BC STARTUP
Saved by @ThomassRichards

Today's thread is on the affiliate business model. Many years ago, I used to be an affiliate marketer. If there is any way to get schooled in marketing, becoming an affiliate marketer is probably the best way.

What is affiliate marketing and why should you care?

Read on >>

 1) Affiliate marketing is selling products or generating leads on behalf of other companies and getting paid a commission for those products.
2) Some notable examples you've seen before:

NerdWallet - you read their articles on best credit cards. You click on a link to one of those cards. You fill out an application. They get paid for delivering that lead to the cc company.
3) In https://t.co/kSfWS69ybp - same thing. Any of their financial products -- you fill out an application, and https://t.co/mCrBT43mOj gets paid for that.

But the affiliate revenue model applies beyond financial services products.
4) Wirecutter -- you see a neat product they review or talk about. You click through and buy.

Wirecutter gets a cut of that transaction.
5) The affiliate business model shows up a lot. And there are a lot of marketers who make a living promoting 3rd party products by being really good are driving traffic to these types of offers.
6) Let's start by talking about the challenges of the model.

At a high level, driving traffic to product offers (of any kind) is REALLY HARD. Specifically, it's hard to keep your customer acquisition costs (CAC) low and make enough money off the commission.
7) In particular, a lot of high volume affiliate marketers like to use ad networks to do this. And at market efficiency, this is near impossible.

For example, if I want to promote Apple Macbooks, I only make a commission on a sale, so I can spend up to a certain limit in ads.
8) But Apple, on the other hand, is making a much higher margin off a Macbook sale, so they can afford to outbid me in ads and spend more per sale.
9) In addition, there are probably a TON of other affiliate marketers that I'm competing with to get the sale. It's a brutal game for common household products.
10) Moreover, you only get the commission if the co can link the sale to you. So you get a special prod link to make this work.

But what if the customer clicks your link to the prod & doesn't buy & later goes to that same product pg on a different computer & then buys?
11) You don't get the credit. You don't get paid. That's it. So you could be driving traffic that you don't get paid on.

Historically, if you were also not the last "touch" w/ the customer, you would also not get paid even if the co could see that you had an initial touchpt.
12) One last issue is that typically customers forget the site who referred them to the end product so it's hard to "own" and retain your audience to increase their LTV over time.
13) For all of these reasons, I generally think the affiliate business model is RIDICULOUSLY HARD.

And anyone considering using it for a startup should probably start by being an affiliate marketer for 2 weeks just to learn.
14) That being said there are a few ways I've seen this work really well.

A) You negotiate and have access to unique products. This mitigates competition in customer acquisition channels. You can also discuss higher commission rates.
15) B) You build an audience around something else. And don't really worry about the monetization optimization at first.

NerdWallet -- community for the most honest reviews
https://t.co/mCrBT43mOj -- keeps all your finances together
16) For both of those sites, monetization isn't in your face, and they focus on retaining the user in the community -- keep you coming back to their site so that over time you will buy lots of products.

You have to be really patient.
17) C) Don't use paid customer acquisition channels because you can't afford high CAC. So you need some level of virality or strong patience via SEO as a channel.

VCs btw don't have patience so likely not VC backable at the earliest stages (which is fine but just know that)
18) D) For affiliate marketers -- offer discounts and coupons to be "last touch" on a sale and have high ad budgets to play with to generate a handful of successful campaigns that convert on offers right away.

(This likely doesn't apply to anyone starting a startup)
19) E) Run the affiliate business model in less crowded geographic markets and/or languages.

One of my acquaintances is a successful affiliate marketer & runs ads for offers in Spanish & the competition for Spanish ads a few yrs ago was basically zero. So her CAC was cheap.
20) F) Negotiate with newer products/companies so that you can make the sale on your site to control the whole sales experience + higher commission.
21) This feels like a niche business model, but it actually shows up all the time where you may not have noticed it.

Even Uber or other cos that have referral codes have marketers racking up free rides / credits -- that's affiliate marketing.
22) Lastly - so if you are using the affiliate model as your startup's business model, think about how you can avoid some of the challenges mentioned above to improve your commissions, reduce CAC / avoid competition, and ultimately "own" the end user to increase LTV over time.
If ppl are wondering how can I sign up for an affiliate mktg prog to see how this works? There are lots incl Google Affiliates, Commission Junction, Amazon Affiliates.

I.e. if you sign up & promote Amazon's products, you will earn a commission of sales:
https://t.co/kDf9PAhhxT

More from Elizabeth Yin

Elizabeth Yin
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Some wed night thoughts on investor “value add”:

1) At the end of the day, money is a commodity. That mere fact should make every vc shudder.

