From A Smart Bear: Startups and Marketing for Geeks

I hesitate to take issue with Jason’s Sacrifice your health for your startup — particularly after his wife gave her up-close-and-personal. His main point is dead on — we need to unhealthily obsess over our creations. But take this too far and your productivity drops off the cliff.

As founder of a run/bike app startup, I can write off my workouts. I have a ready excuse for squeezing in a little “sweat equity” — I need to get in shape to know my customers’ issues. However, I also know firsthand that exercise increases total productivity. I avoid colds and I have more mental staying power. Plus, I have a better attitude when I don’t resemble shtik fleysh mit oygen (Yiddish for a piece of dead meat with eyes).

Technology startups can be horrible for your body. Not mangle-your-arm-in-a-press horrible. But we have all sat in front of a computer for hours on end, tapping on the keyboard and lost in thought. Your only movement is reaching for the can of Mountain Dew or grabbing the bag of chips. Maybe you tear yourself away long enough to call for pizza delivery.

Perfect for veal, not so much for humans. It wasn’t always this way. Joel Spolsky notes that in times long gone, programmers got washboard abs while waiting for the compiler.

Think about exercise in light of a situation we’ve all faced: all-night coding sessions. Remember the all-nighters you pulled, heroically pumping out code until dawn to make a big deadline? Seemed like you were getting lots done while you took a bullet for the team. The truth is your programming was probably awful. Even a few hours’ sleep would have prevented your spaghetti mind from dumping spaghetti code. The worst part: as you got more sleep-deprived, the better the whole idea looked.

Workouts are the same – as you drop further into sloth, inactivity seems smart. Only the uncommitted have time for exercise, right?

Exercise is pretty useful for anyone in a startup even without the health and stamina benefits. Just as your best ideas appear while you’re soaping up in the shower, elegant solutions spring up when you’re out running. Your mind is searching for something to think about besides your body’s pain. And while you don’t have a pen in the shower, you can always use your cellphone if a brainstorm strikes during a run.

…

Let’s say you’re ready to start an exercise regimen. What next?

Some of us already know how to work out – we’ve just given ourselves license to be lazy in this one area. If you’ve never been in shape, start gradually. Choose an activity you already enjoy (biking is my favorite). Regular exercise is far more important than going Charles Atlas overnight. Couch To 5K is a great place to start.

A little goes a long way. You already knew you don’t have time to train for a marathon. Maybe get in a quick run before work – you’ll feel great all day. Or inch up to a hundred pushups while prepping for a sales call. Zen Habits has a detailed list of exercise hacks to help ease you into the habit.

The critical thing is to just get started. Close your door, wipe the crumbs off your pants, and give me ten pushups now!

From A Smart Bear: Startups and Marketing for Geeks

Most people start their first company while they still have a day job.

It makes sense: You don’t need loans, and you don’t need funding. If you “fail” all you’ve lost is time, but considering the fun, the stories, and everything you’ll have learned, that’s hardly a failure.

You just need to give up all your free time which, if you’ve caught the “founders” bug, is A-OK with you.

But you’ve also placed yourself in a hazardous, potentially legally ambiguous situation. If managed improperly, you’re unnecessarily risking lawsuits and worse.

I’ve been on both sides of the table: I’ve done a startup while working and I’ve employed people who either were or are very capable of having their own startup on the side. And I’ve known people who were sued because of it, and not all of them won.

Here are my tips for how to pull this off.

IANAL

Ho hum, hedging is so tedious. But I have to say it: I Am Not A Lawyer. None of this is legal advice. If you do or don’t do anything listed here and anything bad happens, it’s not my fault.

If anything good happens, I’m thrilled and honored to accept your munificent cash donation.

Pick a business that can thrive within your constraints

Your side venture has constraints a “normal” business doesn’t have:

1. You can’t answer the phone during normal business hours.
2. You can’t answer emails during normal business hours.
3. You can’t afford to hire three developers to add features and bugs.
4. You have to work in fits and spurts.

