Reading List for Entrepreneurs

This may be the most valuable post I write. And while I can’t claim this list is sufficient, it certainly is necessary. If you haven’t read everything on this list, get on it.

• Product / Market Fit
  • The most important thing and a really well written article – ALL startups should follow this: Product / Market Fit
• Go To Market Strategy for Startups 
• This is like “Four Steps” (below) but shorter (and written by me – so it’s awesome).
• Part 1 – Market Phase Model, Part 2 – Market Exploration, Part 3 – Market Investigation
• Four Steps to the Epiphany
  • PDF Intro – I think you can get most of the benefit from this first chapter.
  • Full book – I, quite frankly, never made it through the entire book. For some reason I didn’t like it that much and felt most of the benefit was in the intro. But perhaps I’m missing something. http://amzn.to/1m4R1S
• Crossing the Chasm
  • This is THE bible of high tech marketing. Steven Blank of Four Steps would say this is mostly irrelevant since this only comes after customer discovery, but I think he’s non-trivially wrong. This is the book. http://amzn.to/9YPB3n
• The Innovator’s Dilemma
  • This is right after Crossing the Chasm with respect to marketing strategy books. Love it. http://amzn.to/ahEhhN
• The Sales Learning Curve
  • HBS article. Very good article on how to think about sales. Genesis of the concept of the Renaissance Rep. Link.
  • Obviously this isn’t essential if you are building a online-only or consumer startup.

Note – Crossing the Chasm and The Innovator’s Dilemma are two-thirds of the holy trinity of high tech strategy books. I’m still looking for the third.

Go To Market Strategy for Startups: Market Investigation – Part 3

(See Part 1 – Market Phase Model for context.)

Ok – you’ve found the customer. You know their needs and challenges. You’re working on product/market fit. You’ve got a handful of referenceable customers. Now it’s just about execution, right?

Not yet. Just because you’ve been able to sell to a handful of customers doesn’t mean you have figured out how to do it in a repeatable fashion, or do it with people who are not the founders. Now you need to investigate your market and figure out the messages, sales tools, materials, channels, employees, processes, and communication channels that will enable you to sell.

How do you do this? Once again, I don’t know. But I can tell you how to figure it out.

If you’re a good product person, you’re really digging into your product now. You’ve got enough early customers and feedback to give you a solid understanding of essential features. Your dev team has uncovered plenty of problems from v1. Things are getting exciting as you can feel yourself moving closer to your vision of product/market fit.

You need to do the exact same thing with sales. Your product is your best sales tool. But it’s not your only one, and if you’re a product person, don’t get caught in the trap of doing only the fun product stuff and ignoring the BS sales and marketing stuff.  It’s not BS – it’s essential. In fact, the more uncomfortable you are with sales and marketing, the more important it is for you to start working on it early.

Positioning

In marketing textbooks they talk about the 4 P’s of marketing: Product, Price, Placement, Promotion. But they miss the 5^th and essential one: Positioning. Positioning is how you talk about your product and use that language to unlock the mind of the customer.  I’m a positioning guy so I’m biased, but after Product, I think Positioning is the most important tool you have in your sales and marketing arsenal. If you do it well, it acts as a force-multiplier, making every contact with a prospect – via web, email, phone, or in person – more effective. If you do it poorly, you’re making it hard for your potential customers to figure out why they should buy your product.

That last sentence is an important one. Positioning isn’t BS marketing junk. It is the communication equivalent of your product execution.  Just as your product is supposed to make it easy for your customer to solve his or her problems, your positioning is intended to make it easy for your prospect to understand and want to buy your product.  If they have to work hard to figure out what your value is, or why it’s better than competitor X, or why they shouldn’t just wait, then you’re not doing your job.

Positioning And Your Website

I used to do big positioning exercises where you think about your positioning, hone it down, discuss it with your team, iterate, and finally decide. Uggh – what needless pain and suffering.

Now I strongly suggest skipping the pre-work and jumping straight into your website. Since you’ve already gone through Market Exploration, you should have a website. But hopefully you haven’t spent too much time on it (unless you’re a web-based product or company). But now it’s time to really dig in and SPEAK to your customer. You’ve learned who they are, what they need, how you solve their pains, and what value propositions work for them. And you even have real-world testimonials. Great – package that up and make a website that makes it easy for prospects to want to buy.

For a web business, this is obviously the way to go. For an enterprise startup, this is still the way to go. Everyone goes to your website, even if they hear about you first from an in-person visit. More importantly, the website forces you to think through your positioning and messaging and how you want to talk to your customer. Your sales decks, PDFs, demos, email blasts, and everything else fits into the messaging framework you have to de facto create to build a good website.

This will also expose all sorts of weaknesses in your knowledge of your customers. Do they really buy because of X? Do you have substantiation for claim Y? Do your features really differentiate versus competitor Z? Your website will force you to address these issues. (And, of course, you’ll learn and change and improve over time.)

