The #1 Strategy for Raising Money for Your Startup

February 20th, 2010

Don’t Need it.

Seriously, that’s the entire strategy - and it’s the only one that works.

I was going to keep this blog post at 3 words long, but since blog posts are supposed to be longer than 3 words, I’ll take a few extra words to elaborate… 

Investors smell “need” like dogs smell fear.

The problem with most entrepreneurs who are caught in the pitch cycle is that they teleport their strong ”need” for the money from a mile away. They “need” the money because they can’t seem to execute without it, they “need” the money because they have grand visions that require lots of resources to bring to fruition, they “need” the money because it’s the only way to keep the lights on while things fall into place. I’ve been there, I’ve tried this approach - it’s a complete waste of time.

Instead of setting up a “need” for money, start making things happen without the money.

Meanwhile, there are other entrepreneurs who make it happen without investors. They find a way, they execute with a lean and mean team, they start proving the business model, they deliver milestones - and open up doors for the business on their own terms. Then as the business starts to succeed in its own right, they realize they:

Don’t Need the Money.

And this is the best time to talk to investors. If you can look an investor in the eye and tell them with 100% integrity that your business is going to grow with or without their money - then they will want to put their money in the business. I’ve been there, I’ve had the 100% belief (because it was based in reality), and I’ve used this to raise money that helped take a business that was already on a fast track and put it on an even faster track.

Author: Jeff D'Urso Categories: Startups Tags:

Don’t Eat the Goose

February 16th, 2010

Despite how applicable the goose / golden egg metaphor is to startups - there is a distinct lack of goose related articles in entrepeneurial writings, so with this post I’m going to try and pick up the slack :-)

At its healthiest, the relationship between entrepreneur and startup is the same as the one between the farmer and the famous golden goose (disclaimer: I don’t actually know anything about farming except what I’ve learned in my son’s popup books). The goose starts out small, gets care and feeding, lays small golden eggs, gets more steady care and feeding - and over time the relationship blossoms until the goose is laying lots of golden eggs.

Unfortunately, in real startups, the entrepreneur and goose don’t always get along so well.

For most of the startups I’ve seen, there is an imbalance between the goose and the entrepreneur that supports one at the expense of the other, and makes it difficult for the goose to grow or the entrepreneur to keep their sanity. This usually takes on one of two forms:

1) Goose Abuse

Way back in my entrepreneur classes (Intro to Entrepreneurial Strategery or something like that) - I learned there are 2 types of companies: lifestyle companies, and growth companies. Lifestyle companies exist primarily to provide a lifestyle to their owner / operator. There is certainly nothing wrong with this objective - but if you’re looking to “change the world”, “rock your industry”, and achieve the big payout down the road, it is hard to commit to growth and lifestyle at the same time.

Beware though - lifestyle is tempting! When my first startup was making an extra $1,000 per month, my partners and I pondered how cool it would be to just “lease a Porsche” and continue to enjoy “being our own bosses” at our nice little lifestyle company.

Fortunately, we chose the growth path and were able to instead build our company to a $10 million sale within 4 years.

Eating the Goose

At its worst, “Goose Abuse” can seriously slow the growth of the goose (and cause shareholders / investors enormous frustration in the process). I’ve seen startups that were just beginning to hit their stride get seriously sidetracked by shortsighted owners who were more focused on pulling cash out of the company to support their lifestyle than re-investing the cash to grow the goose to its potential.

Remember - the goose may taste pretty good, but the eggs taste much better in the long run!

2) Abuse by Goose

The opposite of abusing the goose and diverting its resources to support your lifestyle is to endlessly dump resources into the goose without ever expecting it to produce profits on its own. Abuse by Goose takes 2 general forms - abuse of the entrepreneur and self-abuse by bloat.

Abuse of the Entrepreneur

The most important thing a startup needs to thrive is a profitable business model. That is where you put $1 in, and get more than $1 out. This doesn’t happen on day 1 - but it has to happen eventually or you have a money pit, not a goose. Unfortunately, some entrepreneurs are willing to pump all of their time and resources (and even worse - all of their friends and family’s resources) into a business where the profitable model never materializes.

