This past weekend I had an opportunity to speak to about 200 engineering and marketing students from the UTSA CITE Boot Camp Program (Center for Innovation and Technology Entrepreneurship) which is a day-long seminar for students to soak up as much information as possible to help them with their competition. Essentially, the engineering students are tasked with designing and building a product, and the marketing students are tasked with figuring out how to market and sell the product. According to Dr. Corey Hallum, the Executive Director of the CITE program at UTSA, “we’re kind of like a feeder for organizations like Geekdom“, which helps incubate startups and entrepreneurs, and even provides $25,000 in funding for those who qualify.
When I was getting my engineering degree from 1994-1998, this kind of collaboration with marketing really didn’t exist. We didn’t have all of the technology that exists today at our disposal. There were no mobile phones, the Internet was slow, there was no Facebook, and our browser/search engine was Netscape. In 1998, you couldn’t start a technology company very easily. Servers were expensive, and there was no cloud. We didn’t have Ruby on Rails or any other agile development coding language. We had C, Cobalt and Fortran. There was no CSS, AJAX or HTML5 that would make my app look beautiful and provide a fantastic user experience. There wasn’t an app store. The “super” computers we had in the engineering lab to run programs like ProEngineer would be laughed at today. There’s probably more power in an entry-level MacBook Air now.
Furthermore, there simply wasn’t a collaboration between engineering and the business school. And that’s why I love this program. It helps engineers become more realistic on feature sets, and not “over-designing” the product. It helps marketers understand their customers’ pain points, and drive engineering to build a “must have” product instead of a “nice to have”. The concept of “getting out of the building”, and any other Steve Blank-ism is ideally taught in the academic world way before you get to somewhere like Geekdom.
And so my advice to these young entrepreneurs will be similar to what I might mentor someone at a 3-Day Startup event, or even a Techstars team, and is based on my own experience in raising a small round of seed funding, failing to get the necessary traction to get to a second round, and then pivoting the business into a profitable and sustainable business:
8 Ways To Improve Your Chances of Getting Funded (a Second Time)
1. Build a working prototype, even if it’s ugly at first. Don’t show up to a meeting with a potential investor with a pitch deck and no demo. And please don’t ask them to sign an NDA. They see hundreds of deals probably just like yours, so don’t classify your idea as “special”.
2. Get the right team. The reason Pear Analytics didn’t get into the inaugural year of CapitalFactory in Austin was because I didn’t have a technical co-founder. Very few single founders get funding, and they have to really be exceptional. Investors are putting more faith in your team and your team’s history together than they are your product at seed round.
3. Build something beautiful that engages users. We had a lot of debate about this when we were building a SaaS tool in 2009-2010. Engineers want it to be functional and don’t want to waste time with making it “pretty”. In my opinion, user experience design is just as much a feature as anything else. Hire a UX designer and make your product beautiful and easy to use.
4. If you’re going freemium, treat the upgrade path like a feature. Sometimes we get so enamored in our product and usage levels that we forget that we ultimately need free users to pony up and pay. The upgrade path should not be an after-thought, but rather a well-thought out and executed strategy. Everything from the design of the path, options for upgrading and even drip campaigns throughout the trial are very effective in getting users to upgrade. Oh, and don’t be afraid to pick up the phone and call them.
5. Spend a lot of time on product-customer fit. After you secure your seed round of funding, the pressure is on. No time to relax now. You need to as quickly as possible describe your customer, their usage patterns and how you are going to market and sell to more of them before you raise another dollar. Chances are, your product is not ubiquitous, but serves a very specific market segment. Find out what that is and exploit it. You may end up pivoting, or changing your feature roadmap as a way to create your niche. By the way, if you want to get rich, find a niche.
6. Stop chasing investor dollars. As my friend Paul Singh said on his blog, if you want to raise money from him, you need to focus on building a great product (and traction) and the money will (should) come. I see a lot of entrepreneurs spending a lot of their time pitching investors, and less time evangelizing.
7. Marketing is not an after-thought. I see newly seeded companies put 95% of their capital into the development and engineering of the product, but little or no money in marketing. This is unbalanced. Spending all of your time building the “perfect” product that nobody knows about is not going to get you to your next round of funding. I’ve seen (and experienced) companies who put significant money in the marketing engine even though their product wasn’t that great, or even fully-baked. But their traction turned into paying customers, which they then parlayed into strengthening the product (not the other way around). Don’t believe me? One word: Hubspot.
8. Get to profitability as quickly as possible. Once you’ve secured your funding, the first thing you want to do is order stickers, t-shirts and your passes for SXSW. Fine. But at least do yourself the favor of planning how you will spend that money, develop your “runway” model and see what it will take to get to profitability as soon as you can. Find out how many customers at $X you need to get there. Offer stock options to keep your salaries low. And if you’re going to blow $20K at SXSW, spend 8 weeks prior to the event planning who you need to meet, sending out emails, etc. – don’t just show up unannounced.
Last week we did a test to see the performance of a sponsored post on LinkedIn vs. Facebook and were interested to see which one would lead to more downloads of our free workbook, the Online Marketing Budget Planner. Both were set up on the same day and ran until a $200 budget on each network was exhausted.
Facebook Sponsored Post Setup
The setup is very easy. Once your page or post has been added to the company page timeline, in admin mode you can choose to “Boost Post” on any of them:
I then chose a variety of settings to target who would see the sponsored post, so naturally people in marketing, advertising or even social media. I wanted the sponsored post to only show in the US, and only to men and women between the ages of 30 and 45. This resulted in a possible 720,000 people who could see the ad, and it turns out $200 won’t even get to 10% of them (more on results in a bit).
From there, I just set the spend to $200. The system gives you a range of minimum CPC (Facebook is a cost per click system), which in my case was suggested at $3.15 per click, so I left it alone. Once you approve payment, there is a quick approval process within Facebook’s advertising system, and then you’re up and running usually within an hour.
LinkedIn Sponsored Post Setup
The LinkedIn system is strikingly similar to Facebook’s – or vice versa – but again, all you need to do is go to the company page and click on the “Sponsor Update” button and go through a very similar process of choosing your demographics.
In this case, I chose very similar settings as I did on Facebook, and interestingly, the number of potential people to reach was considerably less – just under 200,000 people in the marketing industry. I could have probably chosen more, but my $200 wasn’t going to get very far anyway, so I just went with the 6 or 7 senior positions I could think of, and set the budget to $200, just like Facebook.
Both of these campaigns ran only for a couple of days until the budgets were exhausted. Each ad – or sponsored post – took the visitor to the blog post which explained the Online Marketing Planner, and from there they had to click through to the download page and give some information in order to receive the workbook. So essentially, we had 3 conversion points in the funnel (ad to blog post, blog post to download page, enter info) which may or may not be optimal, but we can discuss possible improvements after the results.
Results of Facebook and LinkedIn Sponsored Posts
The results were quite interesting. We got a total of 9 downloads of our free workbook: 5 from Facebook and 4 from LinkedIn (taken from Google Analytics). That’s $40 per download from Facebook, and about $50 per download from LinkedIn (LI went a little over the $200). The reporting on LinkedIn’s platform is much more comprehensive than Facebook’s, in my opinion. Here is LI’s:
So for LinkedIn, we paid $2.75 per click, or an equivalent of $22.22 CPM (quite expensive, even for a targeted audience). The click through rate was 0.8%, which is probably 3-4 times better than a normal CTR we would see on a display campaign in Google Adwords. We barely reached 5% of the total audience selected for targeting, and that’s assuming there weren’t more than one impression for anyone. The 73 clicks resulting in 4 downloads is a 5.5% conversion rate through the entire 3-step funnel. If I wanted to reach the entire audience, it would have cost us over $4,200 and given us about 86 downloads total. Additionally, LinkedIn added 13 social actions which would include a like, share, comments or follows to our company page. That’s only 17.8% out of those who clicked.
Let’s see how Facebook faired:
The data shows that we got a lot more reach and engagement with Facebook. We paid the equivalent of $0.93 per click and $3,99 CPM. The CTR was about half of LinkedIn at 0.4% We reached only 7% of the potential audience with the measly $200 test spend. The conversion rate on Facebook was far worse at 2.3% going through the 3-step funnel. Facebook showed more social sharing on the post coming in at 95 interactions – over 7X more than LinkedIn. Here is a better organized summary:
Some Initial Ideas on How To Improve Conversion Rates and Performance
In conclusion, the end result (downloads) were almost identical, and the real result will be which of the folks who gave their information for the download become actual leads. It was a little difficult to trace back the original source of the download, and neither Facebook or LinkedIn seemed to offer any special tagging capability so I could delineate in analytics which leads were from where. So here are some ideas:
1. If I were spending a lot more money – say, more than $1,000 – on either of these platforms, I would take them to a specific page for the download, and then create a unique thank you page for each. I think the lack of utm tags available in the platforms is problematic if you want to get really granular with results.
2. I began to wonder if the design of the workbook wasn’t inviting enough – or played a part in the low conversion from blog post to download page (73 to 5 for LinkedIn, and 214 to only 6 for Facebook -wow!). That said, those who did reach the download page pretty much all gave us their info. I think reducing the number of steps in the funnel would make a big difference here – but then it wouldn’t really be a “sponsored post” then.
3. Many of the visitors were from a mobile device, particularly Facebook. Since our site and blog is not mobile-friendly or responsive (yet), I wonder how that played into conversion rates. Again, if I were doing many of these types of ad placements on a larger scale and spending more money, I would probably invest in the responsive design as well to make sure they don’t leave because of squinting and pinching.
What do you think would have improved this campaign?