Just Managing: The Need-Driven Startup
Earlier this year, venture capitalist and writer William Gurley
wrote a column
proposing a distinction between supply-driven and demand-driven
companies. On one end of the spectrum were idea-driven companies
founded by eager business school students and other ambitious number
crunchers eager to cash in on the flood of VC money chasing attractive
business plans. On the other end, Gurley posited demand-driven companies
- those formed to meet a simple need in the market.
I agree with Gurley's assessment, and in fact, I believe that
his distinction illuminates the babble we are hearing today about
a return to placing value on the concept of profitability. Everywhere
today we hear about the newfound, some might say renewed, obsession
with profits. But, I think we're seeing nostalgia for something
different - a focus on businesses that work.
Selling the idea behind a company to score-driven VCs is finally
taking a backseat to developing a viable business that solves a
need for customers. This brings up the question for entrepreneurs:
How do you find that need? My suggestion? Start with what you know.
That's exactly what Tom First and Tom Scott, the "juice guys"
who founded Nantucket Nectars 12 years ago, did. They met as students
at Brown University and shared a common love for the bucolic island
off the coast of Massachusetts that became the namesake of their
line of juices. While bumming around on Nantucket after graduating,
they discovered that their passion for fresh juice might lead to
"Tom and I didn't know we were starting a business," says Scott
of their early days mixing batches of juice on a wharf.
But they were. Today, the privately held company has spent more
than five years on Inc. magazine's list of fastest-growing
companies, and it continues to grow at more than 40 percent a year.
The two Toms recently tapped someone for the role of president,
charging that person with focusing on the day-to-day work of Nantucket
Nectars so they can focus on their next venture.
This year the two Toms launched Shelflink, an ambitious attempt
to rout out inefficiencies in antiquated distribution systems. Essentially,
their plan is to link up the three key players - vendors, distributors
and manufacturers - that compose those systems. Shelflink will install
Net-connected PCs into individual stores, and those stores then
will use the Shelflink system to track orders, monitor inventory
and restock merchandise from distributors. The seeds of Shelflink
naturally emerged out of the work the Toms have been doing day in
and day out for more than a decade.
"In a way, we knew we needed this product 12 years ago," says
Scott, who remembers that when Nantucket Nectars first began selling
to local retailers, they would use marine radios to gather information
on who needed what and on how well their wares were being displayed.
Even today they compile information on how their wares are being
merchandised by having sales reps take Polaroid snapshots and mail
them to the company's Boston headquarters.
From the early days, the Toms learned that concocting the perfect
blend of juice was far less consuming than cracking the distribution
system. Though they invested plenty of time in creating an all-natural
drink and building a brand that conveyed their values, their greatest
challenge was in cracking the system.
Shelflink, which launched earlier this fall, addressed burning
needs they saw in their daily work. The two are adamant that they
aren't trying to create an entirely new distribution system or trying
to cut anybody out of the existing system. Instead, they are simply
trying to tap into the Web to enable their most basic customers
to save money and time.
Perhaps the best way to describe their business philosophy comes
from a quote originally made as an aesthetic statement by the doctor
and poet William Carlos Williams: "No ideas but in things." The
two Toms are pursuing something they care about deeply through experience,
rather than trying to cash in by inventing a nifty idea for a business.
"Business by theory is stupid," says Scott, adding, "our success
is not about terms like 'speed-to-market,' but about our ability
to weather storms."
Adds First, "I'm sort of cynical about that first-mover thing,
because what were we? The thousandth mover in juice? And we did
fine. First mover is one thing - but the customer is everything."
Gus Rancatore, owner of Toscanini's Ice Cream, a Cambridge, Mass.-based
store that is a charter vendor with Shelflink, says the Toms "understand
their business and have a proportionate idea of what they can do."
Unlike a product founded with wild visions of changing the world,
Rancatore says, Shelflink attacks a specific problem - the inherently
sloppy nature of ordering products from vendors - with a focus and
ease that tilt the odds toward wide adoption. "This enables people
whose jobs are by their nature very disorderly to lead a more productive
life," he says.
Surely, in this time of great change, there will always be world-changing
big ideas and new new companies that use venture capital as rocket
fuel to become masters of their domain. But those stories shouldn't
obscure the real work of building a company, the natural steps that
apply to the vast majority of startups today - Web-enabled or not.
Read or print the Intro
and Chapter 1.
Read the book reviews at Inc
Read the publisher's press
this book from Amazon.com.
the companies that Tom discusses in the book
Hear a recent lecture by Tom on the Startup Garden
Buy my book and I will send you a worksheet and list of local
and industry resources for your startup. Simply send me an email
with your zip code and type of company and I will email you the free kit. Thanks!
Managing – articles that Tom wrote for The Industry Standard and some
written for Inc., Fortune Small Business, Harvard Management Update, and other
Read about other
books and web sites about starting your own business.