The Right Priorities In The Right Order

As far as product development goes, doing the right things is really important.  But not nearly as important as doing the right things in the right order.

Case in point - I recently had a great phone call with a prospective customer that is without-a-doubt in our wheelhouse.  I'll spare you the details, but will say that this is exactly the type of customer/organization that we want to fall in love with Argyle.

Yet - after a 10 minute conversation consisting of lots of general agreement and lots of knowledge sharing - I couldn't hook her on a demo.  We don't (yet!) offer a few of the widgets that she needs to do her job.  We know we need them and they're on the to-do list...but we don't have them now.  And these aren't rocket science features, just features that we haven't prioritized

Put another way, we're probably over-represented in one functionality area and under-represented in the other.  Just so happens that the "other" is most important to this prospect.  (It is worth mentioning that 10 prospects will have 10 different "most important" things.)

Not to say that we've prioritized the wrong features - because I think we've gotten things mostly right thus far on the product side.  But it does go to show that order of operations matters when it comes to building a web application.

PS - We're not giving up on the prospect.  But that's another post for another time...  :)

How Start-ups Should Do Conferences

Mark Suster wrote a funny post about the "Conference Ho" CEO - the guy that is flying all over the place to attend conferences.

Suffice to say, I'm not that guy.  I had never attended a proper "conference" as a non-student until this past Spring when Adam and I participated in the Social Media Workshop Room at ChannelAdvisor's Catalyst conference.  

At this stage of the game, my time is better spent doing the dirty work - leading, communicating, dialing for dollars, thinking through product decisions, etc.  Thus - and taking into consideration our size and our marketing/travel budget - Argyle's conference strategy is pretty focused.  We only attend conferences/events in which:

  • We know at least one of our customers/prospects will be there.
  • We don't lose more than one day in the office.
  • We can attend for free.
  • We can get on the stage.

If we can't get on the stage - and we typically push pretty hard to get on the stage - we'll attend if we can get in for free.

Here's a list of the conferences Argyle has attended and will be attending in the near future.

On Raising Money for the First Time

Argyle isn't my first start-up, but it is my first time as a founder and my first time as the CEO.  And Argyle's $325k seed round was my first time raising money.  So here are a few quick thoughts from the process from the perspective of a first-timer:

Raising money takes forever.  Not sure what I expected, but I expected things to move more quickly.  Patience has never been a strong suit for me...

Product matters...but not that much.  As much as Adam and I love to dote on our product, most of the people that we pitched just assumed that it worked and didn't really want to spend much time talking about the little details of our app.  As conversations progressed, we obviously spent more time talking about product strategy.  But the first conversations were all about market problems.

Paint a big picture.  Per the previous nugget, the more high-level, big-vision our pitch, the more receptive/interested the prospective investor.  The more we focused on the nitty little details of our product that we love so much, the more blank stares we got.

Optimization is expensive.  I think we spent too much time negotiating terms that aren't incredibly important and it cost us both in terms of time and legal fees.  We got all of the big ticket terms squared away pretty quickly, so it was frustrating to spend another couple weeks cleaning up lots of little stuff.  Live and learn - I know better for the next time around.

Raising money isn't a milestone, it is a means to a milestone.  I'm excited to be done, but I'm more excited about what we're going to do with the money.  Adam and I have welcomed the congratulations from friends and family...but I'll be much happier to accept the congratulations of more product and more paying customers.

Relationships raise money.  We have six investors in our deal and - to a varying degree - I knew five of the six well before we pitched them.  (I received a glowing introduction to the sixth through a trusted mutual acquaintance.)  I didn't set out with the goal of building these relationships to one day ask them for money...but it sure didn't hurt when the people that we pitched already knew me, my bio, and my M.O.

How Start-ups Should Think About Competition

The short answer is:

1.  It is good.
2.  Bring it on.

--
The long answer vis a vis web start-ups is:

Competition validates.  If you're building a start-up and have no competition, then one of three things is happening:

1.  You're a visionary Picasso-type.  This is possible, but amazingly unlikely.
2.  You're targeting a market that is so teeny tiny that no one else cares about it.
3.  You haven't yet Googled to look for competitors.