Unfortunately, you can’t guarantee golden eggs will come out just by continuing to fund a failing goose (and there’s no point pitching investors at this point to feed your money-pit-goose either!)

Self Abuse - The Bloated Goose

Even if the abusive goose isn’t bleeding an entrepreneur dry, it can potentially be stunting its own growth through bloat. A profitable business model requires more than just revenue - it requires that more revenue comes out than cost goes in. Unfortunately, in targeting promising markets, some entrepreneurs scale resources too quickly (to “be ready” for the infinite demand they expect on day 1.)

A budding startup that could have been profitable with 5 developers - may be massively in the red because it hired 20 instead. The marketing campaign that showed promise - may not show enough promise to cover the cost that was spent too quickly.

It doesn’t matter how promising the market is, or how positive the revenue growth looks - if the goose was designed to be fatter than it needed to be - it may miss out on its opportunity to grow to a golden egg-layer because its burn rate was 2, 3, or 5x more than the model could actually support during its growth phase.

So keep your goose lean and mean!

Author: Jeff D'Urso Categories: Startups, Web Startups Tags:

How Business Plans Destroy Startups

January 31st, 2010

Business plans - at their best - are an invaluable tool to help a small startup or growing company plot its path to the next stage of growth.

Unfortunately, most business plans are a complete waste of time and energy - turning would be founders and startup builders into word-smithers and BS artists.

At their worst, it is not uncommon for the business planning process to waste months of effort - or even put the startup (and sometimes the entrepreneur) out of business.

So how did business plans become such an enormous waste of time (and startups)?

The original intent of a business plan - to force the entrepreneur to think through all of the issues for getting the startup launched, and to cover all bases - is actually quite sound. The problem is that most entrepreneurs who write business plans are doing it to play the “startup lottery” - writing the plan in the hopes that after the 6 month to 1 year grueling process of begging angels and VC’s for money, they will be amongst the 1% of startups who get funded. This process creates a few major problems:

1) Business Planning turns into “Let’s Pretend”

By definition, any startup faces a sequence of short term and medium term hurdles that are critical to determining if the business model is viable, and then getting the startup off the ground. Generally these “short hurdles” involve testing a market, gauging interest, and determining if there is a profitable business model. If you are using your own money, then these challenges are real - and all of your planning and execution effort is naturally focused on confronting them.

If you are chasing other people’s money, the real and immediate challenges suddenly seem less urgent - and your business plan focuses on how you are going to take over the world after easily sailing over the “short hurdles” (the same short hurdles that ironically spell the death of the majority of “lucky” startups that do raise money). And so your business plan turns into a steaming pile of “Let’s Pretend” - and investors can smell it from a mile away.

2) Time spent schlepping for money is time not spent building the business

Most entrepreneurs who are chasing money are burning their own cash reserves while doing it, and also not focusing on the business. As time goes on, and the business plan is revised, and the financial model is lipsticked for the 18th time, there is little focus on actually getting the business off the ground - and the startup suffers enormously. Maybe it turned out there was a market, and customers would have loved the product; but you’ll never know because you spent time you could have spent launching your startup in the game of chasing money.

Imagine if the Allied forces ready to storm the beach on D-Day put the mission on pause for a few months so they could instead draft the perfect plan for rebuilding Europe after the war. Just like this, millions of entrepreneurs every year wuss out on their own D-Day, deciding it’s better to spend time writing about their business idea than making it happen.

3) Investors can smell a BS plan from a mile away

Having read a lot of business plans over the years, I’ve found the vast majority can be summarized in 3 steps: 1) the startup will lose (amount being raised) in the first year, but discover that everyone loves the product, 2) the startup will somehow break-even in the second year, and 3) the startup will then become amazingly profitable and everyone will get rich.

Though this plan smells the same every time I’ve read it, it is sadly what I’ve come to expect from entrepreneurs who’ve skipped out on their “D-Day” in favor of the money chase. And for all the bad plans I’ve smelled, angel groups and VC groups have smelled many more. On the rare occassion that a plan doesn’t smell like this, it’s usually written by an entrepreneur running a startup that is already taking down milestones and genuinely has a reason to raise money.

