These are the slides/notes to a talk I gave at Startup Grind 2013
My advice is for venture capital backed social companies, this advice is not for lifestyle businesses.
This is a very lessons learned type talk, it definitely walks a fine line between jaded and RA-RA-RA you can do it.
I want everyone in this room to understand that once you’ve taken VC money, you’ve basically started a clock counting down and subscribed to a certain lifestyle, and you've also agreed to become a certain type of company.
With all that said, I want to talk about money, there are two types of money...
This is a typical business, you have customers and they pay you for your product.
In a social company your users are your money; they might as well be a line item on your income statement.
There is no such thing as a lifestyle social network business, if you choose the social company path you need to be a runaway success.
What do I mean by runaway success?
Pinterest (amazing success, exponential growth)
Ben Silbermann has talked about how Pinterest had 50% growth month after month in the early days of the company. Starting from a small base, this seems like awful engagement and growth for the first little while, but you'll eventually reach a tipping point when you are growing by that big a percentage each and every month.
The tech press who wrote stories about how Pinterest was nothing for years, but the founders stuck it out and didn’t pivot, really don’t understand how magical 50% growth month over month is--even from a small base. To point out how ridiculous those stories were, Pinterest was able to raise multiple rounds of funding while they were “sticking it out.”
Our intuition about the future is linear. But the reality of information technology is exponential, and that makes a profound difference. If I take 30 steps linearly, I get to 30. If I take 30 steps exponentially, I get to a billion.
Plancast (linear growth, X users/month like clockwork)
You’ll run out of money long before you get to the scale of users you need to keep the lights on.
I’ll just get press and my site/app will explode with users
I want you to think back to that Simpson's episode where Rainier Wolfcastle was shooting a movie in Springfield. The acid is coming towards him and so he takes out some goggles and puts them on, then the acid hits him and he says, “The goggles, they do nothing!”
Press is a lot like that, it will not significantly move the needle for your company.
Just as a side note, an easy way to tell if a founder inflates all his metrics is to ask him how many hits he got from a TechCrunch article about his company, if it is really high, my guess is he is lying about almost all his other metrics also.
Power users are overrated
Your best bet to grow is to have users love you, and for them to tell their friends.
Personally, I think people that follow power users are jaded, I’m much more likely to download an app on my mom's recommendation than some random tech pundit I follow on Twitter.
Advertising is not a business model
Why would companies use your brand-spanking-new super geo-targeted social networking app with a small user base when they could just carpet bomb Facebook ads for everyone in your city for less money and reach 200x more people (answer: they won’t).
You have to have huge scale before advertising becomes a viable business model for your company, and even then it's not guarranteed to succeed.
Agree? Disagree? email me your thoughts, set me straight...