In other words - there are very few original ideas when it comes to Internet products and there are always competitors.  Ideas that are somewhat original and potentially lucrative end up with immediate copy-cats.  (The small army of Groupon and flash sale clones come time mind.)  Attractive markets that don't have competitors at the start eventually end up with lots.  (Dodgeball, Foursquare, and the location-based game/service craze are a great example.)

Soooooo.  Having competitors means that you're on to something.  This is a good thing!

Competition isn't a risk.  I wish I had a dollar for every time that someone has said "But what about Social Media Co?  Aren't they a competitor?" because it happens a lot - mostly because we're in a hot space.  (See above.)

We're early enough in the market such that I'm not worried about a single company (or a handful of companies) drinking all of the milkshake.  Our market is going to play out over the next few years and have a few big winners and a handful of good companies.  On the contrary - if I were building a new search engine, then of course competition would be a pretty big risk.

For companies like Argyle, the majority of the risk lies in execution.  Can we build a great team?  Can we augment our product with the right features?  Can we generate sales leads?  Can we convert them?  Can we do so at a large scale?  Can we do all of this at blinding speed?  Those are the risks that I'm worried about.  Not what the other guy is going to do next.

Competition sharpens iron.  True playaz don't let competition define them, they use it to get stronger.  

Great competitors drive great companies to work harder, sell faster, etc.  For start-ups especially, great competitors can create a singular, easy-to-understand "enemy" that can galvanize a team to achieve great results.  You gotta think that NetFlix had a "Kill Blockbuster" sign hanging in their office during the very early days.

Note that the Biblically-derived "competition sharpens iron" has a counterpoint based in 10th grade chemistry - "Competition melts sodium".  Sodium is an extremely soft metal and can be easily cut with a kitchen knife.  (BOOM!  Thanks, Mr. Legget.)  

In other words - if you don't have game, then you worry unnecessarily about your peers and you eventually lose focus as a result.

More Product Or More Customers?

Earlier this week, a very smart person asked me if I would rather have "more product or more customers" - in effect asking if it made more sense for Argyle to make very near-term investments in product development or customer acquisition.

I said "more product" without hesitating and then proceeded to give what was probably a rambling, incoherent justification for my answer.

Here is a more structured argument:

1.  The best marketing program is a great product - especially considering the social media-fication of the Internets.  And doubly especially considering that we're selling a social media marketing product to social media marketers that LOVE to talk about social media marketing to other social media marketers.  The better the product, the more people talk about us, the more people talk about us, etc.  Phil Libin - CEO of Evernote - makes a similar case in this video.

2.  I'm not interested in filling a weak funnel.  We're already generating revenue, but I'm not ready to crank up the marketing spend just yet.  Our website is OK and getting better.  Our app is good and quickly becoming great.  We can keep humming along with a primarily hustle/social driven marketing program, grab the dollars that we can, sink a couple more months into product development, and then make big marketing investments once we feel better about the payoff economics.  Why spend money to drive targeted traffic to a semi-complete site/product?

3.  We don't have a lot of resources.  Given our stage, we need to spend on things that build permanent value.  $10k on software development builds a feature that we'll always have and that makes our product much more compelling.  $10k spent on marketing will give us some customer acquisition insight...but only temporary insight and at a very small scale.

Note that I'm not a "build a product and worry about making money later" kind of guy.  On the contrary, I LOVE selling and look forward to selling/marketing Argyle like the rabid wolverines that we are.  We're just not there quite yet.  But we will be very, very soon.

And the correct answer to the "more product or more customers" question is actually "both - as quickly as possible".  :)

 

RIP Maw Maw Foxtail

My precious grandmother Catherine Maude Rhyne Boggs Postell died today.  And my heart is broken.

She's the last grandparent.  My maternal grandmother died when I was 11 years old and both of my grandfathers died before I was born.

She was a hub for the Boggs/Rhyne family - and not just for her children and grandchildren, but also for dozens of aunts, uncles, neices, nephews, cousins, and family friends.  An endless stream of family members and friends have visited over the past few days and it has been fun to see them, even though the circumstances are so sad.

