I want to start a company.
One of the things I do for fun is help people start companies, and that's one thing I hear over and over. My standard response to that statement is.
That's great, but does the MARKET want you to start a company?
To their inevitable blank stare and maybe a Huh?, I continue on.
The market WANTS you to start a company, but it doesn't necessarily want you to start the company you want to start.
Only then do they start to understand what I'm saying. It's at this point that I tell them this story.
A few years ago, two good friends who live in Seattle, let's call them Shelly and Lee, decided to open a children's clothing store. They decided to name it Punky Bear's after their daughter. They went to their friends and family and raised the $100,000 they needed to open the store and stock it with inventory. They also did a number of things to market their business. All in all, they did a good job. Actually, they did an exceptional job. They had a great store in a great location.
But it never took off.
In fact, after 3 years, they ended up closing the store. Their original investors lost all of their money and my friends had to go back to their real jobs.
Ever since I heard they closed the store I've been thinking about why it failed. It sure isn't obvious. I visited the store a couple of times and found it to be clean, well laid, out, and well-stocked. Their clothes weren't cheap, but they also weren't over-priced. In fact, their store was named children's store of the year by the local independent newspaper. They truly had the better product.
But it failed.
It's only in the last year or so that I think I've figured out what the problem was.
They started the business for the wrong people - themselves.
In other words, they started the store because THEY wanted to start a store, not because their CUSTOMERS wanted them to start a store. They were so concerned with building the store of their dreams that they never thought about their customer's dreams. They were so focused on executing their concept well that they never took the time to learn if people were feeling any pain with the existing children's clothing stores.
As a result, they spent most of their time getting the word out about their store instead of finding people who were feeling pain and could sell the store for them. They had good, loyal customers, but no evangelists. And that was the problem.
Nobody really NEEDED their store.
It didn't solve any pain. It didn't stand out. It didn't do anything unique. It didn't offer anything special - either value or snob appeal. Instead it was a good, solid business. The problem was that, even though they tried their best, they could never convince their customers to join their cause and sell for them. Their customers all thought they ran a CUTE store, but I doubt if anyone thought they ran a VALUABLE store.
And it failed.
The reason that I bring this up is that I see a lot of the same things happening when it comes to the Internet. It seems to me that far too many Internet start-ups are being launched for the wrong people and for the wrong reasons. Entrepreneurs, and even many big companies, seem to be launching many start-ups or spin-outs.
- For themselves.
- For their friends.
- For Wall Street analysts.
- For Venture Capitalists.
- For the stock market.
- For the company that they want to acquire them.
The point is that I don't hear many Internet companies talk about pain.
They certainly talk about how cool the site is and how much money they spent to get it built. They usually talk about how much money they are spending on advertising to create a killer advertising campaign and develop their brand.
They may talk about customers, but they rarely talk about the pain that will give those customers a good reason to use their product or go to their Web site. They may talk about the opportunity, and the fact that it's a billion-dollar market, but rarely do they talk about the customer and the pain that is (or more often is not) at the root of the opportunity.
They never seem to talk about why customers NEED their Web site.
Instead, it's seems to me that many of the companies that are being started are the Internet equivalent of the Pet Rock – basically useless, but occasionally a hit for some unknown, unpredictable, unrepeatable reason.
I don't know about y'all, but I really doubt whether those kinds of companies are going to survive the inevitable shakeout. What will keep their customers from bailing at the first sign of trouble or when the next cool thing comes along. I also couldn't stomach investing in one. I would argue that the companies that are going to survive are going to be the ones that, at the core, are built around pain.
This is what I mean when I tell people that the market wants you to start a company, but not necessarily the company that you want to start. The market is made up of people, and it is inevitable that, no matter how good things get, people will still be failing pain. They will find products or services to be a hassle. They will find that working with a company is a pain in the ass. These people will want you to start a company to help them out. They will be wishing for your product or service. It is your job to take your desire to create something and channel it in the direction of solving one of these pains. If you do that, then the market will love you forever - or at least for a long time.
Copyright © 2000 Chris O'Leary
