Article

Roland Pokornyik
Roland Pokornyik 11 January 2017

11 Lessons Every Business Should Learn from Groove's Startup Journey

I decided to write this article and invest 40+ hours of my time to read and analyze the Groove's startup journey and come up with a shorter, consumable article which will help entrepreneurs like me to understand the ins-and-outs of their growth. There's no such thing as overnight success! That's a fairytale.

Over three years have already passed since we began our full-time startup journey from Budapest.

We had serious ups-and-downs and are still looking for the best way to grow our SaaS business.

Thankfully, we are purely financed by paying customers so we are not dependent on investors. We have a VC company on board who gave us total control over business operations, so we can do whatever we think is best for our growth.

I have to admit that we made tons of mistakes in the last three years. But that's entrepreneurship. If you don't try, you never know.

Image source: Zerotoalpha.com

For true learning, you have to get out of your comfort zone and learn the hard way.

I'm sure Alex Turnball - the founder of Groove - has been there a thousand times, before he ended up building a super successful company with nearly $500k MRR and still growing.

I adore entrepreneurs like Alex, especially since he shares every step of their journey to help others to avoid the mistakes his team already made and help them to grow - and become a Groove user once in a while of course.

I decided to write this article and invest 40+ hours of my time to read and analyze the Groove's startup journey and come up with a shorter, consumable article which will help entrepreneurs like me to understand the ins-and-outs of their growth.

There's no such thing as overnight success! That's a fairytale.

Groove - just like many startups - learned the hard way, and almost died early on. But they didn't quit - neither did we - and started to fight!

 

#1: Fight for survival

We are not surprised to see a startup fail. We are used to news like this. It's simply the nature of startups and regular small businesses as well.

It's easy to run out of time and money, even if you raised some funds from VCs or made a bunch of pre-sales on Kickstarter or Indiegogo, and decide to simply give up the game.

You have to believe in yourself, as well as your business to survive the death valley, and of course you need money in one way or another.

We had our hard times with EDMdesigner, and as founders we had to make huge sacrifices to keep the business alive.

We ran out of investments, failed to raise a second round - since the investor we had discussions with had to close down due to legal issues - and our growth was slower than required. There were a couple of great deals in the pipe, but there were also a few months gap in our budget plan which we had to bridge somehow.

We believed so much in our business and ourselves that giving up was never an option. We decided to invest everything we had and I took a nightmare job for 3 months, in an effort to survive and break even.

If you fail to speak and listen to your customers, you will die. No matter how much money you raise.

Groove has been there. Made the very same mistakes most startups do, although it was not the first venture for Alex. We are all creatives and tend to think we know what to do without asking people.

Image source: Groovehq.com

If you receive an email like this one, it might be too late already. Since it usually means that you already spent months with building something nobody wants... and it can easily mean the end for your startup.

The only way to get out of deep mud like this, is to make a huge shift and sacrifice whatever is needed to break through.

#2: Focus on Product-Market Fit

Growth hacking is such a fancy topic these days that I think many startups forget about the importance of product/market fit.

You will fail if you focus purely on growth before you truly nail what your prospective customers want - and build that into your product.

The best way to test if you've reached product market fit is to run a so called Sean Ellis test and ask your customers: "How would they feel if they could no longer use your service?"

If you find that over 40% of your users are saying that they would be "very disappointed" without your product, there is a great chance you can build sustainable, scalable customer acquisition growth on this "must have" product.

Sean Ellis

When Groove started to focus on growth they had roughly $29K MRR and already 49% of users "loved" the product.

Unfortunately, they don't share their journey to product/market fit on the Groove blog. It would be quite interesting to read more on that too, since I think at least 50% of startups die before PMF.

How did Groove reach product/market fit?

  • They must have invested tons of hours into customer interviews and hustling to get to their desired target market.
  • Spent months to iterate the UX/UI and the feature set. They positioned the product around clean design + simplicity, which are properties that other customer support software lack(ed).
  • They focused obsessively on product-market fit: redesigned, redeveloped, restrategized everything until they reached positive feedback from their customers.

Focus is one of the biggest, recurring challenges (early stage) startups face.

