The biggest challenge for startups
Entrepreneur turned Investor, Founder of K9 Ventures, Team & Starting Up Expert
Distribution is the biggest challenge you will face after your product is built.
Freemium models can create great distribution.
Indirect revenue is when a third party pays a company for your attention.
Lesson: Founder Framework with Manu Kumar
Step #9 Distribution: The biggest challenge for startups
Distribution is probably the single biggest problem companies will face once they have their product built. There's no single answer for this works and this doesn't work. I can give you examples of things that I have seen companies do.
Lyft is one of my portfolio companies; they are doing ride sharing in San Francisco. They have done a phenomenal job of getting distribution and in a lot of cases, the way they got distribution was through word of mouth and by some very, very brilliant marketing on part of the founder.
John Zimmer, who's one of the founders, he came up with the pink moustache. Before I can even talk about Lyft, the pink moustache comes up before Lyft does. That was just a brilliant, brilliant piece of branding and marketing where it identified the product, it identified the culture, and it was very, very visible.
I would call that essentially a successful marketing strategy leading to good distribution and a lot of PR. Whenever any of the press talks about ride sharing, even if they are talking about Uber or Sidecar, in most cases the picture they will put up there will be a car with a pink moustache. That just got a lot of attention for them.
I will give you another example of the company that I described that’s building apps for special needs kids. Their distribution strategy was go free first. You end up distributing really, really high-quality apps for free initially, but they know that they have an entire sequence of apps that's going to be coming out in the future so the goal was to actually build up the user base initially, and then be able to go back and sell additional products to that user base. In a lot of ways it's kind of a freemium type of distribution approach there.
Twilio is another great example of how they did distribution because their market is developers, so they are essentially targeting developers who are then going to build applications on top of the Twilio platform. They did a brilliant job of courting developers, and the way they did that was mostly through hackathons, and sponsoring lots of events where developers would be, and just showing people how easy it was to build applications on top of it. They have got a massive amount of developers who are now building on their platform as a result of it.
Again, it just varies company by company, product by product. Different things work. It's also direct revenue versus indirect revenue. My way of talking about direct revenue and indirect revenue is direct revenue is I deliver value to you, you pay me. Indirect revenue is the Google model or the Facebook model where Google is providing a service to me so my attention is going to Google, and some third party is paying Google for my attention. That's essentially what the advertising business boils down to.