Here’s a common question I get from startups, especially in the early
stages: when should we launch? My answer is almost always the same:
don’t.
First off, what does it mean to launch? Generally, we
conflate two unrelated concepts into the term, which is important to
clarify right up front.
- Announce a new product, start its PR campaign, and engage in buzz marketing activities. (Marketing launch)
- Make a new product available to customers in the general public. (Product launch)
In
today’s world, there is no reason you have to do these two things at
the same time. In fact, in most situations it’s a bad idea for startups
to synchronize these events.
Launching is a tactic, not a
strategy. In the right situation, it’s a very useful tactic, too. In
particular, a marketing launch can help you do three things (courtesy,
as is most of my marketing advice, of The Four Steps to the Epiphany):
- Drive
customers into your sales pipeline. This is the usual reason given for
a marketing launch, but for most early stage startups, it’s a failure.
That’s because a marketing launch is a one-time event, and rarely
translates into renewable audiences.
Worse, if you are not geared up to make the best use of those customers
when the launch sends them your way, it’s a pretty big waste. And, as
we’ll talk about in a moment, you don’t get a second chance.
Because
this reason is so often used as an excuse, I recommend giving it extra
scrutiny. Are you really choosing to engage in marketing in places
where your potential customers pay attention? Do your customers really
read TechCrunch? If not, do not launch there. Even if you must launch
to your customers, avoid the urge to also launch in extra places, just
because your PR firm can do it at the same time. - Establish
credibility with potential partners. In some businesses, especially in
certain industries like traditional enterprise software, you simply
cannot bring a new product to market on your own. You need to combine
your product with others, and this requires partners like OEM’s or
system integrators. A marketing launch can help you get in the door
with those partners, if you’re having trouble getting their attention.
Again, it’s critical to focus your marketing launch on those
publications, venues, and channels that your potential partners are
paying attention to. If you don’t know who the partners are, what they
pay attention to, or what kind of message they are open to receiving –
it’s too early to launch. Do some Customer Development instead. - Help
you raise money. If you are having trouble raising money, sometimes a
little PR can help. But don’t be too sure. When VC’s and other
investors see PR activity, they are going to expect to see significant
traction as a result. If you launch and see only mediocre results, it
may actually make it harder to raise money. Sometimes, it can be easier
to raise money pre-launch, if the launch is not imminent and there is
some fear on the part of investors that they might lose the deal when
the launch drives awareness of your company to all their peers.
Those
are the potential goals of a marketing launch, but those are not its
only effects. It also has causes other tectonic shifts that many
startups don’t consider:
- A marketing launch establishes your positioning.
If you don’t know what the right positioning is for your company, do
not launch. Figuring this out takes time, and few entrepreneurs have
the patience to wait it out, because the business plan does such a good
job of explaining what customers are going to think. The problem is
that customers don’t read your business plan.
When you launch
with the wrong positioning, you have to spend extra effort and money
later cleaning it up. For example, we did some early press (in Wired,
no less) for IMVU that called us the next generation of IM and compared
us positively to AOL. At the time, we thought that was great. Now, I
look back and cringe. Being compared to AOL isn’t so great these days,
and IM is considered a pretty weak form of socializing. When we finally
launched for real, we had to compensate for that early blunder.
Of
course, we didn’t realize it was a blunder at all. We were actually
really proud of the positive coverage. In fact, at that time we were
auditing Steve Blank’s class at Haas,
since he was an early investor. Since we hadn’t shown him much in the
way of progress recently, we actually brought in the article to show
off. I won’t recount what happened next (although your can hear us recount it in audio).
Suffice to say I can trace my understanding of what it means to launch
to that day. We’re lucky we had a mentor on board who could call us on
the bad strategy before it was too late. Most startups aren’t so
fortunate. - You have to know your business model. Most
startups launch before they’ve figured out what business they’re in.
Pay attention to your fundamental driver of growth.
If the product needs to be tweaked just a little bit in order to
convert users into customers, you want to figure that out before the
launch. If the viral coefficient is 0.9, keep iterating until it’s 1.1
before you launch. And if your product doesn’t retain customers, what’s
the point of driving a bunch of them to use it? Spend your time with renewable sources of customers and iterate. - You
never get a second chance to launch. Unlike a lot of other startup
activities, PR is not one where you can try it, iterate, learn, and try
again. It’s a one-way event, so you’d better get it right. Remember the
story about IMVU’s early encounter with Wired? When we finally did
launch the company, even though our product had grown and changed
significantly, Wired didn’t cover it.
I wrote a little bit about the epic launch we had at a previous startup in my post Achieving a failure.
We really did it well, with a great PR firm and great coverage. New
York Times, Wall Street Journal, CNN, the works. But it turned into a
crushing defeat, because we couldn’t capitalize on all that attention.