Especially in the early days of your product, you can be easily influenced by your initial customers.

The reason for this is that you mostly do qualitative research (aka. customer interviews), meaning that you'll speak with a relatively small amount of people.

If you have diverse personas on your list, you will soon end up with several different product versions and you have to choose one to focus on! Only one.

We failed to do so and made a couple of bad decisions early on (which proved to be bad bets, just much later) with EDMdesigner. We are now spending loads of efforts to find a remedy for those decisions and truly nail product market fit for Chamaileon and make it a product that email design and marketing teams will enjoy using!

If you are into email design and think that there are ways to improve your processes sign up as a beta user below. I would love to hear from you.

#3: Hack 1,000's of early customers for beta product

Spend the least possible time to build a very beta product. Almost an alpha version, which includes only those feature that you think are must have for your target audience (based on your customer interviews).

If you're lacking early users, go and do some promotion in any possible way.

Online PR

This is a quite common term these days, and there are couple of tools and agencies who try to help your startup to get early coverage.

They didn't rely on an agency or anything like that to do it. You shouldn't either. You just need to sit down and come up with your own PR list, and start pitching.

If you are lucky and your product/pitch is interesting enough, you'll be picked up by some sites on your list for sure.

Here you can check out the PR list of Groove (might be quite out-dated though).

I have been collecting the PR/guest blogging list of Chamaileon for at least 6 months. I used Google Alerts to find sites which write about our topics like responsive email, mobile email, or similar. You can easily do the same for your own startup. Simply setup alerts for your keywords in Google Alerts and you'll get all the sites that reference your topics.

Twitter Buzz

When you get your product published on a huge website - in the case of Groove it was TNW - there will be many influencers tweeting about your service.

You can benefit from this buzz for a very short time, but those people who tweet about your service are great early customer prospects, so you should instantly start building personal relationships with them.

The best thing about Twitter is that you can still reach random influencers through it, you can start conversations with anybody without being too personal, and thus build relationships.

It requires loads of time and dedication to become a twitter guru, but if you have a SaaS business I'm sure you need to get your hands dirty with tweeting.

Built-in virality

Groove built-in an invitation method to make early subscribers invite friends to their product, which ended up making 30% more subscribers for them per day.

If you have an enterprise grade product, obviously it's not an option for you, but apart from this it's worth a try to test if you can build in any kind of virality into your product.

Exceptionally high quality content (marketing)

Nowadays most companies do some kind of content marketing, but there is a great difference between average content and exceptional.

Groove team pretty much maxed out content marketing, which seems to be the best long term investment for any online business.

These days content marketing is even harder than it was three years before, when Groove started it's "Startup Journey" blog, but I think with this high quality and exciting content, they would still be among the best blogs online!

We failed to create an exceptional blog with EDMdesigner. We have couple of high quality blog posts, but the others are average and maybe below average, which isn't good enough to stand out of the crowd.

Another important lesson is that you don't necessarily need to focus only on your industry in your company blog! Groove started their "Customer support" blog only in 2014 September, when they already reached $1M ARR!

They have been publishing exceptionally high quality content about their own startup story (check out their blog checklist) for over three years in a row. It's still exciting to read each and every piece.

I'm sure many of their old Startup journey posts are still converting startups as Groove customers or at least they are great for branding and getting more email subscribers - who can be turned into Groove customers with smart marketing automation later on.

Extra tips to help you get early customers

Although the title of this article focuses on Groove only, I think this is the right time to share additional tips with you:

  • Find online communities where your target customers "live" - For example startup people can be found on sites like GrowthHackers, Inbound.org, and Hackernews. If you are in a more traditional market, you will need to Google for a while, but I'm pretty sure you can find relevant communities. If not, that's a great opportunity to create the community first and "product" second. That's what Aladdin at Growthhackingidea.com does very successfully.

  • Get featured on "Beta sites" - Like Producthunt, Reddit, Betalist, Hackernews.

  • Leverage Slack communities in your niche - Slack is becoming a new, more personal Twitter alternative in many industries and there are superb professional groups. Check out Slacklist.info for a collection of open Slack communities.

