Startup
Sell it before you build it
How to find out if people will pay before you spend on building · 14 min
Startup
Sell it before you build it
How to find out if people will pay before you spend on building · 14 min
In July 1999, a few weeks after opening, an online grocer agreed to build warehouses estimated at a billion dollars. Eight years later, a programmer with an unfinished product made a three-minute video instead. How much to build before anyone pays, why a price is a filter, and a test you can run before Friday.
Takeaways
- In July nineteen ninety-nine, a few weeks after opening, the online grocer Webvan agreed to build up to twenty-six more warehouses, at an estimated cost of about one billion dollars; by early two thousand and one its Oakland warehouse averaged about two thousand one hundred and sixty orders a day against a break-even of about three thousand and a capacity of eight thousand, and it shut down in July. In two thousand and seven and two thousand and eight, Dropbox showed short videos before its product was ready; one took its waiting list from five thousand to seventy-five thousand people in one day.
- A sign-up shows who is curious; a price shows who is serious. In a door-to-door field experiment with more than a thousand households in Lusaka, Zambia, those who agreed to a higher price for a water-cleaning liquid were more likely to actually use it, while the amount they finally paid made no consistent difference. One city, one product: a filter, not a law.
- Something to try: before Friday, a test that needs no building: a plain description that says it is not ready yet, a picture or short video, and a way to commit that costs something, such as a small deposit you will refund in full if you do not deliver.
Chapters
- A billion dollars, one month in0:17
- Build it properly1:55
- A price is a filter3:33
- A video and a warehouse6:19
- Same picture, different test8:36
- Build yours10:09
- The answer12:05
References
- Webvan Group, Inc. (U.S. Securities and Exchange Commission, EDGAR) — Webvan Group Inc - Form S-1(1999)
- CNN Money — Webvan's IPO checks out(1999)
- Knowledge at Wharton — Webvan Finds that Shopping for Food Online Hasn't Clicked with Consumers(2001)
- CNN Money (CNNfn) — Webvan shuts down(2001)
- Las Vegas Sun (with Associated Press wire copy) — Nevadans lose jobs at 'Net's Webvan(2001)
- Associated Press (via HeraldNet) — Webvan shuts down, leaving 2,000 out of work(2001)
- Houston, D. (Hacker News) — My YC app: Dropbox - Throw away your USB drive(2007)
- Houston, D. (SlideShare) — Dropbox Startup Lessons Learned(2010)
- Ries, E. (TechCrunch) — How DropBox Started As A Minimal Viable Product(2011)
- Ries, E. (Startup Lessons Learned) — Minimum Viable Product: a guide(2009)
- Ries, E. (Stanford eCorner) — Building the Minimum Viable Product (transcript)(2009)
- Publishers Weekly — The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses(2011)
- Ries, E. — The Lean Startup | The Movement That Is Transforming How New Products Are Built And Launched
- Ashraf, N., Berry, J. & Shapiro, J. M. (American Economic Review) — Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia(2010)
- Ashraf, N., Berry, J. & Shapiro, J. M. (AEA RCT Registry) — Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia
- J-PAL (Abdul Latif Jameel Poverty Action Lab) — Can Higher Prices Stimulate Product Use? Evidence from a Randomized Experiment in Zambia
- Ashraf, N., Berry, J. & Shapiro, J. M. (NBER) — Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia(2007)