The co-founders of one of the companies I helped build launched their firm in an unusual way. They were both software engineers at a respected firm and decided to make the leap into the world of startups. They left their jobs with only the notion that their new company would offer some type of Internet product or service. But what type? To answer that, they decided to… listen carefully.
Specifically, co-founders visited with executives at major websites. They asked them open-ended questions about their businesses and the pain points they were feeling as these grew. The execs were eager to share their troubles and challenges. The founders were eager to listen carefully.
The common thread at the time that emerged from the interviews was that larger sites with many contributors had a very difficult time managing the content and updates to their sites. With this in mind, the founders created a content management tool for complex websites and launched Vignette StoryServer.
The first customer for StoryServer was the Chicago Tribune. From a single server installation, the Tribune went on to manage its entire network of more than 300 newspaper websites using StoryServer.
Vignette became one of the most valuable companies in web tools. It grew to over 2200 employees within its first four years, reaching a peak market cap of approximately $9 billion.
Early reviews claimed the average StoryServer price tag of $40,000 would soon drop drastically as Vignette began to face new competition. But, in fact, the opposite occurred. As the product became more full-featured and managed increasingly complex sites, it required more customized integrations. The average selling price climbed to more than $300,000.
The lesson here is that it pays to listen carefully to your market. We see, all too often, that entrepreneurs create clever ideas but fail to test them against real problems that companies will pay for. The Vignette founders did not charge into business based on their own idea of a killer product. Rather, these two talented entrepreneurs launched a business based on their prospects’ idea of a killer product. And, it turned out to be a $9 billion idea.