Vetting a startup (or two): The systematic birth of @WPEngine

February 2, 2011 | Jason Cohen

Guest post by Jason Cohen.

Let me dispose of any lingering ideas that WPEngine was a great flash of insight, born perfect from conception like a Greek God emerging from the ocean, a once-per-decade occurrence sourced from unsystematic inspiration. Let me also dispel your doubts that you can’t produce similar ideas with similar results using a similar process. You can, because there’s nothing magical in how I got to this point.

Inspiration and luck play important roles at the beginning, but turning a bright idea into a real business where strangers come to a website and part with money is an intentional process. A process you can learn and get better at.

This story is one shared by (in my experience) the majority of successful startups — an initial idea inspired by travails from my own life, an idea which turns out to be unworkable, but which ultimately leads to truly good ideas through both incremental and discontinuous transformations. I’ve written about that path before, both in my own companies and in others.

I didn’t do this properly at Smart Bear; that just happened through a combination of luck and perseverance. This time, though, it was intentional. As a good student of startup theory, especially modern theories of customer development, this time I was methodical and purposeful.

And it worked.

Here’s how to do it.

The first startup idea came from a pain I solved at Smart Bear. How do you measure the efficacy of 30 simultaneous marketing campaigns, particularly when offline (e.g. print ads or trade shows)? At Smart Bear I built a system that worked incredibly well — the data were so accurate I could tell you the day an issue of (now defunct) Dr. Dobb’s Magazine hit people’s desks — precision unheard of with offline advertising and still pretty impressive online. (I’ll tell the full story of that system in another post; a lot of the tricks you can use yourself.)

Problem was, this system was hacked together over two years: a mish-mash of spreadsheets, Perl scripts, API-calls, manual exports, Excel spreadsheets, and Access databases. It was an inscrutable, tedious process that only I could execute, even then only when guided by interminable checklists. A stranger presented with this “system” would conclude that it was intentionally designed to be impossible for anyone but the creator to run, and furthermore intended as a peculiar form of self-torture.

A year after leaving Smart Bear, having talked with dozens of startup founders about their marketing woes, I realized 100% of them needed the marketing-measurement engine I built at Smart Bear.

There’s the magic moment! Inspiration sparked by need. A real solution to a real problem shared by thousands, if not millions. I have the know-how to built it and even a blog to promote it.

What am I waiting for, I should build it!

Of course I’m the first one to say that unless you can find ten people who will actually give you money, you have a hobby, not a company. So that’s exactly what I did.

I got meetings with everyone I could find. Startup founders in my town of Austin were the most obvious target because it was easy to take them to lunch. I’d been networking for a while so I had a nice list to call on. Specifically, I had at least peripherally helped a bunch of other startups over email and at various meet-ups and co-working spaces, and now I called in the favors.

(At this moment many of you will protest: “But what if I don’t have an extensive network?” Then find local meet-ups of the type of people who would use your product and go, maybe even sponsor something. But what if you don’t live in a place where such things happen? Then you should be working on your online presence. But what if you don’t want to do that either? Then you can try to find people by dragging them in with Google Ads and asking them to sign up. But what if you can’t do that or don’t want to spend that money?

Then you’re saying you don’t want to communicate with anyone in any form and don’t want to spend any money. So I guess you’re not cut out to run a company, or do anything else requiring substantial social interaction!)

So I got a bunch of meetings; what’s the best use of time? If you want a step-by-step, here’s a great guide and checklist of how to do early customer development by Ash Maurya.

For me it comes down to this: Will they pay for it, and how much? You can’t stop at “Do you think this is a good idea?” and the story of this marketing-measurement tool demonstrates why, because every last person said it was a good idea, and in fact it was not. How did this manifest?

I didn’t have any screenshots, and you don’t need them at this point, because if the idea isn’t exciting after brief explanation then it’s too complicated. If you feel the need to say, “I can’t explain it, you just have to see it,” you’ve lost. Maybe they have to see it to fall in love, or eventually hand over the credit card, but you can’t do market research or vet ideas if you “can’t explain it.”

Also, how are they supposed to spread the word to their friends? How will they explain it when even you can’t explain it?

So I’d kick off these meetings by saying the bit about how I could measure the unmeasurable Dr. Dobb’s ads, and how I could measure 30 simultaneous campaigns. At this point everyone would exclaim, “Oh yeah, I need that, and I know a bunch of people who need that.” Validation, right?

Then I’d get into feature details, and this was exciting too. For example, with Google Analytics you have to set up your goals and campaigns ahead of time; if you get data and only later realize that a different goal is important, or that you really needed to measure a different page, or that the goal values are different than you thought, or that you got traffic from a campaign you didn’t expect, it’s too late. The best you can do is reset the configuration and wait for (pay for?) more traffic.

