An Open Letter to Start-Ups – You Are Doing It Wrong

I’ve been there.  You have what you believe is an amazing idea, one that will take the world by storm.  You put all your energy into it.  You scrap for money and resources wherever and however you can.

Finally, after years of thinking and months of hard work, you launch.  And wait…

If you are like most entrepreneurs, the first start-up is surely a failure.  According to OnStartups.com, first-time entrepreneurs have just an 18% success rate. Not even a two in 10 chance?

Want better news? Henry Blodget, co-founder of Business Insider (among other accolades), places the success rate of one of the most successful start-up accelerators on the planet, Y Combinator, at a mere 10% or less.

If you are an entrepreneur or part of a start-up, you already know the odds are already stacked against you. 

The Definition of Insanity

Albert Einstein is often attributed to most famous of all definitions of insanity:

“Insanity is doing the same thing over and over again and expecting different results.”

And that is exactly what just about every entrepreneur and start-up does.  Even with humiliating success rates, we still launch our amazing product or service exactly the same as everyone else who has failed before us.  Sure, we hold up those unicorns as an example (i.e., Instagram, Facebook) of what is possible, but those examples are few and far between. 

Product First? Really?

According to the U.S. Small Business Administration, the first step in starting a business is to develop a business plan. The standard business plan includes things like “defining what you are selling” and “creating a sales and marketing plan.” Of course it does. I’m sure if you search the thousands of different business plans on the web, they all look pretty much the same. Every start-up essentially plays the game by the same rules.

Even Peter Thiel, cofounder of PayPal and the first outside investor in Facebook, focuses all the attention in his book Zero to One on developing an amazing product unlike the world has ever seen. While I believe Thiel offers some excellent advice to entrepreneurs, the premise is the same as all the other expert advice out there: create a product first. Find the problem, and then solve the problem with an exceptional product or service.

But the results aren’t exceptional.  Not even close.

Why do entrepreneurs go to market with their start-up in the same way? Are we so devoid of creativity that we’ve accepted that there is only one way to start and grow a business?

The Downward Spiral

I decided to launch my business in 2007.  I had the idea that brands needed to tell better stories to attract and retain customers.  Since most large organizations were, to put it mildly, horrible storytellers, they were going to need help (and lots of it).

So I launched Junta42, a startup positioned as the “eHarmony for content marketing”.  At Junta42 we would help brands find the right agencies, writers and journalists to help them tell better stories.  While Junta42 matched up 1,000 projects in two years, we found out that the marketplace really didn’t need the service.  Worse yet, agencies weren’t willing to pay for it. We were bleeding cash. It was a gut-wrenching experience to say the least.

By late 2009, the product was doomed. I actually started to look for opportunities to find a “real job” in the marketplace. 

I remember it well. I had just hung up the phone with an agency who landed a multi-million dollar program through our service.  The CEO had not paid the subscription fee for the next year, and of course, I inquired as to why.  If any agency was going to pay for our service, it would be this one. Well, no such luck.  I received the no and I believed with every bone in my body that this was the end.

I hung up the phone and went for a walk, feeling extremely sorry for myself.  It took me about two weeks to pull it together.  Then, I realized something.  All along, I’d been so focused on the product, I forgot about the audience.  Here I was, in the exact same place as 82% of other first-time entrepreneurs.

It was then I decided to go back to my publishing roots and make a pivot, focusing everything on growing an audience through compelling, consistent content.  Luckily, I started blogging consistently at the same time the business was started, educating my target audience about industry problems and spilling out all my knowledge about the field three articles per week. I started to build a loyal audience.  Slowly, more and more people were subscribing to our newsletter and reading the blog.

Six months after folding my amazing idea that would change the world, we doubled down on this “audience building” business model (the Content Inc. model) and launched Content Marketing Institute as a content platform, a magazine and an event. By focusing on the needs of the audience, we were able to truly understand what kind of solutions they needed (and would ultimately buy). Fast forward five years and CMI was named the fastest growing business media company by Inc. magazine.