Maw Maw was born dirt poor - the 9th of Quince and Maude Rhyne's 11 children - 9 boys and 2 girls.  She and my grandfather Tommie Frank Boggs worked in textile mills their entire life and raised my father and my aunts Rhonda and Cathy on a family farm on Cloninger Road in Dallas.   Maw Maw lived on Cloninger Road her entire life, most recently across the road from the farmhouse she grew up in with her 10 siblings.  I'm proud of my family's humble roots.

She never had much of nothing - to borrow her own phrase - but she was most generous person that I knew.  My grandmother lived on social security checks and food stamps for the past 10 years, but still gave away everything that she didn't need - and she's always been this way.  My mother and father hit some rough times when my brother, sister, and I were young and Maw Maw would leave money in their mailbox on her way to the mill at 5:30 in the morning - just so my parents could make it to my father's next paycheck.

Laughing with (or "at", as it were) Maw Maw was a treasured pastime for my family, especially at Christmas - see here, here, and especially here for a few representative examples.  Most of the phone calls I have with my parents revolve around the funny things that Maw Maw has said or done.

She was a staunch Republican, so you can imagine her dismay when I gave her a homemade "Vote for John Kerry" t-shirt for Christmas in 2004, pictured here.  When I came to her house that Christmas morning - after not seeing her for at least a couple months - she hugged me, kissed me on the cheek, looked me in the eye, and said without a hint of humor in her voice:  "I know you didn't vote for Bush."

When I was home from school one summer, I spent an afternoon with Maw Maw singing songs and making music.  I recorded some of our work and spent the rest of the night at home "augmenting" the music with harmonica, guitar, and silly spoken word.  You can listen to the finished songs here.  My grandmother loved these songs more than anything.

It breaks my heart that she never got to hold a great grandchild.  And that I won't be able to tease her about ObamaCare.  And that I'll never eat her famous macaroni and cheese or fried apple pies.  That I'll never get to hear my Dad tell me about the latest ridiculous thing that she said or did.  That I'll never get to repay her generosity.  And that a part of my identity is gone.

Afghanistan

July 4 is a bit different this year.  We're still spending the day with family, laying around my parents' pool and eating watermelon.  And we'll probably end up smashing watermelon on my dad's head just like we always do.

The big difference this year is that my little brother Evan is shipping out for Afghanistan tomorrow.  He'll be working at Bagram Airfield for the next two months as a C-130 crew chief.  He'll work on a team to help maintain the planes and wave them around the tarmac like this guy:

Ev swears that he'll "punch Osama Bin Laden in the nuts" if he gets the chance.

I'm proud of Evan.  And I love him very much.

MBAs and Start Ups

Lots of buzz of late regarding MBA grads and start ups.  A couple of representative soundbites vis a vis the value of an MBA when it comes to starting companies:

I have an MBA - UNC Kenan-Flagler 2009 - and I'm starting a company.  And I also have a few opinions on the matter:

In descending order according to value, the most important outcomes from a top quality MBA are relationships, direction, and education.  And they're all very helpful when it comes to launching a company.

Relationships have been incredibly important to our efforts to will Argyle into relevance...and the vast majority of those that have been helpful have come directly from my ties/time at UNC Kenan-Flagler.  I made a list of 100+ prospective investors, advisors, customers, etc. a few months ago - most of whom would immediately return my phone call and all of whom at least know who I am.  That's pretty powerful when I consider the networks of those 100+ people and especially powerful when I consider the vacuum from which so many companies try to launch.

Note that you don't get the same kind of relationships from a part-time MBA.  Nights and weekends programs are helpful for the hard skills - (which I've already stated to be much less important) - but sub-optimal when it comes to relationships.  Do a part-time MBA to get a promotion...especially if you can get your company to foot the bill.  Don't do a part-time MBA to find your co-founder or to learn about launching a company.

If relationships are the most important part of the business school experience - which it will be - then you should use this as a filter when determing where to apply and attend - ESPECIALLY if you're harboring entrepreneurial ambitions.  Think about who you would like to be friends with and go there.  Not to undermine the fluffy stuff like "culture", "fit", etc. - but you're probably best off making friends with people at the best school that accepted you, provided it is a consensus Top 25 or so school.

To me, the direction one can gather from 20 months of business school is much bigger than the first job out of school.  I was able to dabble in lots of areas and work a lot of internships/part-time gigs - all in an effort to figure out what I like and what I am good at doing.  (By the way - not all MBA students do it this way.) 

