Getting Traction With No Funding

The other day I was asked on Quora how a startup can get traction with no funding (I apologize I didn’t respond yet). Since I’ve been asked that question previously numerous times, I decided to write this post and suggest three ways to get traction before funding.

I’ll use the stories of companies many of you are familiar as examples.

How many of you use Instagram, an online photo-sharing and social networking service? Did you download the app following an adword ? Cross app promotion? I suspect most of you saw an Instagram filtered photo posted on your Facebook or Twitter feed and many joined the service as a result of that. I suspect that 30% of my Facebook friends, for example, use Instagram to post photos. Instagram basically turned its app usage into a great marketing tool. Every time you post an Instagram photo, you market the app to hundreds of friends or followers, at a zero cost to Instagram. Instagram’s hook – using its customers as marketing agents to scale at mass.

Expensify, an easy to use mobile and web expense report, is another great example. Dave Barrett, their CEO and Founder, mentioned trying adwords during Expensify’s early days and incurring high AAC (Average Acquisition Cost). After numerous experiments they figured out that an expense report submitted is a lead generation to moving up the corporate value chain. The viral corporate sale technique worked like charm: zero marketing cost and few cents per report make a compelling economics and helped drive Expensify’s growth to over 1M users.

Instagram and Expensify aren’t new examples. John McAfee, the founder of McAfee Inc., the security company, used viral corporate sale techniques to generate early revenues: After numerous employees in an organization installed his antivirus, he would reach out to the CIO, who preferred to pay a $2 subscription per seat than going through the process of tracking those computers and removing the software. The CIO would often buy additional licenses too.

Lesson no. 1 – Find a hook that turns your users into marketing agents. (Other examples: Skype, WordPress, Thumblr, about.me, Whatsapp)

Dropbox, a cloud storage and file synchronization service, to-date has over 100 million users. The early days were much more challenging. Their initial distribution strategy was based on buying Google adwords too. Other channels were tested as well. The challenge was that AAC for the free service hit $1000. One of the experiments was a simple video posted on Digg, a social news service. Within 24 hours the waiting-list hit 75,000.

Dropbox, by the way, also implemented a hook. Since it was a sharing file service, sharing the file with non-Dropbox members required them to register and download the client to get access to the file shared. Similar to Instagram, Dropbox utilized its users to promote Dropbox for free.

Lesson no. 2 – Constantly experiment.

If you are reading this blog (and even if you’re not) most likely you have a Facebook account. Furthermore, chances are that you’re not a Harvard student or a student at all, despite the fact that Facebook targeted students, at least initially (e.g Harvard, MIT,Boston College, Stanford ).

Zipcar, a car on-demand service, also targeted students initially. Students spend most of their time on campus, so an on-demand service is a perfect “pain-killer”. It is also a community of early adopters who constantly share things with each other, so word-of-mouth is an ideal low cost marketing channel. While I was at Stanford, I never saw a single Zipcar ad, but my colleagues and neighbors recommended the service a few days after I arrived.

Targeting a specific vertical usually implies specific, many times low cost, distribution channels and in many cases, word of mouth. Different verticals have different influencers who can drive targeted traffic your way.

Andy Rachleff, the CEO of Wealthfront and a former Benchmark partner, recently wrote a wonderful article about the topic (To get big, you’ve got to start small) and also explained why  Wealthfront, a software based wealth management and advisory service, decided to focus initially on young people who work for tech companies.

Lesson no. 3 – Focus on a small verticals initially. Ideally the verticals with the biggest pain point or the ones you have the biggest network with (Other examples: Fab.com, Pinterest)

About these ads

About shanishoham

After 14 years of General Management and incubating/scaling new businesses & organizations for enterprises (established a $55M mobile business and a $100M/400 employees global division), I became an investor Today I’m a board member/mentor with 5 incubators & micro-VCs and involved with many other private & public incubators around the world. I also founded a VC firm named 2020 and I'm a member with a number of angel groups so i get to see & work with many startups, innovation centers and other parties across the ecosystem. I’m an alumnus of the Stanford Graduate School of business - Sloan Master in Management program, a 10 months intensive program for 57 carefully selected experienced Executives and leaders from all around the world.

7 comments

  1. Thanks for your tips Shanishoham,

    I’ve designed an app for ‘Manchester United’, called ‘Fergie Time’. I’m planning to expand it to incorporate other teams. However since the app is an informational app, I’m trying to figure out a ‘hook’ for my app.

  2. Great Insights!

    I think i will try something similar to the hook used by dropbox in my startup http://www.followletter.com but instead of “register to download” i will use “register to read”.

  3. Hi Shani,

    Thanks a lot for posting valuable information. I stumble upon the post because I am, like a big bunch of tech entrepreneurs, looking for a way to drive traffic and user to my web app , http://www.sunnyreports.com.

    I’m very interested to understand more about what you explain about Expensify. I didn’t understand exactly what Dave Barrett and his team did. I understand they submit “expense report” which became viral. But was it an example report ?

    And I didn’t understand the ” $5-$10 per report”. Can you give me more details on this point ?

    Thanks a lot for your time and work :)

    • Expense report were a big headache inside companies at that time. When Expensify solved such an issue to users in a smooth way, they shared that with co-workers, who tried it and shared that with other co-workers, eventually leading to the decision makers who then paid for that. In a workplace, where many potential users are challenged with the same need, a solution like that spreads like a charm.
      Dave basically turned his users into advocates driving user acquisition.

      • Thank you Shani for your reply. I understand. We are looking for something we can give away to spread our service too. But as our customers data are stricty private (adwords data in our case), we can’t spread reports like that. But the idea is here :)

      • There are many ways to get traction. Dave’s method is only one. It is difficult for me to comment on your case without knowing the specifics.

      • No worries Shani. Thanks for sharing your knowledge and tips.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 37 other followers

%d bloggers like this: