The Snowball Effect



I spend a lot of my time advising and mentoring entrepreneurs, including coaching at three awesome accelerators. Since almost all the companies I work with are at the pre-seed stage, I end up hearing the same questions quite a lot. They are, in order of frequency:

  1. How do I convince my co-founder to quit their job and join full time?
  2. How do I close my first customer?
  3. How do I raise my first seed financing?

These are very fundamental questions for building your business, so it’s no surprise they come up so often. The good news is that the first step towards answering any of them is exactly the same: build up your snowball effect.

The Fear of Being First

If you turn around each of those questions, you realize that the person on the other end represents a first for your company. You are trying to convince the first employee, the first customer, or the first investor to believe in you. Being first, while exciting, brings with it the most risk since you clearly have not proven your business if they are the first. Most people have a very justifiable fear of being first, which makes it hard to convince them to take that first step.

However, you need to have a first because if you don’t then you will never have a second, a third and so on. So how do you overcome that fear? 

The Power of Momentum

One of the best ways to overcome the fear of being first is to use an even more powerful force: the fear of missing out. The more momentum you build up for your company and the more progress you make before asking someone to be the first, the more likely that they won’t want to miss the opportunity. You want to make your company move as far as you can as fast as you can to make it an attractive bandwagon for people to jump on.

Having a brilliant idea is not enough. If you have a brilliant idea and nothing else, nothing separates you from the hordes of other dreamers whose dreams will never see reality. An idea has little value itself, you need to turn it into reality or at least as real as you can make it.

So how do you get that momentum going in the early days? You don’t need to build a finished product (although that works well). There are many ways to build momentum without a product:

  • Invest In Yourself. You should be investing in your own company, using your own money. The more you invest, the more you will show commitment to your vision and building your business. You cannot ask others to invest or believe in you if you cannot demonstrate that you believe in yourself. It only costs a few hundred dollars to form a legal corporation – how much more than that do you believe in yourself?
  • Prove Demand. One of the most important things you can do in the early days of your company is prove that your idea has customer demand. Building a product can come later, but you can start by talking to prospective customers, industry experts and investors about a product and how much demand exists. The more you can quantify and prove there is demand, the more likely you are to convince others that your idea has value. Along the way, you’ve also lined up a list of prospective customers that make your company seem a little less risky for employees and investors.
  • Sell Your Friends. There is no rule that says your first customer(s) need to be strangers that you cold call. In fact, almost all successful companies start out by selling to friendly customers whom they knew well before they got started. YCombinator, one of the best accelerators, goes to great lengths to get their companies to become customers of each other to overcome the first customer problem. This strategy won’t scale, but it will get you started.
  • Spread Your Message. While your idea might not have value, communicating about the problem you are solving and building a voice in the community does. Set up a blog, join Twitter, and start a mailing list to talk about the industry, market or problem. The more you participate in the discussion the more you can start to build your company’s brand even before you get started.

Most of all, be creative. I know non-technical founders that hired people to stand in front of conferences wearing sandwich boards to raise awareness of their company, which had no product. I’ve seen founders hire armies of people on oDesk to gather hard to find data on the web to create valuable industry blogs. Even Mattermark, a great market data start up, got started from a blog post.

Accelerators are in the business of helping you build this momentum, at the cost of a small amount of equity. Many accelerators require that you have a working prototype, but if you do have a prototype they can give you a big boost of momentum and help you get past a lot of these early hurdles.

The Snowball Effect

What is the snowball effect? The great thing about building up your momentum is that it becomes a virtuous cycle if you can maintain it. You are more likely to raise your first investment if you can close your first employee, which in turn makes it more likely to close that first customer. Then it becomes easier to hire that second employee, close the second customer and so on. Eventually, making progress on all fronts makes it easier to make more progress on all fronts.

That is the snowball effect. Just like a snowball rolling down a hill, the more momentum you have the larger you can get and the more momentum you will get.

All you need to do is start the ball rolling.

This article was originally published at Sean on Startups, a blog about starting and growing companies.

Image Credit: CC by Dan Nguyen

About the author: Sean Byrnes

Sean is the founder of Flurry, the leader in advertising and analytics services for mobile applications. He is currently an advisor, mentor and angel investor in the San Francisco bay area. You can read more of his advice and thoughts on building businesses on Sean On Startups and his personal website.

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