  • Answer questions on Quora, Stackexchange and other Q&A sites - You will be surprised how many relevant visitors Quora can bring you, and you can easily get 1,000+ views on your answers in a month! Seem like a great way for "free" targeted advertising, right?

  • Do cold outreach on Linkedin - This is quite tiresome, but it works. It brought me super valuable connections. Make your message targeted, and don't SPAM everybody. If you find the right person with the pain you are solving, they'll likely be able to answer your request.

  • Partnerships and promotions - You also might want to look at others who provide related services and are open to promote your service (most likely for a fee or barter).

#4: Track, Learn, Act

Never think that successful startups don't make mistakes. Moreover, they make more mistakes than those who fail!

But they are always ready to learn, and act fast to fix what went wrong, and ready to ditch design, product features or literally anything that customers don't like!

Groove shared some of their early fails on their blog, you can check it out in full length. I want to quote one thought from Alex, which is super important to highlight.

Your marketing site is supposed to tell the story of your product, right?

Well, as I painfully learned, not exactly. Your marketing site is supposed to tell the story of your targets’ pain points, to show them the solution, and to convert them into users.

Alex Turnball, CEO & Founder of Groove

I think this is a very common mistake most startups - including us - make.

It's just easier to tell your features, and focus on what you have, not what your customers are looking for. Especially in the beginning when you know your ideas better than the needs of your target market.

You need to invest loads of time to track and evaluate the effects of every modification you make on the site or in the product.

This helped Groove get rid of features that the target customers didn't want and simply improve the overall user experience.

#5: Transparency builds brand

Maybe Buffer was the first well known startup who decided to go transparent with their financials and even salaries.

This helped them to get broad attention, and become a brand that most startup people know and adore for their transparency.

I think something similar happened in the case of Groove, even if they are not so transparent as Buffer. They share their revenues and learning of their startup journey, but not the salaries.

Their startup journey posts attract exactly their target audience: small businesses, startups, small teams, who need a simple support tool.

Transparency helped them to build the brand and to become well-known in their target market. Since they have been producing top quality, interesting blog posts from the very beginning, their readers started to spread the word about Groove instantly.

I think most of their readers never get to the stage to become a Groove user, but at least they told friends about Groove, and the brand spread like fire - and is still spreading.

#6: Listen, talk, and always be ready to help customers

For startups and small businesses, being really good at support is not optional.

Alex Turnball, CEO & Founder of Groove

It sounds quite obvious that Groove has to provide exceptional customer support if they are selling a help desk software. But I totally agree with Alex that it's a must have these days to be great at support.

For me customer support was always a very important task. I have been the "support manager" who spends serious amounts of time to help and track outstanding support tickets. No matter if the ticket was related to UX, email coding, software bugs or development. I tried my best to answer or get the right answer from our developers.

But I failed to make customer support exceptional at EDMdesigner. So there's clearly room for improvement.

The Banana Phone - by Innocent drinks

Some years ago I got the Innocent book from my previous boss. It was a truly inspiring book about the story of Innocent Drinks - a UK company that manufactures fresh smoothies from real fruit, not concentrate.

Their book features the story of Innocent drinks from day one - similar to Groove startup journey blog just in printed form. It's a captivating story full of hustle, struggle and the ups and downs of starting a revolutionary business. Highly advised read.

Image source: @innocent

Innocent Drinks came up with the idea of the "Banana Phone", a phone shaped like a banana. They put messages on their first products saying "if you're bored, give us a call on the Banana Phone". They received 100s of call per day, and managed to talk with their customers from day one - without hiring an expensive PR company to do the job :).

Obviously it takes loads of time to speak with and help customers, but what happens if you don't do so? You might fail without knowing why.

I wanted to create our own banana phone to improve customer support and communicate with random people visiting our website, so I added an online chat widget to the EDMdesigner site, which helped me to communicate with visitors, learn their needs, get early customers, and shape the concept of Chamaileon.

I'm doing the same in case of Chamaileon, and I'm really the one on the other side of the chat widget. Not a chat bot, so feel free to ping me any time. I'll do my best to answer as soon as possible.

To truly become exceptional in customer support I feel that each and every employee has to be involved in the support process. Which might feel like wasted time - especially for developers - but it's not.