A Better Way

Through a lovely accident, I stumbled on a powerful way to build a business in the digital age—and now believe there is no better way to go to market. By focusing on building an audience first and defining products and services second, an entrepreneur can change the rules of the game and significantly increase the odds of financial and personal success.

Let me repeat that: I believe the absolute best way to start a business today is not by launching a product, but by creating a system to attract and build an audience.

Once a loyal audience is built, one that loves you and the information you send, you can, most likely, sell your audience anything you want. This model is called Content Inc.

But did I develop a method that is difficult to replicate, or are there other entrepreneurs and start-ups that used a similar strategy?

Examples Everywhere

In 2014, I decided to begin writing my fourth book on this “audience-first, product-second” model. In searching for cases around this concept, what we found was amazing.  The Content Inc. model is rampantly growing all over the globe.

• Brian Clark blogged for 19 months on the topic of online copywriting, building an audience of hundreds of thousands of subscribers. Today, Rainmaker Digital is one of the fastest growing software-as-a-service companies.
• Matthew Patrick left the acting business and couldn’t get a “real job” in business. So he started a YouTube series called Game Theory on video games.  Today, Matthew has over five million subscribers and runs a fast-growing multi-million dollar empire.
• Joy Cho started a simple design blog in 2005, building a loyal audience for years. When Pinterest launched, she grew her following into more than 13 million followers. Today, Oh Joy! has designed and co-produced products for such brands as Target and Microsoft, and she has developed stationery lines, wallpaper, bedding, diaper bags, and even computer accessories. Joy’s revenues are diverse, from direct client-engagement revenues to product sales to sponsorship to licensing deals.

And for 17 more examples of this, check out the eBook below:

The Six Steps

The amazing part of this journey is the fact that in every case study we uncovered, each one followed the same six steps.

• The “Sweet Spot”: Identify the intersection of your unique competency and your personal passion
• The Content Tilt: Determine how you can “tilt” your sweet spot to find a place where little or no competition exists
• Building the Base: Establish your number-one channel for disseminating content (blog, podcast, YouTube, etc.)
• Harvesting Audience: Use social-media and SEO to convert one-time visitors into long-term subscribers
• Diversification: Grow your business by expanding into multiple delivery channels
• Monetization: Now that your expertise is established, you can begin charging money for your products or services

This is not a “get rich quick” scheme.  This is a business model that entrepreneurs can use to significantly increase the odds of success.  It takes patience.  The majority of our case studies took over 12 months to develop a loyal audience.

But here’s the amazing part.  First, building that audience is like creating a future customer list.  That means that when you do launch your product and service, they are much more willing to buy from you because they already know, like and trust you.  Second, Content Inc. models grow at a staggering rate.  This is simply because you don’t have to go through the traditional process of finding your customers and your market fit. 

Because you’ve launched a Content Inc. model, you already have your customers as your audience, and you are more likely to get the product or service right because you’ve been serving them with ongoing content for a long period of time.

The New Model for Entrepreneurs

In the future, thousands of businesses from around the globe will be leveraging a Content Inc. go-to-market strategy. Why? Because having a singular focus on audience, and building a loyal audience directly, gives you the best understanding of what products ultimately make the most sense to sell.

Content Inc. tells us that there is a better way and a better model that leads to a better life for entrepreneurs and business owners. You have the opportunity to be like David, who looks like an underdog to the Goliaths of the world, but the truth is that you’ve simply uncovered a better business strategy than all the rest.

Joe Pulizzi, best-selling author and founder of the Content Marketing Institute,
now releases his fourth book, Content Inc.: How Entrepreneurs Use Content to Build Massive Audiences and Create Radically Successful Businesses, now available on Amazon and Barnes & Noble.  To download a free chapter, go to http://content-inc.com.