Last spring at an SMX cocktail reception in San Jose, I had the pleasure of meeting the sharp and slightly quirky CEO of Adlucent—a web marketing startup twice recognized as a top 500 by Inc Magazine. When he asked what my company does, I didn’t jump at the opportunity to answer. After a moment I came up with a nonspecific response, something like “We make web marketing tools for certain industries.” His eyebrows went up, and he mockingly suggested that the CMO should have the company’s pitch down pat. I smiled and said, “You’re probably right.”
The truth is that I disagreed with Jon’s comment. My muddled pause and nonspecific response to the oft-asked question of “What does Red Nova Labs do?” is intentional. Why? Because I’m the CMO of a startup—a startup in a startup-crazed economy where every green college grad is eager to conjure up an idea, win funding, and go to market. And unfortunately, not all of those ideas are original. In sad fact, the large majority of them are shamelessly copied from other startups that have already bled to piece together something from scratch.
Take the daily deal phenomenon for example. There are now over 800 copies of Groupon around the globe. Eight hundred! Once word got out of Groupon’s simple business model and insane revenues, every entrepreneur with access to a web programmer built a daily deal site. Just last week mobile manufacturing company Nokia announced the odd brand-extension of its own mobile daily deals platform. You know things are getting ridiculous when a cell phone maker copies a dot-com.
Even in Red Nova Labs’ target sleeper industry of self storage we see entrepreneurial lemmings. Storage owners are now faced with a miasma of over a dozen web marketing platforms. And the startups keep coming, expecting to storm the trade with the latest blatant copy of an existing platform. Despite the fact that most of the copycats only last a year or two, they complicate our sales process and drive up our marketing costs.
I place the blame for the influx on a couple of eager entrepreneurs at a competing startup. For more than two years they have tooted their own horns among the startup community—as opposed to the self storage industry where the revenues come from. It seems as if I can't turn a page of startup news without seeing yet another news release about these amazing youths who against all odds have blah blah round of financing blah mentors from Fortune 500 blah blah blah. Geez, that cow has been milked dry, let go of the shriveled teats already.
When Red Nova Labs tapped the self storage industry in 2009, the market was quiet and somewhat archaic as far as marketing software goes. Little did we know that this strong contender would hit the market at the same time we did. Both of us succeed today thanks to solid lead generation models, but there are three notable differences between us: Our fees are dissimilar, our market penetration plans diverge, and our approaches to PR are conflicting: Where Red Nova Labs is stealthy about fresh ideas and finance, our competitor takes every chance to boast.
Serendipitously, at SMX in Seattle last month I sat next to the consultant who came up with the competitor’s PR strategy—that’s right, it was a strategy, written down in a plan and everything. Turns out, the consultant initiated the startup braggadocio as an inbound linkbuilding tactic (for SEO), with little consideration of the broad strokes.
I won’t deny that our competitor has lured more inbound links to their marketing platform, however unrelated to the self storage industry they may be. But at the same time, they have inadvertently invited newcomer startups in droves. The consultant offered two defenses for his strategy: “The sales effort is a high enough barrier to entry” and “There’s plenty of room for everyone; we’re revolutionizing the industry and creating demand.” I can only hope my involuntary scoffs planted some snot on his tie. We’re not creating demand; we’re splitting up existing demand. It’s self storage, not the latest model of iPad!
On one hand, competition shows that an idea is sound and the market can sustain it. And frankly, I like having one or two major competitors in any given industry. It keeps me energized and progressive. On the other hand, too many entrants muddy the waters and dilute the benefits. Oversaturation harms businesses and customers alike.
The entrepreneurs who develop real solutions and succeed long-term aren’t about braggadocio. They’re circumspect and planned about their communications. That doesn’t mean they’re stiff, suspicious or distrusting. It means they are careful about giving themselves a solid head start. They know that news and plans spread fast, especially in a business world gone wild with startup fever. They don’t tell more people about their ideas and future plans than is helpful, and they don’t overshare with venture capitalists—who can’t “unthink” an idea, even if they’ve signed a nondisclosure.
Whether or not these entrepreneurs are purposeful in their early stealth, they have plenty of reasons to be:
- Second is the new first.
There’s no question in my mind: America is in a startup bubble. New companies are the new thing – particularly in web and mobile – and the phrase “second mover advantage” is now common marketing strategy. The "first mover advantage” touted by Al Ries and Jack Trout in the 90s doesn’t buy you safe market share the way it used to. Protect your turf. Avoid copycats. - Investors smell blood in the water.
The longer your startup survives, the more value you’re building for the equity holders who took the risk and bled for it. Once the risk is mitigated, financiers will "smell blood in the water" and eagerly add more money to your startup coffers. It’s tough to turn down money and mentors when you’re still operating on Ramen salaries. But unless you must take on more shareholders to break into some critical mass situation, don’t give away your future. - Vendors know where to find you.
In your early days of few employees doing all the heavy lifting, do you have time to spare for solicitor calls and vendor meetings? Startup fanfare and news of big investments draw them in droves. - 90% of startups fail, most in year-one.
If you brag up your startup success yet bomb in the end, it could translate into a blaring exposé of failure. That will make it hard to find support – both emotional and financial – when you get back up on your entrepreneurial horse. Arguments can be made in support of the wisdom gained from a noisy failure, but try telling them to VCs. - Startup peers are not your customer (unless they are).
Your marketing and communications efforts should be consumer facing, not peer facing. Leverage the business solution rather than the underdog persona in your PR. That said, off the top of my head I can think of three exceptions where startup buzz can work in your favor: (1) When you’re trying to lure top talent to an innovative yet bootstrapped startup, (2) When you can effectively yet safely leverage startup fanfare [Zaarly] or better-mousetrap hype [SpiderOak] to draw mass consumer interest, and (3) When the startup arena is where your customers dwell [Incubators]. In all three cases I'd still ask myself, "How much information about my business model makes sense?" - Talent-thieves like startups.
Just as your startup persona can serve to lure top talent, it can also lure top talent thieves. They want the kind of training and energy you put in. Where you can only offer time and foggy opportunity, larger businesses can offer cash straight-up. Just ask small companies like SEOmoz about poaching by deep-pockets players like Google. I hear programmer poaching is rampant in Silicon Valley, Austin and the Pacific Northwest.
Sure, there are those who see it differently than I do. I’ve often heard (even within the walls of Red Nova Labs) that web startups need to be fast, open and readily sharing ideas in the open marketplace. To that I say there’s a big difference between testing ideas and shouting to the rooftops about your awesome startup business model. Be careful. The longer a startup can hold out on blowing the horn, the stronger it will be against copycats.
