Distribution, Distribution, Distribution
I noticed an interesting tweet by Dave McClure the other day that talked about startup pitch decks and the general lack of information about distribution:
He is absolutely right. Most pitches I see are all focused on product and team. There is the requisite slide about the big market opportunity. Usually it ends meekly with some sheepish ask for funding by presenting seed round terms. But the stuff that goes missing time and time again is how you are going to connect said product to that awesomely large and eager market. Basically, it is the nuts and bolts of getting your product in the hands of real users.
Product and team are easy things to talk about. They are the most real thing you can grasp in the early days of your startup. They are easy to define and see and explain. Market is also easy in that you can do some quick research over the course of a day or two and snag the most relevant (and impressive sounding) industry numbers. The stuff about funding needs is a bit of pixie dust and unicorn shit, but generally is standard fare. But the meat that gets lost in many startup pitch tomes is the process of acquiring customers.
No doubt the customer acquisition strategy is hard. You might get some initial customers and traffic just within your own limited universe of social and industry connections. You might convince a tech blogger to write about your little startup. What you really need however is a way of scaling up your business in a big way, and often that tends to be the most murky and swishy of pitch topics.
As I mentioned yesterday, the earlier the startup, the hazier the details are on how one scales the business. The main goal of the early stages of a startup is to create a worthwhile product and demonstrating initial traction that is promising enough to warrant further exploration. Thus it is fair that most of the focus is on product and customer feedback and market validation. You are tackling the first hurdles of product-market fit. However, the hallmark of a sustainable business is one that considers the means by which one is going to not just identify, but acquire, those users in large numbers for the least cost.
This is not to say that you have to have all the answers. You are so deep in the throes of making the initial product solid for your earliest users that acquisition is usually a second thought. But you should at least have a reasonable clue as to your strategy and tactics once you are at the point to scale. This is what VC’s will want to understand; can you take your hypothesis and make it work in the markets at large? If a VC gives you a boatload of money, how are you going to spend it so that you can achieve a high rate of sustainable growth? Are you going to hire a massive direct salesforce, are you depending on SEO, can you leverage network effects, or do you have some other strategies? Are your current tactics used to achieve initial traction sustainable? What are the costs of user acquisition before, now, and projected? You need to sound credible when responding which requires some effort and details on your part to create a well thought out acquisition plan.
Do not ignore the distribution question when pitching investors! Do not simply blow off the questions with a “we will get Amex as a partner” or “product is so awesome users will come”. That simply shows ignorance, laziness, and/or hubris. Early on, have some informed insights as to how you are going to get people to hear about and use your product or service. It is okay if it all seem nebulous at first, because the more mature your startup is, the more concrete the answers become and the more focused your sales and marketing strategies become through various experiments. If you show you are serious about understanding the challenges of distribution early on, you have a better chance of investors taking you seriously.
15 Notes/ Hide
- ingersollnik liked this
- mnomnga reblogged this from marksbirch and added:
Dont forget customer acquisition question in the earlier business model design
- runview liked this
- sidosw-blog liked this
- tim-leung-blog liked this
- tim-leung-blog reblogged this from marksbirch
- hershberg liked this
- juliefredrickson-blog liked this
- joeconyers liked this
- blanketpol reblogged this from marksbirch
- blanketpol liked this
- marksbirch posted this