ENTREPRENUERIAL TECH

Distribution Is The New Oil For Startups

Distribute first, build later: Building Your Moat Before the Castle

Photo by Melanie Deziel on Unsplash

Imagine waking up one morning with a groundbreaking startup idea that could outshine tech giants like Apple and Google. Your vision is crystal clear, your determination unwavering, and your to-do list is neatly organized:

1. Find a complementary co-founder who shares your vision.
2. Secure funding from an angel investor or VC firm.
3. Assemble a team of talented individuals.
4. Develop the product and set up operations.
5. Finally, launch your startup into the market.

The steps seem logical and well-structured, right? However, amidst the hustle of launching your startup, there’s a vital element that often gets overlooked or ranks low in priority, especially in the early days — distribution.

The Glittering Idea

We often hold our startup ideas in high regard, treating them like winning lottery tickets. We’re hesitant to share our ideas, fearing they might be stolen or diluted. However, in 2023, it’s highly unlikely that your startup idea will be entirely unique. There’s a high probability of existing competition operating at various scales or past failed attempts at similar ideas, which, ironically, validates your startup’s hypothesis. Sharing your idea, though a great starting point, has less than a 1% impact on your startup’s success. What truly matters is execution.

Changing Market Dynamics

In today’s landscape, building a product has become surprisingly accessible. No-code platforms like Bubble enable web and mobile app development with minimal coding expertise. AI tools assist developers, reducing the reliance on junior software engineers. The process of creating products has become cost-effective and within reach.

Yet, building a remarkable product, although essential, is no longer sufficient. It’s futile to have the best product if it remains undiscovered by your target audience. In this digital age, you can’t just release your product and expect users to flock to it. You need distribution. While building is becoming more accessible, distribution is becoming more complex. Attention spans are dwindling, competition is fierce, and securing users’ attention requires creativity and, often, significant spending.

When to Distribute

The paradigm is shifting towards “Distribute first, build later.” Prioritizing prospective customer acquisition before completing product development has multiple advantages:

1. Validation: Building distribution channels first provides early insights into whether your product meets a genuine market need. Creating a landing page with comprehensive product details and collecting emails through targeted ads can gauge interest levels.
2. Cost Efficiency: Prioritizing distribution over full-scale product development saves resources. It prevents heavy investment in a product that might not find a market fit. Instead, you spend modestly on setting up a landing page and running ads.
3. Iterative Development: Early customer feedback guides you in building features that users truly desire, avoiding the creation of unnecessary features or extensive product overhauls based on feedback.

Real-Life Success Stories: Dropbox and Zapier

Two prominent examples illustrate the distribution-first approach’s success:

Dropbox: Drew Houston, the founder of Dropbox, initially adopted this approach. He created a video demo of Dropbox’s concept before building the actual product. By sharing the video on platforms like Digg, he garnered attention and sign-ups from thousands of interested users. Only after this enthusiastic response did he proceed to develop the full product.

Zapier: The founders of Zapier, Wade Foster and Bryan Helmig, started with a landing page describing their automation platform, even though the full functionality hadn't been developed yet. This landing page generated sign-ups and feedback from potential users interested in automating tasks between applications. This early interest provided valuable insights, guiding the product’s development.

Beyond Paid Marketing: The Community-Driven Approach

While paid marketing remains crucial, a community-driven distribution approach can be a game-changer. Building a community of users who engage with your product’s launches and provide feedback is invaluable.

These communities may not represent the most significant user segment, but they deliver maximum value, both directly and indirectly.

For instance, when I was working on Crypdeck, a cryptocurrency investment platform, we created a WhatsApp group of crypto enthusiasts. These early users volunteered as beta testers, providing feedback in exchange for incentives like vouchers or early product access. Surprisingly, we lost to a competitor with a more active Telegram community.

These communities not only test your product but also become loyal customers, driving word-of-mouth sales and acting as evangelists throughout your startup’s journey.

Building an Active Community

Building an active community requires effort and creativity:

1. Provide Value: Communities thrive on value. Offer quizzes, articles, giveaways, e-books, events, and webinars. SmallCase, a stock investment platform, boasts a Telegram group that shares financial insights and engages users with frequent Q&A sessions.
2. Gamify the Experience: Keep interactions engaging with elements like giveaways and contests. Communities can creatively spend very little to substantially improve engagement rates.
3. Create Hierarchy: Adding user levels can drive community growth. Discord, for example, awards titles like newcomers, managers, and heads, creating a social status game that encourages participation based on interaction levels.

Refer to this in-depth guide to mastering how to build communities, authored by Varun Mayya — founder of a B2B community-building platform.

Building communities is one of the many methods to get your distribution right before heading to product development, or at least in parallel to product development. User-generated content (UGC), content marketing in the form of blogs and short/long-form videos, and building a newsletter that serves the domain your startup wishes to enter are a few other ways to build distribution organically.

These methodologies might seem obvious, but they can give you a massive MOAT over your competitors when you adopt them right from day 1.

Conclusion: Changing the Startup Course

The traditional path of “Build the product -> Seek traction -> In-house iteration -> Potential success, failure, or pivot” is evolving. A more effective approach is emerging:

Create a Small Group of Prospective Customers -> Build the product with a feedback loop -> Iterate -> Pivot or Succeed

This shift emphasizes early distribution and user engagement, allowing you to validate your product’s need in the market and reduce costly iterations. It’s a smarter way to navigate the challenging startup landscape, putting you on a path to success.

When you look at the startup landscape from a macro lens, it’s clearly visible that to win the race, you need a loyal audience by your side.

By embracing distribution as the “new oil” and integrating it into your startup strategy sooner, you’ll bridge the gap between your groundbreaking idea and the eager audience waiting to embrace it.

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