How Many Lightbulbs Does It Take To Change A Startup?

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How Many Lightbulbs Does It Take To Change A Startup?

 

So, how many lightbulbs does it take to change a startup?
 
Founder's Answer:  "Just one more.  I'm not convinced yet that we need to change..."
 
Note:  If you found this less than satisfying, for more unsatisfying humor, check out "How Many Startup Employees Does It Take To Change A Lightbulb".
 
In any case, on with the article...
 
Generally, I'm a big believer in sticktoitedness when it comes to startups.  Many entrepreneurs give up too early on their idea.  This could be driven by economics, impatience or a simple lack of focus (jumping from one idea to the other).

Having said that, based on entrepreneurs I've talked to and what I've read, one of the key "patterns" in lots of successful startups is that they were able to shift their idea and strategy somewhere along the way.  Sometimes, these entrepreneurs are responding to a "lightbulb" type moment that makes it blindingly obvious that the old strategy is likely not going to work, but perhaps a small tweak would make it viable.
 
So, here are some of the common lightbulbs that I think we should look out for as signs that it may be time to revisit the strategy.  Of course, some of these lightbulbs are brighter (more obvious) than others.
 
Warning:  I'm not advocating that at the first sign of any of these you should drop everything and pursue something different.  Startup issues are generally much more nuanced than that.  That's what makes them interesting.
 
 
Signs That Your Startup Might Need A Change
 
1.  Overwhelming absence of co-founder enthusiasm:  Lets say you've been at it for a few months.  You've even recruited a co-founder (or tried to and failed).  If after this time you just can't get your co-founder on board with the idea, something might be wrong.  If she doesn't wake up on at least some mornings all fired up and ready to take on the world, it might be time to sit down and take a hard look at what you're doing.  If you have failed to recruit a co-founder in the first place (despite pitching the idea to many, many people), that might also be a sign.  They could all be simple-minded and lacking the vision to see the brilliance in your idea.  Or, it could just be that the idea's going to be really, really hard to sell.  Even great ideas, at some point, are likely going to need to be "sold" to people like co-founderes, employees, investors, partners, customers, etc.)
 
2.  "Just one more feature and someone will buy...":  This is a really interesting one (and a common one too).  Finding early customers is really, really hard.  For purposes of this discussion, we'll call "customers" those people that give you money and that are not obligated in any way to do so (i.e. not friends and family).  A common delusion in entrepreneurial circles is to believe that by fixing some aspect of the product, customers will all of a sudden start rushing in.  In most of these cases, if the market collectively is just not responding to what you have to say (or sell), there's a chance that the base idea needs to be revisited.  Perhaps you haven't identified a sufficient point of pain yet.  Perhaps nobody cares.  Rarely is it because of the lack of some specific feature.
 
3.  "Stupid customer! That's not what the product was designed for...":  You wake up one morning to discover that one of your customers is being really stupid.  They're not using your product to its fullest potential -- or in a way that you really designed it to be used.  In fact, what makes it really stupid is that they're paying way more money to you than they should because if all they wanted to do was [X] then there are lots of others ways to get that done.  A week later, you find a similarly stupid customer doing something similarly stupid things.  Guess what:  The customers may have identified a more relevant market opportunity for you.  It may be worthwhile seeing if there's a pattern to this atypical customer usage and whether you could tweak the product or its packaging and go after more of these types of customers.
 
4.  The $1,00 product vs. $10,000 solution problem:  Lets assume for a second that customers are buying the product.  Woo hoo!  That's great.  Now, the problem is that shortly after they buy, they want some other things:  implementation support, training, migration assistance, etc.  Basically, a whole set of services that surround the product.  In the enterprise software world, we call this a "solution" (i.e. te product + services needed to make it useful).  The point here is that though your "idea" may be to setup a website and let customers try/buy your software online, the actual business for your market may not look that way.  It's possible that nobody will buy the $1,000 product but lots of people would buy the $10,000 solution.  If you find that most of your customers are immediately asking for services (and seemingly willing to pay for them), it might be a signal that you need to rethink what your offering is. It's also possible that what you're trying to do is sell a solution, when what customers want is a simple product that they can customize themselves.
 
5.  The "We'll Make It Up In Volume" Syndrome:  There's the old cliche: "yeah, we're losing money on each customer, but we'll make it up in volume!".  This particular strategy is not necessarily a bad thing.  If there are a lot of "fixed costs" involved in the business (like writing the software for example), then you are likely to be losing money on the early customers, but hit profitability at some point.  That's not what I'm talking about here.  What I'm talking about is when the variable cost per customer far exceeds the money you make.  This is simple economics, but startups make this mistake all the time.  If the actual cost to deliver the value to the customer is too high (compared to what you can charge), volume is not likely to fix your problem.  Yes, you heard it here, there are startup business ideas where the fundamental economics just don't work and this doesn't become "obvious" until a bit later in the rpocess.  Do some simple math and figure out what it would take to make each customer profitable.  You don't have to get to this point on your first few customers, but you better have an idea of how to get there at some point.  If not, change something.  Change the offering.  Change the price.  Change the market.  Charge for services.  Do something to make the economics viable.
 
