Startup diary: Questions from your investor can throw up valuable answers
We're in the middle of raising our seed round, and that means I get to explain our company and its strategy to lots of different investors.
Since this is one of those things you have to do anyway, it's best to lean into it and take advantage of all that free advice - experienced business consultants are pretty expensive in the real non-startup world. No matter how carefully you've thought about your business (even if you write about it every week in public), you'll still get asked questions that expose unclear thinking. You'll also get questions that expose unclear explanation - these are all useful and you need to pay attention, because, yes, your baby is ugly.
This week I'll cover three of the more interesting questions that have come up about our approach. First, why did we start with marketing when we had no product? Second, how on earth can we feasibly build a system that serves different stakeholders? And third, how do you know there's a market, especially when it comes to the sponsors and exhibitors at technology conferences?
We started with marketing because it is an excellent way to validate a market need. There's a classic hustle in Silicon Valley - put up a single page website selling your (non-existent) product, and capture email addresses. You email anybody who signs up with a holding email thanking them for their interest - and you'll let them know as soon as the product is ready. It's a classic 'fake it till you make it' strategy. Of course, there's a startup that automates this for you: launchrock.com.
The benefit of this approach is that you can gauge real interest. Buy some Google ads for some keywords relevant to your idea and see who turns up. If you get no traffic, it's a dud and you shut it down. If you do get some interest, that justifies further investment of time, and maybe even the building of a minimum viable product (MVP).
Powerful as this approach is, there's an even more powerful technique you can use, and it's the one we chose: build a community first. Instead of somewhat soulless advertising-based market test, why not try to collect a like-minded group of people in one place, and see if they gel? This might sound a bit wishy-washy, but it can be incredibly powerful.
In my last company we stumbled on this approach somewhat by accident - our adviser, Eamon Leonard (a founder and angel investor) had already discovered the power of community building in his previous company, and achieved a fast exit as a result. It gave us a critical advantage in both sales and recruitment - we got to over 100 staff without ever once using a recruiter, and over €10m in sales without any coherent sales strategy. Gaining the trust of a community is insanely powerful. That's why I'm using the same strategy again with voxgig. We started with a newsletter, proved that there was an audience, and then respected that audience by investing in a marketing team that builds useful and high-quality content. We barely mention our company or product - we don't have to. But when we launch, we won't be worried about where our users will come from. They already know us and trust us.
Next question: we serve multiple stakeholders in the events industry: speakers, organisers, exhibitors, sponsors, and so on. Each of them has specific needs and will use specific, different, features of our product. And out there on the big internet there are existing solutions from established business - some of them pretty big companies. It seems infeasible to complete on features in this landscape.
The events industry is a traditional industry that is undergoing a 'digital transformation'. People in the industry are waking up to the possibilities offered by better online tools. Up to now, product offerings in this space have focused on ticketing because is the obvious place where there is money. If you go down that route, you end up building event management software for event organisers. Every other stakeholder is secondary.
This ignores that fact that all of these stakeholders need to collaborate, and that they currently spend a great deal of time and energy exchanging emails and spreadsheets - it's all very inefficient.
Efficient collaboration is far more important than any specific feature to any specific stakeholder. Our strategy, to borrow a term from computer science, is to go 'breadth first', rather than 'depth first' on stakeholder features, and instead focus our energies on the collaboration feature set - they are common to everyone. Most organisers don't need multi-department budgeting and reporting, but everyone needs to make sure that they caterers turn up on time for their event - that's where the real headaches are.
Final question: how do you know there's a market? Building a community is not sufficient to prove there is a market. You need to talk to the people who hold the cheque books, or at least, those who influence them. In parallel with our community-building efforts, we spent the first half of 2018 doing customer discovery interviews and meetings, and writing up detailed notes. We did this until we were sick of them. How do you know when to stop? When you don't hear new things - otherwise, keep going.
Out of these interviews, we landed our trial clients - another important part of the product validation strategy. But more importantly, we validated that the decision-makers in our target stakeholders, particularly in the conference exhibiting and sponsoring companies, understood that there was a problem, and understood its impact. We needed to make sure that our basic value proposition made sense to them. Out monthly user billing depends on these senior people being willing to use their company credit cards to get us started.
Even though we had had this problem ourselves, and even though we thought we had direct insight into the industry, it was still necessary to collect the data to get real evidence that the problem was bigger than just our own special cases.
These customer discovery interviews were so positive that we ended up increasing our staffing and expenditure to accelerate the product build-out. There's nothing more simultaneously frustrating and encouraging than customers who would give you money today if only you had a product ready.
Marketing update: let's change the format of this section into something more structured. It deserves to be more than an end-note. Our marketing activities are designed to build an audience and community that will ultimately trust us enough to use our system. We track the size of that community and aim to build it over time. This isn't the only way that we get new users, and in the early days won't even be the main way. But over time, it will dominate all other growth mechanisms (that assumption drives our funding strategy - you need a war-chest to make it work).
The big news is that we have decided to accelerate the production of our newsletter for event organisers (The 'EventProfs Newsletter' - the hashtag #eventprofs represents event professionals in the industry). We're able to do this because we have a wonderful new Head of Marketing, Kim Mackenzie-Doyle (who recently ran the country-wide Mind Over Matter design event) who is accelerating our execution ability when it comes to marketing. She's not bad on product design either, so it's a double win (startup hustle tip: if any given activity is not generating at least two net gains, you're not in the game).
From this week I now have some new juicy metrics for you: Eventprofs newsletter: 312 subscribers (we're off to a flying start as we've now built up a network in the industry), and an open rate of 24pc (that will come down to more normal levels as we grow next year). Speakers Newsletter (this is the original): 5,208 subscribers, and an open rate of 14pc - better than average. We'll now split our outreach activities between these two newsletters. We'll observe the effect this has on the subscriber growth rates in the first quarter of 2019 and adjust as necessary. We also have the podcast (where I interview technology conference speakers), with 25 downloads last week. We have yet to put in place a promotion plan on the podcast.
Richard Rodger is the founder of voxgig. He was co-founder of Waterford-based firm Nearform