Sales Tools

When you are building out your website, you’ll uncover all sorts of tools you really ought to have. Maybe it’s a 30 second testimonial from a customer, or some key statistics, or a 2 minute self-running demo, or some sample reports. In addition to these tools, what will your sales force need? Clearly a sales presentation, but also testimonials, references, detailed spec sheets, etc. Put together your list, prioritize them, and start building them out. Note that they will all change as you learn more, so focus more on content than on production quality.

Communication Channels

You’ve found the customer. You’ve got a great product. Your positioning really communicates your value effectively. Now how do you get in front of customers so they can hear your story?

The tools are pretty standard and well known. The question is “which tools will work for you?” This is an empirical question, and the only way you can figure it out is to try them and see which work.

Create your list of channels / tools. Prioritize them based on your intuition. Then start trying them. Figure out ways that you can test your hypotheses about communication channels as quickly and cheaply as you can. Don’t get paralyzed by thinking you need to do all of them, but also don’t get complacent in sticking only to the channels that have worked so far. You need to try other methods, so start trying them.

What are the channels? PPC (SEO takes longer), email marketing, conferences, PR, blogging, social media marketing, local groups, cold calls, etc.

Conclusion

If you do a good job with Market Investigation, you’ll come out of it with product/market fit, a critical mass of referenceable customers, real revenue, increasing momentum, strong positioning, a solid foundation of knowledge of how to reach your target market, and a team that’s up to speed, succeeding, and building momentum towards success.

Go To Market Strategy for Startups: Market Exploration – Part 2

(See Part 1 – Market Phase Model for context.)

This is the most important phase of your company. Period.

Sure – all phases of your company are important. And sure, you make your money at Market Exploitation so that is clearly important. But if you do Market Exploration right and find the customer, then you have a very good shot at succeeding at everything else. And if you do Market Exploration poorly, you’re probably going to fail (unless you have ample dumb luck).

So, what is “Market Exploration?” Market Exploration is when you find your customer. I don’t mean that generically, like “My target user is CIOs of Fortune 500 companies.”  I mean VERY specifically – where you find several real people and you understand their problems in depth. And when you start finding the same problems and same situations over and over, find a product that solves their problems, and you can see that these specific customers are actually part of a larger group of customers, THEN you have found your customer. (As Marc Andreessen writes, product/market fit is the most important thing.  But the precursor to product/market fit is finding the customer. It’s my belief that if you are competent and can execute, then if you have found the customer, you can create product/market fit. In Marc’s language, “In a great market — a market with lots of real potential customers — the market pulls product out of the startup.” )

Here’s an example.  I was fortunate enough to be one of the first employees of Kana Communications back in 1997. When I joined, the company was little more than a very bright founder, a little seed money, a few consultants, a Filemaker prototype, and some Office Depot furniture. Oh yeah – one other thing: the founding entrepreneur had found the customer.

Kana went on to great things. We were lucky enough to be in the right place in the right market at the right time. We did a really good job of hiring capable people and executing. We were a hot Silicon Valley company. And we sold real product for real dollars. (Our ultimate market cap was unreal, but that’s a different story.) But the amazing thing about all that is that much of it was predetermined from the day I joined – and I joined at nearly Day 1 of real company formation. Sure, a more incompetent team could have lost it all. And had we not executed so well we likely would have lost first place in the market to a fast-follower, and there is a HUGE difference between #1 and #2. All that said, the success we ultimately created was largely determined by that first step the founder did mostly on his own – finding the customer.

Here’s a counter example. I was part of a company that was founded by some very smart people. But, quite frankly, they weren’t very good at building a software company. When I joined up we had early sales but no increasing success. In fact, we hadn’t really found the customer. (And without that, we obviously didn’t have product/market fit.) The result? Absolutely predictable – failure.

I’ve seen this time and time again. EVERY company that I’ve seen succeed had found the customer, and from that had created product/market fit.  The vast majority of companies I’ve seen fail or struggle have done so because they still hadn’t really found the customer.

So how do you go about finding the customer?

I don’t know.

Seriously. If it were that easy, then entrepreneurship would be easy. There is no general purpose recipe for finding the customer and it’s highly dependent on your particular company.  That said, I can give some solid advice:

Finding The Customer Is The Main Goal

It’s not about revenue. It’s not about scale. It’s not even about product/market fit (yet). It’s about finding a customer, understanding their problems, working towards product/market fit, and ensuring that there are many similar customers out there.

Optimize Learning

This really is an exercise in market exploration.  While I’m sure you have many ideas of who your customer is, you don’t know until you’ve proven it. So, come up with a hypothesis, figure out a way to test it, GET OUT THERE, and then quickly figure out if your hypothesis is right, nearly right, or wrong. Then move on to the next one (aka “pivot.”)

