I'll never forget my first marketing class at business school. Our professor peered at us with an intense glare as he pushed back on our standard, "chip shot" comments. At one point in the class he asked the guy next to me to opine on the case we were discussing, which involved launching a new consumer product. "Well," my neighbor answered confidently, "I think it will be a hit because I can see my mother-in-law buying it."
"I see," replied my professor dryly and then turned to the class with a withering look on his face, "Steve appears to have fallen into that fatal trap of 'Mother In Law Market Research' – believing this new product will be a hit just because his mother-in-law likes it. Instead, let's look at the data, shall we?"
This put down to allowing personal experience influence your assessment of new products and services came back to me this week while at my board meeting for our mobile video portfolio company, Transpera. As we discussed poor video delivery quality and AT&T's clogged network, eveyone started devolving into their own anecdote of "what happened when I tried to watch a recent video on my iPhone".
Yet, although I know it frustrates entrepreneurs, I confess to being sympathetic to investors who use their own experience as a guide to their investment activities. Frankly, I think it is a critical part of my job as an investor to try out new products and services and those experiences certainly do inform my investment judgment.
Many VCs I talk to feel the same way. Brad Feld wrote a great article in this month's Entrepreneur Magazine urging entrepreneurs to let him play with their products rather than present them to him. Jack Dorsey, the founder of Twitter, recently told me that the reason he chose to work with Fred Wilson, rather than a host of interested Silicon Valley VCs, is that Fred was a Twitter power user from the beginning. When Fred first met the Twitter team, Jack said he was full of new ideas of where to take the product and the power of the model.
The desire to experience new products and services and technologies is why I own a Blackberry, an iPhone, a Kindle, a Sonos, a Roku, and subscribe to a ridiculous number of online services, blogs and feeds. I also study how my pre-teen and teenage kids interact with games, devices, IM, Gmail, Google Buzz, to get insights into how younger users will experience the emerging connected world. I even throw things at my wife that are targeted at her demographic to get her outside perspective on them.
I do appreciate that entrepreneurs get frustrated when the VCs extrapolate too much from their personal experience, particularly when they're not the target market. I remember pitching Upromise to one well-heeled VC who asked, "is college really not affordable?" Um…on planet Earth it isn't. I guess if you live in the stratosphere…
Anyway, here's my simple advice to entrepreneurs: tell a story. As John Quincy Adams says in the movie The Amistad: "Whoever tells the best story wins." Make it real for the prospective investors. If they're not the target market, bring that target market user's pain and pressing need for your new whizbang product or service to life.
And don't be afraid to ask your mother-in-law for advice.
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interesting post! I’ve been astonished how quickly my 12 year old and her friends have adopted Buzz, something I personally played with and discarded instantly as intrusive and “twitter lite”. I don’t know how they heard about it.
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Yes – I re-read his book recently and was
struck by the instinct vs. analytics behind the investment decisions.
That was the Peter Lynch (legendary Fidelity Magellen Fund manager) point. If I remember correctly in his first book he used the example of walking through a store, noticing how busy it was, doing the research and then investing. He advised investors to look around them at the products/places in their lives (then do the research) as possible investment ideas – you know them.
it really depends on what your target market is. If your target market is babies, then make a a video/ad friendly for mothers and babies. 🙂
If they’re not the target market, bring that target market user’s pain and pressing need for your new whizbang product or service to life. – VERY WELL SAID.
And don’t be afraid to ask your mother-in-law for advice. – FUNNY BUT SMART.
Imagine a world of search where everyTHING is an ITEM that can be found using an interactive search box.
That's definitely a risk for start-ups where women are the target market which, as you point out, is the majority of businesses. It's been great to see start-ups like SitterCity, Gilt and Care.com get funded successfully with women entrepreneurs targeting a female audience.
I always think it’s a great sign when a VC really dives deep in experiencing a product. As an entrepreneur or technologist, you want an investor to really love what you are doing, get personally engaged, and be as informed and helpful as possible around product strategy–if they so choose to contribute in that area.
Here’s one rub. Consumer businesses are the dominant (68%) part of our economy. They created 70% of the entire US GDP growth over the last ten years (Business goods and services barely merit a slice on the economic pie.) The consumer target market is women, who control 85% of the spend, even dominating in traditionally male categories like cars and electronics.
And yet, as you have written about before (which I appreciated), the VC community is apparently 98% male. Those mis-matched equations are disastrous for funding consumer businesses. The guys with the money don’t understand the buyer very easily, so innovative products and services don’t get funding.
I’m not reporting anything new with these stats, but I get nervous when anyone suggests kitchen research is a decent proxy for real experience in an industry, or true affiliation with the target market. (Your point about telling a good story is important, but it does not bridge the gap quite as well for this particular issue. It would work fine in non-consumer areas, perhaps.)
Some relevant stats are in this article: Inc.:http://www.inc.com/articles/2003/01/25019.html
OK I’m not feeling as cranky as I sound, because I like how you spin a blog post, tell good stories, and test out theories.
I’ve just heard too many alarming horror stories from businesses that got dinged by a VC because of a poll of one or two people in a skirt. And no amount of story telling could overcome that.
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Very true, Neal. Well said.
Ah, but for all your playing, are you the target market? I just had this conversation with our chairman yesterday regarding impressions of our tag line and logo. What he, I or anyone else in our company thinks doesn’t matter. We’re the communicator. We know what we mean. The question is whether the recipient understands what we intend. Similarly, the builder knows what they think the customer wants. But the only way to really test it is either in the marketplace or with truly valid market research. Spot checks are helpful and useful, but are just that. Spot checks. Rarely are the entrepreneurs their target demographic.
Observing kids is great because they really are different. I’ve been astonished how quickly my 12 year old and her friends have adopted Buzz, something I personally played with and discarded instantly as intrusive and “twitter lite”. I don’t know how they heard about it. I don’t know where the trend started. But they’ve hit it full force.
I’ve seen great reviews of Sonos. I know several people who have them and love them. All of them earn more money than I do, and all live in posh Boston or SF suburbs. I think it’s cool, would love one, but can’t justify the price tag compared to other things I have to prioritize in my life. Particularly when there are cheaper ways of accomplishing the same thing with a little extra work, albeit perhaps less elegantly. So, if Sonos can grow, survive and prosper serving a market that can justify spending thousands of dollars on in-home, multi-room media, then personal VC research is very valid. If it requires selling through best buy to people making less than $100k a year at price points of $300, then personal playing is only so valuable.