entrepreneurship

Recently, an angel investor asked me to provide advice to a start-up in which he was the sole investor. I researched the space and came to the meeting with a hypothesis on why they weren’t doing well: the product was bad; they scaled too quickly, at one point with 50 people at the company; tried to do too many things, etc.

The founder, investor and I met up at Starbucks and after a couple hours discussion, the investor shocked the entrepreneur and me by declaring that — based on what he just heard — he’s going to liquidate the company. Wow! He later clarified with me that he was already thinking it, and wanted to get my input before he made a final decision.

I just hope I don’t cross paths with the entrepreneur…or if I do, to make sure there are plenty of witnesses around in case he decides to take violent revenge!

I share this story because something in the news about HTC’s new business unit, HTC Creative Labs, which created apps like the ZOE on HTC One, caught my eye.

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Xiaomi and OnePlus proved that it is possible to start a successful smartphone company, even with limited resources. Here’s their strategy in a nutshell:

  1. Create a compelling product for tech enthusiasts
  2. Sell it direct as a loss leader
  3. Limit production to create scarcity
  4. Build awareness and demand
  5. Sell profitable related products and services
  6. Scale production once component costs drop

Small Chinese companies like Xiaomi and OnePlus were able to create markets even while competitors like Apple and Samsung spend billions in advertising their smartphones. Their success is a blueprint for others to follow, whether you’re running an established smartphone company or starting one.

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I’ve got friends doing mobile app start-ups, and a couple of them rely on freelancers to develop their apps despite my advice not to. What I’m about to write is a generalization — not all freelancers are bad of course, but despite honest intentions, it’s usually not a good idea to hire freelancers to build your start-up’s app.

The reason is this: Incentives aren’t aligned. Entrepreneurs want a high quality product, one that will require many iterations. Freelance developers want to complete the project as quickly as possible. You will get a lot of unhappiness as a result of these two differences.

Prior to feecha, we built digital products for companies, so we understand the pressure freelancers face. The biggest cost is time: the more quickly a freelancer can complete a project, the sooner she can receive payment and move on to the next project. So it’s in her best interest to define the project brief as exactly as possible and deliver not much more. Every time the entrepreneur wants to change something, it comes at the direct expense of the freelancer; unless the freelancer can convince the entrepreneur to pay more. Not an easy conversation.

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“You have to be in mobile,” venture capitalists will instruct you.  “We have to be in mobile,” tech giants like Facebook, Microsoft and Yahoo will echo.  Obviously, it’s because we’re living in a mobile-first world.

Yet, becoming the next Instagram or Snapchat is insanely difficult and increasingly so.  A hit app is a rarer unicorn than a hit website.  Why?  Unlike websites, apps aren’t linked to each other; you can’t click on a link to discover a new app, you have to purposefully search and download it from the app store.  Then you have to learn how to use the app before finally getting some value out of it.  Some apps — especially on Android but even from bluebloods like Facebook — behave badly and mistreat your phone’s battery or privacy settings.

The result of the above is that, according to Nielsen, most people use only 30 apps on their phone.  What are the chances your mobile app can make a person’s top 30?  Let’s break down how difficult a threshold that truly is.  What are the 30 apps you’d typically use?

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Phew!  Today was an intense day of travel and meetings.  I’ve been preparing a tirade about Chromebooks but lack the energy to complete the story for today.  So instead I’ll post a few thoughts about business development.

For most consumer-oriented start-ups, business development can be a complete waste of time.

Example #1: A major phone manufacturer promised to preload feecha on their flagship phone — to the point of sending us stuff to sign — but then overnight became totally unresponsive.  We later learned a certain telecom company had a similar app and suggested we get dropped… yep.

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Twitter has a new analytics tool that lets you see how many people actually saw your tweets.  Danny Sullivan of Marketing Land reported that of his 390,000 followers, only 1.85% saw (not even necessarily read) a random tweet.  Ouch!

When we started feecha, one of the early decisions was what data to show users.  To be like YouTube, where you can see how many viewed a video; or to be like Instagram, where you have no idea how many actually saw a photo.

We decided to go the Instagram route because content creators need to feel like they’re being read to continue; once that illusion is gone, only the most strong-willed can keep going.  In the beginning, and especially with all that’s out there, most new start-ups will struggle getting engagement from users.  When the crowd is sparse, no news is better than bad news.  It’s better to keep your users guessing on how many they’re actually speaking to.

