After attending #LIS — Lisbon Investment Summit, I realized one thing: a lot of startups still don’t have the slightest idea of what they’re doing. Don’t take me wrong; last Friday, I saw great talented teams pitching their projects at top investors and to an awesome panel (including @johnbiggs from TechCrunch and @sofiahmich from IndexVentures). But even some of those great teams failed to explain some basic aspects which are crucial when pitching to investors:
- How do I make money?
- Who is my competition?
- What need does my product/service satisfy?
- Who is my target market?
If you don’t know this, you drown in the tank.
The Marketing Oriented Startup Concept
Let me start by telling you that marketing is not about advertisement — a lot of people actually mistake one for the other. Advertisement is, in fact, a part of marketing, but also very distinct from it. By definition, marketing is the creation, communication, delivery and exchange of offerings that have value for all stakeholders. This means that marketing is holistic and encompasses all steps of value creation — from product/service development to its promotion. In this way, it is of extreme importance for a startup to incorporate marketing from its inception.
The way businesses did marketing in the past — and the way a lot of startups are doing it today — was like this: “I have this great product/service, people will buy it”. This represents a product-focused view, and in the global market of our time, it cannot succeed in the long term. People don’t buy the features, they buy the benefits. Therefore, startups need to focus on more than just their product/service in order to answer the questions posed before.
The Four Questions Startups Need to Answer
- How do I make money? If you’re pitching before an audience of experienced investors, you need more than just an idea — either a product or service with a tested market or an exceptional and realistic business model. You might think you have the best idea in the world, but if a significant number of people don’t think the same, then your idea is not worth much. AirBnB had a rough start, but once they proved they could make money, investors began to get on board.
- Who is my competition? If you don’t know your competition, don’t even bother to pitch. You’re never alone. It’s only when you know your competition that you can differentiate yourself from it. So are you catering to a specific niche? Are you doing what you do better than anyone else? Are you doing what someone else already does, but excel in customer service? Are you a price leader? Do you deliver greater value? Whatsapp wasn’t the first and only messaging app, but it was more reliable, faster and cheaper (using less data) than the rest.
- What need does my product/service satisfy? If your product doesn’t satisfy an identified need, remember that you’re going to have to educate your audience, and that alone takes a lot of time and money. If it doesn’t satisfy a need, does it really have a place in the market? Whatsapp satisfies the need for quick and reliable communication, Snapchat satisfies the need for impermanent communication, Uber satisfies the need for quick transportation.
- Who is my target market? Right from the start, you must know who is your product/service intended for. The age of standardization is long over. Furthermore, you need to know who are you promoting and selling your product/service to. And “everyone” is not an answer, as “everyone” is not reachable, at least not for a startup with little means. “Growth hacking” can help with this, but you still have to target your communication and not just wait to be noticed. The Poshpacker is targeted at the creative class, Skilleo is targeted at developers, Medium is targeted at bloggers and writers, Zomato is for foodies.
Of course, this is not to say that you need to reach perfection before you pitch, but embracing the Marketing Oriented Startup concept ensures that you have consistency in your ideas, products/services, and their delivery — a good indicator for investors that you know what you’re doing.