I need to find the right tool to help us do so - maybe Groove -, and I swear that exceptional support will be among our core values at Chamaileon and EDMdesigner as well.

#7: Experiment with pricing

It's already nice if you get to a stage where you have a product which is loved by your customers. Unfortunately, "love" won't buy you or your developers beers, so you have to find the right way to make money.

Pricing is very tricky since people cannot really tell how much they are willing to pay for a product. No matter how you ask them in customer interviews, questionnaires, or even in person.

People won't be able to tell you how much they really want to pay and how they really want to be charged.

How should you set your starting price point?

  • You can use the Price Sensitivity Meter (PSM) method. It's a series of tricky questions that help you to identify what's an acceptable price range for your service in your customer's mind. I saw this approach first in a Growthhackingidea.com newsletter.

  • Study your competition and related service providers for couple of ideas and make up your own price based on your research.

But, no matter how you price your product in the beginning, be prepared to experiment with different approaches from day one.

Back in 2014 when we started EDMdesigner, there was no similar web based responsive email builder, so we had to invent the pricing model.

What was our biggest mistake? We never really experimented with various pricing models to maximize conversions and make more of our responsive email builder for end users.

We focused our efforts on white-label integrations instead and our end user application was neglected.

We never spent enough time to figure out the right way to monetize it's potential, although it was always growing slowly - even with a poor pricing model.

Testing different pricing models might require a lot of effort from your developers, and might be tricky to manage various different pricing methods.

If you have paying customers in an "old" pricing tier which doesn't exist, you need to find ways to switch them to a "new" tier.

Also A/B testing different price points might be a bit tricky and controversial, since even the same person might see different price on your site if they visit your site at home and from their workplace using a different computer.

You have to be careful with pricing tests, but do it. Not like us who didn't do it, but now we will, I promise.

#8: Master emailing your customers

Although social media and chat applications are growing fast, email still remains the main form of contact between you and your leads or customers.

What happens if your emails are boring and irrelevant?

You're doomed from day one.

I manually send hundreds of emails per week to learn from our potential customers. I don't do it automatically, since I want to make it personal and learn as much as possible, before we automate part of the process.

Marketing automation sounds tempting and it's becoming quite accessible even for startups who are bootstrapping or running on a very low budget.

But should you automate your emails from day one with a fancy template?

No, I don't think so. You have to take your time as the founder of your startup / business to do manual outreach.

When you are confident with the messaging you should start with, go for email automation and always improve.

There are a couple of articles on the Groove blog about email optimization, and all of them include deep insights with real messages. The below one is among my favorites.

Proactive help email

Image source: Groovehq.com

Why is this email so powerful? Since it offers help at the right time to the right person in a personal way (although it's definitely an automated email).

The email got 10% response rate and 30% of the users became paying customers (meaning 350% higher than the average free to trial conversion, which was 8% that time).

I haven't seen the open rates of the email, but I think the subject line could be improved and could include a question like: "Can't setup email forwarding?".

Are you sending proactive help emails to your customers? You should! We have never sent such an email previously, but it's time to change.

Onboarding emails

I'm the one who's looking for new solutions at our company. I try new software quite often and thus receive tons of onboarding emails.

Only a handful of them are worth remembering. The lack of good onboarding emails won't break the deal for me if your software is superb and it cures my pain.

If your software sucks, there's no onboarding email series that could save you, but at least it can help you to learn where to improve!

Groove built up a very personal onboarding email series with their customers, with simple, very important questions like:

  • Subject: You're in | Plus, a quick question...
  • Question: Why did you sign up?
  • Result: 41% response rate!!!

I believe you are on the road to success if you manage to establish a two-way communication habit with your customers.

If you can do that you'll learn early on and will be able to build just the right product and clearly define your ideal target customer.

#9: Master guest blogging

No matter what industry you are in, it's tremendously time consuming to create quality content which stands out of the crowd.

But writing great content is only one thing. Without proper promotion you are doomed.

Guest blogging is one of the best ways you can grab the attention of related audiences online, but it's quite hard to manage and it's always a challenge to come up with tempting topics for the other site.

I have to admit that I only wrote like 3 guest posts in my life, and none of them became too successful for us. But we never invested enough time and effort into guest blogging.

It was always on my "To-Do" list... but I never really got to it, due to other priorities (maybe many of those priorities were much less important than guest blogging).

I think guest blogging is definitely among the "success factors" for Groove. And it can be for you - and us - as well.

Image source: Groovehq.com

The number of trial signups might feel too low compared to the number of visitors, but the long term positive effects are unquestionable.

It would be exciting to see the number of newsletter subscribers, total visitors (in 1 year), and also ROI of those guest posts.

There are a couple of tools that will help you automate the outreach part of guest blogging efforts, but I'm quite sure that with those tools you cannot get to a site like Buffer or KISSmetrics. That's more about hustle and connections I guess.

But don't make up another excuse for yourself - like I did. Just send your first outreach email and do it.

Start with a mid-sized blog with a couple thousand twitter followers, and do the outreach yourself to learn and improve with every email you send.

#10: Build partnerships

You have to hustle hard if you want to publish great guest blogs and establish valuable partnership like Groove did.

There's no dedicated blog post in the startup journey series about "how" they - or Alex - built their partner network, but you can imagine that it was hard to build a network like this below.

Image source: Groovehq.com

You can see the list of companies that Groove partnered with to give away free SaaS apps worth $10,000 in 2014.

They invented something new - like they did with the "startup journey blog" - that the young, startup community loved and spread like fire.

Image source: Groovehq.com

It was so successful that they extended the promotion and added even more tools into the stack 6 months later, making the stack worth $20,000.

Can you imagine how many visitors, trial signups and MRR this free giveaway brought for Groove? WOW, loads (the actual number is not published on their site)!

But how should you and our business start with building valuable partnerships?

  1. Always deliver quality - This is step zero really, since without a top quality site, content, and a respected product... big names will never partner with you.
  2. Build your own community - The value of your site as a partner will be influenced by the number of people (potential customers) your partners can get to.
  3. Hustle for personal connections - LinkedIn is the best tool for somebody like me who's not based in a large startup hub, but if you are, just lift your ass from the seat and go out for networking events.
  4. Give first - It sounds like a cliché, yes. But it's the only way you can show you are committed to the partnership. Maybe it's just a tweet or an email intro you make.
  5. Actively engage with partners - Partnerships require ongoing effort or they will fade with time. It's just too easy to forget about somebody you don't interact with regularly.

These are just couple of thoughts I have in my mind. Would love to hear your tips in a comment below!

I will write a blog post (or more) about how we are building and maintaining partnerships for Chamaileon (expected to be published in Q3 2017).

#11: Set goals, have a strategy, evaluate results

In job interviews they usually ask you about your five year plan, right? And it's always hard to answer, except if you really have a goal - and have a plan about how to get there.

The same applies for your business, and you have to set goals and always have a plan about how to get there.

It is quite challenging for startups like us to outline such a plan, since everything changes so rapidly:

  • There might be changes in your industry and just general customer trends.
  • New competitors can enter the market.
  • A huge potential client(s) might approach you and shift your focus.
  • You might run into some budget limitations.
  • The product development is delayed, especially if you are already working with many existing clients.

Shortly: everything might be against your great master plan, which makes it truly hard to come up with one, and sometimes it may feel pointless to spend days with planning - if in a couple of weeks you realize that it won't work the way you expected.

Without goals and some kind of strategy, it's hard to see the light at the end of the tunnel.

I'm personally quite good at setting goals, but less convenient with planning the steps well in advance.

I have ideas about the steps we should make, but the order and priority of things are not fixed. I don't carve things into the stone and not even on paper...

There's a task in one of our Trello boards - the Big Picture Plan - that usually gets out of focus. We focus on shorter terms generally.

But it's time for change and to come up with a high-level strategy in writing - not only in my mind - like Groove did in the beginning.

I would like to thank you if you got this far in the article and you're reading these lines now. I spent days to write this article and I think it was really worth my time. It helps me to spot what mistakes I made - and make - while running our business.

I hope these lessons from Groove will help you as well. I'm sure they will help us in doing things differently in the case of Chamaileon.

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