The product didn’t convert well enough, the mainstream customers we
were driving weren’t ready for the concept, and the event fed
expectations about how successful the product was going to be that
turned out to be hyper-inflated.
Worse, we tricked ourselves
into thinking that what the press said about our success was actually
true. And even worse, we’d cranked up the burn rate in order to be
ready to handle all those millions of mainstream customers we
anticipated. When they failed to materialize, the company was in big
trouble.
Why do startups synchronize marketing launch and product launch? I think it has mostly to do with psychology.
- Investors
push for it. Many investors have a desire to see their companies lauded
publicly. This actually makes a lot of sense, if you see the world from
their point of view. Third-party validation is one of the few forms of
feedback they have available to them. Most investors in startups have a
3, 5 or even 10 year horizon for liquidity. That means they don’t
really know if they made a good investment for a very long time. Seeing
the press talk about what a great investor they are is a great form of
feedback. As a bonus, it gives them something to show their partners
and LP’s.
This trend is so strong, this is actually a question I
recommend to screen potential investors: “How do you know it’s time to
launch the company?” See if their answer is about tactics or strategy. - Founders
push for it. Who doesn’t want to see their name in print? Investors
aren’t the only ones with ego invested in the company. In some ways,
founders are even worse. How do they know
they are making progress? They spend so much of their time trying to
convince everyone around them that their idea is great and the company
is doing well: employees, investors, partners, friends, family,
significant others – it’s a long list. But when they go to sleep at
night, who’s there to convince them that
they are making progress? My experience is that many founders actually
have a deep anxiety that maybe they are not succeeding. Sure, they are
keeping everyone busy, but are they really working on the right things?
A marketing launch is a temporary salve for these kinds of worries.
Plus, it gives you something you can send home to mom (hi, mom!).
Unfortunately, it’s not a long-term solution, so it can become a bit of
an addiction and, therefore, a huge distraction. - There
is also fear of the accidental launch. Companies that are thinking
strategically sometimes reason like this: “if we do a product launch,
members of the public will see our early product. They’ll form their
own opinions, maybe see our wrong positioning, and maybe talk to
members of the press. By the time we’re ready for a marketing launch,
it will be too late. Better to launch now and get ahead of the story,
or stay in closed beta until we’re ready.”
In most situations,
this fear is misplaced. Here was our experience at IMVU, which I have
seen replicated at many other consumer internet startups. We did
alienate and mis-position to our early customers. Luckily, if your
product isn’t good enough to have traction, you simply cannot alienate
very many customers – because you can’t get them engaged with the
product. When you finally do get traction, the millions who see the
right positioning will dwarf the few who saw the wrong one. And you can
get an astronomical amount of traction before anyone will write about
your company of their own accord. IMVU was a top-1000 website in the
world, with millions of customers and making millions of dollars
without getting any significant press coverage.
In fact, we
often felt frustrated when new startups with a fraction of our success
got terrific write-ups in Silicon Valley-centric venues. We had to
resist the urge to launch just to make that frustration stop. And, more
often than not, we’d watch those companies flame out and die while we
continued to grow steadily every month. If we’d wasted energy chasing
their PR coverage, we’d probably have died too.
So don’t
combine your product launch with a marketing launch. Instead, do your
product launch first. Don’t chicken out and do a closed beta; get real
customers in through real renewable channels. Start with a five-dollar-a-day SEM campaign. Iterate as fast and for as long as you can. Don’t scale. Don’t marketing launch.
How do you know you’re ready for marketing launch?
- When
you have a strategy for the launch, which means knowing why you’re
doing it. Make sure it’s solving a problem you actually have, and not
one that you think you might have some day. - Know what
the success metrics are for the launch. If you know what the strategy
is, you’ll know how to tell it was a success. Write it down ahead of
time, and hold yourself accountable for hitting those objectives. - Know what your fundamental driver of growth
is. Make sure the math for your model makes sense. That way, you’ll be
able to predict the future. When customers come in from your marketing
launch, you’ll know exactly what they are going to do and how that
benefits your business. - Know where, when, and how to
launch. If you know what your strategy is, and you know your target
well (customers, partners, investors) you will also know where they are
paying attention, and what messages they are able to absorb. Hold
yourself and your PR agency accountable for developing a high level of
understanding of these questions ahead of time.
One last
suggestions. Think about the psychological motivations that are driving
you to want to launch earlier than makes sense for your company. See if
there’s anything you can do to address those underlying needs that does
make sense. For example, if your employees are feeling frustrated that
they don’t get much third-party validation for their work, use a board
of advisers to fill that role. Bring in people that they (and you)
respect to evaluate your progress and make suggestions. In my
experience, this has provided an effective boost to morale and also
helpful guidance.
When you’re ready, enjoy the launch. Until then, resist the urge.
(Image source: upload.wikimedia.org)