4) The “captain gets glued to the ship” the longer the process drags on

Perhaps the only thing worse than the impact the “money chase” has on the startup is the impact it has on the entrepreneur. What was once a rational person who had a potentially good idea is now a stubbornly determined blind optimist who has “bet everything on this idea and has to make it work.” Had they tried building the startup and actually testing the idea 3, 6, or 9 months ago - they may have realized very inexpensively that it wasn’t viable - and thus moved on with their life (and come up with another idea that did work).

But now it’s too late. They’ve got too much riding on the idea, the business plan, and the belief that some investor some day is going to give it a chance and give them the money they need to pursue glory (and now vindication).

The Launch Plan - a Better Way to Start

If your plan is in the 1% that is going to get funded, then just write your plan - don’t waste your time on pressing issues or on building the business :-)

For the rest of us, the key is to use the scientific method (remember from junior high) and break out the most pressing issues you need to solve in order to prove there is a business model. For each of these questions, what is the simplest / smallest thing you can do to prove there is or isn’t a viable product, market, etc? What is the smallest test market you can learn from? What is the minimum set of features you can offer to gauge interest? How much will it cost to acquire attention, interest, and purchases from each customer? Will the purchase cover that cost?

Your Launch Plan should turn all of these questions into an actionable plan for launching the initial product, getting feedback from the market, and determining if there is a viable business model as quickly and as inexpensively as possible. If the answer is no, congratulations, you’ve filtered out an idea on the cheap and can move on to the next idea. If the answer is yes - and there is a viable business - then you can start writing your business plan in earnest knowing it will be based on proven facts and not make believe.

Author: Jeff D'Urso Categories: Startups, Web Startups Tags:

Why ABC’s “Shark Tank” is a Great Show for Entrepreneurs

September 1st, 2009

While millions of entrepreneurs are busy building the country’s future, very few of them are given any direction on “what not to do” - and thus they must learn the hard lessons of launching a venture first-hand.

Enter ABC’s “Shark Tank”

Finally a show that gives a vicarious dose / diet of reality to help other entrepreneurs hone their startup instinct and keep their entrepreneurial careers on track.

During the show, entrepreneurs pitch their ideas to 5 successful investors (i.e., the sharks) who then decide on the spot whether or not to invest. As in real life, more often than not the decision is to not invest, and the reason why is given in colorful - and often harsh - language.

The problem with most entrepreneurs…

Most entrepreneurs start with an interesting idea, then gradually invest more and more  time, energy, and money into that idea until it becomes an obsession. If it turns out the idea was a good one - this obsession is EXACTLY what will make the idea transform into a successful startup.

But if it turns out the idea was not so good (or the world wasn’t ready for it), this same obsession will lead to disaster. And sadly, far too many entrepreneurs don’t see the writing on the wall until they have lost literally everything.

Kevin O’Leary’s solution to the lost entrepreneur.

The show’s “Simon Cowell” is a shark named Kevin O’Leary, who built a software company out of his basement and sold it for $3.2 billion. Fantastically successful, and even more fantastically blunt - O’Leary told one entrepreneur on the first show that he was “lucky to have people like us tell you how terrible your idea is”. I.e., the sharks don’t pussyfoot aroud their opinion - if they think your idea is horrible - they will tell you. And that may save you months and years you would otherwise waste.

Shark Lesson - the expertise is often as valuable as the money it comes with.

Another great lesson from the “Shark Tank” is the value that comes from connections (vs passive investors, or “dumb money” that just invest their cash). In many of the deals offered by the sharks, the connections and execution experience of the sharks offering the cash is far more likely to impact the company’s ability to succeed than the $500,000 or so in cash they are bringing to the table.

Some of the entrepreneurs pitching their companies have seen the value of the connections and jumped on these deals - even if the valuation they were given was much lower than they had originally hoped for. Other entrepreneurs have pig-headedly stuck to their guns and walked away from amazing offers of expertise - and many of these no doubt will now watch their companies rot on the vine as a result.

