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How to Found a Startup in a New Industry

NextView
February 4, 2016 · 5  min.

Most startups’ founding mythologies are full of the same phrases: “hard work,” “agile strategy,” “smart scaling.” But one of the most undervalued and elusive factors is timing. As they say, timing is everything. Arrive to the market too soon and there’s no demand for the product. Arrive too late and you’re light years behind your competitors. But there is a sweet spot, and it’s usually found through a mix of smart industry analysis and luck.

In a recent TED talk, Idealab founder Bill Gross talked about how Airbnb likely wouldn’t have taken off if not for the recession: People were strapped for cash and were therefore more willing to rent a room in their home to a stranger. On the flip side, Gross talked about Z.com, an entertainment company he backed. When Z.com was founded, quality broadband connection wasn’t as widespread as it is now, making it a pain to stream video. Just two years after the company went out of business, YouTube exploded.

The lesson? Timing matters.

My company experienced firsthand how critical that combination of spot-on industry analysis and pure luck can be. We founded Contently as a marketplace to connect freelance journalists to publishers, yet we ended up in a marginally related—but different—industry. As we began trying to broker deals as a talent platform, we realized that there was a big opportunity to redefine ourselves as a SaaS company that would help brands create quality content—what you now likely think of as content marketing, which didn’t even exist at the time.

But just being there early isn’t enough. Your company has to be able to capitalize on its lead in the metaphorical horse race, and that’s often easier said than done.

The perks of being early in the marketplace are obvious: shorter sales cycles due to lack of competition, less competition for top talent, and so on.

The challenge, however, is that there will be people—VCs, potential customers, and employees—who don’t understand the concept, or don’t see the value of your product. That happened regularly at the beginning of Contently’s existence. Since we were among the first in a new industry, we had more than a few VCs and potential customers thumb their nose at the very idea of content marketing.

That’s both a perk and a challenge. Defining a nascent industry is full of potential pitfalls—but when it’s done right, it can be a huge advantage.

Here are three keys to creating a startup in a new industry.

1. Don’t skimp on thought leadership

In a new industry, every company has an impact on the industry as a whole.

For example, one of the top traffic camera companies, Redflex, was involved in a massive bribery scandal. In obvious ways, this made business easier for Redflex’s top competitor, American Traffic Solutions. But it also gave the public and public officials more reason to doubt the industry. (And who doesn’t want an excuse to hate traffic cameras?)

While this is less pronounced in unregulated industries, the concept remains the same. If people don’t believe in your industry, what reason would they have to believe in you?

You can combat this by promoting the industry rather than your company. It’s counterintuitive, but it’s important to speak at conferences and publish bylines in articles without mentioning the company. It promotes the industry and positions your executives as industry leaders without hitting the audience over the head with a sales pitch.

Take this article my co-founder Shane Snow wrote for Mashable a few months after we founded Contently. You’ll notice that beyond Shane’s initial byline, our company is never mentioned. Instead, the article explains the industry at large and addresses an issue—proving content’s return on investment—that was causing companies to doubt the industry.

mashable shane snow

If you’re thinking this is a big time commitment, you’re right. But you don’t have to look far to see the value. Take serial entrepreneur Mike Lazerow, who founded Buddy Media. While running Buddy Media, which was acquired by Salesforce, Lazerow made time to write about digital media trends for publications like Fast Company and Ad Age. When skimming his articles you’ll notice that he only mentions his company when it’s relevant to the point he’s making and simultaneously adds value for the reader.

2. Lead by example

To not lead by example or practice what you preach would be like Netflix CEO Reed Hastings having a giant satellite dish mounted on the front of his house—it’s not a good look.

Leading by example has two key parts. The first part is to use your own product when appropriate, even if your company isn’t the exact target customer demographic. If you’re not using it, why should anyone else? The second part is to use your product in a way that demonstrates the value of your industry.

We used our platform to build our own publication, The Content Strategist (which now reaches more than 300,000 marketers a month), to show potential clients and the martech industry as a whole what content marketing was and how it could work. At the time, it wasn’t the traditional startup marketing route, but how could we approach prospects and tell them their brands would fail without quality content if we didn’t have it ourselves?

This depends on the product, of course. But if you’re a B2B company, you can be your own best case study—before you even have great case studies.

3. Make talent a top priority

Like a lot of startup founders, I’m a huge nerd. I would rather build product, learn new code, and read Hacker News than suffer through awkward hiring interviews.

Well, as my grandma would say, “Tough noogies.”

Hiring top talent is one of the most important things you can do as a founder. Y Combinator President Sam Altman—and just about every other successful entrepreneur—has said that hiring will, and should, require a significant amount of your time.

By bringing on top talent early, you can demonstrate that both the industry and your company have potential. You’ll also build a team early that will help secure your company culture, which, in turn, will help secure more top talent. It’s a cyclical process that starts with the first few excellent hires, the importance of which cannot be overstated.

talent loop

When you’re at the forefront of a new industry, your competitors are a bit like siblings or cousins when you’re growing up. You might be in a battle for who’s more popular at school, and they’ll probably drive you nuts, but at the end of the day their reputation will affect yours.

As a founder in a new industry, it’s your responsibility to gain respect and credibility for the the entire industry. And if you end up being the most popular startup at school, all the better.