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Idealog—in the ideas business

The mythical startup: the firehose

Rowan Simpson

“Optimism is a genetic defect that helps keep entrepreneurs going”
–Sam Morgan, Trade Me founder

"Good software takes ten years. Get used to it"
Joel Spolsky, founder of the Stack Exchange Network

Lots of effort is wasted by startups who are worried about being inundated at launch. Unfortunately, despite all the work done in preparation, the deluge of customers rarely eventuates.

Trade Me, like most of the overnight successes you read about in the media, actually took about seven years from launch to acquisition, and remains under development over a decade later.

These days Trade Me is a juggernaut. But the numbers in the beginning were much less impressive. It took four and a half months to get to 1,000 registered members, even though it was completely free at the time. The first 10,000 members took over a year.

When you first start out, and actually for quite a while afterwards, it’s hard to differentiate between a hockey stick growth curve and a flat line. To make this even more confusing, the customers you attract at the outset are probably not even representative of the audience you’ll eventually chase. In the beginning, the biggest category on Trade Me was computer parts. Later it was womenswear. There isn’t a lot of overlap in those categories. When you’re just getting started, you need different strategies. You need to make sure that you are selling to those people who are ready to buy, and there may not be a lot of them.

This series of posts expands on ‘The Mythical Startup’ in Idealog #33

One Man Band
Eureka
Inventor In A Shed
The Firehose
Pinch Me!
Mojito Island
All Together Now

It is also cross-posted on Rowan Simpson’s blog

At Webstock in 2006 I spoke about how we were inspired by the Team New Zealand mantra, which helped them to focus on the critical things: “Does it make the boat go faster?”

I still think that’s great advice for companies that are underway, but before you can worry about that you need momentum. You can’t steer a boat that’s not moving (credit to Mike from Sonar6 for putting this idea into words).

I don’t have any magic bullets to help you get started. In fact, my track record of starting something from scratch is probably not much better than chance. But here are a couple of things I’ve observed that I think can increase your odds:

  1. Have a number to obsess about. Work out what one thing you can focus on that will create a positive feedback loop and drive the success of your business model.
    At Trade Me in the early days this was the number of unique sellers using the site. We correctly guessed that if we could increase that then it would create a positive feedback loop: more sellers would mean more stuff for sale, more bids, more successful auctions, more feedback placed and most importantly more people telling their friends that they'd be crazy not to list their stuff for sale too.
    Once you’re paying attention to something like that, it will hopefully highlight what is currently constraining your progress and help identify the things you can do to move that number in the right direction.
  2. Do something different. People only tell their friends about things that are remarkable. Unless there is something genuinely different about your idea it probably won’t be news, so you’ll need to find some other way to spread the word.

We were fortunate at Trade Me to have an idea that was inherently viral: once you've sold some stuff that you assumed was worthless you can't help but tell others about it.

Your idea may or may not be inherently viral like this, and it makes a big difference—alternatives will almost certainly be more expensive.

“Expand your operations once you have operations”
Jason Fried, 37signals

It’s very tempting, especially for technical people, to focus too soon on designing for scale. In practice it nearly always ends up looking like premature optimisation. You probably have more time to worry about this than you think, and adjusting for it if and when it arrives is probably not as difficult as you might imagine. At that point you will be starting not with a blank sheet but with all of the information you have gathered and lessons learned about what works and doesn’t work in your particular circumstances, which bits of your application are actually used a lot and where the biggest bottlenecks are.

Before you have customers there are definitely more important things to be working on… like getting customers.

No matter how well you execute, it’s almost certainly going to take longer than you think before it becomes a success. But, that’s actually a good thing: creating something really great is going to take time and if you realised up-front how long it will likely take you might not bother to start at all.


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