Thursday, October 11, 2012

The Hardest Part of Startups: Getting Past Zero

Josh Koppelman rightly pointed out a few years ago in "The Penny Gap" that the distance between 0 cents and 1 cent is greater than the distance between 1 and 2 cents.

Cars use more energy to start moving than to continue moving; overcoming that initial opposing force takes energy. That's why the Prius uses electricity to start instead of gas; the electricity is free, generated by braking.

The same principle applies to going from concept to beta in use, and from beta to an early base of customers (pricing aside).

Once you've landed a few early customers, the next few are a bit easier to land, and at some point--if you're diligent about quality, price and product-market fit, customer service, and brand development--you'll no longer have to provide nearly the amount of energy to keep rolling: your customers supply most of that energy.

It's as though you've gone from 0 to 60 (which might take years), and at 60 the friction disappears and the wind swings behind you. You can coast. You shouldn't coast, but you can.

The toughest part of building a startup--including the early failures, the self doubt, the lack of support from friends or family, the news of competitors beating you to market--the toughest part is getting from zero to 1 mph. It's much tougher than going from 1 to 2, and far, far tougher than going from 10 to 30.

In other words, establishing a functioning business is the hardest part of building a startup. Not product, not capital, not partners, not press. Going from theory to practice, from piecemeal to repeatable, sustainable revenue.

I worry about some of our Startup Lancaster companies. I worry that they focus too much on perfect product-market fit before meeting the market to know what the product fit should even be. I worry that they don't test the business model by actually trying to sell something, and focus too much on UX, anecdotal feedback, fundraising, and research.

I worry they'll give up or fail without even having tried to sell something. And if I'm worrying about it as an outsider, they should be worrying about it because it's pretty clear from the outside that they aren't moving from 0 to 1, which is the hardest and most important part of establishing a business.

You can get to 1, but you have to commit to selling.

Call 10 prospects. Call 100. 100 will take you two days. Can you close 1 out of 100? No? Can you ask each what it would take that you don't have to get them to buy? Can you close 1 out of 200? Yes, you can. And then work it down to 1 out of 100, 1 out of 50, 1 out of 30. Mission Research closes 1 out of 3.

But you can't do it if you don't develop your target list and pick up the phone. Sounds anachronistic, but if you think tweeting, friending, liking, placing Facebook ads or Google Adwords, or email marketing will get you your first customers, well let's just say I think you'll learn a lot more faster and develop a strong initial base by picking up the phone.

You need supporters. You even need complainers--especially, in fact. You need people who see the promise and are aggravated that you haven't delivered yet. They're loyal--to a point. You need backers. People who cheer you on and believe in you, people who'll be forgiving as you try to find your way through the darkness.

A great way--perhaps the best way--you get early supporters is through personal contact. Send the personal email and ask for a time you can chat. No, I don't care that you're only charging $30/month, or $10/use, or that you're selling ads to eyeballs (ouch). The early wins are easier to get through personal contact.

I'm hoping some prove me wrong and show me the A/B testing using Google Adwords that link to a form or video or landing page that converts into an active user, but active users don't make you a sustainable business, revenue does, so take the next step and show the transactions.

"We'd love to have you as a customer." It's inviting. Tell them it's early and you only have a few other customers. If they're not moving yet, give them the second 3 months free. Or the second month free. Or the second year.

Don't make the product free, or discount, but it's ok to give up some per-customer revenue early on just so you can say to other prospects that you have other customers like them. Reward your early adopters.

You can do it. But you have to get past zero, so pick up the phone and work it. Discover what works, then refine it and repeat. But don't wait for product perfection--you'll never get there anyway.

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