Starting a company is a life decision - not a job decision.  And I used my time as an MBA student to aggregate a lot of inputs and experiences to ultimately make the decision. The most helpful classes vis a vis launching a company weren't the entrepreneurial classes - they were the "what do you want to do with your life" classes....which for me helped me answer the quintessential start up question: "How poor are you willing to be, for how long, and in exchange for what potential pay-off - monetary or otherwise?"

With regards to the education piece, I've more or less forgotten most of what I've learned.  With deep apolgies to my teachers, I probably couldn't DCF model my way out of wet paper bag.   

And it doesn't matter at all.  The first 6 months of Argyle have been about hustle, product, and customers.  And the next 18 months will be, too.  You don't need an MBA to work (productively!) for 14 hours a day and build a compelling product - you just need furious passion and an overwhelming love for the customer/problem. 

And the "I'm getting an MBA to study entrepreurship" line is total bullshit.  For one - the entrepreneurship cirriculum in most business schools is completely antiquated.  (And that is me saying it nicely.)  All about writing business plans and raising money from VCs - which is educating, but not the way the world always works.  For two - entrepreneurship doesn't happen in a clinical environment.  I wish someone had grabbed me by the shoulders during my 2nd year, shaken me violently, and told me to stop learning about starting a company and to start starting a company.

When it comes time to build a team and run a company, the MBA education will pay off in spades.  I'm sure of it.  And I'm not necessarily talking about the "how to build an enormously complex financial model" training.  (I'll hire a recent MBA grad for that.  Zing!)  I'm talking about the how to relate to people, build a team, and get sh!t done.

And then there is the tiny detail that no one discusses - money. 

Most students that graduate from business school leave with a crippling debt burden - anywhere from $150k to $250k - that more or less precludes starting a company or joining a start-up right after graduation.  So most students follow the money and who can blame them!  Some of my classmates are making bank and deserve every penny because they're incredibly talented and productive.

The problem is that many of these classmates want to start companies.  I know it for a fact because they've told me as much.  But they won't.  They're making fat salaries...and will make fatter and fatter salaries as they continue to perform...which raises the personal burn rate for all and renders the "leave my job and start a company" hurdle insurmountable for most.  This is a fact and this is how the MBA kills start ups.

Due to a variety of factors, I'm extremely fortunate to have graduated with a fraction of the typical MBA debt load.  My student loan bill is the equivalent of a monthly payment on a new Honda Accord - which gives Kelly and me incredible flexibility that we otherwise might not have.  Had I attended another school and had to rack up a ton of debt to pay my tuition and Kelly's shoes - there is absolutely no way that Argyle would exist.

The minimal debt has helped me keep my personal burn extremely low, which has enabled me to stay alive as an impoverished entrepreneur, which has given me time to figure out what to do, find a partner to help me do it, and start making things happen.

So to summarize what has turned into quite the rant:

  • Go to business school to build relationships and find direction.  Then learn stuff along the way.
  • Don't go to business school to start a company or to learn about starting a company.
  • If you're going to business school, give UNC Kenan-Flagler a look.  :)

Zombie Good Times

The Sequoia Capital "RIP Good Times" presentation is about a year and a half old.

In the past few weeks:

  • Quora - which most of you have probably never heard of - raised $11M at a $84M valuation.
  • FourSquare is rumored to have gotten a $100M offer from Yahoo! with less <1M users.
  • Groupon supposedly raised another round of capital at a $1.2B valuation.

These are all great companies, but - based on nothing but an uninformed hunch - these valuations seem awfully frothy to me.  Perhaps the good times have risen from the dead...

Rework

I read Rework cover-to-cover this afternoon.  Time well-spent.

Jason Fried and David Heinemeier Hansson wrote the book - they're two of the brains behind 37Signals, an iconic software company that creates amazingly simple, useful products and has helped redefine the online software business.

The book is about starting and growing a business.  It is simple, direct, and reasonable - basically a collection of one page manifestos, each coupled with a great illustration.  You can download a sample here.

Some of my favorite nuggets:

Who cares what they're doing?  "Focus on competitors too much and you wind up diluting your own vision."