Not so with my tool! I retroactively apply your inbound campaign definitions and your goal results, so you never worry about getting things set up right the first time, and you can easily experiment with anything you like, any time. 30 out of 30 people agreed this was a killer feature.

I didn’t figure out that this wasn’t a proper business idea until we got to the question of price, because that’s where the agreement ended. Some said that although this would save them $1000/mo in marketing spend, they still couldn’t afford even $50/mo; it would have to be free. I know, that ROI argument makes no sense, but that’s exactly why it was a bad sign. Others said $50/mo would be easy, and I should target the small business market, however it became clear that training and marketing costs with that audience would be large. Still others insisted that I go after the “big guys” in the market, which means charging at least $1000/mo, offering professional services, or partnering with other consultants who were willing to ditch the name brands for something better — though I was never able to locate a consultant willing to entertain that idea.

Price isn’t just a number — it dictates target market, which dictates competition, feature set, and the route to those customers. If you don’t talk about price, you don’t get into these questions deeply enough.

Of course your idea is pretty good, and of course you can convince people your features are pretty interesting. But without getting down to brass tacks of pricing and business model, you haven’t proven anything about your business.

In the end, I gave up on the idea of the marketing-measurement tool. It took about two months, and I really didn’t want it to die. But I’ve seen — and had — enough ideas to know that it’s possible to have a decent idea and no business model, and that’s what I had.

How does this relate to WPEngine? Because if I hadn’t been this meticulous and self-critical about the marketing-measurement idea, I would still be floundering around with it. But I killed it, and that gave me the breathing room to have another epiphany.

WPEngine has exactly the same story with a different customer development outcome, and that’s why what I just described is a repeatable process and not dumb luck.

I needed something like WPEngine for my own blog. My server would crash when I got on HackerNews, because that’s what WordPress does unless you’re an expert. My page-load time was pretty bad. And having gone through the experience of being hacked, I knew how painful that can be, and WordPress is known for being hacked constantly (more often because of poor IT than WordPress itself, but either way you’re screwed).

I searched for a WordPress hosting service that would help with speed, scalability, and security and found nothing. I asked around and everyone said “It doesn’t exist, but man that’s a great idea, I need that too!” Of course I’d just gone through this little song and dance, so I knew those statements alone weren’t sufficient.

So I hit the meetings again — email, phone, in-person, whatever. I wanted to talk to anyone with a blog. Would they pay $49/mo if I fixed those three problems (security, speed, scalability)? What if I added a feature I had hand-built for myself (again out of need) — a push-button staging area so you can test changes before they go live?

The reaction this time was completely different. Some people said they’d pay $49/mo just for the staging feature alone. When the answer is “You had me at ‘staging feature’” — i.e. when just a part of your pitch is already enough — you know you’re over-delivering on expectations, and when you’re comparing those expectations to an actual price, you know you have market fit.

I didn’t start WPEngine until I had 30 people saying they will give me $49/mo. Not would, but will. In the end, 20 actually did. Our message resonates with hundreds of thousands of people, and new people sign up every day though we’ve still spent $0 on general marketing.

Will this process work for everyone, for every idea? No. For example if you’re hell-bent on building something “disruptive,” then you probably honestly can’t explain it, and other people may not be able to understand its utility. Surely Twitter was that way. (Still is?)

But if you’re building something that’s supposed to be straightforward, that’s supposed to solve an obvious problem, supposed to be easy to enjoy, supposed to be easy to spread the word about, and supposed to make money, then you have little excuse not to talk to 30 people before you invest hours in writing code and building websites.

Even with awesome ideas, you don’t know whether it’s a business until you talk turkey.

What’s your experience or ideas about early customer development, especially before the product exists? Can you use this technique or is it unworkable? Let’s continue the ideas in the comments.

This essay was originally posted on December 20, 2010 on Jason’s blog, A Smart Bear.

Jason Cohen founded Smart Bear Software, maker of Code Collaborator, a tool for peer code review and recent winner of the Jolt Award. He took Smart Bear from start to multiple millions in revenue and 50 percent profit margin without debt or VC, then sold it for cash. He is also a founding member of ITWatchdogs, another bootstrapped startup which became profitable and was sold. He’s also a mentor at Capital Factory (like TechStars or Y-Combinator in Austin). And he’s the author of Best Kept Secrets of Peer Code Review, the most popular book (35,000 copies) on modern, lightweight methods for doing peer code review effectively without everyone hating life. He blogs at “a smart bear.” Email him: jason (at) asmartbear (dot) com.

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