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John Petersen

Should We Launch or Raise Money

Startups are hard. For so many reasons, they are hard. One under-the-radar reason is that people have these grand expectations of what a startup should be. They feel the need to launch some overnight success.

Well, I'm hear to definitively tell you that you won't be an overnight success. There's no such thing. For every successful startup you see, there's so much blood, sweat and tears behind the scenes that you never see.

Now is your time to sacrifice your blood, sweat and tears.

Here's my answer to a question on Quora about whether or not a startup should launch with zero marketing dollars or go out and raise funds first.

WE HAVE THE MVP READY BUT WE DON'T HAVE MONEY TO LAUNCH IT. WHAT SHOULD WE DO?

Ok. So what are your options here? There's really only three options that I can see based on the information you provided.

  1. Never launch the app and write off the $50k as a learning experience.
  2. Go out and raise some money. You didn't mention how much you need, but I'd imagine it's not going to happen immediately. With this option, you risk losing momentum and potentially your vendors (regardless of contracts), but you may gain some benefit by spending the money on "launching operations and initial marketing expenses" as you mention.
  3. That leaves us with Option 3 -- launch tomorrow with no budget for marketing expenses and no major launch activities.

Every situation is different, and there's certainly an argument to be made (even for Option 1). Generally speaking, I've seen the highest success rate with Option 3. Here's how you have to do it:

Launch. Hustle. Learn. Improve.

Let's take those one at a time.

LAUNCH

You have an MVP. It works (or it works most of the time at least). You have signed contracts with vendors. Honestly, I've seen many people launch with less and become massively successful.

Launch tomorrow. You'll have zero customers or maybe a few if you can convince some friends to use your service. When your friends place an order, make sure you give them an amazing experience. I'm talking about the type of good where your friends feel bad because you went so far above and beyond. I assume that you'll make some revenue from each order, and then, just like that you're in business. You're growing. Who cares that you have 4 customers. Treat those 4 customers as kings and queens.

{{A quick mini rant. So many people want to raise seed money before they are ready. Why would an investor want to give you money? At this point, you have zero revenue, zero customers, a few lines of code and some contracts. Have you really proven to investors that you are the team they should back to solve this problem? That you can grow this business to $1M / year run rate? $10M? $100M? Probably not.}}

So you launch now.

HUSTLE

Now it's time to bring on more customers than just your friends. Can this be done with zero marketing dollars. Of course it can. Do you think every business in the history of the world was started with seed financing? Everyone has to start somewhere. And you are starting with 4 customers.

In order to grow the business, you have to do whatever the hell you possibly can do each and every day. Paul Graham will tell you to Do Things that Don't Scale. Gary Vaynerchuk will tell you that "you have to grind". Fake Grimlock will tell you BE ON FIRE. Al Pachino will tell you to Fight for Every Inch:

Inch by Inch

You go out there and fight for every customer you can. When you do get a new customer, you must totally blow their expectations out of the water. You add more value than anyone has ever done for this customer. And hopefully, when it comes up in conversation, this person will tell a friend about you. You grow user by user. Dollar by dollar. Inch by inch.

{{2nd quick mini rant. Many people start spending money on marketing well before they should. Might as well flush it down the toilet. In the earliest days, you are trying to figure out product / market fit. You're trying to figure out the economics. You have so many questions that need to be answered first. Once you can honestly say that I can spend $x on marketing to get $y in return and y > x, then you pour fuel on the fire. Until then, you just don't know.}}

LEARN

Now that you are growing a customer base and revenues, you must learn everything you possibly can. Full on Sherlock Holmes. Who are your best customers? How do you find more people like them? How do you get them to buy more and more frequently? What is the 80/20 rule of your business?What happens to your business when it rains on a Tuesday?

You need to anticipate what your customers need before they know they need it. You need to understand where the market is moving next month and next year. You need to know who your competitors are and what they are doing better than you. You need to know everything, and right now you don't. Be irrationally curious about your business.

{{3rd quick mini rant. Many talking heads will tell you that you know what the user needs better than they do. They'll bring up the faster horses quote by Henry Ford and the Steve Jobs quote that "people don’t know what they want until you show it to them". That's fine, but you are not Henry Ford or Steve Jobs. Learn what your users want and learn how to build a better product for them.}}

IMPROVE

One quote that I will agree with, "If you're not growing, you're dying." If you are not improving your business, your competitors will crush you. If you don't have any competitors, you will soon.

Instagram started out as an overly complicated product. Pinterest started out as a window shopping app (ironically, now they are trying to get back there). Paypal wanted to be a digital currency. For you youngsters out there, there was a time when Amazon only sold books and Netflix took days before you could watch a movie because it had to be sent to you via the US Postal Service. It's important to have a vision, but you must be flexible in how you get there.

{{A final mini rant. It is definitely possible to try to improve too early. It happens all the time. A company launches a product, it doesn't turn into a smashing overnight success, and so they want to keep building. "We need to add more features" they tell themselves as a way to explain the lack of success. Most of the time, this just makes the product worse. Often times, improve really means simplify.}}

It doesn't matter where your company starts. No one would ever invest in your company for where it is right now. Investors are buying into your vision of where your company is going to be years down the road, and you can't get there until you start growing the business.

It's time to put aside all your fears and launch this thing!

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