THE BACKSTORY:
Business success is a completely personal marker. Depending on what you want to achieve will be the true metric of success. Businesses fail all the time. Most small businesses and startups fail within the first 12-24 months. Sometimes it is the result of growing too fast, taking on too much investor money, not understanding your primary market, not understanding your primary product. I have watched avidly as some businesses thrive while others fail miserably. Once in a while, I am in the position to offer my outsider advice. I am no serial entrepreneur or major marketing guru but I do study business, finance, marketing, and psychology, among other things. I do work in and out of a few industries and I love tying the commonalities together in order to figure out the hard problems. Below is a letter I recently wrote, as requested, to a CEO of a small startup describing my take on his failed business attempt from the perspective of a crowdfund-er. For more great books not mentioned in the letter click here.
THE LETTER:
Firstly let me just say that your efforts thus far have not been futile. I greatly appreciate the fact that you are able to sum up the issues and are able to learn from the mistakes made in the process. I honestly believe that without 1000 mistakes there can never be a true success. Success is defined in many different ways and I think at the end of the day it comes down to fulfillment. Personal fulfillment. From my perspective, from the outside looking in, it sounds like the marketing ultimately created its own monster. Yes the refunds were a big hurdle and drained the company of cash but marketing was a killer. I can’t imagine what could have been done to fix this in a timely manner in the midst of the storm but I would have not personally put as much effort into the marketing. I think that a product that adds value does not require a massive marketing push, at least not in the traditional sense. Maybe 10 or 20 years ago this might have been the case but today I don’t think it is as relevant. You have direct contact with your customer base and are able to influence as well as take cues from them directly. This is something you should be leveraging every step of the way. I am not saying you should listen to every nag and gripe and try to fix every little dispute for every single person. This is an impossible mission. I am saying that if you see some major trends, maybe there are points when you need to stress test these assumptions to see if they hold water or not. I read a ton of books on this subject as well as many other subjects pertaining to the human condition and what really makes people act the way they do. As far as the returns department I don’t think the scale of the department met the actual need of the returns… I could be totally wrong but it should have been something that was calculated for in the very beginning. I’m sure that a few tweaks here and there could have helped automate the process so that the manpower required would have been way less that what actually happened. Bottom line of all of this is that you can’t change the past and you can’t expect the past to determine the future. If you have a product that you truly believe in and it makes sense and it provides value well beyond its actual price point then the product will inherently be something people want. Moving forward I would recommend a few things that “must” be read in my opinion:
22 immutable laws of marketing
(the older edition) (in order to see what really drives marketing and to help better understand how to reach your audience),
Growth Market Hacking
(in order to see how a company can successfully market in the digital age as opposed to the old tv/newspaper driven age),
The war of art
(a timeless and universally uplifting book that explains the reasons why we are afraid to get started and the things that block the road in the process…Pressfield is simply a genius and completely raw in this book…resistance is the enemy),
Rework
(simply the best small business book ever created explaining how to minimize the bullshit and maximize the product or service…not taking on investor money, not building a huge company, not creating multiple layers of bureaucracy, focusing on the main goals of the company, ensuring that the vision of the company match the vision of the employees and ultimately the vision as perceived by the customers),
Anything you want
(explains his tribulations as well as success and how it really doesn’t require some crazy business plan but rather a business plan that scratches your own itch. How things are simple, not necessarily easy but simple). I could probably go on for days about what to read and where to gain some real world insight and I am fully available to chat or email (completely devoid of any type of compensation or bullshit) if you would like to reach out. Total reading time (Try Audible and Get Two Free Audiobooks) is probably 10-12 hours. Well worth the investment if it helps divert from costly mistakes in the future. I think you had a vision and a product and I commend you on your efforts thus far. I would say, don’t beat yourself up about it and keep pushing forward. Edison had a thousand failures and iterations before finally solidifying the light bulb. Overnight success is usually the result of years of small tweaks and experiments. All the best and I would love to kept in the loop of developments in the future.
THE CONCLUSION:
Mostly my advice to him is to go back and get a little more knowledge before moving forward. Obviously he did some things right as he was able to pull in well over 6 figures of investor seed money. The product launched and shipped. In the very fast moving world of Kickstarter-type projects people expect results very fast. I have watched campaigns drag on literally for years without movement and eventually pissing a lot of people off. I would say expectation management, not only of oneself but of the audience are key. Secondly, I would say having a working prototype and field testing it prior to launching a campaign is critical. Third, building the audience and getting successful feedback that the product will even be useful or wanted can make or break a campaign.
A great resource for crowd funding campaigns would be the FOUNDR Magazine Podcast Episode 116-119 covering crowdfunding mastery.