Your natural tendency is to fight these constraints, but that’s the wrong approach. For example, you know that to avoid social media shitstorms you’re supposed to have stupendous customer service, so you claim as much on your website. But then you don’t have a phone number and emails sent to you at 10:00am don’t get answered until that night (which means they’re not viewed until the following day).

That’s called a “missed expectation.” It’s also called pissing in the wind — it’s just going to come right back at you.

The right attitude is not only to work inside your constraints, but to turn them into competitive advantages!

For example, your regular income affords you the luxury of underpricing your service. So if anyone complains that there’s no phone number, you can just point out that for $5/mo you can’t afford a phone staff.

As another example, pick a product in which simplicity and having very few features is an advantage. “We do only one thing and we do it better than anyone” is a great marketing slogan. You don’t have the time to make a Microsoft Excel knock-off, so don’t!

Embrace slow growth

We all have dreams of stratospheric growth, whether it’s hoping the next blog post will get 267 votes on Hacker News and double your RSS subscribers, or hoping that the advent of release v1.1 will set the blogosphere ablaze.

Good work if you can get it, but it’s not a “plan,” especially not for a business you’re running in your spare time. In fact, any bootstrapped company should be aiming for slow, consistent growth rather than explosive growth.

This is not a bad thing! Slow growth maximizes your chance for success. Slow means your success is not dependent on some unlikely, massive event that’s totally outside your control. Slow means you can change drastically during the early days without sinking the company. You have a job, so you don’t require explosive growth to be successful anyway.

Remember, your immediate goal isn’t to make millions of dollars, it’s to build a business just solid enough to quit your day job. That might mean enough profits that you can already live (frugally) off the company. Or it might mean you have enough customers to have “proved” you have a viable business model, so now you can raise money with sensible terms.

Don’t lie at work

The best way to avoid a lawsuit is to prove that your employer knows you have a side project.

I know, you really really want to ignore me and operate in secret. You’re afraid to tell them because they’re might do something — fire you, distrust you, or look at you funny at lunch.

Yes, that might happen. But what’s worse — one of those things or a lawsuit? If you don’t think they’ll sue you, then you shouldn’t be afraid of telling them! They are going to find out anyway. You need to tell them on your own terms.

I’ve always told my employer, and it always worked out for the best.
Here are those stories.

How do you tell them? Write a simple document explaining what you’re doing. Here’s my template:

To Whom it may Concern:

I have a hobby which does not in any way conflict with work. I’m writing this letter to make sure you’re aware of it so there’s no misunderstanding.

My hobby is ….

I work on my hobby only at home and on my own time; it is not in conflict with my employee agreement. I own it; [Company] has no ownership or rights to it. Like any hobby, it could generate a small amount of income.

Although I don’t anticipate it, I understand that if my hobby ever became in conflict with my job that it’s my responsibility to notify you immediately.

Thank you.

Then you get this letter signed by someone with authority. “Authority” means someone who can legally represent the company. This will of course depend on the company, but typically C*Os or the company’s legal council is a good bet.

Getting a supportive boss to sign it isn’t good enough. He can’t speak for the company.

Check your employment agreement

There’s a phrase in the template letter about your side business not conflicting with your employment agreement. Is that true? It’d better be.

Employment agreements are typically biased in favor of the employer, sometimes with outrageous clauses saying that anything you do, even at home and on your own time and unrelated to anything at work, is automatically owned by the company, and that furthermore you’re responsible for identifying and reporting on those things, and if you don’t do all of the above there’s no limit to the damage you could have caused.

Courts have thrown out some of these egregious contracts, but that’s unusual, and you can’t depend on that. You don’t want to go to court at all. Besides, you signed it.

Read over your agreement and make sure it’s legal to have the side business. If it isn’t, you must write a letter like the one above specifically stating that this is a valid exception to your employment agreement.

Don’t use company property or Internet, for reals

Another clause in most employment agreements is that anything you do physically at work, or on software and equipment owned by the company (e.g. laptop, customer lists, Photoshop) is automatically the property of the company.