Separation of Entrepreneur and Idea

As harsh as the sharks are with many of the ideas that are pitched to them, they will often make it a point to praise the entrepreneur even as they are trashing the idea. “I think you are awesome, I just don’t like the business.” There is a really powerful lesson here that most entrepreneurs miss until they’ve burned through an enormous amount of time and money.

Entrepreneurs are different from their ideas. To the degree that an entrepreneur can recognize this fact, and see themselves as distinct from their idea - they will be much more levelheaded in making decisions to continue investing time and money into their business. By thinking less like someone who is married to an idea, and more like an investor, they will be able to make that tough decision to “move on” if necessary - and they will then be able to pursue another idea with more potential to succeed.

Author: Jeff D'Urso Categories: Startups Tags:

10 Top Startup Killers

August 16th, 2009

Top 10 lists are popular, so I couldn’t resist the urge - but since I’m positive these 10 aren’t the only 10 or necessarily the top 10, I decided to call this 10 Top Startup Killers. So stay tuned for 10 More Top Startup Killers :-)

Now down to business…

There are unfortunately many more ways to kill a startup than to make it succeed. The 10 below are some of the worst startup killers - violate these at your own risk.

Market Doesn’t Really Exist

So you were walking down the street, and inspiration struck - now you’re obsessed with the world’s greatest idea. Problem is - no one else thinks it’s a great idea; and it turns out - maybe it isn’t.

It’s always horrifying to me watching shows like “Shark Tank” and “American Inventor” and seeing people who’ve literally wiped out their life savings chasing an idea without ever validating whether a market existed for it. Validation isn’t always easy, but you absolutely must spend some energy determining whether there is a market and a need before investing huge resources building out an idea.

If you believe in the “Measure Twice, Cut Once” axiom, then now is a good time to “measure” the market.

“Nice to Have…” vs “Gotta Have!”

Although the “Market doesn’t exist” problem strikes many an entrepreneur, often terrible ideas are easy to stop in their tracks - especially if you have a loving spouse or trustworthy friend who’s willing to break the news to you before you waste too much energy on it.

The problem is, many ideas aren’t terrible, they’re “pretty good” - and these can be just as deadly.

When picking companies to invest in, VC’s try to determine whether your customer base deems your offering “nice to have” or “gotta have”. If it’s the latter, they will be interested, if it’s the former - they will run as fast as they can away from your idea. And maybe you should too.

The problem with “pretty good” ideas, is that prospects are more than willing to give you positive feedback until it’s time for them to take out their wallets. Or even worse - a small segment of prospects are willing to take out their wallets, but the mainstream will never care enough to pay to solve the problem.

Know whether your idea is “Gotta have”, or “Nice to have”.

Can’t profitably target your market

Even if a market exists, and even if they are willing to pay for your service; if it costs you more (or much more) to attract a customer than the customer is willing to pay you for your service, then you are in big trouble.

To determine if you can profitably target your market, you not only have to know where you can reach them (Internet locations, media, etc); you also need to know who you are competing with for the customer’s attention. I.e., you aren’t just competing with the “competitors” you envision who offer your service to the same customers - you are also competing with other companies who are trying to gain the attention of those very same customers.

If you can target your market cost effectively, you can win. If you can’t - then it doesn’t matter if they “need” your product, you simply won’t be able to attract enough customers without running out of cash.

Lack of Development Horsepower

If we take a simplistic view of a startup company (and especially a web company), then it is safe to say the company needs development (geeks) and sales (suits) to succeed. To argue which of these two is more “strategic” or critical to succeed is to miss the real answer. If either is lacking, your startup is destined to fail no matter how stellar the other side is.

The developer or development team (although if you’re a startup, chances are the “team” should start out as 1 person) needs to be the “A Team”. They should be passionately excited about the product; they should understand the business objectives; and - oh yeah - they should be good at developing (and you should keep in mind that ~80% of developers are not good at development).

If you have the world’s greatest salesman, and the real pulse on the business potential - and then you hire the B, C, or D team to develop your product; you are all but guaranteed to fail, unless your vision of the startup doesn’t go beyond a “pitch deck”.

