If you are a startup founder, you’ll want to bookmark this and refer back to it. It’s absolute gold.
-Michael Arrington

About a year ago, I wrote a post entitled “Changing the World vs. Making a Profit.” Below is an excerpt from the post:

There is one particular “fork in the road” that distinguishes one entrepreneur from another. It is the decision or strategy each entrepreneur consciously or sub-consciously makes when beginning their business venture. I like to call it the “World Changer vs. Profit Maker” debate. This debate essentially forces the entrepreneur to define their business venture. In other words: Is your business a “world changer” or a “profit maker”?

-via techsoomer.com (oct. ‘08)

I’ve always gravitated towards the world changer mentality.  When an entrepreneur is trying to change the world with their product, the amount of passion and dedication that he/she shows cannot be replicated anywhere else.  This is the type of attitude Zappos CEO Tony Hsieh alluded to in his conversation with Sara Lacy backstage at the TechCrunch50 conference (see video below).

We all know it’s not easy to change the world as a young, underfunded, resource-deficient startup.  Many young upstarts tend to chip away at a niche market because of this.  But it is those rare few that swing for the fences that inspire a community.

Take a look at AnyClip presenting at TechCrunch50 (video below).  The conviction that CEO, Aaron Cohen displays in his presentation is just awesome.  There is no question as to where AnyClip wants to go with their innovative platform.  This is great example of going big.

Early adopters are a critical component to any startup environment.  This particular demographic is unlike any that a company will face in the future.  It’s the early adopters who are first to interact with a company’s initial product or service.    It’s the early adopters who represent a company’s first fan or first critic.  It’s the early adopters who can open the eyes of the closed-minded entrepreneur.  It’s the early adopters who have the ability to drive a company into unforeseen directions.  It’s the early adopters who tell it like it is.  So what does it mean to be an early adopter?  Quite frankly — it means a lot.

For many technology enthusiasts, being an early adopter comes naturally.  This crowd eagerly jumps on beta releases, private invites, and all other forms of limited activation events — commonplace within the dot-com arena.  In an industry with so much transparency and so many options (the closest industry to being barrier free), it’s easy to see how powerful this group can be.  Twitter is a great example of how a group of early adopters transformed a fledgling company into super-stardom.  I doubt even the most ambitious Twitter founder could have predicted how the early adopting community would utilize the simple messaging platform.

Where Do Early Adopters Stand?

The early adopter crowd represent the gatekeepers between the firm and the “early public”.  Needless to say, a positive reaction at this stage in the game can only improve the firm’s strategic position.  However, the early adopter crowd seem to possess a powerful double-edged sword.  Along with boosting company and product awareness through praise, the early adopters can bring user adoption to a halt through negative rants and dismal product reviews.  Although representing only about 5% of the target audience, (according to my not-so-scientific math) this group’s influential capacity is off the charts.

Should Companies Cater to their Early Adopters?

Despite the massive influence that early adopters possess, I advocate against catering to them.  Instead, companies must focus their energy on constantly improving upon their core competencies (which is what every business should do).  It’s in the best interest of the company to utilize the early adopter crowd, taking advantage of real-world interaction and early customer dialogue.  For it’s this crowd who you must ultimately impress.  Without “the approval” from these dedicated customers, your company will likely remain hidden from the masses.  Since early adopters possess  a deep understanding of the marketplace, they know what type of offering a given company should be delivering.  Startups should listen to these smart consumers, but let me stress this one more time: never cater to any particular crowd — doing so will cause the firm to lose focus as well as their true identity.

Bad PR is Still Bad

There’s a misconception that there is no such thing as bad PR.  Maybe that’s true for a moment or two, but eventually, bad press will catch up to any company.  I cannot think of one impactful company who has made their name off of negative press.  Long-lasting, innovative firms are built from within, not through marketing budgets, advertising campaigns, or a few abusive headlines.  Entrepreneurs must keep this in mind at all times, especially throughout the infancy of their struggling startup ventures.

In case there were any contradictions or misunderstandings throughout the post, these three bullet points should summarize the fundamentals:

• The early adopter crowd is an important demographic in any upstart, however:
• Companies must learn to utilize this crowd instead of catering to them.
• Startups must always remember that success is produced internally, never externally.

