For the first half of my career I worked in professional services, first as a lawyer, then in management consulting, design, and most recently digital marketing. To be honest, all of these consulting disciplines blurred into one because the fundamental mechanics were so similar. The day-to-day issues like client management, project management and billing are the same in pretty much every external consulting firm. Even the larger issues are also pretty much the same, how to help the client sell more, connect with their audience, and build their reputation. But moving in-house to work in marketing was a rude awakening. In-house marketing as part of an internal growth team is very different from external consulting.
Most consultants secretly look down on internal marketing teams. In-house marketers can appear conservative, unimaginative and slow moving to revved up consultants trying to ram through big changes in a hurry. Having lived both sides I now have a good view into how things look on both sides of the table.
In-house marketing teams think on a longer time horizon than external consultants. When I’m planning marketing activity at SeedInvest I’m seriously considering where we want the business to be in five years time. By contrast, an average consultant isn’t thinking much past the end of their contract, and even the great ones are still only thinking a year or two out. The longer time horizon can make in-house marketing teams seem slower, but really they’re just building the foundations more carefully, because they know that they’re going to have to live in the house.
In-house marketers are more committed to success than most people give them credit for. There’s a saying that the chicken has an interest in bacon and eggs, but the pig is committed. When you’re in-house, a misstep with the brand can cost your job, your livelihood (if you have stock options), and your reputation. By contrast, an external consultant is only as committed to a project as the difficulty in winning the next gig. That’s not a bad thing because it can allow for more creativity and risk-taking, but I can tell you first hand that in-house marketers work harder and care more than most consultants ever realize.
In-house marketers have a tendency to want to get feedback on everything from everyone. From the outside, all this feedback can seem hopelessly inefficient and it waters down external creative work to have it cut to pieces by a committee. But once you’re in-house you realize that everything is going to go through a review process anyway so you may as well get out in front of it. Internal marketers have been through the process of getting work out the door enough times to know who needs to be involved and when. It may not be pretty and I often wish that less people had to sign off on some projects, but the fact is that non-marketing people like to be involved in marketing and trying to skip them just means having to redo the work later. So what looks like politics and committees to consultants is actually the perfectly natural machinery of the company.
Sometimes internal marketers can seem cheap and nasty to external advisors because every conversation seems to come back to budget. As an external creative the project that you’re working on is the only project in the world that matters and it seems obvious to invest in making a quality product. But for the internal marketer, every dollar on this project is a dollar that’s not being allocated to a dozen other worthy projects. What looks like cheapness as actually the delicate art of trying to optimize marketing spend across multiple channels. This type of on-the-fly ROI optimization is one of the most under-appreciated skills that great internal marketing teams develop. Good marketers know how to make the dollars stretch.
The worst pet peeve that I had with marketing teams when I was in consulting was that they seemed so afraid of change. The most common brief that we heard in brand design was:
“We want a whole new look, but you can’t touch the logo. We just made it, and it went through so many rounds of review that I’m not sure we could handle going through that process again.”
It turns out that once you’re in-house you realize that these kinds of boundaries are the only way to keep an external agency focused. Every consultant wants to redo the mission, vision and values of the company and to redo the tagline. But sometimes all you need is to get a specific project out the door. The conservatism can also be driven by knowing how people in the rest of the business have reacted to changes and suggestions in the past. Hitting a wall with the marketing team isn’t fun, but it’s better than being led along only to have the project killed in review. Creative advisors still need to push the boundaries but there’s no harm in being a little realistic early on in a project.
None of the above is an excuse for internal marketers to be slow, political, cheap and un-creative. On the contrary, one of the most honest clients I ever had in consulting told me “We know exactly what you’re going to tell us as a result of this audit, but we need someone external to tell it to us straight. That’s the only way the CEO and board of director will listen.” In-house marketers can suffer terribly from the curse of familiarity. As a result most CEOs don’t appreciate their own marketing team. Internal marketers need to get much better at tracking return on investment, articulating their value and working effectively with external advisors. The creative process is better when you can see both sides of the table.
I joined the SeedInvest team in New York just over a year ago. SeedInvest is an equity crowdfunding platform focused on angel investing and venture capital for technology companies.