Pick a fight.  "If you think a competitor sucks, say so."

Out-teach your competition.  "Teach and you'll form a bond you just don't get from traditional marketing."

Build half a product, not a half-assed product.  "Getting to great starts by cutting stuff that's merely good."

The content isn't necessarily earth-shattering - but the book's clarity, honesty, and applicability are truly genius.  Highly recommend the read.

 

NFLX v BBI

NFLX hit an all-time high today, which reminded how much I love Netflix, its product, and its "Freedom & Responsibility Culture".  It also reminded me how much I hate BlockBuster and everything it stands for. 

Hey Blockbuster!  Remember all of those late fees?  This is what happens when you charge "fees" instead of create "value": 

Oh - that and your credit rating gets slashed.

Adios, Blockbuster.  I look forward to reading your Chapter 11 filing.  Wow!  What a difference!

The Four Stages Of A Startup Web App

We're getting close with Argyle Social.  Close as in I can sign in to a functioning application, poke around at some stuff, create interesting graphs, etc.

Needless to say, we still have a long way to go before we're going to ask our users to pay for our product.  But we have a plan for getting there. 

Here is our four step history/plan for launching Argyle Social.  It is worth pointing out that the rationale behind this approach is driven by equal parts product development and marketing.

Prototype

My business partner Adam started kicking around a side project in the Fall of 2008.  The side project got big enough that people started to use it, so Adam invested more time developing it, and so on.  He and I joined forces in Fall 2009 and used his prototype app to jump start our thinking.

Adam never tried to monetize the prototype app.  In fact, it is still out there and people are still using it.  (800+ registered users when we last checked.)  Adam has kept it running and plans to keep it running, but he hasn't made any updates to it and most likely won't make any updates going forward.

But that doesn't mean that it wasn't enormously valuable.  The prototype app helped us:

  • prove to ourselves and others that we (read: Adam) can build/maintain a web app.
  • validate that people have a problem.
  • figure out that that we can build a product to solve it.
  • think much bigger vis a vis the problem and the product.
  • show enough momentum/committment to win a grant from NC IDEA.

Alpha

Our alpha is more or less the minimally viable version of our app.  (I guess this is the universal definition of an alpha product.)  It features our core functionality, reporting, navigation, etc. and is functional, useful, and stable.  It is by no means ready for prime time, but certainly ready for users.

That said, the app still has plenty of big holes.  We already have plans to fill most of them and hope that customers will help us decide the best course of action for filling the rest...that is if they're worth filling at all.

And that's the most important part of the alpha period - figuring out what creates value for users and what doesn't.  Thanks to some local buzz and my/Adam's network (and thanks to launching a product in a white hot market), we haven't had to work that hard to line up interest in our alpha app.  But we have worked hard to make sure that we're setting ourselves up to work with savvy users that are committed to spending time using our app, thinking through how it does/doesn't solve their problems, and then working with us to figure out the next features to develop.

It is also worth pointing out that, in most cases, the alpha can extend from the prototype.  After some thinking, however, we decided to build Argyle Social completely from scratch.  (Didn't seem like the right call to build our business around Adam's spare time, side project.)  We lost a bit of time, but we'll make it up with ability to launch from a much more reliable, stable, scalable foundation that should get us from alpha, to beta, to prime time with minimal interruption. 

Beta

Once we can answer some questions with our alpha customers, we'll make Argyle Social available to a broader auidence.  We'll start with a small group and plan to spend some time delivering lots of extra TLC in exchange for product feedback.  As we find begin to find fit with our product, we'll scale back to normal levels of TLC and start gearing up for a public launch.

One smart thing that we've done is collect beta sign ups on our site.  We're about ~3 weeks away from alpha, which probably puts us about ~10 weeks away from beta.  But we've already got tons of interested people ready to hear from us when we launch.  It is satisfying that we've been able to generate interest around our product and that we'll be able to quickly get it out to the people once it is ready.

Beta can be a bit of a squishy stage.  (Gmail was in beta for five years, for example.)  But we've got some specific goals and expect/plan to spend lots of time in alpha, validate our alpha efforts in beta, and then start charging subscriptions.

Prime Time

Prime time means you're good enough to charge a price and - more importantly - people are willing to pay it.  (We're building a business app, so it is all about subscription revenue.  Consumer apps are much different...)

