Brad talked about how he has found ways to keep his relationship going in spite of a schedule which may explode at anytime. Some solutions are easy, such as warning his wife that he is expecting an important call that may come during dinner -– 1) acknowledging her; 2) being clear if he is going to need to be interrupted; and 3) setting expectations appropriately.
Someone buys something in return for something. Transactional sites are about shopping cart conversion, cart size, and abandonment. To be useful, however, it should be a long funnel that includes sources, email metrics, and social media impact.
Someone votes, comments, or creates content for you. Collaboration is about the amount of good content versus bad, and the percent of users that are lurkers versus creators. This is an engagement funnel, and we think it should look something like Charlene Li’s engagement pyramid.
Someone uses your system, and their productivity means they don’t churn or cancel their subscription. SaaS is about time-to-complete-a-task, SLA, and recency of use; and maybe uptime and SLA refunds.
Someone clicks on a banner, pay-per-click ad, or affiliate link. Media is about time on page, pages per visit, and clickthrough rates.
Players pay for additional content, time savings, extra lives, in-game currencies, and so on. Game startups care about Average Revenue Per User Per Month and Lifetime Average Revenue Per User (ARPUs). Games need to solicit payments without spoiling gameplay.
Users buy and install your software on their device. App is about number of users, percentage that have loaded the most recent version, uninstalls, sideloading-versus-appstore, ratings and reviews.
There’s a common view in Silicon Valley that growth is the one thing you should focus on. But it’s hard to grow if you are churning your users. And if you are paying for user acquisition, as many startups do in search of growth, then retention/churn becomes even more important.
You might think you have product market fit and so you scale up your hiring, your marketing, your sales, and your capital raising and spending. But if you can’t retain a healthy percentage of your users past ninety days, you don’t have product market fit yet and all the investment you make in your business is just money down the drain. So focus first on retention, then scale.
(1) Re. “It’s hard to grow if you are churning your users” — see Why retention is the key to growth.
(2) If you have low 90 day retention, then you don’t have product-market fit. But 90 day retention might not be sufficient on its own to demonstrate product-market fit. Consider also user engagement, your net promoter score, whether your product is liked or loved, and the ease of closing sales.
(3) Cf. Product-market fit and fundraising and Don’t scale before you have product-market fit.
If you repeatedly hear any of the following comments, chances are you are not solving a critical problem:
1. “If you made your app easier to use I would start using it.”
2. “I’m really busy right now but I’ll start using your app soon.”
3. “If your app was cheaper I would start using it.”
(1) David Cancel says that this feedback indicates you’re not solving a critical problem. I’m not sure the problem needs to be “critical”; perhaps it’s enough that the customer has a “Job To Be Done“.
(2) Cf. What problem are you solving?
Edited excerpt from an email I sent to a founder:
The most common mistake I’ve seen founders make in external meetings — I’ve done this countless times — is to talk too much. We’re passionate about our idea, so we want to talk about it. But that means we miss the opportunity to learn from the person we’re meeting with.
Here are five tips for how to avoid talking too much in a meeting. Before you read them, let me say that it’s far easier to give this advice than to live it (I’m actually bad at this stuff). Having said that, I wish that someone had given me this advice early on:
1. Send background information in advance. You’d be surprised at how willing people are to read material in advance. This increases the time efficiency of your meeting with them, since you no longer need to convey that info in the meeting. Write the material specifically for that meeting — don’t send generic marketing material — and keep it short. Regularly rewriting a brief overview of your company or key issues helps you hone your message and clarify your thinking.
2. Write down questions to ask the person ahead of the meeting, and consider sending them the questions in advance. This forces you to think of great questions to ask, and to put time into formulating them.
3. Make your key goal for the meeting to learn from the other person. Keep that goal in mind during the meeting, and it will change your behavior.
4. Set a target for what % of the conversation you want them to be talking. Remind yourself of that target during the meeting.
5. Learn how to ask great questions. This is an invaluable valuable skill which takes a lot of work to develop (I struggle with it), but is potentially transformative for your organization. See the entries in the section on Asking Questions and Listening here.
Earn the required experience and learning
The chances are that you won’t hit the jackpot first time around. I often call my previous not so successful startup my “required learning” which led me to have more success with Buffer. Learning tends to only happen through doing.
You want to have something you’re doing
It’s very powerful to have something you’re actively working on which is your own, something to drive you. This “something” can be what causes you to reach out to someone, or attend or offer to speak at an event. These kinds of activities create serendipity which can have a huge impact.
Good ideas come through iteration
The startups which are most successful are vastly different today than the initial idea. I think that this is actually the norm rather than the exception.
(1) Joel titled his article “Why you should continue working on your bad idea”. But if you gave the idea a real shot, and now you have a better idea, shouldn’t you switch? So perhaps a better title would have been “Why you should always be working on an idea, even if it’s not yet working”.
(2) Joel’s assertion that good ideas come through iterating is a reason why you shouldn’t pivot too fast.
