“Distribution is a Hell of a Drug”

For the past few months, I’ve been obsessed with what I refer to as “The Wilsonian Framework” for assessing the stages of a software or infrastructure startup. Of course there are nuances that are missing, but the framework, articulated by Fred Wilson, sums up the phases a startup will go through. To paraphrase, first the company builds a product, then a business around that product, and then a company. For instance, Google built their search engine, developed an ad network through it, and then built a hugely successful company. On the other hand, as Wilson points out, a company like Twitter built a product, then built a company, and is now building a business. It’s not that Twitter is wrong, but it is a different case and one that isn’t entirely normal. (It’s worth pointing out that it’s really, really hard to get even to product/market fit, the first stage in this framework.)

The part I’ve been thinking about is one big piece that I think it’s missing — or that is worth mentioning as a fourth pillar: Distribution. As Eric Eldon famously tweeted, “Distribution is a hell of a drug.” Now, Eldon may be referring to the fact that his publication, TechCrunch, enjoys massive distribution across content sites and social networks worldwide, but he also may be channeling his reverence for the mechanism by which companies actually begin to scale and grow into much bigger entities, to break out the tech ecosystem and into mainstream, or to get lots of customers. “Distribution” is just a proxy that leads to growth, which leads to scale, which leads to adoption and the chance for networks effects and lock-in, which leads to quality revenue, margins, and leverage. If it’s so important then, maybe the framework should be amended to read: “Product, then Distribution, then Business, then Company”?

I am a “work in progress” so please take anything you read here with a large grain of salt. To me, “distribution” is defined as a strategy by which your product is able to efficiently reach a target set of users or customers, either by a specific segment (e.g. high-value) or by sheer numbers (1m users). For the past two years, it has seemed that the drug of choice has been acceleration through platforms like mobile (iOS and Android), social networks (Facebook or Twitter), and by building features into the product and experience — everything from social sharing defaults to referral marketing programs. Distribution for each app, website, or new service is going to be different and unique to that particular “thing,” so there’s really no way to categorize “how” to get distribution right other than to boldly underscore that it’s really, really important. It’s a hell of a drug. It gives you a natural high and leverage. It requires some actual sales and marketing. And, it seems to gel into a strategy and tactics only after much thought and deliberation. If a startup team cannot articulate how they will distribute their product, that strikes me as problematic. Again, this is just one bloke’s uneducated opinion, but the issue of distribution is too often overlooked.

Haywire is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2014 Semil Shah.

“I write this not for the many, but for you; each of us is enough of an audience for the other.”— Epicurus