THE AUDACITY OF ZERO

 

Despite IMVU’s early success, our gross numbers were still pretty small. Unfortunately, because of the traditional way businesses are evaluated, this is a dangerous situation. The irony is that it is often easier to raise money or acquire other resources when you have zero revenue, zero customers, and zero traction than when you have a small amount. Zero invites imagination, but small numbers invite questions about whether large numbers will ever materialize. Everyone knows (or thinks he or she knows) stories of products that achieved breakthrough success overnight. As long as nothing has been released and no data have been collected, it is still possible to imagine overnight success in the future. Small numbers pour cold water on that hope.

This phenomenon creates a brutal incentive: postpone getting any data until you are certain of success. Of course, as we’ll see, such delays have the unfortunate effect of increasing the amount of wasted work, decreasing essential feedback, and dramatically increasing the risk that a startup will build something nobody wants.

However, releasing a product and hoping for the best is not a good plan either, because this incentive is real. When we launched IMVU, we were ignorant of this problem. Our earliest investors and advisers thought it was quaint that we had a $300-per-month revenue plan at first. But after several months with our revenue hovering around $500 per month, some began to lose faith, as did some of our advisers, employees, and even spouses. In fact, at one point, some investors were seriously recommending that we pull the product out of the market and return to stealth mode. Fortunately, as we pivoted and experimented, incorporating what we learned into our product development and marketing efforts, our numbers started to improve.

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But not by much! On the one hand, we were lucky to see a growth pattern that started to look like the famous hockey stick graph. On the other hand, the graph went up only to a few thousand dollars per month. These early graphs, although promising, were not by themselves sufficient to combat the loss of faith caused by our early failure, and we lacked the language of validated learning to provide an alternative concept to rally around. We were quite fortunate that some of our early investors understood its importance and were willing to look beyond our small gross numbers to see the real progress we were making. (You’ll see the exact same graphs they did in Chapter 7.)

Thus, we can mitigate the waste that happens because of the audacity of zero with validated learning. What we needed to demonstrate was that our product development efforts were leading us toward massive success without giving in to the temptation to fall back on vanity metrics and “success theater”—the work we do to make ourselves look successful. We could have tried marketing gimmicks, bought a Super Bowl ad, or tried flamboyant public relations (PR) as a way of juicing our gross numbers. That would have given investors the illusion of traction, but only for a short time. Eventually, the fundamentals of the business would win out and the PR bump would pass. Because we would have squandered precious resources on theatrics instead of progress, we would have been in real trouble.

Sixty million avatars later, IMVU is still going strong. Its legacy is not just a great product, an amazing team, and promising financial results but a whole new way of measuring the progress of startups.