(3) Re. “Good ideas come through iteration”, cf. The best growth teams maximize the velocity of tests.
You can only raise money by pitching the “Dream” or by selling “Traction”. So either bootstrap your startup, or raise money in the early “dream” (no code, no plan, just a dream) phase or in the “traction” (the model is working) phase of your business.
(1) Cf. The real difference between funding rounds.
(2) Re. You can only raise money by pitching the “Dream”— see Startup fundraising: Finding true believers vs. convincing skeptics.
This is something we taught ourselves to do in Seeking Alpha, with tremendous results:
Many times someone makes a suggestion and someone else raises an objection:
Person 1: Wouldn’t it be great if we did X?
Person 2: Yes, but the problem with doing X is Y.
The problem is you’re now at a dead end. The objection means that Person 1’s idea can no longer be discussed. The solution is to flip the suggestion into a question, and incorporate the objection as a constraint:
The question to answer: How can we do x in a way that ensures that y doesn’t happen?
Here’s a concrete example:
Seeking Alpha employee’s suggestion to hedge fund manager: You should launch a subscription research service in our Marketplace. Other hedge fund managers have found that doing so generates meaningful income, valuable feedback on their ideas, and valuable ideas from their subscribers.
Hedge fund manager’s objection: Yes, but I’m a long term investor and I invest in relatively few stocks. If I publicize my ideas on Seeking Alpha, there will be no reason for anyone to invest in my fund, so I’ll cannibalize my main business.
The question to answer: How can hedge fund managers generate meaningful income by launching a paid service in the Seeking Alpha Marketplace while ensuring that there is no risk that they cannibalize their fund?
Once you’ve formulated the question in a way which incorporates the objection as a constraint, it’s easy to brainstorm about possible answers. In this case, for example, the hedge fund manager could limit the subscription research service to ideas which aren’t suitable for their fund, or they could write about stocks they own only when the prices have appreciated from when they purchased the stock for their fund.
Can you think of an example from your startup where you can apply this approach? If so, write it as a comment below.
Edited excerpt from “Monetize Backwards” to Build a SaaS Business That Lasts by Chris Savage:
At Wistia, we started with a paid plan only, and over the last eight years, we’ve progressively made the product more and more free. It’s counterintuitive, but constraining growth by not making our product free from the start has been one of the best decisions we’ve made.
The #1 question when you’re starting out as an entrepreneur is whether or not you are building something that people actually want. If someone signs up for a free product, you’ve only learned that someone was willing to exchange a small slice of time to try it. That teaches you very little about whether you’ve built something useful. The startups that survive aren’t the ones with the most experience—they’re the ones that can learn the fastest. Someone’s willingness to pay a good hunk of cash for your product provides you with undeniable validation that you’ve found an opportunity to build a business.
It’s hard to have any conviction about the worth of your product if no one has paid for it before. Typically, data from previous sales informs your pricing decisions. When you’re first starting out, you don’t have any information, so it’s crucial to start gathering pricing data. You can only do that if you charge for your product.
Monetizing backwards constrains user growth early on, and it makes it unlikely that you’ll be an overnight success. But for us, slow growth was one of the best things that could’ve happened for our company. Having few, paying customers forced us to focus 100% on what those customers needed.
(1) If you start with paid you generate revenue earlier. This is a significant advantage which Chris doesn’t mention.
(2) My personal view is that while both approaches have advantages and disadvantages, you’ll be more successful if you work at figuring out the end game — monetization — as early as possible.
(3) In most cases that means paid before free. The exception is if you are able to monetize your free product. At Seeking Alpha, for example, we have a meaningful advertising business from monetizing our free content. This has given the company income to grow our free audience and figure out our paid products, such as our Marketplace.
(4) “Coming up with the free vs. paid line can be incredibly difficult and is a careful balancing act”, says Sachin Rekhi. Cf. The challenge of monetizing free products and The biggest risk of freemium.
I’ve heard many investors and some executives repeat the mantra, “Never offer exclusive deals,” and since this blanket statement is generally bad advice I thought I’d offer the less conventional but I believe more practical version of why exclusive deals can actually be a huge bonus for a startup and why I actively encourage them.
Sales is all about knowing the key values of your buyer: What are they trying to achieve in working with you, why do they care about your solution and how will it help them economically? If you know that at senior levels the buyers often have an enemy in mind in each of their big moves in the market you can use that to your great advantage.
The beauty of these types of buying motives is that exclusivity comes at a cost to the buyer and they often don’t mind paying up to get it. As a startup this is often the one true source of strong leverage in a negotiation to get a better price, get a longer-term commitment, get PR commitments and so forth.
To craft exclusivity agreements, make them time bound, and name the competitor who you’re not allowed to sell to. If they won’t name the competitor, specify the industry or geographical region as narrowly as you can. In exchange for exclusivity, you want larger contracts, longer-term contracts, more commitments to success, and funding for accelerated development.