opportunity__cost

Articulate a Clear, Specific, Compelling Value Proposition

For many of the startups I looked at, I had to kind of scratch my head and think for a few minutes as I tried to figure out exactly what benefit they offered consumers. The value of your product or service, your unique competitive advantage, should be clear within 5 seconds of visiting your site. I’m sure you’ve heard the old copywriting mantra of “list benefits, not features”. Take that to the next level. Take the single most important benefit of using your service, and make that your headline.

Take the single most important benefit of using your service, and make that your headline.

If you could only have one feature in your app, what would it be? Your “killer app” can lead to your biggest benefit, and that’s how you need to introduce yourself to customers. I could write volumes about writing headlines, but a simple statement like this is a good place to start. Especially if you’re selling a B2B service, as many of you are, you need to make the immediate benefit or ROI of using your service crystal clear. If you’re building a B2B app to manage payroll, “Cloud hosted SaaS payroll for your business” is not a good headline. “Spend less time worrying about payroll” is a better one. “Cut payroll management costs by 37% instantly” is even better.

Find Your Target Market, and Segment the Hell out of Them

Another issue I ran across rather frequently is a distinct lack of marketing focus. When asked who their target market was, many people responded “small businesses” or, worse “anyone”. Alright, fine, you sell your SaaS products to small business in the US. But what kind of small business owner converts the best for you? Which customers are most likely to be profitable customers? Who is most excited about your product? You have been tracking these things, haven’t you?

You don’t have the budget to target all small businesses, so start with a specific niche or industry you think your product has particularly strong appeal for. Selling time tracking software? Start positioning as time tracking software for accountants, or dentists, or landscapers. How about targeting a specific task or feature and finding people looking for that feature only? Or what about people who already use a particular competitor’s software? I’ll go into competitor bidding at a later time, but it’s a fantastic way to get motivated early users.

Build super niche landing pages or, even better, microsites targeting each specific market segment you want to go after, emphasizing the specific benefits of your product to that group only. Not only is this a very strong SEO play, but it will increase your quality score and relevance in AdWords, as well as greatly increase conversions.

If you have a landing page targeted to doctors, test putting a stock photo of a smiling doctor using your software on your landing page. It’s cheesy, but there’s a reason companies use it- it works. Similarity is a very powerful principle of persuasion. Tech people respond well to screenshots of software. Local small business owners may not.

By the way, this applies to ecommerce startups as well. If you’re a clothing company build pages like “Top products for new moms” or “Tshirts for fans of __”, they will do very well.

Optimize Aggressively for CLV

If you’re running a subscription service of any kind, customer lifetime value(CLV) is by far the most important metric you need to be thinking about. More than conversion rates, burn rate, SEO, or anything else, CLV will determine whether your startup lives or dies. Try to determine this number, at least an average for your entire customer base, as soon as possible.

There are so many ways to increase CLV that fall outside the scope of this post, but just remember that effective monetization of the backend is where many online businesses live or die. Effectively upselling or cross-selling once you’ve acquired a customer could mean the difference between outbidding your competitors and capturing more market share or falling behind.

You don’t have to be spammy or annoying to upsell well. This can be as simple a showing a notification when your customer is close to reaching a usage limit, urging him to upgrade to the next tier of service, or emailing your most loyal customers with special discounts.

Start measuring engagement, churn rate and attrition, visit frequency, etc, loyalty and so on. If you’re selling a $20 a month service but you know that you will net $400 over the lifetime of an average customer, suddenly you have a lot more options for marketing, not to mention some great metrics to show investors.

Start Marketing Early and Validate Your Idea ASAP

You don’t need a product to start marketing. Let me say that again. You don’t need anything to start marketing. All you need is a vague idea and a landing page where you can collect email addresses from prospective customers. It’s called dry testing, and it works, at least for gauging initial interest to see if an idea is worth pushing further.

It pains me to see so many startups emailing me who have already spent months or even years building a product without thinking about promotion or validating their idea at all before launching. “Launch first, then figure out marketing” is a recipe for disaster. You need to be able to answer at least these questions as soon as possible, ideally before you write a single line of code:

1. Is there a target market for my product and how big is it?
2. Who are the current players in the market? Is it controlled by a few big players or dominated by many smaller companies?
3. How much market share can I realistically expect to capture, and how well can I monetize them?