When I first moved to the USA I looked at the West Coast online investing platforms like Fundersclub, Wefunder and AngelList. In the end, I chose to join SeedInvest because (like Seedrs whet I worked in the UK) they had focused on building a business that takes early-stage investing seriously and treats equity crowdfunding like a smaller version of high-end investment banking rather than a form of charity or gambling.
Like a lot of New York startups in the finance industry, SeedInvest is a hard-charging, hard-working environment. The hours are long and the work is challenging. But the team are 100% dedicated and we are doing things that haven’t been done before, so itfeels like the effort is worth it.
How New York finance startups approach marketing
To me, it feels like the culture at SeedInvest is formed by two main factors, our co-founders and the city that we’re based in.
Our co-founders are from a finance and investment banking background, so we have the no-nonsense, results oriented, numbers driven culture of the finance industry.
And we’re based in New York, so we have the New York tech scene’s tenacious need to take on big industries and build our products in the face of a seemingly insurmountable obstacles.
The best tech startups coming out of New York are all attacking big, complex industries with large incumbent players. New York startups are taking on the big boys in finance, banking, advertising and fashion.
Co-working spaces like WeWork and Alley NYC have provided a fertile environment for New York’s startups to find each other, meet new employees and connect with investors. But the high cost of office rent, living expenses and developer salaries in New York means that startups based here tend to focus on cashflow and revenue much earlier than those from Silicon Valley.
All of this has bred a unique culture when it comes to the way that New York startups, and particularly New York startups in the finance industry view marketing. Informed by this context, SeedInvest has developed a very disciplined approach to marketing.
We track our cost of customer acquisition very carefully and constantly monitor to make sure that we’re not spending more on marketing that would be justified by the new users that we acquire as a result. Most startups around the world have some general awareness of their cost of acquisition, but almost every marketer that I talk to in New York has also broken down their CAC and LTV on a per channel basis. This sounds like a small distinction, but measuring the ROI of marketing over multiple channels requires much more complicated analytics to be able to attribute visitors and signups over time using cookies to account for multiple marketing touchpoints.
Per-channel cost of acquisition is important for short term optimization across different marketing channels. It allows us to compare the efficiency of each marketing channel and to allocate more spend to channels that provide a better return on investment.
Building a culture of metrics, tracking and analytics actually requires a massive anmout of work and coordination. Every analytics platform promises a single-click install and very little development time to implement. But in practice, even using Segment, Mixpanel, Intercom and Google Analytics requires considerable effort.
Short Term Focus
Ten year ago, when I first moved into marketing, I was dismayed by the short term focus of most large public companies. On project after project I fought to take a long-term strategic view and to build an enduring competitive position for my clients based on strong fundamentals. I still believe that large companies (who are slow to adapt to change) do need to spot the trends early on and build their brand reputations over time. But for small startups who can pivot and change direction quickly, a short term view can actually be the best way to focus on what really matters.
I’ve found that the time horizon on which you are looking for a return on investment can have a massive impact on the types of marketing activity that you prioritize. For example, if you have a long time horizon, you’ll tend to focus on thought leadership, public relations and community management. Whereas a company with a short time horizon will focus on advertising, email marketing and direct sales.
In New Zealand people often get annoyed when they receive an email from someone they haven’t met before. Cold calling and cold emailing are deeply frowned on. By contrast, a New Yorker will be perfectly happy to hear from you if you are selling something that they want, and they’ll also be quick to tell you if they don’t want what you’re selling. This means that New York startups are among the best in the world at what Gary Vaynerchuk calls the “art of the hustle”. New Yorkers are used to constantly being on one side or the other of a sale. Having worked for and consulted with startups around the world, I can confirm that New York startups hustle harder.
At SeedInvest I’ve learned that New York hustle consists of three important things:
Be willing to hunt. Instead of waiting for leads to materialize in your marketing funnel. Be willing to go out aggressively and look for people who want what you have. This can require thinking creatively about demographics that haven’t been exposed to your products before. It also requires hard work to research, find email addresses and build lists.