This clause is fair. If your project is really on the side, you have no business doing business at work. If your project is really yours alone, it cannot be assisted by a company laptop, company software, or company Internet connection.

When it comes to company property, be paranoid. Assume Big Brother is watching. Assume every laptop has a secret program that records all keystrokes, mouse clicks, screen shots, web sites, and emails you read or write. Assume everything you do on the Internet is recorded, cataloged, tagged, and monitored continuously by a methamphetamine-powered slave-army.

Now I realize you’re super clever. You want to sneak in some tech support emails during the day, so you use a cocktail of  Anonymizer plus GMail-over-SSL to confound the network admin. Because of course covering up your activity is a sure sign you’re doing something legal…

Even that is not enough. If they decide to sue, they get to look through your email records (it’s called “discovery”). Then they have 100 emails you sent during work hours. You lose.

Get the picture? Just don’t do it.

Time management is critical

I’m naturally awful at personal time management. I procrastinate, I’m disorganized, and if I’m not careful I’ll burn two hours ROTFL at FailBlog with nothing to show for it but tears of laughter puddled under my keyboard.

A startup already generates an infinite amount of work. It takes all your time, which for you is 40 hours/week less than it ought to be. You can’t afford to waste time, whether that means bad habits or working on the wrong tasks.

There’s no silver bullet — workflow is a personal matter — but here are some techniques to get you started:

• Check email infrequently.
• Inbox Zero — Processing email until nothing remains has both psychological and practical advantages.
• GTD (Getting Things Done) — This technique literally changed my life. Few people implement 100% of this system, but everyone can take away a trick or two that makes them more productive.
• Work in sprints — Short, focussed bursts of activity eliminate the surprisingly large waste that comes from context-switching and interrupt-driven behavior.
• If you don’t sleep enough, your productivity plummets. Trading an hour of sleep for an hour of coding is never efficient.
• Use a tool like RescueTime (free!) to empirically discover where you’re spending time; the waste becomes clear. P.S. Tony Wright, founder of RescueTime, started that company while employed and wrote about what he learned.
• Optimize slowest tasks first — Identifying and optimizing the slowest tasks increases your overall productivity more than you think.

From Startup Whisperer

I was talking to a friend of mine recently who runs a major national brand.  We were talking about the perils of running brand ads online.  His concern was that he didn’t have the ability to really understand where his ads were being placed or whether they were being seen by the right audience.  The folks at Mpire rolled out a service last year called AdXpose.  It asks as sort of the “Omniture for online advertising.”  Its an all-in-one solution to provide brand verification and campaign optimization for online ads.  The team put together a research white paper that you can request here that shows over 50% of online advertising is being wasted.

The chart below looks at the cost of delivering an ad impression.  As you can see for a standard $1.00 CPM remnant ad the cost of delivering it is typically .$10 when you load in all of the manual cost and technology.  This is basically a fixed cost so a higher CPM brand campaign ($10-$40 CPM ad) barely feels this cost.  Knowing that there is so much waste in advertising today – brands and agencies are starting to figure out that they have to tackle transparency and accountability.  The price of this brand protection is relatively small especially considering that there is so much waste.  Plus, the opportunity cost is huge since there is so much upside in having consumer brands move their budgets online.  If you no that 50% of your advertising is being wasted and/or harmful to your brand, then it would seem to make sense that you’d want to track your campaign(s) with a microscope.

A recent PriceWaterHouse Coopers study indicated that nearly 1 in 3
ads is never even seen because they are below the fold.  Today, only 7%
of the global US media budget is spent online.  80% of that volume is
distributed thru indirect channels like ad networks or ad exchanges.
The answer to the question on what is the price that a brand manager
would be willing to pay for brand protection – its priceless.

Some interesting thoughts from Mpire’s Kirby Winfield from this post on Adotas.  Kirby is always excited about talking to potential customers.

