why permission marketing is bootstrapping

his own experience learned seth godin, that old marketing rules are partly obsolete.

not the 30 second "super bowl" ad makes the difference any more. nor the top down political marketing campaign. bottom up is the "new" blue! but did not start.ups alway to do that - somehow?

back to the start. in seth godin´s book "permission marketing" he describes how he had the opportunity to spend $6 million in old style marketing ways. putting up big adds, tv commercials, big sponsorships. only to realize that the return on business was negligible. his conclusion he wrote down in his book in typical american business book style.

he finds out, that it is necessary for marketers to shift from attention to permission marketing. establish a customer relation in steps from light involvement to heavy. and always give back to the customer one every deepening of relationship.

this is nothing new for start.ups. let aside the internet bubble this is how start.ups are forced, limited by financial constraints, to approach their customers. it is called "bootstrapping". keep costs low, focus on your most likely target. approach it in the most cost effective way, such that a long term relationship can be established.

this might not please the egos of the big marketing spenders in the big corporations. their pr/marketing agencies will promise them to establish also permission marketing campaigns for them. "big" surely in money terms.

what start.ups can take from the ideas of godin is, how they can structure and monitor their way to approach their customers. to find out what is behind godin´s five steps is worth reading therefore for start.ups.

„long tail“ financing? 1/2

starting a „long tail“ business means challenging financing conditions. micro financing and/or a 2 phase approach could work.

chris andersons´s book “the long tail” points out that sustainable business can be build on large amounts of low turnover items. but how to finance such a business, where investors will see a return only in the long run? two proposed approaches seem applicable.

first, micro finance it. avoid costs (using free open source software for development, a business which hardly requires any own stocks or heavy capital investments, evangelise and build your – working for free and enjoying it - core team, use guerrilla marketing). prepare to keep the day job and drive the idea for as long as it takes to generate cash flows.

institutional investors will, at least in central europe, not be interested to finance this stage. how to still get them aboard, read the second part of the “long tail financing”.

selected business angels or incubators which see further ahead then most of their colleagues could be interested. bringing along limited but sufficient financial resources, like €20.000 per investment, they focus on developing and driving the business model. the downside for founders is, they can be expecting up to 50 percent of the company. therefore real business value has to be found within their business networks (marketing, sales, finance, people).

if giving away shares is not the preferred way, but small initial cash requirements can not be covered buy the founder, convertible loan agreements can be interesting. handing out tranches not lower then €10.000 per investor and putting them all under one trustee agreement keeps administration at a minimum. this micro finance allows to attack the long tail from it´s tail.