Remember this: A startup is a business. And any business requires basic market research. If you were thinking of opening a coffee shop, would you jump right in and start building it? Or would you first see if there are any other coffee shops nearby, how many customers they have, how much they charge for coffee, etc?

Remember this: A startup is a business.

Marketing isn’t just emailing bloggers and driving traffic. It’s everything- product, price, placement, and promotion. Start thinking about these things before you launch, learn from them, and iterate quickly before wasting a lot of time and money.

Very nice wrap of the most important point when marketing out your startup.

Without a powerful narrative, your chances of getting big press and enthusiastic users who spread the word for you approach zero as a limit.

It took me years to figure this out at Smart Bear. At first when someone asked what the Smart Bear tool suite was, I would say:

Smart Bear makes data-mining tools for version control systems.

It's a description so esoteric that, although accurate, not even a hardcore geek would have any idea what it is, much less why it's useful.

Years later, when it was clear that code review software became our sole focus, I got better at describing it:

You know how Word has "track changes" where you can make modifications and comments and show them to someone else? We do that for software developers, integrating with their tools instead of Word and working within their standard practices.

Better, yes, and for a while I thought I nailed it, but still no press. Eventually (thanks to helpful journalists) I realized that I was still just describing what it is rather than why anyone cares. I left it up to the reader to figure out why she should get excited.

Eventually I developed stories like the following, each tuned to a certain category of listener. Here's the one for the journalists:

It's always fun to tell a journalist like you that we enable software developers to review each other's code because your reaction is always: "Wait a minute, you're seriously telling me they don't do this already?" The idea of editing and review is so embedded in your industry you can't imagine life without it, and you're right! You know better than anyone how another set of eyeballs finds important problems.

Of course two heads are better than one, but developers traditionally work in isolation, mainly because there's a dearth of tools which help teams bridge the social gap of an ocean, integrate with incumbent tools, and are lightweight enough to still be fun and relevant.

That's what we do: Bring the benefits of peer review to software development.

Now the reason for excitement is clear: We're transforming how software is created, applying the age-old techniques of peer review to an industry that needs it but where it's traditionally too hard to do. That's a story.

It took me five years to figure out (a) I needed a story and (b) what the story was. It's hard. But one story beats a pile of AdWords A/B tests.

I am not sure why Jason calls those ideas "unusual", although I can not disagree on his other point that there are some many entrepreneurs are try to pitch the common path as something unique, as it is not even funny anymore.

I really liked this story of transformation. You can not get enough of these and they are always great to read. I still remember ours "Social profile synchronization tool" from Atomkeep, which, frankly speaking, has never got transformed (and I'll pass on sharing its variations :) but it was always amazing to see how people react to this: some grap the idea immediately, other understand the words, but get completely messed up with the meaning.

The Lean Startup Dojo is a weekly class focused on mastering the skills that you need to successfully build a Lean Startup.

Your startup won't succeed unless you have a deep understanding of your customers and the problem that you are trying to solve for them. Customer Discovery is the process that Lean Startups use to create this understanding. In this class, you will learn how to:

- find your first customers
- convince them to be interviewed by you
- determine if they'll buy your product
- get referrals to other customers

The Lean Startup Dojo places a strong emphasis on creativity and critical thinking. You will generate multiple approaches to solve each problem that your startup will face while executing Customer Discovery. The instructors and other attendees will assist you in analyzing each solution you propose through the lens of the Lean Startup philosophy. When you leave the class, you'll have a wealth of ideas that you can put to use in your startup.

This class will be taught by Rich Collins under the guidance of Eric Ries.

The cost is $100 per class.

Seriously. This is the best bargain you can get. This class is so under-priced, it will address the skills that you need to get out and talk to customers, includes but not limited to: finding your first customers, convincing them to be interviewed by you, determining if they'll buy your product and getting referrals to other customers. The class is kept to under 10 people, so it will target your own problems.

Silicon Valley proper is mostly suburban sprawl. At first glance it doesn't seem there's anything to see. It's not the sort of place that has conspicuous monuments. But if you look, there are subtle signs you're in a place that's different from other places.

