One of the most important things we look for is founders with distribution advantages. Reaching potential customers is the biggest challenge in the early days of any company, as you have no brand, no product, and no reason for anyone to pay attention. Having a distribution advantage means you can reach those early customers faster and more easily than anyone else.
When we think of distribution advantages, we often think of big companies and their marketing machines. Startup companies can’t afford to buy ads, billboards, or commercials! Startups don’t even have existing customers that might spread the word, because they’re starting from zero. In fact, startups have so little that the traditional definitions of “advantage” don’t apply.
So, what does a distribution advantage look like at the earliest stages?
Here are some examples:
- A large number of subscribers to your newsletter.
- Personal fame in an industry that means everyone wants to talk to you.
- A huge following on TikTok or LinkedIn.
- A wealth of contacts you’ve done business with in the past.
- Close relationships with key distribution partners.
It’s not enough to have an audience; you need an audience that includes your target customers. You might have a ton of followers on Instagram, but very few might be enterprise software buyers! Often, founders think they have an advantage in reaching customers, but it turns out they are the wrong customers.
The real test of a distribution advantage is simple: How quickly can you schedule 50 meetings with potential customers?
When Mike and I started Outlier, we launched a newsletter before we had a product! The Data Driven Daily was a newsletter with tips on how to make decisions using data. Over six thousand people subscribed, and almost all of our first customers came from that newsletter. It was a huge distribution advantage, especially in the analytics market where it’s hard to get the attention of buyers.
That newsletter wasn’t the only thing we tried! We tried everything from podcasts to live talks; the newsletter just happened to be what worked for us. That’s the harsh reality of marketing and distribution: it’s almost impossible to know what will work before you try it.
If you wait until you start your company to build a distribution advantage, it might be too late. Velocity is the currency of the realm in the early days, and if you cannot reach customers quickly, you will struggle to reach the velocity necessary to succeed. We had an advantage in Outlier in that I had worked in the analytics industry for many years and already had a large following of industry experts.
Like planting a tree, the best time to start building a distribution advantage is today. Even if you haven’t decided to start a company yet, think about what distribution advantages matter in your industry and how you might build one. Get started small and build it over time, so when you are ready to be a founder, it’s already in place.
And give us a call; we’d love to talk!