Marketing HiTech Products for startups

This isn't rocket science, but it does represent a kind of discipline. And it is here that high-tech management shows itself most lacking. Most high-tech leaders, when it comes down to making marketing choices, will continue to shy away from making niche commitments, regardless. Like marriage-averse bachelors, they may nod in all the right places and say all the right things, but they will not show up when the wedding bells chime. Why not?First, let us understand that this is a failure of will, not of understanding. The following example makes the things clearer and what the mistakes to avoid during marketing in high tech products in startups.

In the first year of selling a product—most of it alpha and beta release—the emerging high-tech company expands its customer list to include some technology enthusiast innovators and one or two visionary early adopters. Everyone is pleased, and at the first annual Christmas party, held on the company premises, plastic glasses and potluck canapés are held high.

In the second year—the first year of true product—the company wins over several more visionary early adopters, including a handful of truly major deals. Revenue meets plan, and everyone is convinced it is time to ramp up—especially the venture capitalists who note that next year's plan calls for a 300 percent increase in revenue. (What could justify such a number? The technology adoption profile, of course! For are we not just at that point in the profile where the slope is increasing at its fastest point? We don't want to lose market share at this critical juncture to some competitor. Strike while the iron is hot!) This year the company Christmas party is held at a fine hotel, the glasses are crystal, the wine vintage, and the theme, a la Dickens, is "Great Expectations."

At the beginning of the third year, a major sales force expansion is undertaken, impressive sales collateral and advertising are underwritten, district offices are opened, and customer support is strengthened. Halfway through the year, however, sales revenues are disappointing. A few more companies have come on board, but only after a prolonged sales struggle and significant compromise on price. The numbers of sales overall is far fewer than expected, and growth in expenses is vastly outdistancing growth in income. In the meantime, R&D is badly bogged down with several special projects committed to in the early contracts with the original customers.

Meetings are held. The salespeople complain that there are great holes in the product line and that what is available today is overpriced, full of bugs, and not what the customer wants. The engineers claim they have met spec and schedule for every major release, at which point the customer support staff merely groan. Executive managers lament that the sales force doesn't call high enough in the prospect organization, lacks the ability to communicate the vision, and simply isn't aggressive enough. Nothing is resolved, and, off line, political enclaves begin to form.

Third quarter revenues results are in—and they are absolutely dismal. It is time to whip the slaves. The board and the venture capitalist start in on the founders and the president, who in turn put the screws to the vice president of sales, who passes it on to the troops in the trenches. Turnover follows. The vice-president of marketing is fired. It's time to bring in "real management." More financing is required, with horrendous dilution for the initial cadre of investors—especially the founders and the key technical staff. One or more founders object but are shunted aside. Six months pass. Real management doesn't do any better. Key defections occur. Time to bring in consultants. More turnover. What we really need now, investors decide, is a turnaround artist. Layoffs followed by more turnover. And so it goes. When the screen fades to the credits, yet another venture rides off to join the twilight companies of Silicon Valley—enterprises on life support, not truly alive and yet, due in part to the vagaries of venture capital accounting, unable to choose death with dignity.

… What the company staff interpreted as a ramp in sales leading smoothly "up the curve" was in fact an initial blip—what we will be calling early market—and not the first indications of an emerging mainstream market. The company failed because its managers were unable to recognize that there is something fundamentally different between a sale to an early adopter and a sale to the early majority, even when the company name on the check reads the same.