It is amazing how many ppl (incl myself) clamor to get into a commodity business!

2) As such, to differentiate, different investors provide other things beyond money. Sometimes it’s community. Sometimes hiring help. Sometimes expertise or sector-focused networks. Etc

3) And some VCs are truly value add! For example, if I had an edtech co, I would hands down raise from @jwdanner - he has been there as an entrepreneur, built schools, and invested in so many hit edtech companies.

4) But at the end of the day, regardless of who invested in you, it’s the founders + team who are doing all the work.

5) when I think about what I’ve done for my own founders, it’s ranged from doing intros (mostly to other investors) to cust acq advice to feedback etc

But the reality is - all of my founders would’ve figured out how to get that intro or that piece of advice w out me
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Last week, I wrote a thread about generating momentum for startups.

Today's thread is on how emerging fund managers can generate momentum for their fund.

Whatever you do, momentum is so impt to get ppl onboard -- for hiring, for sales, for fundraising.

Read on >>

1) First, why does momentum matter?

Think about it from the "buyer's perspective" -- it is almost ALWAYS better to wait and get more information if you can get the same deal. Right?

More info on a potential investment. More info on a new product. Etc.

2) There are few situations where it's impt to be a first mover.

If you're a product buyer, it could be you have a dire situation at your company that alternatives can't handle.

But if you have a decent alternative (alternative product or alt investment), it's better to wait.

3) That means it's YOUR JOB to create momentum. Whether for fundraising, sales, or hiring.

So with that in mind, how do you generate momentum for fund fundraising?

4) In a prior tweet about generating momentum for startup fundraising, essentially I said to limit your supply (the amnt you are raising) in tranches AND to increase demand by packing in mtgs.

Unfort this doesn't quite work well for funds.
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@dunkhippo33
Some gems from @MacConwell of @RarebreedVC in Clubhouse right now:

1) VCs are looking for startups that can get to $100m / yr in rev by yr 7-10.

VCs need this kind of return in order to produce great funds.

2) And so many companies won't get to this level - and that's not a bad thing - but then it means you should be thinking about trying to get going w company revenue since you can't count on VC backing.

3) someone asked about age and fundraising & do accelerators help?

Age doesn't matter. But just make sure no one is taking advantage of you. And as such, accelerators can help sometimes w that guidance.

4) Someone got a rejection because he had a teddy bear in his room (side note: what investor says that?!?)

Mac says he's been there and has heard that saltiness. But you're going to get a lot of nos. And you gain more leverage w more progress and traction. So just keeping going.
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Saturday thoughts on market pull. What is it? How is it different from Total Addressable Market (TAM)? And what ideas tend to have strong market pull?

A thread >>

1) First: "Market pull" != market size.

IMO (and most VCs will disagree!!), market size (TAM) doesn't *really* matter. But market pull DEFINITELY does. For that reason, I've almost never asked a startup about TAM.

Why?

2) First, what is TAM?

TAM is a sizing of how big your market is. A good way to estimate this is - if you can get to all potential buyers and based on how much $$ they are worth to you, how much money can your company make if you took the whole mkt?

3) An example: Say we run an e-commerce site that sells hippo food. TAM in the world:

-1000 zoos have on average 3 hippos = 3000 hippos.
-Each hippo eats $100 worth of food each day
-365 days * $100 * 3000 hippos = $110m per year globally

4) But, we'll come back to this.

Why I don't like TAM - it doesn't take into acct a few things:

A) how hard it is to get customers
B) how much more you can upsell once you have customers
C) how fast the mkt is moving up or down
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
A thread on employee equity in early stage startups -- what are the compensation norms? What every early employee should ask? Some thoughts on whether the structure is fair.

Read on >>

1) First, there are NO NORMS! Hah. I have literally seen everything from giving early employees no equity to giving employee #1s near co-founder level of shares.

But what is more common than not?

2) In the Silicon Valley, if you're hiring your 1st employee, & you've raised NO $$ & are paying very little (e.g $0-$10k / yr or thereabouts), your first employee is basically a co-founder.

And the equity tranche for employee 1 should be closer to a co-founder level.

3) For ex, a friend of mine gave his employee #1 10% (vesting over 4 yrs of course) of the business. This employee was only getting his housing paid for. And this was 10 yrs ago, so it was during the bust.

4) On the flip side, if you have raised some $$ & are paying employee #1 near mkt rate, typically I see around here ppl get 1-5% (w/ vesting).