Lack of Sales Horsepower

 Equally frustrating to “Lack of Development Horsepower” is lack of sales horsepower. You can have a great market, and a killer product - but if your sales person / team lacks the chops to get it sold, you are in for a world of hurt. Your killer product will die on the vine, and you will constantly hear the sales team saying “if only it had x feature, it would sell like crazy.”

In the ideal world, your product will be ultra-viral like Facebook, and you won’t need any sales people to spread the word - but for the 99.999% rest of us - if sales is a factor in connecting to your market, you absolutely must make sure the sales team can sell.

No Plan

Like a game of chess (from what I’ve heard, I’ve never actually played :-) ), you need to think several moves ahead when you are launching your startup. If you are only gunning for the next milestone without thinking about what will come after that, you could end up hitting the milestone only to find out that you can’t go on because you ran out of resources from lack of planning.

It’s a cliche - but business plans (the kind that you actually use to run your business) are critical.

Planning to Plan

The opposite of no business plan can be equally deadly and costly. Many entrepreneurs spend weeks, months, (or years even) perfecting a business plan without ever working on their business, exhausting all of their resources in the process.

If you want to be a writer, be a writer - don’t start a company. Business plans are useful, but businesses are more useful. Make sure you spend the vast majority of your time actually building the business, not “planning to plan”.

Chasing VC Dollars instead of Customer Dollars

Often the biggest driver for the “planning to plan” crowd is the dream of VC dollars coming in to make everyone rich as the company goes through the roof (or in the later stages of planning to plan, the dream is the VC dollars coming in to save the day).

Here’s how it actually works.

If you can’t convince customers to give you their dollars, don’t waste your time pitching VC’s about how if only you had their money you could sell customers. They don’t want to hear it. For the vast majority of deals, customer revenue MUST come first, then (maybe) VC revenue (might) come later.

Premature Ramp-up - or hiring “just in case”

In the world of “if we don’t build version 15 immediately, some huge competitor is going to eat our lunch”, it is easy to get caught up in the pressure to build out a huge development team to handle the influx of “imminent sales”.

The problem is - whenever this is done, the only thing that ends up being “imminent” is the constant onslaught of developer salaries.  I’ve seen too many companies that actually could have organically found their path and grown into great companies - but they ramped up too early, got stuck with a devastating burn rate - and ran out of cash.

A better strategy - keep your development team as light as possible (remember: A team only), and only ramp development capacity when sales justify the need.

Confusing a Pitch with a Product

You might have a huge idea, a powerful set of slides, and a sheet of numbers that show how easy it will be to scale into the billions of dollars in revenue.

But if you don’t have a product (or a “Beta product” as I’ve written in previous posts), don’t kid yourself - you only have a pitch.

I’ve seen way way way way WAY too many entrepreneurs tell me about a great idea and get me excited about a great pitch; only to return 6 months later to tell me about their great pitch.

If your pitch is really so great (and thus the product you are pitching is such a great idea), then first “buy it yourself” and build the thing already! :-)

Author: Jeff D'Urso Categories: Startups, Web Startups Tags:

Warning for Entrepreneurs: If your idea is not yet in Beta, it’s just an idea!

July 28th, 2009

Ultimately, it’s big ideas that change the world (and make loads of money in the process). eBay, Google, Amazon - all of these started out as “big ideas” - and all of them have great valuations.

But it takes a lot more than a “Great Idea” to achieve great value.

If you have a great idea, in a great market, with a great presentation, and maybe even a great business plan - then what is it currently worth? The only accurate valuation method I can think of is that ideas are worth “a dime a dozen” - therefore your (unlaunched) idea is currently worth just under 1 cent.

And sadly many entrepreneurs spend weeks, months, or even years stuck in the “Idea” stage.

The old axiom “Measure twice, cut once” certainly is true in the game of entrepreneurship. Before spending enormous time, money, and resources building out an idea - it is worth researching the market potential and receptivity to the idea. But there’s a reason why it’s “Measure twice”, and not “Measure 500 times”.

Don’t get caught in the “Presentation” / “Great Idea” feedback cycle.