I fully expect to make a strategic product/market shift within the first year, but I'm actually pretty confident that it will be after we've already got some customers using Argyle Social as we've planned it and as we're building it.  My hunch is that our pivot won't be a brand new product or a brand new customer, but more likely a feature or set of integrations that we hadn't considered before. 

Paying customers seem light years away when you're still making fundamental product decisions...but we'll get there.  Our market is starving for tools that link social media efforts to business outcomes.  And we're working like crazy to deliver.  :)

 

Introduction Cheat Code

When someone offers to make an introduction on my behalf or - as is more often the case - I ask someone to make an introduction on my behalf, I often write the intro email myself and email it to the introducer, suggesting that they use it as a template.

I do this because:

  • It lets me control the message somewhat and ensure that it is short/accurate.
  • It saves the introducer a few minutes of writing.
  • It just seems like the right thing to do, even though people don't usually expect it.

Do it.  People will use it.  And you'll be glad they did.

The Startup Soundtrack

I LOVE music.  And I LOVE (so far) starting a company.  The two obviously go hand-in-hand - I spend a lot of time at my desk blasting tunes while I churn through my to-do list.

So here are some of my startup workaholic jams.  I welcome your recommendations for more.

Eric
--

They just don't make 'em like Ronnie James Dio any more.

I find that the The Sword helps me endure Quickbooks.

Detecting a theme? Aggressive music drives aggressive growth.

Sonny Rollins for late night sessions.

Litterfin Louie

Check out my friend Habel's soon-to-be-released iPhone/iPod game Litterfin Louie.

From his site:

Eat junk. Clean up the ocean.

The ocean is being trashed by polluters! Help Louie gobble up the trash to keep the water clean. If you miss too much, the water will become toxic. Avoid obstacles and collect power-ups to get special abilities. Coming soon for iPhone and iPod Touch. Mmmmm... junk food!

There is a video of the game on the site.  Fun!

Prediction - HubSpot Will Acquire An ESP In 2010

The ExactTarget / CoTweet deal got me thinking...and here's one of many thoughts:

HubSpot is going to buy an email marketing service provider 2010.  And I have a few pretty good ideas of who it could be.

Here's why it is going to happen:

It is blatantly obvious. 

The guys at HubSpot have built a fantastic B2B lead management machine with some nicely integrated SEO, blog, and other content tools.  (And probably more - I'm not an expert on their platform.)

Email is the obvious missing piece.  I think HubSpot already provides customers tools for simple nurturing campaigns...but my hunch is that there remains MUCH room for improvement. (What about mailings that are independent of a lead form or the HubSpot platform?)

I also suspect that many of HubSpot's low/mid-tier customers would gladly dump their existing email vendor for a reasonable, integrated offering from HubSpot.

(Yes - email marketing kinda goes against the inbound credo.  But if you do it right, email marketing makes inbound marketing MUCH stronger.)

Email marketing isn't easy...

...and it certainly can't be dumbed-down into a grader.  (Zing!)  Deliverability, workflow, reputation, best practices, etc. all have a steep learning curve - both for the customer and the vendor.  The best email marketing apps are highly specialized and get all of the little details just right.

Instead of trying to build it all in-house, HubSpot would be smart to buy a platform and all of the email marketing product/industry expertise that comes with it.

They've got to keep pace.

Eventually, HubSpot will to start bumping into up-market vendors like Marketo, Eloqua, and Salesforce.com - all of which have very strong email marketing components, either native or through amazingly tight integrations.  Thus, it would take them a long time to build out a feature-complete email platform that is strong enough to compel marketers to switch from their existing vendor.

So they'll buy a mid-tier vendor, integrate the platform with HubSpot, happily accept the top-line bump from the new contracts, and make up a lot of ground with their biggest competitors - all in one smart acquisiton.

They're flush with cash.

HubSpot CEO Brian Halligan recently said that the firm's next financing round would hopefully come from public markets, which means that their last round came at a great valuation and gives them a nice, long runway to grow...a runway presumably lengthened by the gobs of cash they're raking in every month.

A $8M - $15M acquisition is certainly in their sweet spot.  And the list of email marketing vendors that match that profile is fairly short.

