I made a rather bold statement on Twitter today: “I’m convinced 90% of startup success comes down to market research.” I’ve also said, “I feel like most of the time when an entrepreneur is telling you about what made him successful, he’s lying a little bit.”
I really meant it.
I think a lot of startups get deceived when they hear success stories. Take the startup I helped found when I was 18, Stubtopia, for example. This is how the story goes:
I was an eBay junkie, so when my family wanted to go to an event in New York I looked at tickets on eBay. They were expensive, I was intrigued, and I decided to come back to it later. A little while later, my brother emptied out his life savings, we bought some tickets, doubled the money really quick, put the savings back, and kept making a bunch of money. Later we moved it off eBay, turned it into a real business, and it’s still around today making millions.
It wasn’t exactly a secret that Stubtopia did pretty well; my brother won the Utah Student 25 (a student entrepreneur of the year award) while I was on an LDS mission in Ukraine, and in doing so Stubtopia’s revenue numbers were exposed.
It was really interesting to watch what happened in the entrepreneurial ecosystem after that. It was publicized that some college kids made good money, and other people started doing the same thing. A couple of friends went out, bought thousands of dollars worth of tickets to try to resell, and lost it all. They probably determined we were lucky, cut their losses, and moved on.
But something was different; something was missing. I bolded it above.
Almost all entrepreneurs intentionally leave out the secret sauce. It’s usually something that anyone could replicate if they were told, but it takes a long, long time to figure out.
Even before we started selling tickets, I was selling silicone wristbands on eBay, not unlike the LiveStrong wristbands which received an absurd amount of popularity. It was an extremely flooded market; there were thousands on eBay at any given time, but I would regularly make $6-7/wristband while everyone else on eBay fought for pennies. The secret sauce? I used the word bracelet. Personally, if I were looking for a silicone wristband, I would never, ever use the word “bracelet” to describe it, but apparently some people do. Their selection was so limited that they would pay 600% of what other eBay users would pay.
When we started selling tickets, I watched the eBay auctions for about a month. I kept detailed information (some on spreadsheets, some in my head) about what seats sold for what, which seats didn’t sell, which cities sold well, which didn’t, etc. By the time we bought tickets, we knew exactly what we were buying. We knew the dates, venue, times, keywords, and even what times we would list on eBay to receive maximum exposure. That was part of our secret sauce. We didn’t flippantly buy tickets, and if we had, we would have failed.
When we moved it off eBay and onto the real-life Internet, I was really nervous. We didn’t have an already-available market we were selling to. So what did I do?
I sat down for about a month. I probably did thousands of Google searches, private messaged hundreds of people in forums, joined IRC channels, and spent 40 hours per week for about a month just researching. I cold called would-be competitors, I made a few friends (whom I still talk to today), I talked to a few drunk people at some trade shows, and we figured out exactly what we needed to do to market our tickets. We developed some marketing channels that probably still account for over 90% of Stubtopia’s sales. If we hadn’t had that (which a lot of future copycats didn’t), we would have failed. We had to have about 100 things exactly right for it to work, including a bunch of things that other members of the founding team figured out when I had messed up. But doing so made us a lot of money.
And now, as I work on a new project, I’ve spent a month and a half head-down trying to figure stuff out. I know this goes against the “get out of the building” mantra that many entrepreneurial leaders talk about, but I “get out of the building” online. There’s usually not a lot of information online about what I’m trying to find; I often have to try about a dozen different search queries, search a few different forums, and talk to a couple people in order to get an answer. But we’re really close to it again; we’ve almost got the secret sauce. And once you’ve got the secret sauce, you’ve got a magic box where you put $1 in and $10 comes out. And then you never tell anyone what that secret sauce is, you tell them everything peripheral. Other entrepreneurs who think, “Oh, I could do that too” will probably fail. Not because they’re not as good at executing as you, but because they don’t have the secret sauce.
You have to become an absolute expert in what you’re trying to do, enough that you will be able to make money and do so at scale, and that requires an absurd amount of what I’ll call “market research.” You can’t just arbitrarily throw stuff against the wall and hope it sticks; if you’re doing that, you might as well play the lottery. If I had my way of saying it, this is how I would rephrase the whole “nail it then scale it” or “customer development” mantra: become an absolute expert. Know everything. Make it so that when you show up at trade shows people think you’ve been in the industry for years. Innovate in ways that seem completely natural to you but seem absolutely foreign to everyone who has been in the industry for 15 years.
And when you talk at entrepreneurship events about how to be successful, give vague answers like “work hard” and “learn fast” and “hire well,” but never, ever reveal the secret sauce.