Law #22: The Law of Resources
30 Jun 2004
(This entry is part of a series I am writing on
Immutable Laws of Marketing.)
The Law of Resources says that "without adequate funding, an idea won't get
off the ground". The gist of the chapter is that marketing is very
expensive and you have to be prepared to spend big bucks on advertising if you
want to be successful, so you're going to need a lot of funding from your
Preaching these ideas to small ISVs is like showing up at your local
Alcoholics Anonymous meeting and telling everyone that a little red wine every
day helps the heart.
Like most of my marketing articles, this series has been about taking the
best stuff from the world of marketing and applying it in a small ISV.
Some stuff works well in our context, and some stuff does not. My
goal is to help make a clearer distinction between these two categories.
Sometimes I shine a bright light on something which simply isn't going to
be a good fit for most small ISVs.
Chapter 22 is one such example. Strictly speaking, the advice in this
chapter is all true. Marcomm is expensive. Grabbing mindshare costs
a heckuva lot of money.
But that that doesn't mean everybody should go get funding and start running
ads. Magazine ads and venture capitalists are two of the most common ways
to kill a small ISV.
I'd like to express my affectionate concern for NewsGator, who announced the closing of a
round of VC funding last
week. I met Greg Reinacker a couple of trade shows ago. He seems
like a good guy. I use his product every day. I admire what he has
accomplished with NewsGator.
On the one hand, I am excited for Greg and the opportunities he can now
explore with deeper pockets. I also see this funding announcement as a
very nice sign of momentum for blogging and RSS.
However, I am concerned. I worry that Greg has taken the first step of
converting his excellent small company into a lousy big one. I'm not
saying that VC money is always a bad decision. But just because a
company is a wonderful success at one level does not mean it can be a success at
a larger scale. Once you take the VC money, you can never go back.
Some companies lose
their stride as they try to
force themselves through the transition from small to big.
If this happens, I'll be okay, since I can easily find another RSS
reader. But Greg will have lost something precious.
Even in companies with huge resources, chapter 22 is likely to serve as
ammunition for the marcomm guy who is always trying to convince you to spend
more money. He will quote chapter 22 as if it were scripture, trying to
make you feel guilty for underfunding your marcomm efforts.
But the real problem is in taking chapter 22 out of the context of the rest
of the book. This chapter is the last one in the book, and for a good
reason -- it depends on the other 21. Marketing has two phases,
strategy and communications. No matter how much money you have, don't
spend money in the communications phase until your strategy stuff is done and