Will Marlow - Filed under 'Startups'

January 23, 2010

Hasn't That Been Done Before?

When you get ready to do a new business venture of almost any kind, you should expect a lot of people to ask, "Isn't somebody already doing that?"

The answer is: I hope so. If no one is doing it, or planning it, or offering a different version of it, there is likely no developed market for your business. Competitors add legitimacy to your plans. They help "soften" the market by reaching out to customers. They also commit themselves financially to a specific way of doing things, and they create huge costs for themselves if they ever need to quickly change directions. They help prove or disprove the viability of risky plans, and they pay the full cost for their mistakes.

The presence of competition isn't a reason to avoid a new business venture. The whole point of a new venture is to offer customers a compelling reason to hire you, instead of the other options.

Will Marlow co-founded AlumniFidelity to help his clients reposition their fundraising to benefit from Web2.0 technology and marketing techniques. He’s working with clients such as UVA, the College of William & Mary, the University of Oklahoma, Bowling Green State University, Randolph Macon College, and he loves nothing better than a thorny marketing challenge. Email him at will@alumnifidelity.com.

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Filed under // Business new venture Startup Startups venture capital

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December 26, 2009

The Cost of Building a Business in 1995 vs. Today

I was just reading the 2005 blog post by Ryan McIntyre about the plummeting cost of doing a startup, and thought I'd share the comparison of prices for hosting services in 1995 versus 2005.

Bandwidth: $1100/megabit/month in 1995 vs. $128/megabit/month in 2005
Cage Space: $175/sqft/month in 1995 vs. $25/sqft/month in 2005
Disk Storage: $1,300,000/TB in 1995 vs. $3,300/TB in 2005 (SCSI RAID)
1-CPU Server: $25,000 in 1995 vs. $1,000 in 2005 (web server class machine)
4-CPU Server: $360,000 in 1995 vs. $38,000 in 2005 (with 16GB RAM)

Most investors and entrepreneurs LOVE talking about the low costs of doing an Internet-based startup these days.

Which is why I was very glad to read Bill Burnham's great article about the true costs of building an enterprise startup, and why plummeting software costs don't totally change the game for enterprise startups.

Burnham has three main points (all true) as to why "enterprise startups" (think Blackboard or SalesForce.com) are different from "consumer-startups" (think Google or Twitter):

(1) enterprise customers don't do "betas," -- that is, they won't buy anything that's not ready for prime time;

(2) enterprise customers need customer support and sales attention (which Google is learning as it begins to enter the enterprise space for the first time); and

(3) enterprise customers want an inherently stable infrastructure, which costs money to build and maintain.

The only PS I would add to Burnham's post is that cloud computing has a fundamentally different value proposition for enterprise businesses than it has for consumer businesses. Enterprise businesses use the cloud to deliver better software, not simply cheaper software. An enterprise product (whether cloud-based or not) needs to be fantastic to be viable, because being cheap isn't good enough.

And to make a truly fantastic product for enterprises, you need to follow an iterative development process to find the right product-market fit. That is, you would never dream of building a software package alone in a room with four engineers and unveiling it to your enterprise customers at a grand opening. You need to build a non-beta product that is ready for market, make sales, get customer feedback, do A/B testing, get customer feedback, expand your reference-base, incorporate customer feedback and A/B test results into new features, and repeat until the product fits the market, and you're ready to scale. (Of course, this is similar to the process you follow when building consumer software, too, but in this case you need to factor in the higher costs for doing it (1) to a higher non-beta standard for each iteration, (2) doing it in a stable environment, and (3) incorporating sales and support resources starting on day one.

In other words, falling hosting costs may have reduced the overall price tag (with those cost savings coming primarily early in the process), but bandwidth and "cage space" aren't the only things that you need to pay for when you set out to build a fantastic enterprise company.

Will Marlow is the co-creator of AlumniFidelity, which helps schools and nonprofits improve their online fundraising results. Email him at will@alumnifidelity.com.

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Filed under // Bill Burnham consumer business Enterprise business Ryan McIntyre Software development Startups

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December 22, 2009

The Most Valuable People to Work With, and the Story of Little Tuppen

The rarest and most valuable people in a startup company are the ones who not only understand their role, but can perform that role, even when things that should happen first, don’t happen first. If you can't find these people, you can still be one of them yourself.

Without these types of people, the first part of a startup would feel like the story of Little Tuppen, whose mother needed water to help her stop coughing, and everyone wanted to help, but they all wanted her to do a different task before they would lift a finger. (The stream told her to see the tree, the tree told her to see the boy, the boy told her to see the cow, the cow told her to see the blacksmith...)

