Start-ups, why do we need them?
We often hear about amazing start-ups, we hear about the ones that succeeded and made it to the top, but for every one, there are hundreds, if not thousands of carcasses of those that had failed before them.
When we sit with a client, we often ask them to describe the reality within which we all reside, and if they do not explain the problem that their product or service solves, then we ask them to go out and revisit their reality.
If you are not presenting a solution to a problem, or the problem is insignificant – then what is the call to action, what is the trigger, what is the push required for someone to spend their hard-earned cash on your ‘dream – your golden ticket’ – if the problem isn’t there, then the solution is required.
Think about it this way, a start-up is the question, and what the start up does or provides – is the solution.
We like to work on the principle that a start-up addresses a present that is flawed, in order to make a more perfect future.
Now this may sound impossible, it isn’t, you don’t need a client whose ‘hair is on fire’ or is in ‘extreme pain’ – you just need to show them that the discomfort they feel now is only temporary, you need to indicate that you understand what it is they are going through, and that this discomfort is what prompted you on your journey to discover the solution.
The world is not a perfect place, there is pain and fear and uncertainty – the pain is closely tied to the uncertainty, and they need to understand that this is what keeps you up at night, its this pain that drove you to find the solution.
The 10X rule applies to entrepreneurs, regardless of their enthusiasm, merely believing that the novelty associated with a solution, wont drive people to participate. This is a problem seen in many start-ups across the board. People are under false impression that if they find something interesting – then the world will come with their wallets open, cash in hand ready to invest in their mind-blowing idea.
What is your cost per click? How many clicks are required to acquire a lead, – therefore what is your cost per lead, and once you have that down, how many leads are required to arrange a meeting, and after the meeting, how many meetings are required to acquire a customer? What is your cost per acquisition? Now that you know what it costs to ‘on-board’ a new client – what is the average customer lifetime value? Their CLV? Is their CLV more than their acquisition cost? If so, by how many factors of multiplication, twice, three times?
Clients, start-ups and often even crypto start-ups with their shining ICO’s often overlook the CAC/CLV rule that rules them all. If the cost to get someone to want your thing, is more than the value derived from them using that thing – then you are running at a loss.
A breakdown of this function will allow a prospective start-up to decide is this is really a road worth heading down. Its really easy though – if the CAC is more than the CLV then its not worth doing.
With an ICO (Initial Coin Offering), the start-up should (best case here) take the combined costs of all sales and marketing functions, (salaries, programs, lead gen, travel, products, OPEX and CAPEX etc.) and divide it by the total number of customers that purchased into the ICO (actually you need to give each customer the average value of each purchase) during the ICO period. If your total sales and marketing spend during the ICO was $1m, and you closed 1000 customers with an average purchase of 500 coins – each coin valued as $2.00, then your average cost to acquire a customer (CAC) is $1,000. – but, if each client then purchased $1000 worth of tokens then you would theoretically break even on the sale.
With most SEO agencies like ours, we would want to recoup the cost to acquire in under the 12 months – and in all reality we would want to do so within 2 months.
The valuations of an ICO doesn’t change in a linear time based fashion as it may with some other forms of start-up. Once a set dollar figure has been raised, it doesn’t mean that the coin or blockchain is now worth that much – in reality the supply and demand curve as well as the adoption of the currency in the market plays a role in determining the value of a given coin.
Finally, ICO’s fail if they just don’t deliver on their promise – if a start up set out to create a coin that was based on a block chain, and that coin doesn’t deliver, then the coin wont take off in the market, it wont be traded and without trade the coin becomes a ‘hoddle doddle’ – if its sits then it won’t grow, it won’t circulate and become one with the marketplace in which it can thrive.
An example of a 2 coins that have taken the market and grown well beyond any expectation are Bitcoin and Ethereum, both have worked incredibly hard to overcome their initial adoption hurdle.
The main hurdle faced is based in relation to both ICO’s and Kick starters is called “Trust Management” – and it comes down to the ability of an entity to foster trust within its user base.
We will post another article specific to this endeavour shortly.