Authors: Matthew Wahlrab and Craig Rochester
What is a viral startup?
Viral startups are early-stage companies that attract a significant network of early users for market validation and product/market fit feedback.They’re often also proactive in establishing intellectual property (IP) assets and an IP strategy that create barriers to entry against competitors in important markets and territories (this is particularly key when the time
comes to expand and scale the business).
Below, we’ll outline what sets viral startups apart when it comes to building productive relationships with their (potential) user base, successfully entering and thriving in their chosen market, scaling sustainably, and bringing investors on board.
Assets and strategies that set viral startups apart
1. Multi-faceted customer relationships that minimize guesswork and attract investment
Having a robust network of early adopters means a company can:
a) Get feedback on the size of the problem that its solution is solving;
b) Get feedback on the product or service itself for technology optimization;
c) Get feedback on willingness to pay within a set of customers;
d) Cultivate long-term customer relationships;
e) Potentially recruit evangelists for the company among early adopters;
f ) Retain more human capital due to more dynamic growth;
g) Increase amounts and rates of investment; and
h) Increase access to alternative financing options, like debt financing.
2. Market validation
Relationships with a large set of early adopters yield high volumes of data. Leveraged correctly, this provides key insights into the characteristics of users with whom the product or service particularly resonates. These characteristics are critical to creating buyer personas and account-based marketing profiles, so sales campaigns can target the best prospects in the best market segments.
Early adopters may also agree to provide testimonials about the value and impact of the startup’s product or service, as well as permitting the use of their company logo. This lets a startup show future customers that its product or service is already trusted among peers in the industry.
Early testing also lays the groundwork for recruiting development partners. This acts as a significant force multiplier if, after launch, these partners become evangelists for the startup’s products and services on which they’ve provided feedback.
Focus
“Relationships with a large set of early adopters
yield high volumes of data. This provides key
insights into the characteristics of users with
whom the product particularly resonates.”
3. Product development optimization and risk management
Feedback from early users is critical to knowing that a startup’s product or service solves a significant problem in the market. Nurturing these user relationships is key for two main reasons. Firstly, they can translate into sales post-launch. Secondly, they create a continuous feedback loop which can be used to further fine-tune the product or service, with the end goal of creating an ideal customer experience. “Relationships with a large set of early adopters yield high volumes of data. This provides key insights into the characteristics of users with whom the product particularly resonates.”
By requesting feedback from a wide range of early users, a startup can compile lists of requested features, including technical specifications. This enables focusing time, effort, and resources only on aspects that will make a real difference to the end user, accelerating rapid adoption of the startup’s product or service.
4. Making decisions about when to scale up
A major concern for many startups is the timing of when and how quickly
to grow their business. Leveraging a sufficiently large sample size of early
adopters, strategic account-based marketing, and careful monitoring of
leading indicators of product/market fit allows companies to know when
to strategically hire and acquire resources to scale up.
5. Investor relations
Tapping into large sets of early users also helps startups to show investors a direct path to widespread adoption. An IP position also provides a degree of insurance against direct competitors. Depending on the industry, patents or trade secret protection can be a significant value-add during diligence and company valuation discussions. Investors also see IP as a driver of book value, as well as a public relations asset in telling the company’s story and developing its brand.
Focus
“Investors see IP as a driver of book value, as
well as a public relations asset in telling the
company’s innovation story and developing its
brand.”
6. Legal mechanisms for reducing risk
Having some patent protection in place gives founders and investors a degree of comfort that early public use of their technology by a wide network of users won’t create a bar to patenting, or result in widespread copying.
“Investors see IP as a driver of book value, as well as a public relations asset in telling the company’s innovation story and developing its brand.” Non-disclosure agreements (NDAs) also help with this risk. However, they don’t guard against independent invention and filing of patents onthe technology by third parties, or any attendant freedom-to-operate issues. Because many product development agreements include patent licenses, patents also provide a starting point for defining exclusivity and fields of use of the product or service for development partners
Supporting strategic, robust startup evolution is what we do
Driven to leverage the wide-ranging insights you can gain from a network of early users, understand how and when to scale your startup sustainably, and develop an IP strategy that sets you well ahead of the competition? Reach out to our team to discuss where your startup is headed — we’ll be glad to hear from you.