So why did Twitter make this kind of analytics tool available?  Advertising. I find advertisers’ interest particularly ironic; if they only knew just how many really saw their ads on TV or print…  390,000 Twitter followers sounds amazing, but it’s the 7,215 that actually matters.  I wouldn’t be surprised if the 1.85% seen ratio applies to TV ratings and print circulation numbers too.

Yesterday we used Snapchat, Instagram and Candy Crush as three examples of apps that were just as much about great marketing as they are great products.  The implication being that there are many good products that failed because the marketing didn’t connect.  Today we’ll present three examples of that.

Let’s start with a major product from a major brand that failed: Google Reader.  True story — a year ago an excited friend pitched me that “Jeff, this a billion dollar idea.  What if we could invent a way to keep track of websites, so you can get all the latest updates from the websites you follow all in one place?”  LOL.  That product exists of course; it’s called RSS and it’s already widely supported by our industry.  Yet, very few outside the tech world know what it is; even when its leading product was from a titan like Google (Reader was shut down in June 2013).

My start-up, feecha, organizes content from websites, blogs, events databases, etc. into neighbourhoods so you can easily see what’s happening in the area you care about.  Part of that is utilizing RSS feeds.  When we contacted bloggers to get their permission to use their content, we were shocked to discover that most hadn’t even heard of RSS.

Has there been any product like Google Reader and RSS that added so much value yet remains largely unknown?  Lack of awareness is a marketing issue, and one that the RSS community has yet to figure out.

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In yesterday’s post, we casually mentioned Tinder as an example of how a successful app is both great product and great marketing. Nothing just sells itself. There are lots of wonderful products that die a quiet death because nobody knew about them.

“Marketing” might be a misnomer, because technically product is part of marketing. What we mean is a go-to-market strategy: price, single-minded proposition, awareness building and distribution strategy.  Not only do you need product-market fit, you need an effective way for product and market to find each other.

Take Snapchat as an example.  Snapchat, despite being the same essential product from inception, puttered along at first without any traction. In fact, Murphy, one of the co-founders, got a full-time job elsewhere while the other, Spiegel, returned to finish his final year at Stanford.  The two had basically given up on Snapchat. Then they got their lucky break: Spiegel’s mom introduced the app to her popular niece who went to a school where Facebook was banned; soon, all the students there used Snapchat.  Murphy and Spiegel saw the numbers and realized they had a hit, and that the way of achieving it was through teens and schools. The rest is history.

Note: the big break wasn’t a product change, it was simply marketing.

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Bloomberg Businessweek has a fascinating article on Tinder’s origins story, which alleges much of what we know to be mythologized.  It’s a fantastic story and worth reading.

Tinder is not a start-up, for starters.  Giant corporation IAC is the majority owner.  IAC also owns Match.com and originally planned for Tinder to be a marketing tool to get more users to the paid service.

The two most often portrayed as Tinder’s co-founders, CEO Sean Rad and his buddy Justin Mateen, aren’t really so.  Mateen joined only after Tinder was launched on the app store, and there were three others who played crucial founding roles but don’t get much if any recognition.

One of them is Whitney Wolfe, a former marketing executive, who is suing Tinder and parent IAC for sexual harassment and discrimination.  More interesting though is that Tinder’s marketing breakthrough was her initiative.

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I had written a few days ago about how Microsoft took customer feedback too much to heart with the Xbox One, which resulted in an E3 showing that was too focused and none too exciting.  It’s only fair that I now point to where Microsoft has used customer feedback in exactly the right away.

Gabe is a comic book artist at Penny Arcade.  He went on Microsoft’s radar after he wrote a glowing review of the first Surface Pro; possibly the most positively influential of all the coverage given to Microsoft’s first gen device.  As a comic book artist, the Surface Pro’s thin-and-light tablet form factor and pen were transformative.  Not surprisingly, he liked the second version even more.

So the Surface team was likely looking forward to getting his reaction to the Surface Pro 3, which is a giant leap better than its predecessors.  Except, Gabe had a few major problems with it and posted a less-than-glowing review.

So Microsoft did the right thing and tried to learn what went wrong.  Check out Gabe’s remarkable update here.  Read it and mosey back.

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