More on fundraising
One of the most common questions I get asked about is funding. I always find this a bit curious. People want to know how our fund raising is coming before they ask about how the business is doing. My answer is always the same. That is, “I’ve been spending 90% of my time focusing on the website and making a better experience for customers and I haven’t really been spending that much time on the fundraising side of things.”
What surprises me most is how this feedback surprises most people.
I would think that it would be a natural reaction for most people to just nod and say “hey, that makes a lot of sense to me.”
Funding takes care of itself if you’ve got something interesting.
Stating the not so obvious?
I’ve noticed lately that it really isn’t that often that I’m either blown away with a business plan or the execution of one. Most of the time, it’s because they miss the mark for me on the three pillars by which I try to adhere myself. They are:
1) Know your angle.
2) Don’t think you’re too smart
3) Execution is more important than features
A few words about knowing your angle. Firstly, your business angle doesn’t have to be obvious but it does have to be simple. The markets are pretty efficient so most of the time an “angle” wasn’t obvious until after the fact. It’s really just another way of saying “now why didn’t I think of that?” Salesforce.com had a great angle. In a nutshell it was ‘NO SOFTWARE’. Quite literally that was their tagline but they were really just saying that bloated, expensive desktop CRM systems were not the future. Web-based, subscription based CRM software was the future. Siebel and Oracle were just too entrenched in their ways to respond effectively even to this very simple marketing angle. For the guys at 37 Signals (who recently received investment from Amazon’s Jeff Bezos) it was ’simpler software with fewer features’. Turns out people don’t like having to work very hard to learn new software and Basecamp let you capture some value and confidence quickly. For our latest company, Imagekind the angle is ‘use the web to buy and sell original artwork’. Pretty simple.
A few words about thinking you’re too smart. Don’t do it. Let me give a very real example in my former employer, RealNetworks. How many people know that the guy who currently runs (and was instrumental in the development of) the iPod division worked at Real first? Yep. He was hired to make an MP3 player. He quit after three weeks. How many people know that Real had several acquisition offers for WAY more than its current market cap? Consider Broadcast.com. They were a customer of Real and had to fight tooth and nail to get good licensing terms from us because we were big, they were small and they needed us to survive. Then they sold to Yahoo for billions and in theory Mark Cuban could have subsequently purchased all the outstanding shares of RealNetworks with (A LOT) of money to spare. That’s a case of thinking we understood the market better than the other guys. That was a case of thinking most of your top lieutenants usually couldn’t do their jobs as well as you could do it for them. Thinking you’re too smart can be very, very expensive.
A few words about execution. For some odd reason this usually is not valued as highly as “features” in the software industry. Apparently, in our industry most people think that more features means better product. If this web 2.0 craze taught us anything at all it should be that fewer features and better execution is a better order of priorities. I enjoy being an advisor to a couple of local Seattle companies. I was thinking the other day that I find myself saying (or thinking) the exact same bits of advice to both companies. Can you make something simpler? Easier to understand? Can you make something work with fewer clicks. Can you make it look less confusing? Can you make it pleasant to look at? Unfortunately, I’ve convinced myself that good execution requires creativity and that’s difficult to measure. Many gifted engineers have a hard time seeing what separates a well designed product from another and that’s very hard to fault. It’s sort of like asking someone to be good at coding and design and product management all at the same time. If you’re a start-up you either have to figure out how to pay for all that headcount or have an above average ability in all three areas as the entrepreneur. Hard though it may be, it is still gospel. Good information architecture is more important than lots of code. Start-ups like Brightcove understand this very well and that’s why they are able to succeed in the crowded digital media sector even as a late comer. If you can make software very usable and enjoyable (dare I say FUN) then you can find users.
53 percent of customers will abandon their shopping carts
Last year, TJMaxx.com consolidated its multiple page process into one page and saw a 50 percent rise in order completions. There are some great lessons in this little article if you are in the e-commerce business.
Interesting statistics about ImageKind
It wasn’t that many months ago since we launched ImageKind. I was surfing around the web the other day and thought I’d share a few interesting statistics.
First, compare where ImageKind stands relative to the top 5 highest grossing online art sites in terms of inbound links (e.g. number of sites that link to us).
Google tells it all.
Enter this in Google:
link:http://www.imagekind.com
691 linking to http://www.imagekind.com
Nearly 700 sites that link to us in a matter of months. And, check our traffic according to Alexa in the process.
That figure shows 52,581. Our Google ranking shows 6 out of 10.
We launched about 3 months ago.
Now try that with Art.com (which will do $150 million this year) and the rest in descending revenue order:
link:http://www.art.com
55,300 sites that link here
Alexa rank: 1,787
Google Page Rank: 7 out of 10
In business 10+ years
link:http://www.barewalls.com ($10-$15 million)
1,180 sites that link here
Alexa rank: 48,584
Google rank: 6 out of 10
In business 10+ years
link:http://www.artselect.com ($10-15 million)
140
Alexa rank: 44,915
Google Page rank: 6 out of 10
In business 10+ years
link:http://www.fulcrumgallery.com ($4-5 million)
9
Alexa rank: 86,133
Google rank: 4/10
In business 4 years
What does this data tell us?
1) We know how to drive traffic and users
2) We will be in the top 3 highest trafficked art retail sites soon
3) Sales is a game of CONVERSION. How do you turn clicks to buys?
4) Conversion is partly about traffic and partly about good product merchandising
What is good product merchandising? The same rules apply to online that apply to offline! At the office I like to say that the window displays at Nordstroms are a great example of product merchandising. You can’t put every good thing you have in the window. You must use creativity, timing, seasonality and a host of other factors to determine what things you can put in each of your windows that best encourage customers to come inside.