For enterprise software companies, here’s a pretty good plan:

• Write down your target market hypothesis.
• Write down a SHORT pitch.  The goal is to think through who you think the customer is, what their needs are, how you solve their problems (ie: your value proposition), and your next steps.
• Write down a few assumptions or things you’d like to learn from your conversations. I highly favor qualitative / open ended questions that get the interviewee to talk. You’re too early for a quantifiable survey.
• Build as minimal a website, PDF, and sales deck as you can. Why? When you call or email, they will check your website. Then they’ll say, “send me something via email.” But don’t invest too much time in these, since they will almost certainly change.
• Now get out there and talk to as many of those potential customers as you can. Use your network. Use LinkedIn. Cold email. Cold call. Try PPC ads.  Whatever it takes to have a bunch of short conversations. Your goal isn’t to sell (yet). It’s to learn. And if as you learn you start finding customers who resonate to your value proposition, then turn them into prospects and sell to them. Conversations are a good first step, but you don’t know you have a customer until they are willing to back their enthusiasm with money.
  • Aside: One really good entrepreneur I know – Tyson Roberts from Lucid Commerce – said he couldn’t even imagine starting a company until he had actually sold his product, before he had even built it. Excellent.

Build Your First References

As you start to hone in to your customer, it’s time to build your first reference customers. This may be only 5 customers if you are an enterprise software company, or 500 if you are a consumer web startup, so while they aren’t material in their scale, you need them. They validate that you have found a customer (since they are giving you money), and they are essential to getting your next customers.

Once you’ve found your customer, built some early references, and are starting to feel good that you’re onto something and have a real market on your hands, it’s time to figure out how to sell to them. It’s time for Market Investigation.

(Next: Part 3 – Market Investigation)

Go To Market Strategy for Startups: The Market Phase Model – Part 1

I’ve worked with a  lot of early-stage startups, trying to help them get to traction and growth. In evaluating different strategies and tactics, over time I’ve evolved a framework that’s been very useful in clarifying why a certain path feels right. This isn’t unique or brilliant, but it’s definitely helped me.

The key question I have usually been focused on is, “How do we unlock the potential of this market?” Embedded in this is the belief that one doesn’t create a market.  Instead, a company finds some unmet need and, if it is lucky, can release the potential embedded in the market. The iPod and iTunes are a great example. Sure, Apple “created” a market for easy MP3 players and digital music. But really what they did was to unlock the potential in that market with the right combination of product, service, and marketing.

Let’s say you have a vision of a market potential. What’s your strategy for unlocking that market? Well, there’s a term for that, and it’s called your “Go To Market Strategy.”

Go To Market (GTM) Strategy

How you plan to bring your products or services to your customers and how that changes over time.

The key thing about a Go To Market strategy is that it changes over time. So when you think about your GTM strategy, the first question is, “Where are you in the lifecycle of your market?”

Let’s say you are an enterprise startup and you just raised $1m. It’s time to ramp up, right? Build out your website, hire a sales guy, and go for it. Hell, you probably put pretty aggressive numbers in your plan to investors, so you’re now on the hook. And that’s what the money is for, isn’t it?

Maybe, but maybe not.  The right Go To Market strategy is completely dependent on what phase your market is in.

Here is a simple model that really helps clarify how to think about your market. All successful startups will start with no sales, get to a phase where sales start to increase gradually, and then hit a phase where they start to grow rapidly (what I call “Market Exploitation,” which is good, and not to be confused with “customer exploitation,” which is bad).

Obvious Point #1

While we all care about Market Exploitation, you’ll never get there if you don’t pass through the preceding two phases.

Yes, this is obvious. But it’s also really easy to overlook since many early entrepreneurs don’t understand how hard the first two phases are. When we built the business plan for InsideCrowd (my wildly unsuccessful startup), we had many truly insightful ideas about how to solve the challenges of scale confronting our market. And yet we then spent the next three years ignoring those topics almost completely and spending all our time trying to unlock the market in Market Investigation.

Obvious Point #2

The goals, and hence the tactics, that you need to pursue are highly dependent upon the phase your market is in.

Let’s look at these specifically:

Rather than make this post too long, I’ll cover each area as a separate post.

(Next: Part 2 – Market Exploration)

Blog Re-Start

I’m restarting my blogging after about a year and a half off. I don’t know how long I’ll keep at this blogging this time. As long as I find it valuable, I guess.

Last time I focused on some research I did in GPGPU. (Very cool stuff.)

This time I’m going to focus more on the operational side of starting and growing a company. I just finished working with Atlas Accelerator where I had the opportunity to work with 15 startups and to see dozens more. While all startups are different, there are certainly many common themes and challenges. My plan is to focus on those.

The posts prior to this one centered on GPGPU. They are completely different content  than what will follow and rightfully should be archived away.  But my WordPress skills are mediocre, so I’ll just leave them.