That's all I have for now.  There are lots of other "signs" that I see that startups (including my own) need to look out for that that warrants revisiting the product, the strategy or other things.  It's good to be determined and stick to your plan.  But there's a fine line between determination and stubbornness.
 
What are your thoughts?  What other things should entrepreneurs be looking out for that might signal that some change is in order?  Please leave your thoughts in the comments

Posted by Dharmesh Shah on Wed, May 30, 2007

COMMENTS

I thing I've seen in my past is after quite a few salescalls, you don't see "spark" from customers that they get it or they start leading you down another path (e.g "that's cool, but we are trying to solve is...."). If you are objective enough and *listen* they'll will help you down a better path. One thing I warn is that one customer doesn't make a market...test your hypothesis with other customers or prospects.

posted on Wednesday, May 30, 2007 at 4:32 PM by ChandraB


Chandra has a good point! If you can possibly do it, send somebody out to do a "lost sale report" on each prospect you work hard on but fail to turn into a customer. The conversation should start, "I respect your decision and I'd like to understand what factors went into making it."

posted on Wednesday, May 30, 2007 at 6:35 PM by Oliver Jones


Seth Godin cautions that truly innovative ideas may well be very hard to sell initially as they must overcome pre-conceived mind-sets. He offers a fine book titled "The Dip" (quite small too) for evaluating go-no go situations. It's worth a read for another perspective on this topic.

posted on Thursday, May 31, 2007 at 7:16 AM by Robert S Hedin


Bad link.

posted on Thursday, May 31, 2007 at 9:00 AM by Nemanja


Dharmesh, it sounds like I should hire you to sell for us. I've known a few founders who should be clients of ours because they can't "sell" the idea to a co-founder, investors, or other financiers. They delude themselves that the product will sell itself even though they're incompetent at helping their prospects identify a problem that can be fixed. They blame misuse of product or lack of knowledge of the customer rather than accepting the blame for being poor communicators. They fail to appropriately identify the magnitude of the opportunity and undersell figuring that they can add on. Customers usually feel "taken" when they buy a partial solution. Finally, if you're the CEO/founder and you decide what the price needs to be, don't let your salesperson or prospective customer talk you out of it. Doesn't your customer want you to make enough money to stay in business so you can service them when they need it.

With all due respect to you founders, learn how to sell before you take somebody's money to bring your idea to market. Or if you don't have the ability to sell, get yourself a hotshot salesperson as a co-founder or your first key employee.

posted on Thursday, May 31, 2007 at 7:00 PM by Rick Roberge


There's a corollary to the $1,000 vs the $10,000 solution problem in enterprise software. It's the "we need to price our product at $100,000" versus our "customers only want to pay $10,000". Enterprise software companies fall into the trap of pricing their solution to satisfy requirements around their perceived target market and business plan. To justify their business plan and direct sales force, they target the high end with a higher price point when what they really need to do is go with a different sales model at the lower end of the market.

posted on Thursday, May 31, 2007 at 7:51 PM by Yong Su Kim


Wow, this is eerie. I just recently made a change in direction in the web application I'm developing. While your list is not an exact explanation of my change in plans the theme of what you are saying rigns true. You've got to gauge general excitement when you show it to people. You can't respond to people who say, "this would be great for X", with, "um.. that's not how it works." Another indicator for me a change was needed was when I was trying to explain how to get an account setup for usage after the registration. (Creating projects, creating users, setting permissions) I found it was complicated to explain, so I reacted by creating a more open application. It simplified the code base and the explanation of how to use it! I'm about to launch (last round of beta - hopefully). I'm betting the changes I made will be the difference between small chance for success, and this can actually be successful!

posted on Friday, June 01, 2007 at 2:25 PM by Michael Sica


Your customers say you have the wrong customer: We approached our early prospects with our value proposition and alpha prototype, and were told "great idea, but we wouldn't use it much ourselves--but our customers would love it". That led to a complete shift in functionality as we refocused the application on the needs of the customer with the real problem. Result: typical sales calls changed from a lukewarm reception to "how do we get started with a pilot".

posted on Tuesday, June 26, 2007 at 5:50 PM by Michael T.


Paul, "Stealing people's money?" What are you thinking? or aren't you? There's very little difference between a con artist and a professional salesperson. They use many of the same tools and techniques. The difference is intent. The salesperson looks to solve a problem and earn. The con artist looks to steal. It appears that you've defined yourself.

posted on Sunday, July 01, 2007 at 3:02 PM by Rick Roberge


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