Be willing to make the first move. Cold outreach isn’t easy, but putting your product in front of people who haven’t met you yet definitely moves the needle for a small startup. There is an art form to being effective at cold outreach in particular to how to integrate the sales process with the marketing function so that the two support and reinforce each other. Instead of thinking of marketing as the top of the funnel and sales as the bottom of the funnel (the traditional view), I’ve learned at SeedInvest to think of both sales and marketing as operating throughout the funnel. In practice this means that everyone needs to hustle.
Follow up is everything. Never send a cold email if you’re not willing to send another five emails (even without hearing anything back). These followups shouldn’t sound desperate or plead for a sale. Your prospect is busy and it might take them some time to get to know you and your product. So even if you don’t hear back, you should assume that your email has been read, that the person is mildly interested, but that they need more time to get to know you better. So it’s on you to keep following up.
Get Shit Done
I’ve never seen a more ruthless business culture than in New York. From the large banks to the smallest startups, people are regularly made redundant or outright fired. Good startups treat their staff like their most valuable asset but in New York everyone is replaceable and if you’re not delivering results right now, then there is someone waiting in line who can.
The intensity of competition for jobs has bread a hungry business culture that means that most New York startups can outwork startups from the rest of the world and at the same time can also outmaneuver large companies, because the team members each have so much at stake.
High-end banks are known for their early morning meetings, long hours and 24/7 email responsiveness. Combine this with the software development culture of late night coding and weekend hackathons. And you have a recipe where New York fintech startups like SeedInvest are able to move quickly, deploy cheaply and provide customers with products and services that they can’t get anywhere else.
Personally it took me quite some time to adapt to the long hours. The things that helped most were finding a gym close to the office, and buying a bike to stay fit. Early on in my time in NYC I went through a phase of eating too much late night pizza. But the adaptations I’ve had to make to life in NYC are worth it for the chance to be part of a team where everyone else is as dedicated and committed as you are.
In marketing terms the “Get Shit Done” mentality means that at SeedInvest we’re focusing on projects where we can point to measurable results in the shortest possible timeframe. Shorter feedback loops allow us to learn from our growth experiments faster and to iterate the whole growth engine of the company faster.
My year of startup marketing in New York
Overall, my first year at SeedInvest has been an amazing learning curve. I’m now starting to feel like I really have a handle on our archetypal target customer (high net worth Americans who want to invest in startups). I’m also at a point now where I can point to specific marketing channels and projects that have resulted in new investor signups, increased investment volume and higher quality companies wanting to work with us.
The future is very exciting with the emergence of Mini-IPOs for medium sized growth companies to allow their customer base to become investors and the emergence of Title III Regulated Crowdfunding which will allow smaller early stage companies to raise capital from their customers, fans and community. Each of these new types of capital raising will require whole new approaches to marketing. Exciting times.
Alex Tynion from SeedInvest and I sat down recently to talk through some of the things that we’ve learned from helping the first few companies who have “tested the waters” under the new Reg A equity crowdfunding rules. Regulation A is an equity crowdfunding rule that allows private companies to raise money from the general public. So far, we have helped three companies on SeedInvest to reach over $10M in indicated interest from over 2,000 people each.
There are some common mindsets and practices that we’ve seen across the companies that have been most successful with equity crowdfunding.
Equity Crowdfunding Deepens Your Customer Relationships
Alexandra Tynion: What does undertaking a Regulation A offering mean for a company’s relationship with their customers?
Peter Thomson:Reg A+ and the whole process of raising capital online is really interesting. The most exciting thing about equity crowdfunding is the ability for a company to turn their customers into investors.
Companies that are customer-centered and really care about their users seem to love the idea of deepening their relationship with their customers by allowing them to invest.
Owning shares in a business is an extreme form of customer loyalty program. The customer actually has a vested interest in the brand’s success.
Companies that put a high priority on building long-term customer relationships, and a high priority on word-of-mouth, want to build long-term customer relationships. Allowing their customers to become investors deepens the customer’s relationship with the brand.
Customer-Centered Businesses Are Better At Equity Crowdfunding
Alex Tynion: What do you look for in a company that will succeed with this type of capital raising?