--
PS - Here's why it won't happen:

  • They won't be able to get a good price from a good ESP.
  • Despite everything I just said, HubSpot seems like a builder...not a buyer.
  • I'm just taking a wild guess.

Thinking About Markets And Startups - Part II

I published a mostly-baked thought regarding startups, products, and markets last week, largely driven by my prior experience as an early employee at Bronto Software.  Bronto CEO Joe Colopy added some detailed email marketing industry insight in a lenghty comment.

In summary, new products and new markets are funny things.  The first products to enter don't always win and neither do the products with the most whiz bangs.  Those that win usually do so because they nailed a target segment right from the beginning and/or because they zigged/zagged from their original thesis to follow the market and stay alive.  Financing certainly has some correlation to success, though I'm not going to do the homework necessary to figure out how it played out in the email market.

I took the time to think this through because I think that the social media marketing software market - the market we're trying to crack with Argyle Social - is following the same cycle:

The first market entrants are (correctly) targeting the top of the market.  That's where the money is and also the most obvious application of the core sentiment/monitoring technologies that hit the market first.  Not sure who the first entrants were, but my guess would be sentiment analysis vendors like Radian6, ScoutLabs, et al. and big, enterprise players like Vocus.

There are many apps in the market today and many of them are fairly similar.  The aforementioned sentiment analysis providers (basically) inhale the Internet and/or the Twitter firehose, search for your brand and/or keywords, and then apply some natural language filters to determine sentiment.  I have no idea what makes ScoutLabs different from Radian6 and I'm not entirely sure it matters.  (Interestingly, I've talked to quite a few people that use these apps...and no one has had a glowing review to share.  Pretty sure I know why.)

The first entrants are - for the most part - well funded and duking it out for the top of the market.  Radian6, ScoutLabs, VisibleTechnologies, et al all appear to be thriving, but they're all targeting the same set of customers.  Which is fine by me because it creates big, blue oceans in other parts of the market

Marketers don't know what they don't know.  For the bottom 2/3 of the market, email marketing apps solved problems by introducing a mechanism that created a workflow, presented important information, and - in general - made it a little easier for them to feel like they were doing a good job.  I think that social media marketers are in search of the same set of solutions.  They feel like they're on to something what with all of the blogging and Twittering and Facebooking and whatnot...but they can't accurately measure the impact of their efforts because don't have a decent set of tools to tie it all together.

...and all of that is a big part of the thesis behind the Argyle Social initiative.

Having said that, there are some BIG uncertainties in the market:

  • Speed.  The Internet moves fast, but innovation around the social channel seems to be moving extra fast.  We've got to get our app in the market and pronto, lest we risk getting scooped and thus lose a chance at picking up some quick momentum.
  • Dependencies.  It has taken me a while to get comfortable with the fact that we're building an app with critical dependencies on other web services.  It compounds our risk and makes it a bit harder for us to carve out a defensible nugget.  That said - all the cool kids are doing it.
  • Value.  Many might disagree, but I think that the freemium craze is fine for consumer apps, but nets out as a negative for the business market.  Lots of free apps leaving money on the table drives down value for the entire market.  And there are LOTS of free apps in the low/mid tier of the emerging social media marketing software market.

Note that I didn't list competitors.  That's because competition is good. 

And that's a post for another time.

Thinking About Markets And Startups - Part I

I started working at Bronto back when it was called BrontoMail.  Back when companies featured downloadable .pdf brochures on their website and everyone scoffed at GOOG's overpriced IPO...way before email marketing was an "industry." 

At the time, there were lots of players clamoring for position in an emerging market that we all expected would get big, fast.  (Turns out it did.)  Funny thing is that everyone's product looked the same and more or less did the same thing - especially from a "checking the box" perspective.  Every product could track clicks, de-dupe lists, dump data to .csv files, etc.  It wasn't rocket science, even though it seemed like it at the time.

The biggest differences between vendors - even though I would never admit it while on the phone with a prospect - were price and packaging.  The core technologies and product concepts were the same across the board.  Some vendors charged $25/month and targeted SMBs with ease-of-use and consumer-esque marketing messages.  Others charged $2500/month and targeted the top of the market with high-powered marketing speak and brand name customers.  Others tried to find their way in between. 

