Battle for Share of Market Part 2 — Securing Viable Market Entry

7 min readFeb 28, 2021

Over my career, I have failed at more things than anyone I know, giving me an insiders view of failures — and successes. Successes always combined team, product and market. No one succeeds alone.

YC’s Paul Graham summarizes things succintly as “make something customers want” around which a phenomenal amount of free and incredibly valuable content is available. [1]

Given that most of us may not be as smart as Paul Graham, how do we move forward to initial market entry?

Beware Paper Takes Any Ink You Give.

The Sequoia note on what a pitch deck needs to have provides guidance — big ideas, big market, team, etc..

And since paper asks no questions of any ink, one can spend lots of time constructing imaginary models of the way things will be. This can result in models showing 10X ~ 20X growth in sales, year on year, without the need to worry about anything more than the need for growth capital, internal company processes and the accounting team needed to keep track of all the earnings, to 4 decimal places, meticulously manicured in font and colors for your VC pitch or Board. (And neither VC nor Board get real early-stage insight either from these dreams.)

Start by Understanding Customer Needs.

Off course, this is where the smart, detailed and ambitious will say “But Steve Jobs never listened to customers”.

Steve Jobs and Apple may not have directly asked customers “would you like an iPhone?” — but they certainly paid enough attention to customers to know the *issues* customers faced, *which* issues to prioritize, *how* to solve those issues, *what* to build, *when* to deploy, and *how much* to charge and more. None of that is accidental or drops from the sky as packaged inspiration in gorgeous Keynote slides. It takes listening, deeply.

And you can see the difference in products and valuation; Apple’s customers are end-users first and foremost. Facebook’s factory is staffed by users (cue the scenes from The Matrix …) while Tesla makes (and sells direct to users) ridiculously fast cars for “green” drivers, and improves them with each software update. Amazon is about the customer at all times — resulting in incredible market growth and dominance despite endless trolling.

In comparison, Microsoft’s customers are OEM first and foremost — HP, DELL, Fujitsu, Lenovo, ASUS and so on. The end-user experience is not yet primary though rumors of change have been around for at least 30 years. Intel makes chips for OEMs, Ford and GM make vehicles for rental fleets and dealers first. You can see the difference in market valuation of user-obsessed companies. Even ARM, whose designs power all of today’s smartphones, most IoT devices and a huge part of the consumer industry, is worth less than 1% of Apple as they have no direct end-user relationship.

Focus on customers. On every detail.

It is important to have fuss-free clarity in knowing your current status, where you want to be, what you need to do to get there, all defined in terms of the customer experience and value.

The Problem with Initial Traction.

All entrepreneurs have some level of confidence in a contrarian view by definition — a belief that their insight shows a different path to a better result. So the exchange of cash for product is thrilling. That is necessary, but not sufficient.

My first startup counted investors, partners and customers in the who’s-who of tech, including a US Government Lab with no street address. We invented the first subscription based SaaS multi-platform offering for EDA software in the early 2000's. Getting paid by customers who just found you online is a real a thrill. We succeeded by being customer-obsessed. But, while the business was enough to give us hope, the market was not enough to build a viable business. The EDA market continues to push the pinnacles of technology, and remains a declining and hyper-competitive market with a few independent players. Just like HDDs.

In a bad market, the market always wins.

The technology we developed ended up being integrated into the toolset of a major chip company. We all moved on.

Pick Your Beachhead Wisely.

Unit economics, markets and business models matter. Seasonality may also matter. If you need 4 decimal points to be sure you are going to make a business, maybe you are not? A spreadsheet does not subsitute for common sense. There are enough materials from YC on market and products which I strongly recommend.

Pick a market that is big, and matters to you with the potential for interesting business models. Then narrow down to a segment that is small and not defended, that you can win, and build from. This is your beachhead.

If you target a beach, take it. (US Navy LCAC at Camp LeJeune)

Premature Escalation.

Initial traction, is initial, until the point at which customers place orders, demand product loudly and break your systems. At that point, your job is to rapidly take — and *keep* — market share. You will also need to *respond effectively* to the other needs the customers are telling you about.

But, before that, you are going to see a J-Curve. [2] This will happen. Look for it, and do not fear it. Your customers are digesting the new stuff you gave them. This is when you learn, make sure the product is working, and *get ready* to scale.

But do not scale until the product is working reliably, from the basics up.

FOMO Should Never Be Your Accelerant.

Investors will naturally push for “scaling the sales team” way too early. This is FOMO driven, even though they know better. This is human. You too, do things you really should not :-) (See above on Paper and Ink).

Never hesitate from shipping — after all, you are going to be improving and developing for years. But, never ship if the product does not work right.

Violating this rule (on either or both sides) is the single most consistent failure point of hardware startups in particular, where the cost of rework can be humbling. Patches do not work.
As an example, a flakey radio is flakey until you are sure you’ve addressed physical (antenna power, type, orientation, grounding) and logical (protocol, system timing) and more.
Software companies can also fail — easy distribution enables wider distribution of a faulty product, and a wider tarnishing of brand.
IoT companies need to extremely careful — they are impacted by both hardware and software.

Admiral McRaven to the Rescue (Again).

Better known for leading the US Navy Seal Teams, Admiral McRaven is also an interesting author — and the one responsible for us taking our shoes off for airport security screening :-)

Admiral McRaven at Texas A&M Commencement

One of his earlier books is a study of Special Operations [3]. A startup team has some alleged similarities with special forces — small size, focus, agility, (VC) funding for a mission …whereupon the similarities end.

Key takeaways mapped to startups and mixed with my viewpoints include:

Never overload the mission. Work hard to narrow down targets. Work the details. Look at all angles. Understand the metrics that matter to the MVP. Dump everything else. Focus on the leanest MVP possible and then build up. Sprint-planning is good.
Bring all the energy you can, to deploy the MVP, at the best market opening you can find. Work the first few customer wins yourself. Focus on what needs to be done, yourself. Each early customer engagement is part of your “team training”. Understand why the customer bought, in addition to the why-nots. The “whys” are really critical. Use this to update your MVP systematically.
Use the right tools to solve the challenge. Make sure you are matching your capability with the need. Have dependable gear — whether that is hardware or software.
Protect your assets. Protect your team, tools and information. Don’t release code or design files without NDAs and a real need to know. Don’t betray your customers trust. Make sure your IT systems have some rational level of security, and do not let data pass into the hands of companies required to share data by their Governments, that could end up with your adversaries.
Secure the area you attack. Take over a segment in the customer-map systematically. Make sure the activity is supportable. Then, and only then, bring in additional resources. If you bring in resources before you have secured the area, you put the resources at risk. This is not a computer game; once lost, the resources are fully lost. (Time, money, your brand, shares in your company to raise new funds … are all assets that you need to use, and not waste.)
Never stop gathering intelligence. Listen and continually respond to the customer, relentlessly looking at all the ways to sustain your win all the way to market dominance. Attend shows and events related to your industry. Listen, ask questions. Cross-check your intelligence. Listen deeply with humility — and the intent to take action, backed up by action.
Help when you can, but do not over-extend yourself and your team.
Stay tight. Don’t bring in 3rd parties into your early customer relationships — you must be able to support and sustain direct action. Your customers are precious. Treat them accordingly.
Have integrity. Your customers will always known truth from fiction — give them credit for being smart and human. After all, they are your customer, because they are in business, and are already successful without you.

Once you’ve secured your initial market, you can start working on scaling. That will require many changes.