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Figure this out and you may have a business.
20 points by NSX2 on March 2, 2008 | hide | past | favorite | 21 comments
Just got done with this pretty good book on marketing called "Selling the Invisible" by Beckwith.

Most important thing I got out of it was the points you need to cover to have a complete value proposition to any potential customer; you usually need to cover all points to get people to take their wallets out:

We are (who are you?), and we do (what do you do?) for (who cares what you do? who do you serve?) who need (what special needs do those you serve have that they can't take care of without you?). Unlike our competitors (who are they?), we're different in this way (how so?) and that's important and people care about that because (what's the unique benefit to your difference?).

Pretty simple, but how many startups you think can fill in all those blanks? I'd be willing to bet next week's beer money most people never think it through, from a marketing perspective, past the "who are we" part ... maybe the "what we do" part.

A pithy homily does sell business books. I can't disagree.

But often the answers to these questions are found (or changed) by experimentation. The point of a scrappy startup tends to be that experimentation, not a sophisticated execution of a great idea.

I've read your comments, and while I appreciate your economics perspective, and I do agree that's immature to pretend to be a sophisticated business when really what's being built is a sloppy experiment, it's not going to be well received to attack the focus of this community: experimentation.

I don't see how most of your post has anything to do with what this post is about.

This post is not about a "pithy homily". It's not intended to "inspire" anybody with platitudes. This is about understanding the underlying reality of what makes people care enough about your "experiment" to pay you money for it.

I was under the impression that people here were starting startups in the hope they they may one day become successful businesses. To make that transition all the questions above need to be answered. I thought that might be relevant to some people as being able to answer all those questions is something lots of startups, Y-related or not, have trouble answering.

> The point of a scrappy startup tends to be that of > experimentation, not a sophistacated execution of a great idea.

Well, that may be the point of your startup, but this post was for people who want their startups to be about good enough execution of an idea that paying customers think is great.

That translates into financial transaction which translates into a functional business.

Experimentation should be the points of students still in school, major corporations with money to support it, and people who are tinkering while having another source of income. If you quit all that and "dropped out" of the system to start a business, well, the only point is to figure out how to start making money. Especially over the next 4-5 years.

To the extent the tinkering strays away from that and becomes absorbed in itself for its own ends, you'll wind up with an interesting experiment, not a startup that becomes a business.

That's not me "attacking" the delicate egos of any programmers, that's cold, hard economic reality. Whine if you wish but people still won't hand over their increasingly scarce money to you as long as you pout instead of figuring out how to answer all the above questions.

I think that we should argue between ourselves in a long thread... starting now. So far, I have the last word!

How could that possibly be when this post comes after yours?

Because you, dear sir, have less karma in your post.

I have enjoyed all of Harry Beckwith's books. Short, to the point, all the stuff that goes without saying but worth another read anyway. "What Clients Love" is also very good.

"I'd be willing to bet next week's beer money most people never think it through"

Are you a heavy drinker? If so, one of us can set up a poll while you get out your checkbook.

Sadly, I am not a heavy drinker. Usually 1 six-pack of Sapporo Light and 1 six-pack of some sort of Belgian white ale is my "thing."

But for what that's worth, that comes out to about $16 per week. Which I have full confidence I'll get to keep the majority of based on a poll like you'd describe.

I would venture that 95% of "startups" never get past my personal modification of question #2 from the consumer perspective, ie, "We do this."

Consumer version: "What do you do for me?"

Go ahead and start your poll! I got 16 bucks to play with!

Well put. While people say dont worry about the business plan, just get your product launched, they really need to look at the overall idea of how the big the market is. Know exactly who you are targeting and how big that target is. Personally, i find the best way to do this is to write a detailed plan out for your teams own benefit. Its worth the time to write your plan out now and make changes before you spend hours on end coding the product, only to change course. But thats the business students perspective for you...

Not to mention that even an informal business plan forces you to do away with your own fluff and focus on stone-cold reality that will not go away until you address the questions it poses.

Lol, have you ever _read_ a submitted business plan? In my experience, most business plans are exactly the opposite: focus on fluff.

Uh ... not sure what business plans your talking about, but I would take the worst business plan any VC gets and wager that more people would pay money for whatever it describes, however poorly, then stuff that most programmers put up on the web with a "me and all my programmer friends think it's cool, so give me your money, how about it?" approach ...

When Greg Mcadoo of Sequoia spoke at YC last week he said that Sequoia looked for startups founded by people solving problems they themselves faced.

Good for him.

I'm sure he, like all VCs everywhere, says exactly what he means and would never tell an audience of prospective entrepreneurs what they want to hear just so he doesn't narrow his own investment options in the future.

Not sure what a speach on venture capital funding has to do with creating a successful business based on convincing customers to hand you their money, but I digress ...

Let's say a "business" is defined as "getting a venture capitalist to write you a check."

Try to get him to follow through with cold, hard cash for for, say, a problem you face that nobody else cares about, let alone cares enough to pay for.

For example, go call him up and tell him, "I have this problem: there's this annoying poster on Hacker News called "NSX2" and rather than manually respond to posts he puts up that I disagree with, or, for that matter, rather than respond to any such posters, in a flash of inspiration I created this superb program that summarizes all the key points of my essays into a set of 79, prioritizes their uses as responses, and anticipates what annoying posters are most likely to say based on empirical data I've collected since starting Hacker News and matches their anticipated annoying posts with a point in one of my essays that has the most statistical probability to express what I disagree with and how. Fund me."

Please let me know how that works out for you.

"Not sure what a speach on venture capital funding has to do with creating a successful business based on convincing customers to hand you their money, but I digress ..."

VC's are an integral part of the setup for many startups that go on to become successful businesses. The list includes Google, Cisco, Ebay, and almost all other big tech companies.

Perhaps you're aware that these days VCs are exponentially more likely to invest in you if you have paying customers than if you have a solution you think is interesting but nobody else agrees with you enough to pay you for it.

And I think Ebay was actually making money and showing a clear proof of concept before it got funding. Google began during a period of collective insanity; I doubt they'd be able to raise a penny with a similar starting proposition today.

Cisco I have no idea about.

But as for "all others", not sure what you mean but Microsoft, for example, was making money as a private company before getting VC to help with the IPO process, and the terms they got investment on a clear indication of their cash-based negotiating leverage at the time.

Oracle if memory of my reading serves correctly was making money first.

SAP had paying customers ...

When you say, "almost all other big tech companies" started off with VC as a prerequisite, can you specify what you had in mind?

What I mean is that not all products can be developd using only your own money, and even less can be grown to successful business without taking in money from investors. This is a normal procedure in many startups, where the goal is to grow fast. This requires money, and this money comes from investors.

And if the best search engine we had today was Altavista I don't think it would be a problem for Google to raise money today.

That would be a pretty cool product if it actually worked -- it could be used to automate a lot of customer support. I'd invest.

I'm pretty sure PG could build such a thing. You have my blessing. If it works out for you guys you can make even by hooking me up with some programmers.

well, the YC app asks at least 2 of these. so anyone who applies to YC thinks about them!

What do you understand about your business that other companies in it just don't get? (how so?)

Who are your competitors, and who might become competitors? Who do you fear most? (who are they?)

Sounds like the beginnings of a summary for SqueezedBooks.com :-)

His books are great. Good advice about forgetting about who you are and focusing on selling the benefits of your business.

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