Peter Thomson: For Regulation A, SeedInvest looks for companies that have a large customer base, a straightforward consumer-facing business model, and an easy to understand technology base. There also a number of other due diligence type things that we look for in a company that will do well with this type of capital raising, but the most important thing that I personally look for is companies that are customer-centered, and in particular companies that have built strong word-of-mouth engagement.
Support, customer service and community management are often under-appreciated parts of a business. But they are trace indicators of a company that cares about their customers and cares about building customer loyalty, repeat business and good word-of-mouth.
If you have good word-of-mouth, then it means that people are talking about your company, it means that they like your products, and that they like your products enough to tell other people about them. In turn, that probably means that some of those customers like your company enough to actually want to own a part of it.
When your customers love your product and the service you provide, then they may want to own a part of what you are building, to share in your success, and to invest their own money into being part of it.
Products That People Use Every Day Have High Customer Engagement
Alex Tynion: What types of products and services suit Regulation A capital raising?
Peter Thomson: I think that this type of capital raising tends to suit companies where users are highly engaged with the product itself. If it’s something that you use every day, then you’re more likely to have a relationship with the product and to feel like you have a relationship with the company.
Products that you use every day and have a close relationship with include clothing, habit-forming mobile applications and food. Products that go in or on your body, or that you’re in constant physical contact with, are very intimate. Those are very personal things, things that you wear, things that you carry with you every day. Those tend to be the sorts of products and brands that you feel strongly about.
Think of someone’s wristwatch, it’s a key part of their identity. And for some, a key part of how they communicate their identity to other people. Likewise someone’s phone is in constant use every day.
Every day products are the sorts of brands that we tend to form deep and long-term relationships with based on our daily habits. I think those can make for very strong brand relationships.
Companies that really care about nurturing these types of everyday product relationships can build fanatically loyal customer bases. Those are the sorts of companies that I think will do very well in raising money online from their customers.
I vehemently disagree with a lot of this article, but it’s so well written that I just had to share it. Murad Ahmed from the Financial Times neatly captures the changes that are happening in the London startup scene and the increase in angel investing and venture capital in Europe.
For 4 years I lived through the heyday of this boom in UK startup funding. But my experience was that to go along with the increase in investors, there has been a corresponding increase in startups so that the two have balanced each other out. The good startups that get funded by good investors are still dedicated, hardworking and humble.
I’ve reproduced the article from the Financial Times site below because the article is so important as a record of a certain time in London’s startup scene and it would be a shame to lose it. You can see the original article, if it’s still visible on the FT site.
The Lean Branding process consists of strategy, messaging and design. Of these three, messaging and copywriting is often the hardest to apply lean principles to. Language can be very subjective, so judging how best to create copy in a fast-paced environment is not easy. There are a few lessons I’ve learned from creating copy to help express a refreshed brand position.
Copy and messaging is where your brand comes to life in the written word. People are visual creatures, but language is still one of the most powerful ways to communicate and persuade. In almost every industry copy and messaging is a vital part of bringing the brand to life.
Continuously improving your messages
These days you can use Google AdWords and A/B testing to iterate and improve your copywriting as you go. The thing that I see go wrong with using digital tools to improve copy is that the tests we run aren’t often fed back into the strategy. The key to using digital advertising as a testing and learning tool for copy is to input the lessons back into the strategy so that they can be captured and then repeated.
I see too many startups making the same mistakes with communication over and over again with the marketing team learning the same lessons over and over again and not capturing the information somewhere that the rest of the team can learn from.
The essence of lean branding is continuous improvement. So instead of locking-down copy changes as permanent, I prefer to try and keep my options open to make small incremental improvements to copy and messaging as we learn more from the marketplace about what people want from us.
Just in time branding means creating only as much collateral as you need, just before you need it. In practice, this means creating the basic templates in advance, and only generating as much physical collateral as you need.
For example, you might print 50 business cards before going to an event rather than printing 5,000 business cards because they seem cheaper per-card. What most people don’t realise is that even though 50 cards may be on a per-unit basis more expensive than 5,000 cards, the total cost of 5,000 cards is still more expensive. Particularly when you take into account the fact that if you print 5,000 cards you will have to store 5,000 cards, you will have to look at 5,000 cards in the storage unit every time you walk past the cabinet and, most importantly, you will be locked into the same copy and messaging for the next 5,000 people that you interact with.