From cdixon.org

I’ve written a few times about what seems to be an exploding tech scene in NYC.  This is sometimes interpreted as arguing that NYC is a better place to start a company than the Valley. Most recently, Matt Mireles seems to be addressing people like me with his critique of the NYC startup scene (he makes some good points as does Caterina Fake in her response).

I’ve never meant my arguments to be about where it is better to start a company. California is a phenomenal place to start a tech company. NYC is a great place as well. (Note to Matt – it’s hard for first time founders everywhere). To me, the important question isn’t which place is better, but rather how we import the things that make the Valley great into NYC. As I said last year:

New York City has many of the same strengths as Silicon Valley – merit-driven capitalism, the embrace of newcomers and particularly immigrants, and a consistent willingness to reinvent itself.   Silicon Valley will always be the mecca of technology, but now that people here are getting back to, as Obama says, making things, New York City has a shot at becoming relevant again in the tech world.

I spent the past week in California and had the honor of meeting some legendary venture investors. I was deeply impressed: they are legends for a reason. Of course, they are incredibly smart and hard working and all of that, but most impressively, it was clear that they truly believe in making big bets on ambitious, seemingly wacky ideas to try to change the world. Every VC has this rhetoric on their website, but – at least in my experience – most just want to make incremental money on incremental technologies. (Side note: I noticed that the more powerful the VC, the more likely they were to pay close attention, show up on time, and not bring phones/computers into meetings.  I guess when you are changing the world, emails can wait an hour for a response).

California should be NYC’s role model and ally. The enemy should be people and institutions who make money but don’t actually create anything useful. In NYC, this mostly means Wall Street, along with the Wall Street mindset that sometimes infects East Coast VC’s (emphasis on financial engineering, needing to see metrics & “traction” vs betting on people and ideas, etc).

Matt should do what’s best for his company. God knows it’s hard enough doing a startup – you don’t need to carry the weight of reinvigorating a region on your back as well. That might mean moving to California. Meanwhile, forward-thinking investors and founders in NYC will continue trying to make things that change the world – in other words, trying to make NYC more like the Valley.

From Tony Wright dot com

My startup (RescueTime) has enjoyed some pretty ridiculously good PR (online, print, and video). It’s not a surprise that the most common questions that we get from other founders are about PR. How do you get press and the blogosphere talking about your product?

When you research this topic, you’ll see lots of technical and how-to articles that talk about how to build relationships with writers, how to use services like PRweb, how to format a press release, and more. In a lot of ways, this reminds me of SEO (search engine optimization). Research SEO and you’ll find a bunch of articles about page markup, link sculpting, meta descriptions, and all sorts of other mechanical processes. But what you won’t find much of is information that teaches you how to write great content and how to build your startup and features (from the ground up) with “linkworthiness” in mind.

Just like fabulous content solves 75% of your SEO problems, fabulous storytelling solves 75% of your PR problems.

I think there’s a lot of built-in contempt for PR and marketing among entrepreneurs (especially hacker-flavored entrepreneurs). We’ve all been in companies with fat communications budgets wasted by blow-hard marketeers, so many of us have dismissed the profession altogether. We’re so entranced by the concept that just building something people want will win the day. I remember cheering the first time I read the quote, “marketing is a tax you pay for being unremarkable“. I remember reading a statement on Hacker News that said, “my code speaks for itself“. Two years ago, I would’ve said, “Right on, brother! Preach it!”

But my mindset has shifted about 180 degrees over the past few years. I now believe that how you say something is at least as important as what you’ve built. The A/B testing and design/copywriting iteration that we’ve done over the past year (which has, over time, resulted in a 400% increase in conversion rate on our site) really has driven home this belief. What’s A/B testing if not a bunch of microscopic marketing/PR tests?

What you need to send to reporters and bloggers

If you’re reaching out to reporters and bloggers, you put yourself in the shoes of that person. They are looking to write a headline that causes readers to buy a magazine/paper or click on a link. They are looking to write a story to support that headline that causes readers to consume that content and (ideally) find the content so provocative (note that “provocative” can be VERY different from “valuable”) that they send the link to their friends and relatives, post it to Twitter, and write a supportive (or critical) write-up on their blog.