Once you’ve determined you have a good idea, you will likely put together a presentation and start getting feedback from friends, associates, and others - and the feedback will inevitably be that you have a “Great Idea!” Now that it’s a “Great Idea”, you can double your valuation to 2 cents, and then:

Build out a Beta site already!

Some of the greatest web success stories (including eBay) were up and running in Beta within days or weeks of the initial concept. Then the real magic began. What started as a “Great Idea” quickly became a proven idea, a proven model, and a proven business.

In the case of your idea, there will be 3 possible outcomes that you can get from your Beta launch. 1) the idea is the next killer app and you just need to add water, 2) the idea is “close” and needs some tweaking and iteration to get closer to “hitting a nerve” with your target audience, or 3) the idea is not good.

Now for the key take away…

It’s less important what the outcome of Beta is, then how long and how much it took to get there. If it takes twice as long as it should (or longer), and costs more than it should have (and remember that time is money if it took too long to get here) - then welcome to the land of lost opportunity.

If instead you got to Beta fast, and found out that “the idea needed tweaking”, then you have not exhausted your resources and can tweak away and get it right while the momentum is still there.

Author: Jeff D'Urso Categories: Startups, Web Development, Web Startups Tags:

“High Speed, Low Drag” - the Only Way to Develop Scalable Websites

June 8th, 2009

It’s amazing how you can do something for 25 years, feel like you’ve “seen it all” - then read a book that causes an “aha moment” and gets you as excited as you were the day you started with it.

Oddly enough, I had such an experience when I read “Building Scalable Websites” by Flickr CTO Cal Henderson. And it wasn’t a “geek moment” that you’d expect from a book on website architecture…

It was a validation of a Common Sense Approach to Software and Website Development that I had evolved throughout my career.

In the book, Henderson details all of the various best practices learned while building Flickr’s architecture from startup phase to a website that handles millions of hits a day. And - contrary to popular belief - the secret to handling the growth is more about “pragmatism” than it is about “rocket science”. 

But the part of the book that really hit home was how the team’s choice of development approach drastically influences its ability to get work done throughout the growth of a website. At the two extremes of development approach are what can be described as “One Giant Function” on one side, and “Object Oriented Programming” on the other - and (here’s the key), Sanity in the middle.

Few software development professionals would argue that “One Giant Function” (OGF) is a viable approach to building websites…

OGF (or putting all of the code into huge, quickly unmanageable scripts) is an approach that dominated the early web. It certainly made it easier to “get something up” faster without having to worry about frameworks or infrastructure, but in the medium and long term - it’s a disaster. With the exception of bottom-of-the-barrel offshore sweatshops, you’ll be hard pressed to find a lot of support for the OGF approach, but…

Too Much Focus on Framework can be just as deadly to a website’s success as not enough.

Without any framework, a website is unmanageable over time, but with too much framework - it can get stuck at the starting gate. Teams that overdo framework end up spending 80% of their time “paying homage to the environment”, and 20% of their time solving the business problem (vs the reverse which is clearly a better scenario!)

I’ve seen teams waste enormous amounts of time trying to get some awkward framework to do something absurdly simple, only to get stuck for days or weeks dealing with obscure errors spit out by a framework that required too many i’s to be dotted, and too many t’s to be crossed for any practical project. So if you’re about to build a new operating system, you can ignore what I’m about to say, but otherwise:

Aim for “High Speed, Low Drag”

Whatever “methodology” you use to get a project done, it should pass two simple tests. The “High Speed test” requires that your team is able to get functionality delivered rapidly at all phases of the website’s development. Elaborate frameworks fail this test miserably because they waste the team’s time figuring them out instead of delivering functionality.

The “Low Drag test” requires that you have enough framework in place that the site is easy to maintain over time. I.e., as the site gets bigger and more complex, it doesn’t create “drag” on integration of new functionality. Fortunately, there are several simple “lightweight” frameworks out there that deliver on this promise by creating just enough rails on the development process to prevent “spaghetti code” without slowing the process to a crawl.

