sábado, 3 de agosto de 2013

¿La oferta atrae a la demanda? (1/2)

Part I: Build It and They Will Come?

ED ZIMMERMAN: “Passion. Instinct. That was it. Blind faith,” responded David Chesky, co-founder of HDTracks, when I asked him how he had tested the market before investing his time, reputation and cash to found his company and build his product. But let’s back up because I’ve been tweeting a lot about HDTracks — for instance, 9 months ago:
RT @EdGrapeNutZimm: don’t need discounts, I’m sold @HDtracks -the only place2hear it all (liberate me from compressed formats) #Hifi #Music
Why? Well, I’m a passionate music fan and an ignorant audiophile geek. That means I prefer tube amps over solid state, but I can’t explain the engineering underlying that preference. I also know that when I hear mp3 compressed files or the 1982 technology used in CDs, I feel cheated. When I hear uncompressed .flac or .aiff files (music stored in formats that let us hear all the info), it makes me happy and my kids and I are able to hear previously unheard details in familiar performances.
Here’s my test of any stereo equipment or new recording format: Does it make me want to listen to my favorite stuff all over again? HDTracks does precisely that. HDTracks has no outside investors; heck, I’m not even their counsel. I’m just a devoted customer. I’ve always loathed audiophile recordings because they’re songs you like by people you’ve never heard of, or people you’ve sort of heard of performing music you’ve never heard of (like a “worst of” compilation). Chesky solved that problem by having NYC-based HDTracks quietly strike licensing deals with the big music labels. He’s now actually making money for all involved and enabling fans to download an ever-increasing list of great albums in high def, uncompressed sound: Beach Boys, Clapton, Stones. But it isn’t just older stuff: Green Day, Tift Merritt andthe National have each released new albums on HDTracks.
Chesky has two advantages: (1) music is something about which many of us feel passionate and (2) in his words: “Here is the market research: …I am an audiophile who wants this and thinks it’s cool; therefore the rest of my kind will want it as much.” Of course, the question now is how big the market is – because he’s going to take it over, and if there are indeed a lot of “the rest of his kind,” we’ll all be sorry we haven’t invested!
Craig Danuloff, a serial founder, started Rewind.Me for the same reason: “I’m more of an ‘I think this is cool so I’m building it’ guy.” Rewind.Me enables us to use past check-ins, posts, tweets and other social media to take advantage of our own digital history – ‘have I been here before?’ (Disclosure: (a) I’m an investor and (b) Craig is an audiophile with a sick amount of .flac files…maybe this approach is just for us audio geeks?)
Are Craig and David crazy or lazy? Not according toJeff Richards, a partner at Silicon Valley and China-based GGV Capital, a leading growth stage fund that has backed PandoraBuddy MediaAlibabaSoundCloud and other great companies here and in China. (Disclosure: I’m an investor in GGV Capital).
Jeff says fewer people do testing “given how cheap it is to launch a product now – primarily due to the low cost and on demand availability of infrastructure (AWS [Amazon Web Services]) and ease of distribution (app store) – most entrepreneurs I meet are in a ‘launch and iterate’ mode. The flip side…it’s very hard to remain on top – competitors can launch and iterate quickly as well.” This doesn’t just apply to consumers – sure, we consumers are happy to be early adopters of iPhones or new cameras, but “perhaps even more interesting … I see enterprise customers willing to be part of the cycle – taking a chance on relatively new technology and in return getting to help shape the product. A decade ago no enterprise customer wanted to touch a product until it was ‘fully baked.’ ” This is an important change.
One of our amazing FirstGrowthVN companies, Food52, takes the “splash page approach” (which I see frequently used): “We put up a splash page before we launched to collect email addresses, and we let them join in stages. This was less about testing the specific concept and more about seeing if people had an appetite for a new kind of food site, specifically one coming from our perspective (or really [cofounder Amanda Hesser's], since she had already built such a strong reputation),” according to Merrill Stubbs, co-founder. Amanda Hesser garnered that reputation as food editor of The New York Times Magazineauthor of several books, including “The Essential New York Times Cookbook,” and by playing herself in the film Julie & Julia(coincidentally, I’m available to play myself in a major motion picture…for the right price…just letting y’all know!). Here’s how Hesser leveraged that reputation for Food52: “We first tested our recipe contest system via email with family and friends. Then we bootstrapped by getting a book deal, and using the book advance to fund a year of testing.”
But what if you don’t have a product about which people are impassioned?
When Matt Keiser founded LiveIntent (in which I’m an investor), he marketed enterprise customers before he built product by using a PowerPoint deck as a proxy for a costly product (he saved the money up front that Danuloff and Chesky spent in building their actual product): “We made a bunch of mock-ups and a killer PowerPoint. We met with as many potential clients as possible. We refined the pitch until we got five very positive responses for every lukewarm response. We then built what we thought was the right product. It took a few tries. Year one is great, you believe your vision is correct. Year 2 sucks as you’ve learned that your baby has warts and you don’t know if you will be able to fix them. Year three rocks if you survive. Radical innovation is key if you want to be noticed.” He’s telling the truth – Keiser knows I hate to sit through PowerPoint decks but he’s made me do it repeatedly, and then I somehow find myself buying him dinner…talk about a great salesman! Still, Keiser had to rebuild that product (the wart-covered baby) and rebuild he did. It took some time, but boy has LiveIntent now found its groove!
Chesky, a 3x Grammy Award nominee, is deeply experienced and connected in his sector. What if you’re not? Keiser and Danuloff are serial founders who have successfully exited other startups. As for Hesser, well, she’s got plenty of street cred from her NYTimes gig and successful books. What if you don’t have these amazing credentials? How will VCs do their diligence and consider the market for your company’s products? Stay tuned for the next installment!

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