Fast forward to today.

Many of the names that mattered in 2003 are still around and thriving - ConstantContact (which IPO'ed in 2007), ExactTarget (which should IPO any day now), SilverPop, Responsys, Cheetah, and of course Bronto - which mattered to me at the time, but wasn't big enough to matter in the broader email marketing software conversation.

Several other names that mattered in 2003 are MIA - CoolerEmail, iMakeNews, Topica, and probably more if I really thought about it.  If I recall correctly, CoolerEmail was actually one of the first to productize email marketing software.  So much for a first-move advantage.

So why do some players win and some players lose early markets?  I can think of three reasons:

1.) Financing.  Some companies started out with enough capital to out-spend, out-market, and out-last the competition.  

Some hung around long enough to get it right. Others hung around long enough to pay themselves nice salaries while they spent their company out of business.

I'm too lazy to do the legwork necessary to confirm my hunch, but I'm certain that many of the leading vendors in the market today started off with a healthy slug of financing.  Though I think it has MUCH less to do with their success than #2:

2.) Focus.  Some companies focused on a particular market segment and pounded it into submission.

ConstantContact dominated the $20/month segment in 2003 and it still does today.  It never wavered from a stripped-down, simple, easy-to-use product marketed with a "You can do it!  It is so easy!" message.

Bronto didn't have product/market focus in the beginning - we were happy being "a step up from ConstantContact...and less expensive from ExactTarget".  A precarious place to be.  The company finally figured it out a few years ago, re-focused the offering/message around ecommerce, and has been killing it ever since.  Turns out the middle is a tough place to be when it comes to marketing products - customers are either trying to step up their game with a better app or cut costs with a cheaper app.

3.) Fudge Ups.  Some companies just had bad products and/or poor execution.

Stay tuned for Part II when I explain why I think all of this matters.

One Week Down

The Argyle Company just wrapped up its first week at full strength.  A few lessons learned over the past couple months as we've taken the first steps of a (hopefully!) long journey:

Find a partner.  This past summer/fall, I spent a lot of time navel gazing in search of the right first steps toward a software start-up.  I knew the market I wanted to enter and even had a general sense of the product I'd like to build.  But I couldn't really articulate what I was thinking, let alone develop the product.  (I'm a seller, not a coder.)

My then-prospective business partner Adam and I started getting together and stuff just started happening.  The collaboration and accountability was like a shot in the arm after a period of wandering alone in the wilderness.

So - if you're looking to start something, I suggest that you start looking for the right co-founder as soon as you start getting the idea itch.

Don't delay the equity conversation.  Adam and I had the equity/role/expectations conversation over a series of meetings a couple months ago.  Awkward, but necessary...and also done pending some signatures on a handful forthcoming legal documents.  

It would have been really easy to delay the conversation, but it also would have been a mistake. Ownership is a sticky issue that you need to get right at the start.  Plus - it is just the first of many difficult questions that start-up founders will face.  So you might as well just deal with it and move on to the next one.

Regarding roles, we used HubSpot as a model.  Two founders - sales guy CEO and product guy CTO. Hopefully we'll have a fraction of the success that they've engineered.

Don't waste time with a business plan.  Business school is all about business plans.  The real world isn't. People don't read them and you don't have time to waste writing one.  Instead of planning your business, I suggest that you just start building it.

That said, you should definitely start writing.  I recommend that you:

  • Write an executive summary that can brief prospective advisors, etc. on your company. 
  • Blog to articulate your market/problem/product thesis and to generate search engine juice.
  • Set up a wiki to manage research, internal docs, etc.  Way better than doc files.

Put yourself out there.  Once you've refined your market/problem/solution thesis into an actionable nugget, start talking about it to anyone that will listen.  You'll be amazed by how:

  • You start to really believe in what you're doing.
  • You get better at articulating your thesis.
  • People are willing to help. 

Incubator Overload

This morning's LocalTechWire mentioned the launch of Appubator - the 4th new Triangle-based tech incubator I've heard about in the past few months.  Did someone start an incubator incubator?

Appubator focuses on wireless app development, so at least it is a bit different.  Add it to the following list of old and new technology incubators in the Triangle: