Startups often wonder why investors can’t see how viral they’re going to get.
I met an entrepreneur yesterday who confidently stated that his product was going to grow ‘virally’ because it was the best in its category. That was essentially the optimism that powered the growth slide in his investor deck. (To see why this is wrong at many levels, read point 2 below, but more on that later)
The problem: Investors weren’t buying this pitch of his yet.
Why don’t investors get it?
Frankly, too many startups out there have claimed that they will grow virally and too few actually have. Here are the top three reasons why a startup’s claim to going viral may not be well-founded.
1. They don’t have a clue about user acquisition
Imagine this! You don’t have a clue how you’re going to get users. There’s an empty slide in your deck reading user acquisition, which follows the slide showing hockey stick adoption.
The solution? We’ll grow virally! Three words that fill up the slide nicely.
This may sound naive but investors have seen so many startups use this route that they automatically clam up when someone presents virality as the only source of user acquisition.
The second problem with this is as follows: Virality is users bringing in other users. For that, you need some users on the product in the first place. Hence, virality can only work in tandem with other user acquisition models, which bring in users, who then bring in other users. Relying on virality as a standalone source of user acquisition is fatally flawed to begin with.
Key Point: Virality is unpredictable and works only in tandem with other sources of user acquisition.
2. They’re confusing Virality vs. Word of Mouth
So here’s one of the biggest problems with entrepreneurs claiming their startup is going to go viral. Often, they don’t understand what virality is in the first place.
Virality and Word of Mouth are two concepts that are often conflated and confused.
Word of Mouth is what happens when people love your product so much, they just can’t stop talking about it. Word of Mouth is driven by your ability to deliver customer delight and your ability to convert users into fans. It’s largely an art, and one that you can’t necessarily structure or control. You can maximize the chances of generating WOM by delighting your users but you can’t force them to start talking about it.
Organic virality, on the other hand, is what happens when users spread the word about your product in the context of using the product. It, unlike Word of Mouth, has nothing to do with how much they love your product. When users share an Instagram photo on Facebook, Instagram gets exposed to other users. When a Kickstarter project creator spreads the word about his project, KickStarter gets greater adoption. In all these cases, the existing users get extra value out of taking an action, which in turn, exposes your product to new users. If you can architect that into your product, you’ve got virality going. You don’t need fans any more, you just need users, to bring in other users.
Word of Mouth works effectively for online as well as offline products. Virality works only for networked businesses, and hence, largely for online businesses. Users need to be connected to each other for them to spread the word about a product during the course of product usage.
Investors like products that have organic virality of the kind shown above. Products that spread with usage are ideal for venture scale returns. Hotmail, Surveymonkey, Paypal, Skype, KickStarter, YouTube and Instagram are all examples of such products that have performed extremely well.
Organic virality is more controllable. You can design your product in a manner that it leverages users’ interest in sharing what they create on the product. In contrast, Word of Mouth cannot be designed.
Key point: Figure out whether you’re relying on WOM or organic virality. WOM can rarely be controlled and designed. Organic virality is something that is designed within the product.
3. They’re The New Invite Spammers
Word of Mouth can’t be designed. But it can definitely be forced and/or manipulated.
We saw a lot of this happen in the early years of the Facebook Platform. Get users to send irrelevant invites and notifications onto the news feed. The problem with these invites were that they were little more than spam.
This notion continues to exist even though Facebook has tightened its policies. Startups still believe that virality is nothing more than an invite loop that can be slapped onto a product after the product is created. More often than not, this approach leads to invite spam.
The problem is compounded with an obsession with optimizing virality by maximizing ‘k’, the viral factor. If your viral loop itself is leading to spam, maximizing ‘k’ will make the spam problem even worse. We’ve seen this play out with Branchout and Skillpages, and with countless games.
Key point: Conning users into sending invites is poor design, unsustainable, and leads to users abandoning in the long run (even if you get adoption in the short run).