You Hardly Ever Fail Because of Your CTO

This has been said many times before but I'll say it again. It's not about technology or innovation. It's all about customers and sales. I've noticed recently that you have lots of entrepreneurs always pitching their newest "mousetrap". Unfortunately, the discussion about how you're going to find customers for your product and sell it to them comes late or never. If you're going to send your business plan to a VC or pitch their partnership make sure you address this issue right up front. Convince them that you first know who your customer is. Second, make clear that you know how to address these customers. Finally, show that these customers will spend their hard-earned cash on your product. It's always sales that kill most early-stage businesses. I can't remember ever saying "shit, we're going to fail with this one because of the CTO!" 

I have to admit that when sitting in a pitch hearing endlessly about tech and how innovative a product is, if I don't hear the business case, it all becomes "blah, blah, blah". Of course I have to be convinced that you have a USP in regards to your product and this will most likely be technology related. There have simply been too many companies though that were far better technology-wise yet never made it.  

It's also the news in the press and blogs nowadays. You're often hearing about how innovative something is and there are new products here and there constantly. Yet, when I think which companies make it, it's hardly ever the technology which first comes to mind. I was just reminded of this when playing with Foursquare this morning. This is so not rocket-science yet people are using it and I have to admit it's addictive. Look at all the attempts out there to crack the LBS nut. I believe Foursquare is on to something. Sure, it's like Twitter in that it hasn't yet figured out it's business model but I can already see there's money there. Same is the case for Twitter. Give me this feeling when I am listening to your pitch. I don't need to see the break-even point. I need to see the huge exit down the road thereafter. 

Note: this is very VC related. If you aren't raising venture capital, you'll have different issues to address up front and this is necessary. 

Comments

[twitter.com/David]

There's something flawed when a business says about itself that it is innovative.

If no one's gonna buy your product or service, it's not innovation. It's an experiment.

[Paul Jozefak]

Right!

[pwarden]

I think another way of putting this is that internet startups are now dominated by market risk, not technology risk. Back in 2000 just getting a site up and running was risky and expensive, just like developing a new drug. Now the engineering is a lot more routine, so you're much more likely to be killed by lack of customers and revenue than technical failures.

I've talked to Eric Ries about this, and I see the Customer Development movement as a path for engineers to learn about the fundamentals of business in a way that resonates with the technical mind, to get to the market-focused approach you're talking about.

[Berislav Lopac]

The thing with high-tech startups is that they don't really need sales to succeed. Or, to put it more correctly, in some cases they only need one sale -- of the whole company.

I note again that it only applies to some types of startups, specifically those with high level of innovative technology involved, specifically what Bruce Greenwald calls "technology businesses" -- http://www.markpeterdavis.com/getventure/2009/10/the-three-types-of-scalable-information-technology-companies-.html

[Paul Jozefak]

Very good point!

[Paul Jozefak]

You always need sales if you're in business. But you're right in noting that one sale can be enough. I prefer lots of sales for the product or service and one big sale at the end when we exit the company.

[Jan Peterson]

Well, I like your blog and I am sure you know what you're talking about. But it's so disappointing - it's the restricted view of the world of an non-engineer. And it's an arrogant view of someone who is proud about money - but what's money without meaning? A kid is proud when constructing something, when working with friends on an engineering project, building something using head and hands. Engineers stay this way and some banker or sales-pro may think this is like not growing up. But it's the passionate to make something meaningful, something that remains. And that's a very respectable way of life.

Sales on the other hand is able to make a success of something totally worthless. Great. You can be proud of yourself.

Even if I know how important "creative" sales was even in tech-driven success stories like the Internet itself and lots of it's side effects like Google+Co it shows what all this would have been without engineering: Nothing.

Life is short. Play more.