Silicon Valley Frontlines: Three Keys to Startup Success ... Monetization Strategy, Effective Marketing and Management

Three things keep showing up as critical to getting a startup on the road to success - Monetization Strategy, Effective Marketing, and Management. Ok, yes, cash helps too. But you won't get cash without being clear how you'll use it to execute well in these areas. A good, working product or service? Of course - but history is littered with great ideas and good products that never went anywhere because people didn't know how to turn then into successful businesses.

Success in the near term may be getting enough funding to enable the next stage of a company's development. This may be completion of the initial product, build out of the team or gaining initial marketplace traction. In the long term it's building a sustainable, profitable, growing business with a large market opportunity (unless you're building a lifestyle business - which looks a more and more attractive option these days!). So what do I mean with these three things that are so critical to getting on that road to success?

Monetization Strategy

As I've noted before, with certain exceptions (Twitter, at least for now; YouTube - though not for much longer), having a clear, well thought out and tested monetization strategy is critical. "Tested" ideally means people paying real money for your product or service and who will be reference accounts (ones that a VC can call and talk to) - or, if you're still very early, credible people who will say "yes, if you produce that I'd buy it and here's what I'd pay". Its highly unlikely you're going to be a trailblazer in your monetization strategy. Leave that to Google, Salesforce and others. But you ought to know what others are doing and how you play off key trends and examples in the marketplace - term software licenses instead of perpetual, scalable subscription-based services rather than fixed fee, micropayments (many payments of small amounts) and so on. See my post from May 8th for more!

Effective Marketing

For many of the startups I've seen pitch this year the biggest near-term challenge is getting known and then getting customer traction in the market. "Who are you and why should I care?" is a major barrier - but when you solve it you are in great shape! In a pitch I saw last week from a very exciting startup, UserZoom, being able to say you have eBay, Monster, Shell, Novartis and others as paying, happy customers in less than a year from starting their service is the most compelling thing you can have when raising money. Fortunately these days the options for creative and cost-effective marketing targeted at getting that initial adoption are better than ever. See my post from April 11th for more on marketing spend - what's worth it and what's not.

Management

Although it's an old axiom in the VC business - that VC's invest in management teams - it rings even more true today when money is scarce. Why? Because VC's know that great management teams are far more likely to execute effectively, with fewer mistakes, and find ways to turn good ideas into successful businesses with the least amount of cash investment and lowest risk. The VC money is the lubricant - but its people who have to make it happen. Regrettably, many inexperienced founders have a hard time understanding that the best thing they can do is hire people who have been there, done that - but that's what it takes and what a VC will look for. Find and hire the best people you can to help turn your idea into reality - these days those people are even more readily available than ever before.