1. Stanford University

Stanford is a strange place. Structurally it is to an ordinary university what suburbia is to a city. It's enormously spread out, and feels surprisingly empty much of the time. But notice the weather. It's probably perfect. And notice the beautiful mountains to the west. And though you can't see it, cosmopolitan San Francisco is 40 minutes to the north. That combination is much of the reason Silicon Valley grew up around this university and not some other one.

2. University Ave

A surprising amount of the work of the Valley is done in the cafes on or just off University Ave in Palo Alto. If you visit on a weekday between 10 and 5, you'll often see founders pitching investors. In case you can't tell, the founders are the ones leaning forward eagerly, and the investors are the ones sitting back with slightly pained expressions.

3. The Lucky Office

The office at 165 University Ave was Google's first. Then it was Paypal's. (Now it's Wepay's.) The interesting thing about it is the location. It's a smart move to put a startup in a place with restaurants and people walking around instead of in an office park, because then the people who work there want to stay there, instead of fleeing as soon as conventional working hours end. They go out for dinner together, talk about ideas, and then come back and implement them.

It's important to realize that Google's current location in an office park is not where they started; it's just where they were forced to move when they needed more space. Facebook was till recently across the street, till they too had to move because they needed more space.

4. Old Palo Alto

Palo Alto was not originally a suburb. For the first 100 years or so of its existence, it was a college town out in the countryside. Then in the mid 1950s it was engulfed in a wave of suburbia that raced down the peninsula. But Palo Alto north of Oregon expressway still feels noticeably different from the area around it. It's one of the nicest places in the Valley. The buildings are old (though increasingly they are being torn down and replaced with generic McMansions) and the trees are tall. But houses are very expensive—around $1000 per square foot. This is post-exit Silicon Valley.

5. Sand Hill Road

It's interesting to see the VCs' offices on the north side of Sand Hill Road precisely because they're so boringly uniform. The buildings are all more or less the same, their exteriors express very little, and they are arranged in a confusing maze. (I've been visiting them for years and I still occasionally get lost.) It's not a coincidence. These buildings are a pretty accurate reflection of the VC business.

If you go on a weekday you may see groups of founders there to meet VCs. But mostly you won't see anyone; bustling is the last word you'd use to describe the atmos. Visiting Sand Hill Road reminds you that the opposite of "down and dirty" would be "up and clean."

6. Castro Street

It's a tossup whether Castro Street or University Ave should be considered the heart of the Valley now. University Ave would have been 10 years ago. But Palo Alto is getting expensive. Increasingly startups are located in Mountain View, and Palo Alto is a place they come to meet investors. Palo Alto has a lot of different cafes, but there is one that clearly dominates in Mountain View: Red Rock.

7. Google

Google spread out from its first building here to a lot of the surrounding ones. But the buildings were built at different times by different people, the place doesn't have the sterile, walled-off feel that a typical large company's headquarters have. It definitely has a flavor of its own though. You sense there is something afoot. The general atmos is vaguely utopian; there are lots of Priuses, and people who look like they drive them.

You can't get into Google unless you know someone there. It's very much worth seeing inside if you can, though. Ditto for Facebook, at the end of California Ave in Palo Alto, though there is nothing to see outside.

8. Skyline Drive

Skyline Drive runs along the crest of the Santa Cruz mountains. On one side is the Valley, and on the other is the sea—which because it's cold and foggy and has few harbors, plays surprisingly little role in the lives of people in the Valley, considering how close it is. Along some parts of Skyline the dominant trees are huge redwoods, and in others they're live oaks. Redwoods mean those are the parts where the fog off the coast comes in at night; redwoods condense rain out of fog. The MROSD manages a collection of great walking trails off Skyline.

9. 280

Silicon Valley has two highways running the length of it: 101, which is pretty ugly, and 280, which is one of the more beautiful highways in the world. I always take 280 when I have a choice. Notice the long narrow lake to the west? That's the San Andreas Fault. It runs along the base of the hills, then heads uphill through Portola Valley. One of the MROSD trails runs right along the fault. A string of rich neighborhoods runs along the foothills to the west of 280: Woodside, Portola Valley, Los Altos Hills, Saratoga, Los Gatos.

SLAC goes right under 280 a little bit south of Sand Hill Road. And a couple miles south of that is the Valley's equivalent of the "Welcome to Las Vegas" sign: The Dish.

Decent overview of "what to see" in Silicon Valley. Pretty much that's it. :)