Guy Smith argues founders fail by neglecting marketing and misjudging market size. He identifies three critical errors: distorted market perception, unclear value propositions, and swinging between selling to everyone and only early adopters. Both extremes drain resources and lead to bankruptcy.
Chapters
So, one of the great management minds of all time said something which I find perfectly provocative and absolutely true. There are only 2 functions in business. That's innovation and marketing. All of you are probably already innovators. You've got that spark, you've got that great idea, you want to charge ahead with it. You have innovated. The other half is marketing, because when you get right down to it, what is business? Marketing. It's thinking of something somebody needs and selling it to them. Everything else is administrative or tech support. So if you don't get the marketing side down, the probability of failure skyrockets. Probability of— mathematical equation for all you number people— probability of success equals 1 minus the probability of failure. Reduce the probability of failure, your probability of success goes way up. So why do founders go astray? What is it that causes them to stumble? There's probably 1,000 or 2,000 different ways. We're only going to talk about the top 3 today. First one is that they have a lousy perspective of what their market really is. And it manifests itself primarily in hyperopia, looking too large, or myopia, looking too small. Founders, especially techie founders, have a genetic inability to articulate a value proposition. And there's a lot of good reasons why they cannot do so, but it is their downfall most of the time. And they also have a reluctance or an inability to segment their markets and define their personas in such a way that they can communicate the value proposition which they are unable to compose. And this, of course, has led to a lot of very sad stories here in Silicon Valley. Founders believe that they see their markets accurately, and almost never do they. And it falls to a number of different problems. The internet, God love it, has actually made it possible to sell to everyone on the planet. Problem is, no one can sell to everyone on the planet. IBM cannot do it. Oracle cannot do it. It's too big. However, 90% of the founders here in Silicon Valley think that they're going to be able to throw up a website, communicate to everybody, start to sell to everybody. One of the problems that trying to do this, even if you're not trying to do the whole planet, but just half the planet, is that you spread yourself too thin. If you're trying to serve too many different types of customers in too many different types of markets with too many different feature sets trying to fit all of their needs, You're never going to make anyone happy. And because of that, you're never going to get your revenue inflow that you need. Plus, you will be burning yourself out and burning all of your investment capital just trying to sell to all of these people instead of trying to make them happy. One of the funny things that happens though— sad, funny, take your pick on words— is that a lot of founders, once they do try to sell to the entire world, and they start to see their burn rate pulling them down, then revert to arguably the second worst thing that they could do. They go back to their early adopters. And they start refining their product to be the perfect product for those 5 or 10 customers. The problem with this, the myopia, is that you are now focused on way too small of a market. You never get your top-line revenues coming in. You never get word-of-mouth buzz because you're designing your product for too few people. And I've seen endless number of companies go through this ping-pong match. They go, try to sell to the world, try to sell to a few people, discover they can't do that, try to go the other way. By the time they reach that, they've burned through their investment capital. They're not finding new investors because they have no traction. And then that leads them basically to running to the bankruptcy court.