Morten Lund offers up a super-refreshing outlook from a serial entrepreneur’s point of view.  A man who expresses so many awesome character traits, most notably:

• humility
• honesty
• transparency
• perseverance

Which scenario would you rather face as the CEO of your recently launched startup company? :

• Scenario A | Not being able to keep up with customer demand

OR

• Scenario B | Having scaled your business to meet expected customer demand

Well, personally, the answer is a no-brainer … it’s Scenario A.  You may think, “Well why would you rather be unprepared and unable to deliver?  Wouldn’t it be better to forecast and prepare for the future?”
Quite frankly, I don’t believe that it is.  Remember, I’m talking about a startup company, where cash is king, and it’s a matter of survival.  Odds are, you just do not have the resources to blow on hiring more employees, more office space, and the numerous overhead costs associated with growing a fledgling startup.  More importantly, your conservative projected forecasts are likely wrong anyways, so why scale up before you really need to?  Instead of worrying about the future, heed this simple (and most likely, obvious) advice:

1. Treat cash as your company’s oxygen; if you run out, your company will suffocate and die.  This will cause your company to operate as scrappy as possible, making you think twice about spending hundreds on those rad new business cards and gold-foiled company letterheads.
2. Focus on your core product/service.  It’s easy to get caught up in adding extraneous product features or unrelated services to an existing company’s business offering.  Worry about the extras after you have achieved 50% of your first year sales projections.  [This will take longer than 6 months, by the way].
3. When it’s ready, ship [or release, launch, open...depending on your business].  Don’t ship when it’s perfect, because your product will never be perfect.  It’s impossible to be perfect without having a single customer.  It’s more important to release and start amassing customers.
4. Continue to gather as much customer feedback as possible, then, collect more.  Your customers are the lifeblood of your company, and they will have insight beyond your biased viewpoint.  The customer will likely see your business in a completely different light than you do; it is crucial to understand their sentiments, digging and mining for the gems that will help you improve their experience.

These points are not revolutionary by any means, but they are easy to overlook in your pursuit to change the world.

It’s understandable why companies would prefer to be in Scenario B.  CEO’s [founder, owners, whatever] don’t want to give their customers the sense that they are running an amateur operation.  To combat this, they will, in my opinion, overcompensate to create the perception of an operation that is well beyond its true size and/or capabilities.  While creating this perception, companies are apt to spend money outside of their core competencies.  This is the beginning of the end for startups.

Micro-blogging revolutionary, Twitter, shows startup companies a very important lesson: Being underprepared and/or overwhelmed with the amount of new customers will not demolish your business. In fact, it could result in the opposite effect.  When Twitter’s user base began to climb, the service was unable to scale quickly enough, creating a series of service downtime.  During these times, Twitter would feature the now iconic “fail whale” overcapacity image.  Many stories and posts were written about Twitter’s shortcomings and their inability to handle the influx of users.  Despite a brief period of negative press [depends how you look at it] and some annoyed users, Twitter is now one of the hottest new services to date.

Twitter "Fail Whale" Screen

The “fail whale” did a few things for Twitter:

1. It gave Twitter press [positive or negative, you be the judge].
2. It showed that their was enough people signing up and using the service to sporadically bring it down.
3. It allowed people [especially their early adopters] to rally and root for their underdog.
4. It expressed honesty and gave Twitter legitimacy among its users by not hiding behind its deficiencies.

Author, entrepreneur, and venture capitalist, Guy Kawasaki writes the following in his book titled ‘Reality Check’,

I have never seen a company fail because it couldn’t expand fast enough.  I have seen many companies – I won’t mention their names to protect the guilty – die because they “invested in the future” and “spent ahead” to avoid missing an opportunity.  Once in my career, I’d like to invest in a company that can’t scale fast enough for its orders.  That’s an easier problem to fix than lackluster sales and adoption.

-Guy Kawasaki

How will you surpass your projections?  How will you outperform the limits of your business?…

How will you achieve your “Fail Whale”?

There has been a poem on my refrigerator for as long as I can remember.  It’s a simple, yet powerful little ballad that has meant different things to me, during different times in my life.  After reading it one more time, I cannot help but relate it to the entrepreneurial hustle; that mysterious, foggy world where most startups live during the beginning of their venture.  It has helped to reinforce the value in pursuing your passion, forgetting the naysayers, and rising above every single obstacle that you face.  And it goes, my friends, something like this:

The Winner is always part of the answer;
The Loser is always part of the problem.

The Winner always has a program;
The Loser always has an excuse.

The Winner says “Let me do it for you”;
The Loser says “That is not my job”.

The Winner sees an answer to every problem;
The Loser sees a problem to every answer.

The Winner says “It may be difficult, but it’s possible”;
The Loser says “It may be possible, but it’s too difficult”.

The Winner never loses;
The Loser never wins!