Author: Jeff D'Urso Categories: Web Development Tags:

Marketing Tip: Manage Leads Well, or Don’t Bother Marketing…

June 6th, 2009

When I was learning the nuances of web marketing back in 2004, one lesson that really hit home came from direct response guru Dan Kennedy.  Oddly enough, it had nothing to do with “marketing” per se, and everything to do with what happens in your company after the marketing has done its job of bringing someone to your website, your telephones, or your place of business. His message was simple…

“Get Your House in Order, or Don’t Bother Spending on Marketing”

While most marketers focus their time solely on trying to get traffic on the cheap, the smart ones (according to Kennedy) focus on efficiencies at every step of the process. Does the traffic convert into leads? Are the leads followed up with promptly? Are the people managing the phones moving leads forward, or stopping them dead in their tracks? Do the sales and ultimate product experiences work?

Although all of these questions seem obvious on the surface, it is a rare company that thinks of marketing in the context of all of these at once. And yet - the more you increase your backend efficiencies, the more you can spend on marketing up front while achieving the same cost per lead / profit margin on the backend. And ultimately…

Whomever can pay the most for advertising (because they have the highest backend efficiencies) will clobber their competition in all media.

Think about it for a second. Just say you and I compete, and you are twice as efficient as I am in your backend processes. What this means is, if I can afford to pay $50 to acquire a customer, you can afford to pay $100. You will not only beat me in the media we compete on, you will also be able to buy higher priced media than I will (while still being profitable) - and since higher priced media often has greater reach, you will be able to drive growth faster than I will. Your operational efficiencies will allow you to clobber me in the marketing arena all day long.

Now for some brass tacks…

So all of this sounds great in theory - but what are some examples of back-end processes that are often overlooked and have huge sway on conversion and profitability?  Well - let’s go with lead followup for starters…

A study commissioned by MIT on the correlation of lead response rate to ultimate success uncovered some pretty stunning results:

MIT Lead Response Management Study

In the study, it was shown that web leads that are followed up within 5 minutes have a 4X better chance of success than those followed up with after 10 minutes. After 30 minutes, the differential was 21X.

How many companies do you know that follow up with web leads within 5 minutes of receiving them?

In my own experience, I’ve had a few companies over the years call me within 5 minutes of filling out a web form - and come to think of it, those were the ones I ended up doing business with! The ones that called after 45 minutes were calling me about something that was “ancient history” in my mind.

On the flip side - how many companies do you know that are tight enough on their lead handling process that they respond this fast? It’s clearly possible - and obviously a good idea. But alas, very few companies think about this part of the process - or any other part of the critical backend - when they are thinking about “marketing”.

The Bottom Line: Your next marketing breakthrough could come from your backend processes.

Author: Jeff D'Urso Categories: Web Marketing Tags:

Interesting SEO Strategy: Write Relevant Content!

June 2nd, 2009

Over the years I’ve heard lots and lots of debates from experts and charlatans on the best way to “get to the top of the search engines”, the most prominent approaches falling into the 15 year cat-and-mouse game that started when someone figured out how to game WebCrawler in 1994 with keyword stuffing - to all sorts of elaborate methods used today to “make Google think the content would be interesting to an end user.”

And all of these SEO methods have had one thing in common…

When they crash - they crash HARD! From websites that go from the top to the bottom in one quick “Google Slap”, to websites that got entirely banished & blacklisted from the search engines - to stories of companies that built their entire business (and hiring plan) based on “free traffic” from SEO, only to have it disappear randomly in an instant (and with no way to rebuild the traffic, or business for that matter).

SEO just seemed to risky - and for years I recommended PPC as the far safer alternative.

As strong as the allure of “free traffic” from SEO was, I personally had much better luck with pay-per-click search engine marketing, most notably on Google. In fact, I built’s traffic machine almost entirely on Google PPC in the early years - and it was great!  Sure we had to pay for each click, but with solid conversion on the back-end, PPC allowed us to predictably put money in, and get more money out the other side.

And we didn’t have to worry about random “Google Slaps” coming out of the blue and hitting our traffic when we least expected it. It was so good that for a while I strongly believed SEM was the only solid traffic strategy, and SEO should be used with great caution.

