The year was 2007, I was ahead of the curve on this whole social media hubaloo, at least several conference organizers thought so. Whether or not I actually knew what I was doing is kinda beside the point since this was right before the age of the wide spread “social media gurus” and “social media marketers” were spreading faster than syphilis in a Thai whore house.
Sometime in mid 2007 my company, Infinimedia, put out a Twitter service called Twitbin, which started getting some traction. Managing this buzz was proving difficult with our small team. So in typical green entrepreneur fashion we figured “well if we have this issue, others must too, this sounds like a perfect product market fit!” you know, or something along those lines. This was early in my startup career so to speak, so trust me, I’ve learned a lot since then. This was also before the Lean Startup era. Back in 2007, startup resources were much less prevalent than they are today (no angel list, no HN, we had techcrunch, mashable, and a few others). In Miami there was zero mentorship available to a web entrepreneur like me, heck, Refresh Miami still averaged under 30 attendees per meeting (now its well over 300+). However all the first generation of dot com vets were in hiding or too busy buying too many apartments at exorbitant prices.
Even the term product/market fit was unknown to me. I was so sure that I knew what I was doing. I had a problem, and I had a potential solution. That is what I had been told I needed for a successful business; the rest would fall into place. Right.
My first step was discussing this with my friend who was working at a local startup (the startup no longer exists) as their community manager. We got to discussing how did he manage the buzz and the chatter going on around his community. He was facing the same issue as me. There were no viable tools out there for us to use, so we now had two people with this problem. TWO WHOLE INDEPENDENT PEOPLE!!! OMG MARKET VALIDATION FOR REALZ! Hah. If only.
We decided this was totally going to work, so we dove into this, my team and I knew how to build web apps and services, and SaaS tools were all the rage after 37signals popularized the concept, my friend knew how to market this and build our customer base. So we decided to build this cool tool which would monitor everything going on in your social media world. This was before Facebook had pages, and Yelp had anything, effectively we were trolling through blogs and tweets hoping to find gold for our users. We figured, well selling to enterprises is hard, and we don’t know much about them, but we know startups, and think we can make something useful and affordable for small businesses. This is a great idea, at least in theory. In practice, it doesn’t make a lot of sense. At the time (2007/2008) not enough people were talking about small businesses to generate enough buzz about them on social media. Furthermore, there was no way to track the direct ROI cost associated with bad tweets and so on (yet). Additionally there was no easy way to detect sentiment of tweets either (yet).
In reality what happened is we spent the better part of the first 6 months building out these rough prototypes which did a great job of finding keyword searches for you on various social networks and blogs, but we missed the real core customer: big enterprise. This was around the time Radian6 was building their product and raising a shit ton of capital from VCs. We had the cashflow from my consulting business, my small consulting business. So we had enough to build the product, get it to market, but not enough to hire sales teams, or hire anyone really. Radian6 ended up killing it in the enterprise market charging something like 15-20x what we charged (they also sold for $326 Million!). Kids, here is an important lesson, if your competitor is charging magnitudes more than you, but their product isn’t magnitudes better, you are underpricing your product and will never make money. Seriously, you won’t make shit.
So what did we learn in the years we kept the site alive? Thousands of people signed up for the free trials, but since they were small businesses/startups, there wasn’t enough chatter for them to see value and understand our value proposition (i.e. why we felt our software was worth even $20/month). We failed to make the use of our tool FEEL critical to these startups. We failed in a number of avenues (we made a crappy and costly attempt to lure enterprise customers through white-labeling, again wasn’t worth the time by then). Eventually the site was mothballed the remaining 5 customers had their last month refunded (most had forgotten they even used the service and didn’t remember they were still being billed!).
- What do I know now that I wish I’d known then? Here is a simple list:
- Find out if your problem is widespread (upcoming post on how to do this)
- Interview some of your potential customers
- Find people who have sold to this market before and ask them their advice
- Price high, then discount, its easier to raise your prices this way (anchoring).
- Craft your marketing plan before you even write your code
- Research. When you think you’re done researching, research some more. You can never know too much about your market.