7 Steps to Selling Vaporware

Far too often, as a consultant for government funded medical technologies, I have found technologies looking for market applications. Also, I have observed many hackers that have the philosophy of developing and releasing fast, trying to get customers to use their product/service, and iterating from there. This works only in a subsection of opportunities, such as programmers developing stuff where they are end users, the problems only need simplistic solutions, or it is a web application which requires marginal fixed costs. When end users are not tech savvy, when the technology aspect is complex and requires substantial thought, the quick prototype and iterate philosophy breaks down. When you need an interdisciplinary team that requires substantial investments in time and money, up-front market research pays off in spades. In these cases, I suggest the alternative approach of "selling vaporware."

In this way, you benefit by:
-quickly distinguishing what users want from what users want and will pay for,
-wasting less development time
-ensuring a better product/market fit (in reference to a previous pmarca post)
-acquiring a ready list of customers that you can show to investors

The steps to selling vaporware are:
1. Figure out the group you want to target, and think of a couple different problems you could potentially offer.
2. Get a list of people you can call or meet.
3. Test one value proposition at a time.
4. Interview them and try to sell them your vaporware.
5. Listen carefully and understand their responses during your interviews. Figure out what issues they care about most, and restructure your pitch.
6. Figure out if you could potentially make a profit by building what users want.
7. Iterate 3-6 until people like the idea and have people that are willing to pay.

1. Figure out who you want to target.
When you first come up with an idea, figure out who your likely users are, and try to make it as niche as possible. Examples could be real estate agents that gross over $1 million per year, travel agents listed in the yellow pages in the New England area, or accountants that do not yet have web presence. It is likely your first idea sucks and won't work. That's ok. Just come up with a couple different ones that you can try out.

2. Get a list of people you can call or meet.
Look for a concentrated list of contacts. You can typically find them in the yellow pages, trade associations, blogs, websites, forums, trade publications, research institutions. You want to contact them in person or on the phone because you want to have a conversation with them to figure out what issues are on their minds. E-mails don't tend to elicit as much useful responses.

3. Test one value proposition at a time.
You don't want to start out with something you have no chance in delivering. Try to pitch something that differentiates on an aspect of performance, ease of use or price. In different types of markets, different value propositions will work. Also, different people have different pains. Some pains are so great that people don't really care how much the cost is as long as the product works well, such as effective diagnostics or treatments for early detection of esophageal cancer, sepsis, heart disease, etc. Some things are commoditized such that you can only compete based on brand or price such as tooth paste, paper, soap. You get the idea. Think of how you can compete, and try out one thing at a time.

4. Interview them and try to sell them your vaporware.
The point of this is to try to make a sale, or at least progress the sales process. You can't just get people interested, but figure out if they will pay you for your efforts. "Would you pay $20 per year if you could get online e-mail service with 50 gigs of storage and keep your old e-mail address? Why/why not? What if it was 100 gigs? What if it was $5/year? What if it had no ads? What do you use now? What do you like/dislike about it? What kind of service/product do you think we should focus on? What do you think people will pay for?" This is the most useful step to figure out what their priorities are, and reaffirm that your assumptions are correct.

5. Listen carefully...restructure your pitch.
Mostly this is looking at notes from previous interviews and trying out different value propositions and pitches for the next interviews.

6. Can you make a profit?
This is not just Price - Cost of Product = Profit. Many entrepreneurs forget distribution costs and cost of acquiring new customers. If distributors typically get 50% for a $300 product, can you let distributors make more so they're more incentivized to sell your product over others? Exact numbers are not necessary, but it is good to understand how profitable it could be. Also look at the number of sales you need to break even, profit margins to see how feasible your business is.

7. Iterate 3-6 until people like the idea and have people that are willing to pay.
You're not going to get it right the first time. Or probably the second time. Keep iterating through your contacts and ideas until your vaporware sells. You should have at least 5-10 people willing to pay. By this time, you'll know what makes the end users tick, what they value most, and have a good idea of why they want to pay to use your vaporware.

While this certainly does not apply to every start up, it's something to keep in mind.