After painful search of product-market fit for a food marketplace VendorHub and difficulties of initial audience growth, I asked myself many questions:
What are the perfect initial conditions for the startup owner to succeed with a new project?
The first question we discuss, is about market and product itself.
Nikita: “ our market is very competitive and huge simultaneously. And there is no any visible leader that can dominate and prevent other players from coming to the market.
Your market should be huge, hundreds of billions dollars in market size followed by increasing growth trend;
It was important that our market contained competitors with valuations over $1bln, that was what attracted us, but not only;
Regular appearance of new products and competitors is a good sign that your market is not shared by a few monopolist companies (like Facebook in social networks); On our market we saw young companies started their way following the past year.
Andrew: “so, how do you plan to compete?”
Nikita: “Generally, you may have two basic strategies:
- either make your product better than by competitor
- or make your product same style but cheaper.
If you chose a right market there will be a space for startup alterations, even if you missed the correct path or sub niche from the very beginning. You will be able to reorient your product strategy, make changes in product vision and rush ahead again.
On a wrong market you simply don’t have enough space for changes.
From the very beginning, when we did our product we had a great competence in our industry and sub-niche of LinkedIn automation tools. Before we accomplished sales via LinkedIn and emails for 5 years. We know exactly the right approaches in lead gen, which we later implemented in our product.
Andrew: “sounds good, I heard that LinkedIn constantly changes their API that prevents most tools from operation suddenly and make them dependable on the service”
Nikita: “We don’t use API for such level of automation that we have, we simulate user behavior in a cloud. There are risks, and we build a multiple value platform to reduce such risks for the user”
Andrew: “I spend for my startup around 1.5 years, to validate some hypotheses it took me 2-3 months. I was a bit slow in research, what about you? How much time did you spend for the product launch?
Nikita: “First we did the tool for internal use (it was scrappy but preformed well), later decided to push it on a market.
The transformation from internal into external product took us six weeks:
- We started sales before launch;
- There were 30+ people willing to try it in the day of launch;
- The first payment was transferred in one week after launch;
It is important to be quick, while modern markets are so dynamic that changes may influence your startup if your product launch is prologned”
Andrew: “True, what about the funding? To my mind, nowadays is not the time when we can easily bootstrap the product with no funding at all and by means of one person.
I first believed in that, but now understand that modern products should provide complicated value to compete. A product value should be difficult to overcome by the competitors who invest millions of USD
Nikita: “We invested a lot and continue to do so. Our case is not a product, where we can complete the product once and just sell. We continuously improve the product, add new features as far as market quickly rushes ahead. We should keep us trendy. Now we work on the edge of two markets: LinkedIn automation and email campaigns where we see a new need: multichannel campaigns. Nobody wants to pay for two separate tools (for email and LinkedIn) so we combine both.
The need is fresh, not many tools on a market, no perfect tools at all.
Andrew: “ok, is my feeling correct, that for a new startup launch nowadays you should have dozens of thousands, not thousands of investment? After pre-launch of VendorHub MVP I did some traction and lead generation myself. It was slow and efficient, but I’ve got impression that one should make initial buy out of leads in a good volume to get a first traction.
One of my acquaintances who launched a marketplace in logistics spend dozens of thousands USD to acquire hundreds of deals for their marketplace. What do you think?”
Nikita: “For initial research it’s enough a couple of thousands dollars (3-5k), you need landing page and traffic. You can just get the signups to evaluate demand and write “coming soon” for the product. Of course communicate well with those early potential users;
For a good launch you need more, I would say not dozens but hundreds of thousands USD, before you get predictable SaaS economics and channels of growth.
And then to attract investment into business model (when you already have unit economy, conversions, growth channels).”
Andrew: “It gives confidence to my initial thoughts, thanks for that. Which advice we can give to people that want to start working on their first startup?”
Nikita: “I would remind once again the known principles from startups periodics and undreline that thousands of closed businesses and billions of wasted investment are standing behind :
- Done better than perfect;
- Sale first than develop;
- You shouldn’t avoid failure, you should focus on how to fail faster and cheaper.”
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