At ImageKind I think we’ve done a good job with graphic design but that is not product merchandising. That is design. After some introspection we think we’ve now graduated a to this next area of consideration which should turn traffic into even more dollars and more members.
10 steps to launching an early stage company
I won’t say who sent me this document from Ignition Partners though I am fairly certain that it is not considered secretive. Some curious readers may find it interesting. This is an Ignition Partner’s (Jonathan Roberts) perspective on how to launch a company successfully.
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Ten Steps to Launching an Early Stage Company
In general, Ignition companies follow the following ten step plan to success:
1) Determine your main value-add.
• What is it that you’re good at?
• Where is your unique advantage? Focus on that and build from there.
• When thinking about your initial offering don’t over reach. If the first phase of your business plan is too broad by definition you’ll end up doing things you don’t understand very well. There are lots of inherent risks in doing new things. When you are new you often don’t know what you don’t know. It’s fine to have a vision of where you do want to go, but it’s important to have a very pragmatic starting point.
• Who are you like? Best way to figure out who you are is to triangulate with what you are replacing and who you are like. Windows was replacing MS DOS based applications and was like the Mac. People understood it as something that makes your PC into a Mac. This allowed us to very clearly position it as something that “made PC’s easier to use”. I’ve had other companies position themselves as the “Oracle of Unstructured Data” or the “Salesforce.com for Recruiters”. Anyway, it allows you to more clearly figure out who you are and who you are not.
• A winning strategy has the following components: a) A great vision; b ) Place to start to day; c ) A plan to scale between the two. You should think through your strategy in this order.
2) Evaluate the market and determine who your customer is and what they want to buy.
• Understand. Try to make it something they already understand versus something new you’d like them to consider.
• Need versus nice to have. A “need to have” is something that you are already planning to buy and all that you have to do is convince them to switch vendors or more than like take on an additional vendor.
• A “nice to have” is when you are trying to educate and convince somebody to buy something they are not buying presently or solve a need that they don’t currently have.
• In terms of who the customer is, you need to go beyond simply identifying the companies or organizations that buy, but who specifically in the organization that buys.
3) Determine your competitive strategy. How do you fit with in the context of the marketplace? What “play” should you run? Are you a trying to win a drag race or execute a fast follower play? Are you trying to pincer a competitor between an advanced or basic offering? You don’t need to start from scratch. There aren’t a million choices. There are only five based on how you assess the overall market landscape.
4) Determine your positioning. Why your version of the solution is this situation is better than anyone else’s? Translate this into messaging that your target audience find both easy to understand and memorable. Finally, roll all of this up into a case for your company or product based on the situation in the market that makes your product or company necessary. See the fourth bullet point on point number 1. Usually it is easiest to start with the man on the street positioning and double back on the “X that does Y for Z” construct. My favorite focus group question is to ask a customer, how do you describe this product or service to a friend?
5) Identify the key trends you’re going to exploit. The way for a new product or service to displace an established service is to align with trends that are bigger than any one company. Major trends in technology include the exploding power of the micro-processor, the pc economy, and internet standards. In each instance the large established players resisted the trends and were either displaced or had to adapt to them.
6) Produce the product or a proto-type of the product at minimal cost and sell it to a few select customers. You’ll learn a ton along the way. You’ll validate your proposition and your target customer. You’ll also get a much better understanding of your profit structure.
7) Fully deploy with a handful of customers. In other words, it is better to have one really good customer than three folks who are simply sampling your goods or services. The reason is that when you are a new company potential customers will want to call existing customers before they buy. It is really, really hard to scale a business if you don’t have reference-able customers.
Acquire the next handful of customers primarily through word of mouth. In other words, ask your first happy customer to refer you to three others. Make them happy.
9) Use PR and momentum to project your product, offering, or company into the market. In other words, win the thought leadership battle. If you’ve aligned with key trends in the marketplace, have happy customers, and are showing momentum you should be able to convince key influencers that your product’s success is inevitable. If you’ve done this right than customers will start believing it is “when” and not “if”. You than need to create the perception of overwhelming momentum so that you play to both the motivations of greed (e.g. the desire to get a head of their competition) and fear (the anxiety about being left behind).
10) Scale. Here is where you have a Web Site, tighten up your product positioning, find additional partners ect. The key thing is to keep your cost structure low until you are ready to scale. At this point you should have a good sense of what your revenue is before you spend the dollars. Most new entrepreneurs try to scale too early before they really figure out what they are selling and who they are selling to. They spend a bunch of dollars on the front end and ironically it actually hurts their ability to refocus their business towards a better outcome.
Yet more video sharing sites?
Hard to believe but true. It feels like the world just discovered online video in 2006. Now, a company with a dumb name called EeFoof manages to raise a bit of money for something that looks a lot like 30 other sites out there. I don’t have a crystal ball but I’m going to suggest that the world doesn’t need another video sharing site unless there is something really unique about it. I’d love to see the economics of one of these new, young video sites. After all, somebody is convinced this is worth a fair amount of money. Hmm. Very, very interesting. Most of these sites just cannot make it. On the other hand, Zooomr managed to get traction in spite of Flickr’s apparent domination. Rising tides won’t lift all the boats in the video space but hopefully a few will manage based on excellent execution and unique features.
Congrats to Mika Salmi
I sit here in the former Seattle house of my good friend Mika Salmi writing about his new position at MTV. They couldn’t have chosen a better candidate. Hardest working guy in digital media though he still finds time to get surf time in on a regular basis.