Home Startup Strategy Roundtable: Do One Thing Really Well

Startup Strategy Roundtable: Do One Thing Really Well

I am very pleased with the conversations I had with the four entrepreneurs who presented at today’s Online Strategy Roundtable. All are going after problems and then looking for solutions, as opposed to presenting solutions that are looking for problems. While not every business solves a problem per se, all do cater to a need of some sort. Once you identify the potential customer who truly needs your product or service in the narrowest of terms, then you can zero in on the best way to reach them. Only after you sharply define your market segment can you develop a successful go to market strategy.

Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies and writes a business blog, Sramana Mitra on Strategy. She has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Her Entrepreneur Journeys book series, Entrepreneur Journeys, Bootstrapping: Weapon Of Mass Reconstruction, Positioning: How To Test, Validate, and Bring Your Idea To Market and her latest volume Innovation: Need Of The Hour, as well as Vision India 2020, are all available from Amazon. Mitra is also a columnist for Forbes and runs the 1M/1M initiative.

Matt Sidhom started off by introducing MyTestAnswers.com, which offers video solutions to questions on standardized tests. While coaching in Maine, he realized the students didn’t have easy access to test prep services beyond buying a book. His aim is to give everyone, including those living outside of metropolitan areas, access to affordable standardized test prep. Each video can be viewed on an iPod, iPhone or browser, and is self-contained. Through combining audio and graphics, his videos explain which answer is correct and why, rather than just providing an answer key like the prep books.

Launched in 2009, he currently offers 1,700-plus SAT prep videos and 800-plus LSAT prep videos. Which leads to the first problem: The market segment preparing for the SATs is completely different from the segment preparing for the LSATs and I’m afraid too much time has been wasted trying to reach both. Matt says he has more free customers for the SAT prep, so I recommend he builds that up as his primary business and puts the LSAT business on hold for now.

I also don’t think his pricing model that offers each video for $0.99 is right. His 8% conversion rate from freemium to paying customer is not bad at all (the average is 2-4%). I suggest he does some sort of focus group with existing free and paying customers to find the most appealing pricing model. I also recommend Matt reads up on Archipelago Learning and understand their strategy. Archipelago could also be a possible channel for him to go to market through.

Next, Juan Perez presented Nature’s Beauty, a line of creams, shampoos and soaps made with natural extracts (such as cream of avocado oil and garlic shampoo) that he would like to introduce to the U.S. market starting in San Diego. These products are produced in Mexico and he claims the benefits are well known to women in Mexico. Juan says his target segment is Hispanic women, ages 20-60, in middle- to upper-income levels, which definitely needs to be narrowed down. This is much too broad.

He planned to introduce the product as giveaways at local swap meets, until we came to realize that those attending such events are by and large not middle and upper income level women. You cannot test your product with the wrong market segment. Your experiment will come back with tons of false negatives or false positives. Juan needs to validate who his target market segment is, and then go where they can be found to test the products. I recommend he read the story of TheFind, an excellent example of a business zeroing in on its customers precisely.

Aaron Moskowitz was up next to present Capchure, a startup that wants to bring the lead generation model and all its monetization potential to the blogosphere. Capchure adds a hover-over form that readers can opt into as they touch highlighted keywords on a blog page. Through his research, he has learned that bloggers are open to this depending on the price, and advertisers are willing to experiment with it. It certainly sounds like a better alternative to CPM, which doesn’t monetize well at all, and is something that the big ad networks should be interested in.

He has identified the video game segment as the one with the most potential for his service, and also bloggers in the technology space. My suggestion is for Aaron to consider working with the big advertising networks already in those verticals (Federated, Adify, IDG in Tech), and get them to buy into his service while he remains the tech provider who runs the service. The alternative is for him to become an ad network himself, but that requires core competency in reaching advertisers which I did not get the sense that he has. Aaron asked me if I would use his service for my blog. The answer: It depends on which advertisers you bring to the table. I suspect Richard, Om and Arrington would all say the same thing.

Up last was Ram Kumar, who discussed techcello’s cellosaas, a shrink-wrapped SaaS framework on which you can develop, host and maintain your cloud-ready application from anywhere. Built on standard technologies, developers can start coding the first day with this system, saving on custom development time and maintenance. He went into too much detail explaining the licensing and pricing strategy and had to be reeled in, but overall I like his ideas.

He was concerned about going against the verticalization trend, but I’m completely comfortable with his strategy of focusing on the horizontal layer. Since he plans to do online promotions rather than employ a direct sales team, I pointed out that they have a great opportunity to use an open-source framework as a means to acquire customers. He should offer a free version along with the paid version as outlined in this story about Dimdim. I also suggest he explores partnering with outsourced product development companies like Persistent Systems. I think he’ll find the enterprise IT companies harder to reach without systems integrator intermediaries.

I started doing my free Online Strategy Roundtables for entrepreneurs in the fall of 2008. These roundtables are the cornerstone programming of a global initiative that I have started called One Million by One Million (1M/1M). Its mission is to help a million entrepreneurs globally to reach $1 million in revenue and beyond, build $1 trillion in sustainable global GDP, and create 10 million jobs. In 1M/1M, I teach the EJ Methodology which is based on my Entrepreneur Journeys research, and emphasize bootstrapping, idea validation, and crisp positioning as some of the core principles of building strong fundamentals in early stage ventures. In addition, we are offering entrepreneurs access to investors and customers through our substantial channels. Last week we launched our 1M/1M Incubation Radar series, and you can also read about several other 1M/1M entrepreneurs on my recent Forbes column, These Companies Are Built To Enjoy.

Recordings of previous roundtables are all available here. You can register for the next roundtable here. You can find the recording of this roundtable session here.

Photo by ilco.

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