Summary: Before building that network/platform/marketplace MVP solution, consider starting by building a tool for your customers. Your execution will be easier, chance of failure will be lower, and you can build your $B network later.
How Help20.me Never Launched
In late 2012 I tried to rebuild my blogging audience by helping any entrepreneur in the world for 30 minutes via Skype. The experiment worked and soon friends began asking me to help them setup a similar system. The project sparked some product ideas and after a few months of Customer Development I came up with a concept of “Help20” – a platform where people could give and get 20 minutes of help.
3 months and 100+ interviews later I had identified problems and possible solutions but was struggling to scope an MVP. I had seen too many “expert networks” – including some that I worked on – try and fail over the years. I didn’t relish the idea of revisiting that graveyard of painful memories.
So I did what I always do in situations like this – I asked for advice 1. I setup a Skype conference call with friends Joel Gascoigne and Patrick Smith to talk through my ideas and concerns. They both pointed out what I subconsciously knew but was reluctant to accept – my vision was way too complex for an MVP and I should explore what Joel calls a “single-player mode” product.
When we hung up I pivoted from Help20 (a “network”) to SoHelpful – a “tool” for people who want to efficiently build their brand & reputation by helping others worldwide. And while I’m a long, long way from declaring SoHelpful a success, I’m quite sure Help20 was the wrong product for me and I made the right decision.
(thank you again Joel and Patrick!)
Why We First Look for Network/Platform/Marketplace Solutions
2Since that decision I’ve talked to dozens of other entrepreneurs who have identified a problem and plan on pursuing a market-based solution3. I often ask them the same questions that Patrick and Joel asked me – is there a solution you can FIRST build for one side of the market? Like me, most are resistant to the idea of building a “tool”.
We all get into entrepreneurship because we want to change the world and have impact. Aside from being great businesses, network solutions just sound grand – we all imagine becoming the next ebay and creating new forms of commerce.
Tools, on the hand, sound small. Why waste your time building a little tool to help people find the right apartment when you make bring all of the landlords and renters together in one efficient bazaar?
Why Tools are Easier to Start Than Networks
Actually there is a very good reason why you probably don’t want to start as a network – you’ll probably fail. I know because I’ve tried (Soapbox.com 1999, ManyWheels 2008, a dozen smaller projects) a few times and vow never to do it again. Here’s why:
The Initial Value Proposition for Networks is Very Low
The value from networks comes from having a lot of participants. The obvious dilemma is how to offer any value when the network is small. Tools, on the other hand, add value for the first customer on day one if you’re solving the customer’s problem.
2x 10x Harder in a Network
With network solutions every problem has multiple dimensions and the participants often have competing interests. Never underestimate how hard it will be to execute 4 on your idea – every little exception, edge case and rule makes it much harder. In a network you suddenly have to worry how every feature will be fair to both parties, you need more interfaces, more business logic, more rules.
Your Marketing Costs Double in a Network
If you build a tool for people who are already organizing events you’ll only have to sell to one type of customer. But if you decide to build a platform for event organizers and participants you’re going to have to sell the solution to both parties. I know you dream of “viral” behavior where both sides build your market but this type of traction takes a long time in today’s world.
An Alternative: Start as a Tool and Let Network Dynamics Emerge
Of course there is nothing wrong with building tools – 37Signals has done a mighty fine job of it. But starting as a tool doesn’t mean you have to forgo the scalability and defensibility that network dynamics provide.
In SoHelpful we’ve started testing features that allow customers to make referrals to each other; for instance, a freelance designer referring a potential customer to a freelance web developer. These type of network dynamics are starting to emerge among the people using SoHelpful – not between those seeking and providing advice as I originally hypothesized. It may or may not work, but proving value with the tool gives us the opportunity to systematically test ideas like this.
Case Study: Dropbox, the Tool that Became a Network
Like me, you may be reluctant to let go of your grand vision of starting with a network solution. But if you think about the successful companies & products you love, you’ll find many that started as tools. Dropbox is a great example.
In the early days of Dropbox, Drew Houston talked about a “magic pocket” - a place you could put your stuff and share it between your computers, phones, etc. Of course we now know the biggest value Dropbox provides customers (and its shareholders) is the existing installed base of customers because it makes it so easy to share documents with each other.
Some Suggestions if You Decide to Start as a Network
Of course you’ll find specular examples like ebay, Twitter, and AirBnB that started as networks from day 1. If that’s your dream, go for it, but here are a few suggestions.
First, recognize that for every one of these examples there are 10,000 others who tried starting as a network and never got started for the reasons I list above. These companies capitalized on massive emerging market trends that looked crazy at first. How can you trust buying things from strangers online? What can you possibly say in 140 characters? Who would ever let strangers sleep in their house? You get the idea.
Second, bootstrapping is probably not a viable option. Networks take money.
Third, look for ways to start ultra, ultra niche: one small geographic region, one product or transaction type. It will go a long way to simplifying your execution.
Finally, talk to VCs, Startup Weekend or Lean Startup Machine organizers, or folks like me who talk to a lot of startups. Find out who else has tried to build a similar network and see what happened. Of course this DOESN’T mean you should/shouldn’t do it – but it does give you the opportunity to identify some major risks.
Need Help Deciding Between a Tool and a Network?
Just grab some time with me and I’ll be happy to help you.
- At the risk of belaboring this point in every blog post, I hope you see that I’m quite serious about asking for advice constantly ↩
- An astute reader will probably quibble with my rather loose definition of “network” in this post. I talk about Networks/Platforms/Markets as if they are interchangeable terms – of course they are not. But for the purposes of making the key point of this post I’ve lumped them together ↩
- What is even more interesting is that I hear many of the same ideas over and over again. Attend a Lean Startup Machine or Startup Weekend and you’ll hear about ideas like the “music teacher and student musician networks” among others. Spend a year or two working in Venture and you’ll see a parade of them. ↩
- Speaking as someone who slept very little in the past few days, I’m acutely feeling this at the moment. ↩