Entrepreneur Office Hours - Issue #35
Are you building your startup backwards? And a conversation with the man who could have bought Google for $1 million
With the (US) holiday on Monday, I decided not to release a new episode of Web Masters this week. However, since I’ve been doing Web Masters longer than this newsletter, I figured I’d take this opportunity to feature one of my favorite episodes, which was our very first episode. It’s a conversation with Louis Monier, the guy who created AltaVista.
For all you young people reading this, AltaVista was amazing. It was the first legit search engine that actually returned high quality results. Before them, you had to click through pages and pages of garbage results and SPAM. In other words… kids, you don’t know how good you have it these days!
OK… enough being the “old guy.” In this week’s issue, you’ll also find an article that examines a common entrepreneurial problem. I call it “building a startup backwards.” Also, in an unplanned coincidence that shows just how common the problem is, the Q&A this week grapples with a question that’s caused by… well… a founder building a startup backwards. Go figure.
Maybe you’re struggling with the same problem? Or maybe it’s something else. Either way, find out by asking your startup questions. Reply to this email or find me on Twitter, LinkedIn… whatever. I’ll do my best to answer in a future issue of EOH.
Are You Building Your Startup Backwards?
It’s a problem that plagues nearly every entrepreneur, and most never even know it. They start with building a product instead of building an audience. The result is almost always the same.
I Couldn’t Raise Venture Capital Until I Learned One Simple Lesson About Pitching Investors
You can spend hours learning to give great fundraising pitches, but you’re probably wasting your time. Instead, learn to approach fundraising pitches like this.
The Man Who Could Have Bought Google for $1 Million
The first truly global, publicly available, and reliable search engine wasn't Google. It was AltaVista. And the man who built it wasn't trying to create a billion dollar startup. He was just trying to help people find stuff on the Internet.
Listen to the full story on the first episode of Web Masters:
…or search “Web Masters” wherever you listen to your favorite podcasts.
How My Five-Year-Old Taught Me a $10 Billion Dollar Lesson About Entrepreneurship
Successful entrepreneurs are good at asking questions about the world that other people never think to ask. But learning to ask those kinds of questions is a difficult skill to cultivate. However, if you also happen to be a parent of young children, you have a secret weapon.
Office Hours Q&A
I’ve got a SaaS company targeting the B2B space. My co-founder and I are debating pricing. He thinks we should price low, have a self-service business model, and try to get as many users on the platform as possible because there are lots of SMBs that are underserved.
I think we should price higher and do enterprise sales since that seems to be what ultimately happens to all the other companies in our space, and I figure there’s a reason for it.
How do you make a choice about what types of consumers to target and how to set pricing strategy early on before you have any data?
I’ve got two answers for you here. The first answer is the obligatory “I need to scold you” answer because the honest truth is you shouldn’t be asking this question. You should have already figured out who your target customers is before building anything. Simply put, the fact that you have a product and don’t already know who you’re selling it to means you screwed up. #BrutalHonesty
But the past is the past. Can’t go back and change things. You’ve got a product built and now it’s time to start selling. So what can you do?
In this case, it doesn’t matter what you or your co-founder think. In fact, as best as you can, try to get away from any preconceived notions. Instead, your goal should be to get the data from the market in order to make the right decision.
Step number one is to make a deal with your co-founder right now that neither of you will base any decisions on your own beliefs. Agree that you both don’t know the correct answer, and what matters is that you identify what’s best for the business, not what’s best for your egos.
Once you’ve done that, step number two is to begin the process of collecting data. Specifically, you want to figure out which customer acquisition strategy is more viable: an enterprise strategy or a self-serve model.
If I’m in your shoes, I’d build out tests for each model. For the self-serve tests, I’d create some Facebook ads focused on my target SMB segment, and I’d push people to a dummy landing page where they can register on their own for some sort of trial account. Note, the registration process doesn’t have to connect directly with your product. You’re just testing to see if people would register. You’re not actually trying to get users at this point. Once they register, just take them to a page that says, “Thanks for registering! We’re over capacity at the moment, but we’ll let you know as soon a space opens.” Sure, you’ll annoy some people, but right now you’re just trying to collect data.
For what it’s worth, I’d also make this test a free trial that requires a credit card to register. Yes, requiring a credit card is going to dramatically reduce conversion rates, but it’s going to give you a much more realistic sense about whether people are actually willing to pay.
For my second test, I’d identify somewhere around 50 potential enterprise customers and then find the right contact person for that company via LinkedIn. I’d send cold emails to all of them, see how responsive they are, and jump on calls with anyone willing to chat. If a decent percentage of the people you email respond positively, that’d be a good indication the enterprise channel has potential. If they don’t, it’s a red flag you’ll struggle to sell into the enterprise.
Once you’ve run your tests, look at the data and, as objectively as possible, use it to answer your question. Good luck!
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!