Always print the minimum number of items that you can possibly get away with any one given time. This keeps your options open to change and improve your copywriting over time.
Faster Copy Approval
I’ve found that when a piece of copy takes a long time to get approved and involves a lot of consultation then it’s tempting to avoid changing it for fear of restarting an endless cycle of feedback. By contrast, when things move from idea to execution quickly then it’s also more likely that people will feel safe to make frequent improvements over time.
Lean Brand Messaging
Lean principles such as iteration, agility and collaboration can all be applied to the copy and message creation process. In fact, I would argue that applying lean methods to your brand messaging is just as important as applying them to any other part of your business. The words you use to describe your business create a large part of the perceptions that your audience has of your business. Your words matter.
The idea behind the book is to derive practical lessons from how different startups have achieved their early growth. The book is probably the best window into the modern growth hacker style of marketing being practiced in startups today.
The Lean Analytics blog has a link to a sample pdf with the first 3 chapters and the book website has links to several more sample pdfs. To really get a taste of the depth and usefulness of the book I’ve pulled out a couple of my favorite excerpts below. The quotes below are pulled from the first edition, so be sure to check out the book website for the latest samples and chapter outlines.
Enter Gabriel and Justin…
Traction: A startup guide to getting customers
Chapter 1: Introduction
Before we get started, let’s define what traction is. Traction is a sign that your company is taking off. It’s obvious in your core metrics: if you have a mobile app, your download rate is growing rapidly. If you’re a search engine, your number of searches is skyrocketing. If a SaaS tool, your monthly revenue is blowing up. If a consumer app, your daily active users are increasing quickly. You get the point.
You can always get more traction. The whole point of a startup is to grow rapidly. Getting traction means moving your growth curve up and to the right as best you can. Paul Graham, founder of startup accelerator Y Combinator, puts it like this:
“A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of ‘exit.’ The only essential thing is growth. Everything else we associate with startups follows from growth.”
In other words, traction is growth. The pursuit of traction is what defines a startup.
Summary: Nineteen Traction Channels
After interviewing more than forty successful founders and researching countless more, we discovered that startups get traction through nineteen different channels. Many successful startups experimented with multiple channels (search engine marketing, business development, etc.) until they found one that worked.
We call these customer acquisition channels “traction channels”. These are marketing and distribution channels through which your startup can get traction: real users and customers.
We discovered two broad themes through our research:
Most founders only consider using traction channels they’re already familiar with or think they should be using because of their type of product or company. This means that far too many startups focus on the same channels (search engine marketing, public relations) and ignore other promising ways to get traction.
It’s hard to predict the channel that will work best. You can make educated guesses, but until you start running tests, it’s difficult to tell which channel is the best one for you right now.
When going through these traction channels try your best not to dismiss them as irrelevant for your company. Each traction channel has worked for startups of all kinds and in all different stages. Get one channel working that your competitors dismiss, and you can grow rapidly while they languish.
1. Viral Marketing
Viral marketing consists of growing your userbase by encouraging your users to refer other users. We interviewed Andrew Chen, a viral marketing expert and mentor at 500 Startups, for common viral techniques and the factors that have led to viral adoption in major startups. We also talked with Ashish Kundra of myZamana, who discussed using viral marketing to grow from 100k users to over 4 million in less than a year.
2. Public Relations
Public relations is the art of getting your name out there via traditional media outlets like newspapers, magazines and TV. We interviewed Jason Kincaid, former TechCrunch writer, about pitching media outlets, how to form relationships with reporters, and what most startups do wrong when it comes to PR. We also talked with Ryan Holiday, bestselling author of Trust Me, I’m Lying and media strategist, to learn how startups could leverage today’s rapidly changing media landscape to get traction.
3. Unconventional PR
Unconventional PR involves doing something exceptional (like publicity stunts) to draw media attention. This channel can also work by repeatedly going above and beyond for your customers. Alexis Ohanian told us some of the things he did to get (and keep) people talking about reddit and Hipmunk, two startups he co-founded.