But then I learned about an SEO strategy that actually works.

In late 2007, I reconnected with college classmate Sherman Powell, and he told me about, which at the time was a homegrown site he built by creating interesting content he thought army personnel would want to read. They did, of course, because it wasn’t written to “seem relevant” to search engines - it actually was relevant.

But here’s the interesting part - every time he created a new page on the site, it very quickly went towards the top of Google, and his traffic kept growing until he had hundreds and then thousands of users coming to the site - to read the content, and to use the other tools he built there.

Relevant SEO Content –> High Google Rankings… Go Figure!

Since Sherman enlightened me to how SEO really works, he and I have worked on the site and have been able to generate enormous levels of traffic - all by continuing to build relevant content and presenting it in a way people actually want to read it. And of course - it turns out in the end it can be easier to create actual relevant content, rather than trying to simulate what you think Google might consider to be relevant content…

Author: Jeff D'Urso Categories: Web Marketing Tags:

Web Strategy: You Can’t Bloat Your Way to the “Killer App”

May 17th, 2009

There is a battle between 2 basic strategies that plays out on the web time and time again with consistent and predictable results.

On one side there’s “Keep it Simple Stupid” (KISS), best exemplified by Google; and on the other side it’s “Build Lots (and lots, and lots, and lots) of Application-fattening Tools” (BLOAT), best executed by Yahoo.

KISS is about relevance and resonance.

When executing the KISS strategy, it’s all about finding and solving the “main thing” - i.e., what is the user’s single biggest hot button (maximum relevance), and how do we overdeliver on that with excitement (maximum resonance).

For Google’s audience, it was all about relevant search results, and so Google focused on search and only search. For MP3 players, the goal of most users was to play MP3’s (go figure!) - and so Apple focused on delivering the simplest way to do just that. For Sales Force Automation, it was about easy pipeline management; and so delivered it.

All 3 of these players grabbed enormous market shares in seemingly “crowded markets” by finding “the thing”, and delivering on that and only that.

The BLOAT Strategy - it slices and it dices; it delivers everything but a solution to the “main thing”.

BLOAT actually starts in the same place as KISS - with the seed of an idea that tries to get to the heart of the “main thing”. The problem is - then it keeps going, and going, and going to lots and lots of lower priority features. The underlying concept is, if we’re not super-confident that the end user is going to be wow’ed by the “main thing”, then we better gold-plate it with lots of razzle dazzle so that they’ll still end up liking the product.

But the problem is - if we don’t nail the end user’s “main thing”, then all the razzle-dazzle and functionality in the world isn’t going to change the fact that we failed to engage them. At worst they’ll scoff, or yawn, at best they’ll claim to like it and then disappear into the ether never to be seen again. The combination of our attempt at the “main thing”, and all the added bells and whistles just didn’t stir any emotions, and so it was all wasted.

And it probably didn’t come cheap!

The only thing worse than failing to engage the end user with our new product or website is that we wasted an enormous amount of time, energy, and expense on “bells and whistles”. Instead of delivering a first iteration of the “main thing” in a matter of days or weeks (like we could have in the KISS scenario), we burned months of time, thousands or tens of thousands (or more) in expenses, and lots and lots of “buzzkill” - and we’re no further along than we could have been.

But what if we miss the “main thing” in the KISS Scenario?

If you miss the “main thing” under the KISS scenario, then either 1) you have the wrong audience, 2) you have the wrong hot button,  3) you didn’t quite hit “resonance”, 4) you are way way off.

Assuming any of the above (except #4), the good news is that you haven’t wasted a lot of time and iteration on your first attempt, so you probably have lots more “steam” available to iterate on a second, third, etc. attempt than if you had gone down the BLOAT path. When it comes together, it’s like a radio station that’s off by a hair - it doesn’t sound so good, but with a few tweaks it comes in crystal clear.

And so the moral of the story is…

Use the KISS strategy, get something (i.e., a Beta release) in front of real live users ASAP, and then iterate as rapidly as you can until you get it right. And avoid the BLOAT monster at all cost!

Author: Jeff D'Urso Categories: Web Development Tags: