April 25, 2014

Selling Vaporware

Allow me to share with you one of the great secrets to success in business...

In order to be successful in business, the first requirement is that you actually BE in business, and it is to this topic that I refer.  Most startups never get to the point of actually being in business because they have to do (list of other stuff) first.  This strategy is flawed.

Most startups would argue that there is some initial period of being in business that is devoted to product development, whereby a product is built, and only then is the search for customers, and the ultimate exchange of cash for software.

What I mean by "being in business" is characterized by talking with customers about their needs and charging them real money to provide the solution. If you aren't doing that, you're not in business.

I learned this first-hand when I started my software company.  I didn't have a product, and I didn't have, and couldn't borrow, any money.

It is when your back is squarely up against the wall that you get most creative.

I had to sell a product that didn't exist.  In fact, I had to do that in order to get the money to live until I could build the product, so I could deliver the product and get paid.

I educated my first customer to understand what sort of a solution he needed, and then gave him the opportunity to enjoy this fine product in a couple of months, and all it would take to achieve this yummy goodness is his autograph on a check for half the price now and half on delivery. He readily agreed, and then I informed him that the only other condition about the software was that it would be my property, he would get to use it in perpetuity, and that he would get all support and updates for free. His forward-thinking reply was that it's irrelevant who owned the software, only that he gets the benefit of using it.

Imagine the beautiful moment when you turn an idea into words and then into cash!  This was the beginning of Remote Control International, and my product TeleMagic, the first CRM* product for the PC, in 1985.

Some startups think that they need seed capital in order to build a product, but I respectfully disagree as a general principle. Selling stock instead of selling your product (the one that doesn't exist) is a sucker play. Seed capital is the most expensive money your could ever get.

Because of the Vaporware approach I took, I was able to retain 100% stock ownership from startup through the Exit. It was very rewarding.  :)

Check out this neat post about the subject of Selling What Doesn't Exist. Interestingly, it is from another CRM (close.io) founder.

*CRM is the acronym for Customer Relationship Management and describes a category of software that facilitates customer/prospect interactions.  Since TeleMagic was the first product of it's kind in 1985, there was no category.  Soon after I started selling, there were many competitors, and software of this type was known as Contact Management software, then Sales Automation software, and now Customer Relationship Management software. Whatever the name others gave it, I always saw it as one of the elemental products that every person needed.