

3.  Are you really an expert?  How can I be certain that you really know as much as you claim you do?  What if you're simply wrong and an animated logo with cool sound on my home page really will get me more customers?

4.  Did the expert make the call?  How do I know that this advice is not coming from some junior person that was just hired last week because the "experts" haven't really had a chance to spend much time on my business?

So, my advice to those of you in startup-land that want to be trusted advisers is to focus on the above questions and make sure you understand where the customer is coming from and what you can do about it.  Be transparent.  Be objective.  Be empathetic.  Trusted adviser relationships are earned but are well worth it. 

What are your thoughts?  Have you ever had to tell a customer they were wrong?  How did you handle it?  Would love to read your comments.

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Startups and The Challenges Of The Freemium Pricing Model

Posted by Dharmesh Shah on Wed, May 16, 2007

It has been a while since I wrote my last article on pricing models titled "Startup Pricing Models:  Free Forever, Freemium and Freedom To Pay".  This article ended up being reasonably popular (and continues to rank on the first page of Google for a search on "freemium").
I was reminded once again of freemium by a very interesting article from Don Dodge which notes that the average conversion rate of free to premium offerings for companies using the freemium model is about 3%.  I was actually quite surprised (in a pleasant way) by this level of conversion.  I've been considering the freemium model for one of the products currently being built at my startup, HubSpot.
The product under consideration, WebsiteGrader, is a website grading tool and recommendation engine that helps business people get a sense of how effective their website is from a marketing perspective, how it compares to competitor websites and makes recommendations for improving the site.  The tool is currently free.  Even in it's current beta state (very little PR and promotion), it has graded over 28,000 websites and gets over 500 visitors a day.
So, what are the challenges with releasing a product under the freemium model?
Here are the ones I've come up with (so far).  I'm sure the a few of you will have some of your own.  If so, please share.
Challenges Of The Freemium Model
1.  Deciding what to include in the free version and what to offer in the premium version is non-trivial.  The trick is to put enough in the free version to get traffic and usage -- but not so much that there's not enough incentive for a certain percentage of people to upgrade.
2.  Though hardware, bandwidth and infrastructure are cheap (and getting cheaper), they're still not free.  Supporting thousands of free customers costs money and unless there's enough money coming in from paying customers, there might not be enough cash coming in to subsidize the free folks.
3.  Support is a problem.  Though in theory you can take the position not to offer any support to the free users, in practice, it's hard to have the discipline and processes in place to actually do this.
4.  Pricing for the premium version is likely impacted by the fact that there's a free version.  For example, I don't think one could successfully offer a premium product for $250/month if there's a free version out there.  The premium version would have to be really good and an order of magnitude better than the free version.  This is probably why most freemium products are less than $50/month.
5.  It can get a bit tricky to use scaling pricing models for a freemium product.  For example, let's say you charge $20/month "per user" (per seat or per whatever).  For many customers, this creates an added barrier to upgrading.  If they have 10 users, there's even more incentive to just have all 10 users use the free version.  Or, they could just buy one paid license (for the key features they need) and keep the other 9 on the free version.
6.  Attrition rates can be unpredictable and potentially higher than traditionally priced products.  For example, if there's not enough "value" in the premium version, it's possible that even customers that upgraded will eventually revert back to the free version. 
Of course, there are lots of benefits to the freemium model too -the most important of which is efficient marketing.  It's a greaty way to get early users to use the product and have a pool of potential people to upgrade.
What are your thoughts?  Have you tried the freemium model?  If so, what has your experience been?  Are there other challenges that I missed?  Would loveto hear your ideas in the comments.

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