4 Startup Lessons From Groupon's Andrew Mason
Over the weekend I attended Startup School, an annual event put on by the Silicon Valley startup incubator program Y Combinator. In the spirit of learning how to run a business through the "school of hard knocks," 11 entrepreneurs and investors told the audience of would-be founders what they know now that they wish the knew when they were first starting out. Among them was Andrew Mason, the founder and CEO of Groupon, a business built on sending out one coupon a day to a list of email subscribers. Now it's one of the fastest growing Web businesses on the planet.
Here are four things I learned from Groupon's success that could apply to just about any business:
1. Forget the vision -- just tell customers why you're useful
The big idea behind Groupon is "collective buying" -- meaning that if a critical mass of people sign up for a deal, say a restaurant coupon worth $40 that you can buy for $20, then everyone who buys in gets the deal. But Mason realized early on that people don't get excited by the abstract idea of "collective buying;" they get excited about saving money. So if you go to the home page of Groupon, the first thing you see in large font is the deal of the day, along with a bright green "Buy!" button that you can't miss. When customers come to your Web site, "you have one second for people to decide if you're useful," says Mason. If you try to use that one second to communicate your larger vision, you're going to lose them.
2. Embrace what you can't do
Mason knew he wanted Groupon eventually to serve up all kinds of deals in cities all over the world but if he had tried to do that from day one, it would have been impossible. Groupon wouldn't have been able to amass enough people to sustain the deals. So he focused on building a user base just in Chicago with one deal a day. "It was all we could get," Mason says. Now Groupon has grown to more than 150 cities worldwide but it hasn't messed with the one-deal-a-day formula -- it's central to the company's identity as a "curator" of deals. Rather than try to be the one-stop shop for all coupons, Groupon aims to send you one unique and special deal you won't get anywhere else.
3. Have a growth plan
"I knew we were going to have crappy deals from time to time," says Mason. If Groupon had tried to push people to sign up for individual deals, the company would have had only one shot and one deal to try to hook them. If they didn't like the deal, they wouldn't sign up. So Groupon does something more strategic: It pushes people to sign up via email for daily deal alerts, giving the company many more chances to try to engage with users.
4. Social media is overrated
Building a business on the Web means that you have lots of great online tools at your disposal that can do things efficiently and cheaply -- but that doesn't mean they'll solve all of your problems. Mason says he'll take one email address over 10 Facebook or Twitter followers any day. And the company wouldn't be anywhere near as popular with small businesses today -- it has a six-month backlog of merchants who want to run a Groupon deal -- if it didn't have its most important tools: an old-school, offline sales force to drum up business and a merchant-care team to make sure it keeps customers happy.
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