How to spot startup gaps and build traction in unloved markets10th January 2019
We're all looking for that next big business idea and trying to make it stick with traction. But how do you turn a frustration into an obsession, an obsession into a business, and a business into everyone’s business?
A number of years ago I did a talk at a digital conference, DotYork. I titled my talk Unloved. Don’t worry it wasn’t a plea for help or a lonely hearts advert. Instead I hoped to provide some guidelines for finding business opportunities in everyday frustrations and spotting what others can’t see. In other words, how to turn unloved experiences into profitable startups.
All too often, as business underdogs become mainstream, their radical ideas appear more obvious, founder stories get airbrushed, and early struggles for traction are forgotten. I wanted to relive those original kernels of a new business beginning and the tactics for making them stick.
I think it is advice worth repeating, so I’ve written it down for the first time.
Here are my tips for building traction in unloved markets…
We’re surrounded by everyday niggles and underwhelming brand experiences. What the AirBnBs, Ubers, Slacks, Stripes and Dropboxes of this world all have in common is that they’ve done something about it. In their eyes, the bigger the niggle, the bigger the size of the prize. However, what’s also true is the more ingrained the behaviour the harder it is to shift. Despite the potential for hypergrowth, initially it can be difficult finding others who feel the same and are brave enough to be early adopters.
It helps to break traction down into its three main components:
1. Get Product/Market Fit
The term product/market fit describes ‘the moment when a startup finally finds a widespread set of customers that resonate with its product’Eric Ries
There’s an old saying that goes along the lines of “You can recognise a pioneer by the arrows in his back.”
Starting anything new can be daunting. Let alone with a counterintuitive move against established competition. Trust the frustrations you’ve experienced firsthand over the latest trends or thinking. Which fundamental assumptions to you hold to be false? Is there a segment currently being underserved? What market dynamic can you alter to your advantage? What could you do less of, but better?
If the market is established it’ll resemble a children’s football game. Everyone is chasing after the same ball. Instead, hang out in the space on the wings and you’ll have the run of the field.
When Google started, there were already 10 other search engines out there, all fighting it out. But search resembled a market worth disrupting. It had the perfect storm of a large and growing number of potential users, a mediocre end product, and a relatively low cost of acquisition. Somebody just needed to introduce a step change solution. Easier said than done, but knowing if have product/market fit should follow a simple process. According to Marc Andreessen:
“You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of ‘blah’, the sales cycle takes too long, and lots of deals never close. And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.”
In other words, product/market fit is less about consumer appetite and more monetisation. The acid test is, are people willing to pay for what you’re building?
I’ve talked before about a new wave of entrepreneurs eliminating virtually all risk associated with making a product. The focus needs to be on transforming your Minimum Viable Product into a Minimum Buyable Product, which can be as simple as sharing your idea upfront and adding a ‘preorder’ button or running a Kickstarter.
Having paying customers is the only way to really know the true value of what you’re creating.
2. Find your traction channels
Your gateway into any existing market is likely to be small, because everything else is taken up. However, what you do have at this stage is proof of concept. You can now commit investment to your growth efforts with some confidence of the likely return.
As preached by Justin Mares, the co-author of the book Traction, the key to uncovering your most promising lead-generation activities is through trialling and testing different channels. Spread lots of small bets at this stage.
The questions you need to ask of any potential channel are:
- How much will it cost to acquire customers this way?
- How many customers can I reach this way?
- Are these customers likely to be profitable?
Some tactics will be more obvious than others. Some will contribute buzz, others new leads. Overall, they should fall into one of three categories: Paid, earned and owned.
Focusing on existing platforms and publications grants you easy access and scale, albeit at a cost.
Tactics open to you include advertising, trade shows, paid search, sponsorship, branded content, social ads, and so on.
Get in front of the people you’re trying to attract through merit. Possibilities include affiliate programs, third-party blogs, PR, App Store rankings, speaking gigs and referrals.
Your messaging will probably hinge on exaggerating your point of difference and playing the challenger brand card. Every brand has its own inherent drama – use that unique narrative as your calling card.
The easiest place to share your vision and invite others to shape what happens next is on your own platforms. Atomise every inch of your journey with blog posts, social media, videos, in your email newsletter and on your website.
You’ll also need to do some boring things well, such as SEO, cold emails, outbound calls, swag. Not all of these things will scale well but you’ll need to be proactive to recruit users early on.
Try to recruit partners, ambassadors and messengers for your cause. Some of today’s most valuable tech startups all had referral mechanisms built into their product. Dropbox, for example, offered generous storage top-ups for both the sender and the recipient. Facebook, Twitter, WhatsApp, Outlook and more all used referrals to power their explosive growth and many more are turning to viral giveaways such as VYPER to make an instant impact and gain traction.
Last but not least, don’t forget that most people follow the same startup playbook. A great product might not be enough in itself to stand out. Throw a few creative activities into the mix. Remember when Lyft gave free DeLorean rides to New Yorkers on Back to the Future day? Or when BrewDog raised £4m by hiring a full-sized army tank, which they drove around the Bank of England to promote their Equity for Punks crowdfunding campaign? Don’t be afraid to be outrageous and do what it takes to surround yourself with others that feel the same way about a problem as you do.
3. Iterate as quickly as possible
Congratulations, you’ve now got traction in an unloved market. Your original hypothesis has been validated and you’ve converted attention into orders. Now the real work begins. Diminishing returns will threaten to kick in and, if your newly-occupied spot in the market is deemed big enough, the competition will soon be on your heels.
One of the traps a lot of startups fall into is to relentlessly pursue hockey stick growth at the expense of product evolution. Your earliest customers are likely to be the most forgiving but the next batch will have higher expectations.
Setting out clear phases of a product’s development (e.g. alpha, beta, full launch) give you an opportunity to respond to feedback and create a version of the product you are really proud of.
Iterative design is a cost-effective approach to building a startup which puts user experience at the heart of everything you do. It’s an approach that will de-risk new ideas and get you traction that lasts.