4. Search Engine Marketing
Search engine marketing (SEM) allows companies to advertise to consumers searching on Google and other search engines. We interviewed Matthew Monahan of Inflection, the company behind Archives.com (before its $100 million acquisition by Ancestry.com) to learn how Archives relied primarily on SEM for their growth.
5. Social and Display Ads
Ads on popular sites like reddit, YouTube, Facebook, Twitter and hundreds of other niche sites can be a powerful and scalable way to reach new customers. We brought in Nikhil Sethi, founder of the social ad buying platform Adaptly, to talk with us about getting traction with social and display ads.
6. Offline Ads
Offline ads include TV spots, radio commercials, billboards, infomercials, newspaper and magazine ads, as well as flyers and other local advertisements. These ads reach demographics that are harder to target online, like seniors, less tech-savvy consumers and commuters. Few startups use this channel, which means there’s less competition for many of these audiences. We talked with Jason Cohen, founder of WPEngine and Smart Bear Software, about the offline ads he’s used to acquire customers.
7. Search Engine Optimization
Search engine optimization is the process of making sure your website shows up for key search results. We interviewed Rand Fishkin of Moz (the market leader in SEO software) to talk about best practices for getting traction with SEO. Patrick McKenzie, founder of Appointment Reminder, also explained to us how he uses SEO to cheaply acquire lots of highly targeted traffic.
8. Content Marketing
Many startups have blogs. However, most don’t use their blogs to get traction. We talked with Rick Perreault, founder of Unbounce, and OkCupid founder Sam Yagan to learn how their blogs transformed their businesses.
9. Email Marketing
Email marketing is one of the best ways to convert prospects while retaining and monetizing existing ones. For this chapter we interviewed Colin Nederkoorn, founder of email marketing startup Customer.io, to discuss how startups can get the most out this traction channel.
10. Engineering as Marketing
Using engineering resources to acquire customers is an underutilized way to get traction. Successful companies have built micro-sites, developed widgets, and created free tools that drive thousands of leads each month. We asked Dharmesh Shah, founder of Hubspot, to discuss how engineering as marketing has driven Hubspot’s growth to tens of thousands of customers through tools like their Marketing Grader.
11. Targeting Blogs
Popular startups like Codecademy, Mint, and reddit all got their start by targeting blogs. Noah Kagan, Mint’s former director of marketing, told us how he targeted niche blogs early on, and how this strategy allowed Mint to acquire 40,000 users before launching.
12. Business Development
Business development is the process of creating strategic relationships that benefit both your startup and your partner. Paul English, co-founder and CEO of Kayak.com, walked us through the impact of their early partnership with AOL. We also interviewed venture capitalist Chris Fralic, whose BD efforts at Half.com were a major factor in eBay’s $350 million acquisition of the company. We’ll show you how to structure deals, find strategic partners, build a business development pipeline, and approach potential partners.
Sales is primarily focused on creating processes to directly exchange product for dollars. We interviewed David Skok of Matrix Partners – someone who’s taken four different companies public – to get his perspective on how the best software companies are creating sustainable, scalable sales processes. We also take a look at how to find early customers and have winning sales conversations.
14. Affiliate Programs
Companies like Hostgator, GoDaddy and Sprout Social have robust affiliate programs that have allowed them to reach hundreds of thousands of customers in a cost-effective way. We interviewed Kristopher Jones, founder of the Pepperjam Affiliate network, to learn how a startup can leverage this channel. We also talked with Maneesh Sethi to learn how affiliate marketers choose what products to promote, and some of the strategies they use to do so.
15. Existing Platforms
Focusing on existing platforms means focusing your growth efforts on a mega-platform like Facebook, Twitter, or an App Store and getting some of their hundreds of millions of users to use your product. Alex Pachikov, on the founding team of Evernote, explained how their focus on Apple’s App Store generated millions of customers.
16. Trade Shows
Trade shows are a chance for companies in specific industries to show off their latest products. We interviewed Brian Riley of SlidePad, an innovative bike brake startup, to learn how they sealed a partnership that led to over 20,000 sales from one trade show and their approach to getting traction at each event.
17. Offline Events
Sponsoring or running offline events – from small meetups to large conferences – can be a primary way you get traction. We spoke with Rob Walling, founder and organizer of MicroConf, to talk about how to run a fantastic event, how it can benefit you, and the type of work that goes into pulling off a successful event.
18. Speaking Engagements
Eric Ries, author of the bestselling book The Lean Startup, told us how he used speaking engagements to hit the bestseller list within a week of the book’s launch, how he landed these talks, and why he chose to use this channel to generate awareness and book sales. We also interviewed Dan Martell, founder of Clarity, to learn how to leverage a speaking event, give an awesome talk and grow your startup’s profile at such speaking gigs.
19. Community Building
Companies like Zappos, Wikipedia, and Stack Exchange have all grown by forming passionate communities around their products. In our interview with Jimmy Wales of Wikipedia, he detailed how he built the Wikipedia community that’s created the largest repository of human knowledge in history.
Takeaways from the Nineteen Traction Channels
Every one of the nineteen traction channels has proven an effective means to get initial traction for both enterprise and consumer companies. It is hard to predict exactly which traction channel will be best for your company at a particular time. You have natural tendencies (bias) toward or against certain traction channels. Which traction channels are you biased for? Which traction channels are you biased against?
Chapter 2: Traction Thinking
If you’re starting a company, chances are you can build a product. Almost every failed startup has a product. What failed startups don’t have are enough customers. Marc Andreessen, founder of Netscape and Venture Capital firm Andreessen-Horowitz, sums up this common problem:
“The number one reason that we pass on entrepreneurs we’d otherwise like to back is their focusing on product to the exclusion of everything else. Many entrepreneurs who build great products simply don’t have a good distribution strategy. Even worse is when they insist that they don’t need one, or call [their] no distribution strategy a ‘viral marketing strategy’.”
A common story goes like this: founders build something people want by following a sound product development strategy. They spend their time building new features based on what early users say they want.
Then, when they think they are ready, they launch, take stabs at getting more users, only to become frustrated when customers don’t flock to them.
Having a product your early customers love but no clear way to get more traction is frustrating. To address this frustration, spend your time building product and testing traction channels – in parallel.
Building something people want is required for traction, but isn’t enough. There are many situations where you could build something people want, but still not end up with a viable business.
Chapter 3: Bullseye Framework
With so many channels to consider, figuring out which one to focus on is tough. That’s why we’ve created a simple framework called Bullseye that will help you find the channel that will get you traction. As billionaire PayPal founder and early Facebook investor Peter Thiel put it:
“[You] probably won’t have a bunch of equally good distribution strategies. Engineers frequently fall victim to this because they do not understand distribution. Since they don’t know what works, and haven’t thought about it, they try some sales, BD, advertising, and viral marketing—everything but the kitchen sink. That is a really bad idea. It is very likely that one channel is optimal. Most businesses actually get zero distribution channels to work. Poor distribution—not product—is the number one cause of failure. If you can get even a single distribution channel to work, you have great business. If you try for several but don’t nail one, you’re finished. So it’s worth thinking really hard about finding the single best distribution channel.”
Chapter 4: Testing out Traction Channels
The testing step is where you put your ideas into the real world. The goal of this step is to find out which of the traction channels is worth focusing on. You will make that decision based on results from a series of relatively cheap tests. These tests should be designed to answer the following questions.
Roughly how much will it cost to acquire customers through this channel?
How many customers do you think are available through this channel?
Are the customers that you are getting through this channel the ones that you want right now?
Chapter 5: Moving the Needle
Your traction strategy should always be focused on moving the needle for your company. By moving the needle, we mean focusing on marketing activities that result in a measurable, significant impact on your company. It should be something that advances your user acquisition goals in a meaningful way, not something that would be just a blip even if it worked.
From the perspective of getting traction, you can think about working on a product in three phases:
Phase I – Making something people want
Phase II – Marketing something people want
Phase III – Scaling your business
At different product phases, moving the needle means different things. In phase I, it’s getting those first few customers. In phase II, it is getting enough customers where you’re knocking on the door of sustainability. And, in phase III, your focus is on increasing your earnings, scaling your marketing channels, and creating a truly sustainable business.
