At Start-Up Media we love to tell stories of Startups and their journey to launch into International Markets. Simon tells his story and shares with us the lessons he has learnt. This is a great read.

Mollycoddling, obsessive reworking and poor timing. Each can turn promising new business startups into lumbering heavy weights that somehow never quite get off the ground. Jerry Kaplan, author of “Startup, A Silicon Valley Adventure” pinpointed this situation in his five biggest startup mistakes as “Not Knowing When to Let Go.” But defining the right time to let go is easier said than done, as Simon Slade, founder of online product sourcing directory startup www.salehoo.com has discovered.




Trade Me was the beginning for Slade and SaleHoo. Slade started trading as a part-time seller on Trade Me in 2003. Days were spent holding down a day job, while nights were about building relationships with suppliers and other prominent sellers on Trade Me.  As he became more successful, others started seeking his advice on suppliers and product sourcing. Slade began to compile this information into one source which would evolve into SaleHoo.com

What began as a three hour a week income-supplementing exercise eventually turned into a 30-40 hour weekly marathon. Slade would be in the Cashel Street office of his business partner Mark Ling every night after his day job, and at the weekend building and refining the list of suppliers. Confident in the concept, his goal became to expand the list of high quality suppliers that were reliable and get it online. Having little experience in web development Slade looked to Ling for support.
 
Ling was an online business veteran, having run a successful Internet marketing company for six years. The two brought complimentary skill sets to the startup: Slade had the vision and the industry knowledge while Ling had the experience to action it. A programmer was added to the team, working 10-15 hours a week on the base of SaleHoo with only the promise of being paid when the startup launched.

The Main Problem – Knowing When To Launch

After five months of development and with a product well on the way Slade and Ling had a decision to make. When exactly should SaleHoo be launched?  Kaplan compares launching a startup to having children. Just how much do you protect your child before you let it out into the world? It's possible to become too precious with the thing you've spent so much time and energy (and money) on. There is often a feeling amongst development teams that one more feature needs to be added or another test run has to be completed. A number of factors influenced Slade's decision to launch when he did in August 2005.

Being first to market was a nagging demand for SaleHoo. The examples of Windows and Linux would not budge from the back of Slade's mind, “What would have happened if Bill Gates decided not to release Windows when he did? Would a competitor have beaten him to the punch?

There is a staggering precedent for those products that are first to market. In marketing terms it's called the law of leadership and often leads to the brand name becoming the generic term. Xerox, Google, and Coca Cola are classic examples. The first two have even become verbs! Realising this Slade enlisted friends to test the product with encouraging results.


Even though he was buoyed by the overwhelmingly positive comments from the handful of test users Slade admits the only way to really find out what the world thought of SaleHoo would be a full release.  The wisdom of crowds is a relatively new notion, often referred to as a Web 2.0 concept. Yet the process of giving users the power to influence the development of a product has formed a crucial part of production for startups.

It's an advantage that online businesses have that most bricks-and-mortar businesses don't. A physical product launch is a product launch. Yes, there are focus groups but once you hit the ground and go public, it's bloody hard to get it back and change. Georgie Pie and 'New Coke' learned this the hard way. On the web, if the product has a solid enough core then it can stand by itself, “Windows is twenty years old and still being developed!”

“We knew there were features that would turn SaleHoo from a good product into a great product, but we didn't know which ones were the most urgent. We could have guessed but this would have been a time-consuming exercise with no guarantee we'd get it right. ” Slade stresses that the stability of the product was never in question.

“Once we had 99% of the bugs fixed, getting it out to market was the most important thing for us. We knew that getting people to actually use the directory would be more efficient than the three of us brainstorming and testing over and over again. Also, we wanted to be earning money and developing at the same time, delaying the release would mean losing potential income.”

With only two decision makers, Slade says that the ultimate decision to release the product was smooth. The lack of a hierarchy in fledgling companies is an advantage of the startup business model. Slade and Ling did not have to pander to an Engineering Department or an uptight Marketing Executive. Any disagreements were solved by sitting down and talking it through.

The launch was without fanfare, almost unbelievably so. “As it was our first product we really just put it on the web and let people go for it,” Slade says. Day one of the launch saw two memberships, as did day two, three, four, and five. The rate gradually picked up to three or four memberships per day, and by the end of the first month, SaleHoo had  a grand total of 100 paid up members, at the starting price of $29 for a lifetime membership.


After the launch – Letting Go

One wonders what Silicon Valley start-ups would think of this approach. Relying on word of mouth and virtually no promotion SaleHoo continued to grow.  Eight months after the launch the site had 10,000 members, though Slade was cautious about expanding or diversifying too wildly. The launch is the primary release but the process of letting the product go continues well after the launch date. The question remained; How much power or influence should be given to the users?

Slade concentrated on what he knew and sold SaleHoo memberships on Trade Me until the auction site prohibited the sale of digital items in mid 2006. By focusing on his knowledge of auction sites Slade was able to listen to the SaleHoo community with the ear of an expert. Users would email their suggestions in. “At the start if someone needed a list of suppliers and asked for support I would go through the list and hand-pick suppliers I thought suited the member.” However, the sheer amount of feedback was now overwhelming.

The first major addition to the site arrived a year after its launch. July 2006 saw the creation of a Member's Forum. Starting an open dialogue with the members where other more senior members could participate was a natural step for SaleHoo. And it paid off: allowing users to take the lead generated a more fluid process of development.

Yet development was not without speed bumps. Around the same time as the addition of the members’ forum, a competitor of Slade's created a hate website not very originally named “SaleHoo Sucks.” “I think it was a first for New Zealand start-ups! How many others can claim to have a hate site dedicated to their product?” The site soon fizzled out, the impact on sales barely registered, and SaleHoo continued to thrive.

Giving users the tools to run their own businesses was part of letting go for Slade. “It's all well and good to release a product and not touch it, which is what we found other Supplier Directories were doing, but by constantly working with the community, and letting them set the tone for the discussion we were able to generate independent users that were also productive community members.”

In conjunction with SaleHoo's software developers and users the Product Research tool was added in mid 2007. By entering a product name the tool searches eBay and informs the user of the current advertisements across the Internet, the competition and prices on eBay, as well as the total demand for the product by searching the Want It Now marketplace. By analysing these factors the Product Research tool  gives an overall rating called potential. The higher the better: for instance, iPod nanos come in at 65% due to their relative saturation but high demand.

“The feedback we received was encouraging, though there were a huge number of different opinions and suggestions flooding in, I had to think, what was the problem I was originally trying to solve?” The answer: Quality suppliers that were reliable.

Slade narrowed his focus and implemented a three tier review process for suppliers. “When a supplier applies to SaleHoo for inclusion in the directory SaleHoo employees verify the authenticity of the company. Following this one of fifteen eBay Powersellers will buy from the supplier and make the results public. Finally SaleHoo members are able to name and shame suppliers they've had bad experiences with. “We don't encourage defamation in any form whatsoever, but it's important that our members are aware of possible threats to their business.”

Slade made the call to leave bad suppliers in the directory, “if they've been reviewed and are found to be under performing then it's best that our members know. It also gives the supplier a chance to improve. SaleHoo's success relies on the success of its members: we're not in the business of creating clones who all sell the same thing, SaleHoo is a tool that belongs to the members.” 
 
Things I've Learnt

Last month SaleHoo breached 50,000 paid members worldwide. The refinement will continue and Slade has been working on his second start-up project due for release later this year. I asked him about the lessons he would be taking on, “Every startup will be different but tackling the problem of when to launch is the common denominator.”

Slade stresses that letting go is not just at the launch, it is something that continues well into the life of the product. If you can involve your users in the development process you will have a much more valuable product at the end when looking at exit strategies or further opportunities. Slade gives five lessons that are universal:

Release Early If Possible: Releasing early is better than releasing late. Being the first to market is an incredible advantage to have if you can capitalise on it. This doesn't mean releasing a product that isn't up to scratch as far as programming goes. It needs to be solid and it needs to be adaptable.

Commercialise Quickly: Getting the product out early also means monetising and commercialising more quickly. The problem with a lot of startups is that they focus on development and then pitch to Venture Capitalists or other investors. If you can make a product profitable earlier then a lot of the strain of developing can be reduced.

Listen to and Trust your Users: The pressure can be reduced even further if you trust your users. At the end of the day these are the most important people to your start-up. They are the ones using it so it makes sense that they will have the best idea on how to improve it. The best ideas we had to expand SaleHoo came from our members. That said, be flexible but don't be flakey. There is a difference. Trying to meet every single demand is impossible, caving in to every request will leave you floundering without direction.

Know your industry: Having an absolutely rock solid knowledge of your industry is vital. If you haven't done your research before it's too late now. I was able to take on board the opinions from the members because I had been one of those people using eBay and Trade Me.

Don't overextend: As the noise around you increases returning to the original problem, and your original business plan becomes more important. Don't overextend yourself, before we began hiring staff and getting offices our first cheque was spent on a faster server so the page load times were improved for the users. And even as new ideas came rolling in we implemented them on a time scale that was realistic and used the members to gauge which features they wanted first.

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