Caveat - near mkt rate doesn't mean compared to Google or FB salary rates. I mean compared to "normal big cos"
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THREAD: Most advice is garbage

Here's some advice you shouldn’t listen to on startups, careers and life:

“90% of startups fail”

If you’re building a startup for the money, please quit

You’re probably better off working for FB or AMZN and rising the ranks

A successful startup isn't just about the valuation. It's about impact on your team, the world and yourself

The journey is 🔥

“You'll sleep when you’re dead”

If you don't sleep, you'll BE dead

Sleep is crucial to a happy mind and body

Without sleep, you become "foggy drunk", unable to take control of your life, startup or career

Beware of hustle culture and sleepless nights

“Become a doctor, lawyer etc”

This is probably some of the most undercover toxic advice parents can give to their children

The internet has opened the doors for anyone to become anything

Discover WHO you want to become before you decide on WHAT you want to become

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- You can't get the benefits of the internet without talking to strangers

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Growth Tactics
Growth Tactics
@GrowthTactics
THREAD: How to grow your startup through referrals, and word of mouth.

(Actionable tactics from working with 400+ startups)

Here's the truth: Your startup most likely won't make a video and go viral like Dollar Shave Club.

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There are 3 ways to grow through your current customers:

1. Product-led growth: Your product is built for sharing.

2. Word of mouth: Users proactively recommend your product to friends.

3. Referrals: You create an incentivized reward program.

Let's dive into each 👇

Product-led growth.

It's powerful: You don't have to artificially incentivize users to refer—you simply empower them & get out of their way.

E.g. To pay someone with PayPal, the payment recipient needs to first join PayPal—they're incentivized to sign up to receive their cash.

Product-led growth is possible when ppl use your app to:

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@fintechjunkie
1/23: One #startup trap to avoid (founders and VCs) is to fall in love with a value prop that can’t be delivered IRL now. Good diligence will surface disconnects but they’re often brushed under the rug by #VCs who believe fixing delivery over time will be fine. Unpacked:


2/23: The foundational reason why this matters from day 1 is that building a franchise of loyal customers is difficult for any #startup to pull off but the challenge is amplified if the #startup has to rebuild its franchise as it scales.

3/23: Broken or unfulfilled promises lead to customer behaviors that have real consequences. Poor ratings and reviews. High customer service costs. High complaint volume. Low engagement. High attrition/returns/cancelations. Low organic growth.

4/23: Undoing damage takes time and sometimes is nearly impossible. Convincing inactive customers to “retry” your product isn’t easy. Overcoming bad reviews can be a Herculean task. And resources will be thrown at fixing past sins at the expense of new functionality.

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Jon Brosio
Jon Brosio
@jonbrosio
How to build a $100/day digital side hustle.

A dead simple guide to get you started:

Since 2020, I've:

• Built an online audience of 80k+
• Sold $150k+ in digital products
• Secured $50k+ in contracts
• Generated 100M+ views

It all helped me build a side hustle that allowed me to leave my 9-5.

If I had to start from scratch, here's what I would do:

1. Find your "niche-of-one"

This is found at the intersection of:

• What you're good at
• What is already popular
• What is currently profitable

The three ingredients of a profitable, money-making side hustle.

2. Start on Twitter

Why?

Twitter is the best audience building platform because:

• You can DM creators
• You can collect rapid data
• You can quickly execute on publishing
• You can mix short and long form content

(And we'll leverage the content later)

3. "Borrow" your core audience

Most people:

• Publish into the void
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@WilsonCompanies
This is a very long thread. @SamtLeslie asked to give the playbook for service companies so here it is. Follow it and you’ll get to 5M+ in a few years.

This is pure operations playbook.

No leadership, financial or HR discussion. Enjoy.

Industry:
Doesn’t matter much. @sweatystartup has an awesome list of service industries on his website that will get the job done.

Trades:
If you are under 3M and in multiple trades you’re doing it wrong. I was there and it was a mess.

Businesses under 3M don’t have good system, managers, effective onboarding, training, hiring practices, or pricing methods. If you did then you’d be bigger.

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Multiple trades doubles that mess. Get your first business figured out then work on another.

I would recommend earliest 4M to add a second trade, if at all. Any earlier you’re splitting focus and treading water.

Focus Focus Focus.

Software:
If you’re using anything besides Servicetitan then please stop and go get Servicetitan. No other software even close to their capabilities.

It is 50% more expensive than other programs on the market while making you 100% better than any competitor not using it.
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