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 works like charm: zero marketing cost and $5-$10 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)