The Virus Killing Silicon Valley Startups

The Virus Killing Silicon Valley Startups

There is a pandemic in Silicon Valley. It is making startups sick, and 90+% of all small businesses fail. This virus didn’t start in China, or any country. It didn’t begin in crowded, filthy wet markets from different animals swapping genes. It began with Google and Facebook, and their unrelenting greed for profits.

I am currently mentoring startup students at Berkeley-Haas. I also teach entrepreneurs at Stanford and Cal how to achieve that illusive 10% of sustained business success. Without exception, all are starting up in the exact same backasswards way.

1. They begin their business by developing their product or service.

These entrepreneurs have invested their time, and often their own money in creating a MVP (minimum viable product), a concept introduced by Eric Ries in 2011, and the 2nd of 3 primary reasons most startups fail. NEVER begin your business by producing two-thirds of an idea hoping to ‘find’ your customers, and get them to tell you how to improve your offering. In fact, producing your initial offering at all is the wrong way to start any business.

2. The startup, with their developed MVP, create ‘digital’ marketing campaigns.

They launch their website, and create SMM (social media marketing) and PPC (pay per click) ads to get ‘traction.’ Impressions, Engagements, and Likes are virtually meaningless. Sure, Branding is essential to build awareness of a startup, but sales are what makes a business successful. SALES. That’s it. Without sales, or paid subscriptions, or donations in nonprofits, you have a hobby, not a viable business.

Let’s get real. It’s ridiculously simple to use Google Ads, or to place Facebook ads. These platforms spend millions annually to convince entrepreneurs that slamming the net with crappy advertising will make your company successful. It’s BULLSHIT. They are lying to you, pocketing your $3,000 – 5,000 monthly to ‘train’ their AI engines to “target” your business better than you can. In fact, you should KNOW YOUR TARGET AUDIENCE BEFORE YOU PLACE ANY ADS, or even develop your website.

Beyond Google and Facebook, there are tens of thousands of “Digital Marketing” agencies, selling you the same crap Google and Facebook are. They promise to make you money if you spend your money with them because it is equally easy for them to place these PPC ads as these platforms have made it for you. Stop buying into their deadly virus!

The real ROI on “digital advertising” is very hard to find. Google, Facebook and ‘digital’ agencies make these stats almost impossible to come by. Reality check on ROI of “digital” advertising, according to Search Engine Journal: “the average ROAS (return on ad spending) for small accounts is 1.5 to 1% – or barely break even.” Additionally, PPC or CPC means COST PER CLICK, not sales. It is estimated that 25 – 40% of all clicks on ads are fake, meaning you are paying for clicks from Click Farms in the Philippines, or automated systems meant to profit Google while costing you for every fraudulent click.

3. The startup goes after “building market share” with freemium offers, hoping to convert users to paying customers somewhere in the theoretical future.

It’s easy to get people to try, or even use your offering for free, when they have no skin—money—in play. SALES means getting folks to pay for your offering/s. Getting actual sales is a lot harder!

To garner actual SALES, you must first understand the competitive landscape of your product or service. Many startups have no idea the market share they’re seeking has been garnered by another company with the same or similar offerings. And here’s a heads-up to all the entrepreneurs who think your offering is so unique there’s nothing out there like it. Bullshit. In 5 minutes I can find similar offerings to just about anything. Even if your offering has a few more bells and whistles, it’s hard to get people to pay to switch from what they’ve become accustomed to using.

First and foremost, MARKETING is NOT “digital advertising.”

Broadcast, to PR, to networking, the ROI from these mediums average between 2 – 20+%, way more than the .05 – 1% ROI of ‘digital’ advertising.

BUSINESS, any business, BEGINS with MARKETING. Regardless how great your products or services are, your business will NOT be successful without constantly marketing your offerings. Branding is a tool of marketing—campaigns meant to build awareness of your offerings and company. And Marketing takes many forms, way beyond the extremely low ROI of “digital” campaigns.

The Marketing process is far more complex than designing a logo, putting up a website, and slamming the internet with “digital ads,” organic or paid. BEFORE you build your offering, construct a MARKETING FOUNDATION for your startup, (or existing business—better late than never) to create a thriving, sustainable company.

Before investing the time and money to build a product or service, then waste more countless hours and dollars advertising it, BEGIN any startup or business venture by PRODUCTIZING each and every offering IDEA.

PRODUCTIZATION begins by getting intimate with the offering you hope to create. Make lists, actual, physical lists of your idea’s FEATURES, and the BENEFITS or SOLUTIONS the FEATURES your potential offering will provide. Next, create lists of who will benefit from the features of your offering. These are your TARGET AUDIENCES, the people you will market your offering to. These lists also provide SEO content marketing when you begin the process of creating advertising campaigns.

PRODUCTIZING your offering/s means doing COMPETITIVE ANALYSIS every month or so, to be sure you understand what companies are producing similar offerings, and the market share they’re collecting. If your startup has any success at all, others are going to copy what you’re doing, and go after the same targets you’re hoping to attract, and keep. Understanding what your competition has will help you define what makes your offering unique. Your startup’s marketing should always be selling your UVPs (unique value propositions)—what makes your offering better than your competitors.

It is a lot more fun developing products and services—turning a concept into a reality—than PRODUCTIZING an idea. PRODUCTIZATION is time consuming and detail oriented, and a drag comparatively speaking. If you want to have fun, then enjoy your hobby of creating offerings. If you want to be among the 10% that build SUSTAINABLE companies, you must first build a MARKETING FOUNDATION under your startup, which begins with the PRODUCTIZATION of each and every potential offering.

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