There’s a debate that rages all over the interwebs and in the minds of entrepreneurs everywhere regarding what really makes a web/mobile start-up go (I’m not talking about harder science start-ups because I don’t know a lot about them yet). Many innovators like to think it’s having a better product than anyone in the marketplace. In this entry, I’d like to make the case for why a start-up’s “marketing” is of equal if not greater importance than the idea and product to the success of the company. Full disclosure: I’m a Law/Business guy, and this post is meant to have at least some people (likely of the techy variety) tell me I’m full of it.
A couple of weeks ago, a prominent New York VC told me: ‘VC’s aren’t going to be interested in funding the development of a web or mobile project. We want something that’s up, and we’d prefer to have a crowd of people around it already.’
Having been an entrepreneur whose venture failed SOLELY <insert sarcastic tone> because I didn’t have enough money to keep the technical talent around and interested, my gut response to that VC’s statement was, “That’s harsh! I hate investors! (soft whimper + tears of nostalgia).” After getting over the whole “it really would have worked if we had just…” vibe that was going through my mind and thinking about the sage words for a while, I realized that my correct response should have been “DUUUuuuH!” Clearly, if I’m a VC sitting around with $50m to deploy and investors looking to profit or dig ravenously into my backside, I want sure-things, or, at least, investments that seem like sure-things. It doesn’t matter if I see a company I think is a pretty good idea, but which doesn’t have any traction in the marketplace (genius ideas that geniuses think are genius probably get exception here). I’m probably not willing to make that ‘pretty good’ bet because of what’s going to happen to me if I’m wrong, especially when I consider the other 500 pitches that come across my desk to be one of the 3-5 companies I’m funding in this round.
At this point the inventor/purist inside you might say, “But, terrible ideas don’t work in the marketplace! The capital markets are a place where only the fittest survive!” This mentality suggests that an entrepreneur should spend at least a majority of his/her time on the idea and product development.
First of all, terrible, stale products do work in the marketplace. Examples include: Pet Rocks, the Twilight saga, United Airlines, popular hip-hop, and the Snuggie. Even if you don’t believe those products are terrible, undoubtedly you have seen things that sell-out which you don’t think are great, giving way to the point that the product definitely doesn’t have to be earth shattering to roll out and capture an audience. Obviously, some people have to find some need/want for it in their lives. However, “marketers” can, and often do, define that need/want. I’m not old enough to remember the marketing campaign for the Pet Rock, but sex = Twilight, price = United, superficial status = hip-hop, snuggling = Snuggie.
Marketers use our emotions to get products into our lives. As a better tech example, why are so many people excited to buy Facebook stock on the secondary markets for a price that values the company at $60billion on $2billion in anticipated annual revenues from fickle sources, 1.5 months after the secondary market price valued the company at $30billion on the same projected revenues? Does it have anything to do with “The Social Network” getting award nominations? Might it have to do with Mark Zuckerberg being named “Person of the Year”? Absolutely. Clearly, those immediate elements are a part of a larger Facebook hype machine that has been developing for a while. However, the point remains that it’s that hype machine that keeps something like Facebook, which is, at its core, pretty much just a better version of Photobucket/Ophoto/Snapfish, or even Google, in the money. That money enables those companies to give inventors free reign and develop products that will actually change the world in an intellectually positive way.
Aside: This concept works across industries. David Boies, Al Gore’s lawyer in Bush v. Gore and the guy who is currently fighting for gay marriage rights, handles divorce cases to pay the bills and keep his meaningful constitutional law career alive. Point being – you can’t survive as a purist.
This gets me into my definition of “marketer”, which I don’t limit to the CMO. Basically, I would say that a company’s marketing team is its hype-generating engine. Relationships with major publications, VC’s, taste makers, companies that use the product, etc. That’s all part of the marketing team for a start-up, and the more effective your work with that machine, the better your company will do. Spend your money wining and dining. Buy friends. No offense, but seriously.
HOKAY! So you’re sort of with me at this point. How does that fun little rabble-rouser Snooki fit into all of this? You know who’s really good at pushing total garbage? MTV (and that “Survivor” guy…also the people behind the “Real Housewives”). Pretty much what happened with the explosion of reality TV is that the studios got tired of investing a ton of money into creating meaningful and interesting content for no guaranteed Return on Investment and thought, ‘Hey! We can make a ton of cash for 0 cost, just by showing people how crazy other, more glamorous people are and making these plebs feel better about how crazy they are themselves.’ All we have to do is convince the normal folk out there that these people they see on TV are specimens of society as it should be (crazy/fun, resourceful/strategic, blonde/glamorous). And so, the marketing machine got to work. Those guys make BILLIONS of dollars every year. From what?! Culture? No. Useful material that progresses human-kind and makes people themselves better for the experience? Hell no! Remember, like your web/mobile business, networks also make money off advertising. HBO/Showtime, which have quality content, don’t (and maybe you’re going for a paid web/mobile service…good luck). AMC is a weird exception. However, NBC/Universal is the larger umbrella for Showtime, right? MTV uses the Jersey Shore money to help interesting programming like “16 and Pregnant”, “True Life”, etc. (Reference earlier point about putting forward meaningful stuff after you’ve gotten attention and money).
Certainly, there’s a large intellectual pressure in the start-up community perpetuated by the Harvard, MIT, and Stanford kids who dominate it, so selling out might not be as prevalent in the tech business as it is in show business, or in many other industries. However, even if you believe that to be true, I think this start-up ecosystem will inevitably draw back from the current levels of deeper meaning and altruism that we attribute to it because, the more notoriety this business gets (the simple fact that everyone now pretty much knows Palo Alto is indication enough of this phenomenon), the more superficial it’s going to become. The only way you’re going to differentiate yourself from the rest of the pack of companies trying to get VC funding is by moving your product. Fast. Simply, this is because, I can almost guarantee it like George Zimmer guarantees that you’ll love the way you look, your web/mobile product isn’t that novel. Someone else is doing something similar enough to make you irrelevant if they capture market first.
Fun Aesop of the story: If you’ve got a web or mobile start-up, and you’re trying to get some VC action in your mix, BE THE SNOOKI. Get people to pay attention. After people pay attention, get that money to do some awesome stuff that BLOWS MINDS. If no one’s paying attention, quit, or self-finance (Note: Self-Finance = NOT RECOMMENDED).
~ Sean Weinstock, Current Insite Fellow