Some traction channels will move the needle early on, but will fail to work later. Others are hard to get working in phase I, but are major sources of traction in the later phases (PR is a good example). On the other hand, some channels will be great in phase I but useless in phases II and III because they simply don’t have the volume required to move the needle.
To read the the full book, check it out on Kindle and paperback on Amazon.
The equity crowdfunding industry is still so new that best practices and lessons from real life haven’t yet made it onto paper. But there are some very valuable lessons to be learned from related industries and reading these three books will give anyone a crash course in equity crowdfunding.
Venture Deals by Brad Feld
Venture capital can be confusing at first. Some people treat equity crowdfunding as just Kickstarter with equity, but the best players take the capital raising process seriously and have woven the best of how venture capital deals get done into their platforms. Venture Deals by Brad Feld clearly summarizes the world of venture capital. It covers everything from cap tables, convertible notes, term sheets and liquidation preferences.
David Rose is the founder of the online angel investing platform Gust and a leading New York angel investor. Angel Investing by David Rose book is a solid introduction for new angel investors. It’s perfect for someone getting to know the world of equity crowdfunding because it treats startups as real businesses to be understood and invested in on a rational basis.
Transforming Customers Into Loyal Owners by Jonathan Frutkin
This book changed my approach to the entire investment industry. We know in practice that investors in an equity crowdfunding round are a mix of: people on the platform, people who are connected to the startup, and new people who are attracted to the campaign. Equity Crowdfunding by Jonathan Frutkin opened my eyes to just how important turning customers into shareholders can be.
I recently joined the SeedInvest team in New York. SeedInvest is a leading equity crowdfunding platform that is streamlining the startup investing process so that new types of investors can invest directly in early stage companies. I’m responsible for digital marketing and helping startups promote their campaigns to investors. It’s been a big couple of months for me, so I thought I’d take a moment to update you on what I’ve been up to.
1. I’ve moved to New York
New York has always been a centre of financial innovation and the earliest venture capital investors almost all started out in New York before moving to Silicon Valley. I’ve always wanted to live in New York. In late 2014 I won the green card lottery and we have now relocated permanently to the USA. So far, we’ve been using AirBnB to experiment with different neighbourhoods and have fallen in love with Tribeca, Nolita and Brooklyn Heights.
New York has a great environment to build a startup. The city is alive 24 hours a day and there is a great mix of design, business and technical skills. I love the intense energy and the mix of cultures from all over the world.
2. I’m still working with startups
As soon as I knew that we were moving to the states, I started researching the emerging American equity crowdfunding platforms. I’ve long believed that democratising the financing of small businesses will be one of the greatest shifts in the structure of capitalism since the advent of the public stock markets. Allowing new entrepreneurs and new investors to find each other will create new companies, new jobs and new opportunities. I loved being part of investment platform Seedrs in the UK and with recent changes in US securities laws, the timing was perfect to transfer these skills to the USA.
Business design is a new way of thinking about companies as interconnected systems worthy of innovation, creativity and the application of design to the systems themselves. Business design applies the mindsets of a designer to the task of creating the overall strategy and business model.
Business design is a useful way of looking creatively at a company in the context of its customers, suppliers and competitors. Every company needs to combine the disciplines of technology, design and business together to deliver value for a customer. But too often, only the crafts of technology and design are seen as real sources of new innovation (with the business function itself just doing the marketing or arranging the finances). In reality, the business-side of innovation can be incredibly important.
Company valuation is one of the great myths of early stage company finance. Both investors and entrepreneurs get themselves endlessly tied in knots trying to calculate a startup’s value despite the fact that the whole concept of valuation is entirely artificial. How to value a startup is one of the most common questions I get when I present to entrepreneurs on the topic of venture capital and online angel investing. But talking about valuation distracts people from the real issues of economics (amount of cash invested) and control (percentage equity offered).
One of the most common questions that you hear entrepreneurs ask each other is “What’s your valuation”? It seems like a sensible question and it’s a tempting way to compare different companies who are raising capital, but the idea of a single number as an agreed valuation for a startup is a dangerous distraction from the real issues. The term “valuation” is simply a useful shorthand to talk about several independent variables. These variables can be quickly forgotten when you start a conversation with the issue of valuation.