If you can truly empathize with a writer, you fairly quickly realize why your new social bookmarking app, web annotation service, or small business accounting app isn’t particularly newsworthy. You aren’t click-bait. You aren’t link bait. You aren’t going to sell a paper.

Which is why your most important problem from a PR point of view is this: How can you make your uninteresting (to a broad audience) company interesting?

The good news is that it’s quite do-able. If at all possible, read Made to Stick by the Brothers’ Heath. If you can’t read it, read this summary. If you can’t do that, just try to craft a story that succeeds in as many of these areas as possible:

• Surprising
• Funny
• Personal
• Has a story arc
• Useful

(notice how low “useful” is on the list? That’s not an accident. You have to be REALLY useful to be worth talking about.)

A boring company with good storytelling skills can do some amazing things on this front. Off hand, I can name a company that sells shoes online that did pretty well on the PR front, a personal finance app that a lot of people talked about, and a creator of small-business project management software that people can’t stop linking to. If you want to see smaller/earlier successes, check out Balsamiq or UntitledStartup (both are doing some clever things out of the gates).

So if you tell your product’s story at a party (which you should, over and over!), watch the listeners eyes. Do they glaze over? Or do they light up? Do they laugh? Do they argue with you? Do they ask questions? If a you’ve never had a listener at a party say, “wait a minute– John over there would LOVE to hear about this… Let me grab him!”, then you probably aren’t ready to work on the mechanics of outbound PR. If at the end of your story, the listener doesn’t often say, “Can you tell me that URL one more time?” as they reach for their smartphone, then you need to keep working on your story. Because charging forward on outbound PR with a shitty story is pretty much the equivelant of working on your SEO mechanics when you know you have crappy content. Your’e ignoring the most important part in favor of the least.

Post Scriptum – On the Value of PR

Having enjoyed pretty great PR success, I wanted to throw out a final thought. Like a lot of accelerants (marketing and funding being two other examples), PR can be like throwing gasoline onto a fire. Or it can be like throwing gasoline on a pile of wet wood. It can be especially exciting if your business is enjoying growth already. But PR (and, more broadly, your startup) is a marathon, not a sprint. The first couple times you get a PR hit, you’ll quite likely be flummoxed by the fact that your traffic and usage doesn’t really change that much as a result. TechCrunch might get you 5-10k uniques. Being in the print version of the New York Times might get you a few thousand uniques. PR is not going to result in a viral/word-of-mouth explosion, but it’ll speed things up nicely if you’ve already got one happening.

As Andrew Chen says in one of his many fabulous posts (why bloggers and press don’t matter for user acquisition), if you’re going to spent time on marketing and PR, spend it on things that will pay ongoing dividends rather than 1-time dividends. Andrew was talking about stuff like viral loops and SEO, but in my opinion he missed the most important marketing “gift that keeps on giving” – crafting and tweaking a story that makes you worth talking about.

From A Smart Bear: Startups and Marketing for Geeks

What if your company were allowed only one advantage over the competition?

What would a sales call look like, starting with your 30-second pitch, then dealing with skeptical questions, trying to earn this potential customer’s interest, respect, and eventually money, all with only one advantage?

Impossible, or just pointless?  Neither!

You should go through this exercise because this skill is valuable in every sales call. Sometimes you’re defending the few advantages you have over a specific competitor. Sometimes you’re arguing the virtues of small businesses over large ones. Sometimes you’re defending your product against what the potential customer perceives as a glaring lack of functionality.

Hanging your hat on just one advantage that you can own completely is stronger than diluting your message across many advantages.

And it’s not just in face-to-face sales calls either. Your homepage becomes laser-focused. Your advertisements become pointed, powerful, pithy, and other words starting with “p.”  Your 30-second pitch becomes compelling. You know what to blog and Twitter about. Your 5-minute product demo drives home a single point. Everyone knows who you are and where you stand.