In the earliest days, this may be your feeling when you approach your very first investor, who wants you to have traction, or the very first clients, who want to know who your other clients are, or the VCs, who want to know about the other companies you've built and exited, or the potential partners, who want to work for a startup as long as it's already scaling halfway up the hockey stick.

Your only hope is to be the type of person you're looking for, and be grateful (I am) for all of those great people who find you.

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Filed under // Business plan early-stage investing Little Tuppen Seed-stage Startup Startups VC VCs Venture capitalists

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December 9, 2009

How to Learn from Google's Beta Tag

The beta tag is one of Google’s brilliant hallmarks.

The beta phase (it can actually last forever) solves one of the key challenges in software product development. The first challenge (unsolved by the beta phase) is to build software that solves a serious consumer or business problem, which is no small task. But the second challenge (once your software solve a serious customer problem) is that you can never figure out how human beings will actually use your software once they get their hands on it. That is, unless you have a strong beta program and you watch a large number of your users in action, and you learn from them.

Google is the master of using emergent data. Don’t design Gmail. Let your beta testers play with your new email system until the right patterns emerge, and let them design Gmail for you. Same with Twitter. Let the right features emerge, don't airdrop them in from corporate HQ.

Having a strong beta culture is all about knowing when to stop inserting your own preferences and opinions into things, and letting the end users tell you how the product should be designed. That’s when the software gets designed right.

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Filed under // Beta Google Software Software development Startups

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December 8, 2009

How to Stay Ahead of the Game in 35 minutes

For the last 42 days, there has been a YouTube video of an awesome presentation about trends in high tech by my hero Geoffrey Moore (below). Over the last 42 days this video has been viewed a grand total of 617 times, according to the YouTube statistics. Anyone who wants to gain a better understanding of cloud-computing, and how consumer software is entering the enterprise world, would be interested in watching this.

If you're like me, you appreciate finding a very, very valuable bit of content like this presentation by Geoffrey Moore, and you appreciate it even more when you know that less than 1000 people are interested enough to watch it, which means that you'll be gathering uncommonly held data. Or, to think of it another way, you like knowing that you are the 618th person to watch the high tech video, and you're NOT the 502,219th person to watch Porn Stars and Tiger Woods in the last 24 hours.

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Filed under // Emergent Data Geoffrey Moore Gmail Google Growth High Tech I/O Startups Tiger Woods

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December 7, 2009

Here’s to Putting All Your Eggs in One Basket (re-reading Crossing the Chasm)

Sometimes it’s a good idea to put all your eggs in one basket. This is one of the key lessons of the startup bible, Crossing the Chasm, which I’m re-reading right now.

The Chasm is the place where many high-tech startups die. It’s the gap between the early market of innovators (people who are enthusiastic about buying a groundbreaking product that is only 80 percent complete) and the pragmatists (the people who look at a product that is 80 percent complete and say, Where’s the other 20 percent?).

In order to leap across the Chasm, you need to commit to building the “whole product” for at least one target customer. Rather than making the common mistake of building a product that’s got something for all your potential target customers, you need to give just one target customer everything. If you do that, you’ll get your first round of pragmatist customers, who will be your reference base as you seek to get more pragmatist customers. (Don’t forget: there are a lot more pragmatists than there are innovators, so you’ll want your reference base to be full of pragmatists so they can tell their friends.)

I regularly recommend Geoffrey Moore’s book Crossing the Chasm to other people who work at startups. For now, this book, along with the sequel, Inside the Tornado and Guy Kawasaki’s Art of the Start, stands alone as required reading for entrepreneurs, in my opinion. If anyone has suggestions for books that they would recommend to entrepreneurs, please let me know at will@alumnifidelity.com, or @willmarlow, or in comments below, or let me know when you run into me on the street :)

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Filed under // Art of the Start Crossing the Chasm Entrepreneurs Geoffrey Moore Guy Kawasaki High Tech Startup Startups Technology

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November 17, 2009

How to Create Innovation in Your Organization

I attended a good panel this morning organized by the people at Ogilvy PR in DC. The topic was innovation in organizations, and there were some great panelists.

We ran out of time, but I would have loved to discuss the dynamic between the outward-facing guys and inward-facing guys within companies. My own attitude has been that a company should do its best to create tension between the outward-facing team (maybe led by the CEO), and the inward-facing team (led by the COO). Both teams are essential to stimulating innovation. The trick is, even though you want to foster tension between the outward and inward forces, you need the outward force to win often enough to keep people very busy.

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Filed under // AlumniFidelity Entrepreneurs Innovation Mason Business Alliance Startups

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