And at least on this one point, you’re untouchable. Doesn’t that sound nice? It is nice.

But don’t you need lots of advantages to overcome sales objections and competition? No. Let’s see how to riff off single advantages, using them to answer a range of skeptical questions and concerns.

If nothing else, this should get your juices flowing and make future sales calls and marketing messages more effective.

From cdixon.org

In an earlier blog post, I talked about how sites that generate purchasing intent (mainly “content” sites) are being under-allocated advertising dollars versus sites that harvest purchasing intent (search engines, coupon sites, comparison shopping sites, etc).  As a result, most content sites are left haggling over CPM-based brand advertising instead of sponsored links for the bulk of their revenue.

But there is an additional problem:  even among sites that monetize via sponsored links there is a large overallocation of advertising spending on links that are near the “end of the purchasing process” (or “end of the funnel”). For example, an average camera buyer takes 30 days and clicks on approximately 3 sponsored links from the beginning of researching cameras to actually purchasing one.   Yet in most cases only the last click gets credit, by which I mean:  1) if it’s an affiliate (CPA) deal, it is literally usually the case that only the last affiliate (the site that drops the last cookie) gets paid, 2) if it’s a CPC or CPM deal, most advertisers don’t properly track the users across multiple site visits so simply attribute conversion to the most recent click, causing them to over-allocate to end-of-funnel links 3) if it’s a non-sponsored link (like Google natural search links) the advertiser might over-credit SEO when in fact the natural search click was just the final navigational step in a long process that involved sponsored links along the way.

What this means is there are two huge misallocations of advertising dollars online: the first from intent generators to intent harvesters; the second from intent harvesters that are at the beginning or middle of the purchasing process to those at the end of the purchasing process.  This is not just a problem for internet advertisers and businesses – it affects all internet users.  Where advertising dollars flow, money gets invested. It is well known that content sites are suffering, many are even on their way to dying. Additionally, product/service sites that started off focusing on research are forced to move more and more toward end-of-funnel activities.  Take a look at how sites like TripAdvisor and CNET have devoted increasing real estate to the final purchasing click instead of research.  For the most part, you don’t get paid for the actual research since it’s too high in the funnel.

As with all large problems, this misallocation of advertising dollars also presents a number of opportunities.  One opportunity is for advertisers to correctly attribute their spending by tracking users through the entire purchasing process (in the case of cameras, the full 30 days and multiple sponsored clicks).  Very likely, these sites are currently overpaying end-of-funnel sites (e.g. coupon sites) and underpaying top-of-funnel sites (e.g. research sites). There is also an opportunity for companies that provide technology to help track this better. Finally, if over time advertising dollars do indeed shift to being correctly allocated, this will allow research sites to be pure research sites, content sites to be pure content sites, etc instead of everyone trying to clutter their sites with repetitive, “last click” functionality.

From Tony Wright dot com

I tend to disagree with 37Signals on a mess of things. Like a lot of successful internet pundits, they deal in absolutes and hyperbole. There’s no middle ground and there’s no “…well, it depends”. That’s just not as linkbaity. It’s probably not as fun, either.

But there’s one place where I wholeheartedly agree with ‘em– if you’re in the Freemium game, start charging for your software. Right now. Yesterday, in fact. Should you put a price tag on just any web service? Absolutely not. Kayak shouldn’t charge to find you a flight and (if the rumors about their success as a leadgen platform are true) Mint shouldn’t charge you to organize your personal finances. But if a big part of your revenue plan involves charging for premium services on top of a free product (freemium), you should start charging as soon as possible. Here’s why:

1. Price signals value. Where you set your price emotionally sets a value for your product. What that means is that amassing a gigantic pile of enthusiastic free users isn’t going to result in a big pile of paying users when you turn on your premium features (or worse, move some of the features behind the “pay wall”). In fact, it will likely piss off a lot of users who have grown accostomed to getting something for nothing. During the Y Combinator experience, I got a chance to hang out with Joe Kraus (founder of Excite and later Jotspot) and the fellas from Wufoo. Both had horrifying anecdotes about asking a bunch of free beta users to start paying for their software. The conversion rate was awful. When we first turned on our premium offering, we were struck by the same thing. We opened the floodgates for paying customers and found that almost none of our free users made the switch. So even with your pile of zealous free users, you’re starting from square 1 in the premium game– you’ve already convinced your current userbase that the fair price for your product is “free”.I mentioned this in the comments but I wanted to promote it up here as well. *”Take a minute and answer this two-part question:*“1. Is the percentage of African nations in the United Nations higher or lower than 65? 2. What is the percentage of African nations in the United Nations?

   This was one of the queries that Amos Tversky and Daniel Kahneman posed in their 1974 paper in Science called “Judgment Under Uncertainty: Heuristics and Biases.” It turns out that the answer you provide to the second question is heavily swayed by that first question. The average estimate for question two was above 45 percent. When question one was lowered from 65 percent to 10 percent, the average estimation of question two was dropped to 25 percent. ” Source (pdf)

   Your free beta anchors your perceived value at zero and it’s a bitch to climb out of that hole.

2. Speaking of Square one… You don’t know nothin’ about square one! Charging people money for software is a whole new set of skills that you quite likely don’t have. What do your paying customers REALLY want? What do you put behind the pay wall versus in front of it? What do you give your free users? What kind of free trial should you offer? Will a referral program work for your business? Does your value proposition resonate most with individuals or businesses? Big biz or small? Can you make adwords work for your business? What works on an adwords landing page? Will a salesperson be valuable for your business? Where do your leads come in? Telesales? Direct Mail? SEO? SEM? Viral/word-of-mouth? The problem with all of these questions is that the answers don’t transfer across markets very well. What might work great for my market/product might perform terribly for yours. The sooner you start investigating this stuff is the sooner you start being smart about your market.
3. Getting people to sign up for a free service doesn’t mean that you know they’ll spend money on it. There are lots of clever ways you can ascertain whether someone would REALLY buy your product. You can put up fake adwords ads, you can cold call people, you can throw up a permission marketing page and try to get attention for it, you can do a focus group, you can ask some pricing experts, and more. But nothing is a perfect substitute for having a buy button next to a price and seeing if anyone actually clicks on it. And they generally won’t. At first. So start learning!

We’ve been at this for almost two years and I have very few big regrets. But my biggest regret as an entrepreneur is not starting on the path of charging customers sooner. It’s taken us about a year to get pretty good at it, but we’re still learning new stuff about our customers every week (we’re pretty darn grateful to have customers who are generous with feedback).

Some additional fabulous reading on the topic of when to charge can be read on Sean Ellis’ blog here. Sean basically contends that you shouldn’t charge at all until you are certain you have product/market fit. In the comments, someone expressed concern that product/market fit isn’t real until there’s a price attached to it. Here’s Sean’s response:

I agree that price is part of the process of figuring out if you have product/market fit. I’m basically starting with the price of zero. If people aren’t that disappointed to see the product go at zero cost, then we already know that any cost above zero will very likely also result in people not being that disappointed to see the product go. Once enough people consider it a “must have” at zero cost, then the next step is to figure out a price that generates the most revenue for every thousand people that try the product.

This is an interesting thought, but I’m not convinced. I remember hearing that Wufoo and Jotspot both had pretty passionate free/beta users. I could be wrong, but I’d wager that they would’ve had a solid number of folks who would state that they’d be “very disappointed” if they had to give up the product. Nonetheless, they came up pretty empty when asking these users to start paying up. The difference between product/market fit for a free product and product/market fit for a $5 product could be a lot farther than you think. It might be a few iterations or it might be a whole new product.

But where I think Sean is absolutely right (to be fair, I think Sean is brilliant– you should subscribe to his blog!) is that you need enough customers to be able to measure and improve your product. If you can’t acquire/retain 100 paying customers, perhaps you should stick with a free/private beta.

From Startup Whisperer

From Startup Whisperer