Lenny's Newsletter · Product & Work
TIER 4 2021-06-22
> ## Q: This tweet by Justin Kan has stuck with me ever since I saw it: > > ## Do you agree with it, and if so, how does one win at *distribution*? The more startups I work with, the more I’m convinced that Justin is right. While starting a company has never been easier, and building a great product has become table stakes, getting your product in front of the right people efficiently—getting people to even know you exist—is increasingly what separates the haves from the have-nots. As Peter Thiel once put it, “Poor distribution—not product—is the number one cause of failure.” This is ever-more true because free channels like SEO are getting increasingly crowded, CPMs are going up, privacy features are making it harder to reach people, and every new interesting market quickly grows to dozens of competitors.  To break through the noise, and often to even raise money, you need a unique distribution advantage. You need to find a way to go directly to your early target audience more cheaply and quickly than your competition. At scale, there’s essentially only one winning strategy: Become world-class at one growth channel (performance marketing, virality, content, or sales) within your market. For example, in discount online shopping, Wish dominates performance marketing, Pinduoduo dominates virality, and Wayfair dominates SEO. In travel, Booking.com dominates performance marketing, Airbnb dominates virality, and Expedia dominates SEO. A few more examples from a [previous post](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups):  **When you’re just starting out, though, you have more options. I’ve found seven unique distribution advantages that new startups can take advantage of, each of which I’ll explore below:** 1. Starting with a pre-existing audience 2. Developing a unique viral loop 3. Being first on an emerging platform 4. Having a remarkable story 5. Starting with pre-existing strategic relationships 6. Closing early strategic partnerships 7. Bringing extraordinary hustle Having one of these advantages is great. Having two or three is even better. *If you’ve come across any other examples of distribution advantages, please share them in the comments 👇* [Leave a comment](https://www.lennysnewsletter.com/p/distribution-advantages/comments)  #### **1.** Starting with a pre-existing audience Companies like Kylie Cosmetics (Kylie Jenner), Square (Jack Dorsey), Superhuman (Rahul Vohra), Goop (Gwyneth Paltrow), and Tesla (Elon Musk) all springboarded off their founder’s pre-existing audience, giving them an immediate unfair advantage. This distribution advantage has become increasingly popular with the rise of influencers, who launch their own products (e.g. [MrBeast Burgers](https://en.wikipedia.org/wiki/MrBeast_Burger)) after building direct (free) connections with their market. Having an audience doesn’t automatically mean you’ll build a durable business, though—[Justin Kan’s Atrium](https://techcrunch.com/2020/03/03/atrium-shuts-down/) being one ironic example. **How might you create this advantage?** Start building an audience, ideally on a platform that draws the type of people you’ll eventually want to sell to. #### **2.** Developing a unique viral loop A second type of distribution advantage is developing a unique viral loop that allows you to grow more quickly and efficiently than anyone else in your market. I previously wrote about [these magical loops](https://www.lennysnewsletter.com/p/magical-growth-loops), and one that always comes to mind is [Faire](https://www.faire.com/) where the team found a way to incentive their supply to drive their demand, and their demand to drive their supply, creating an ever-accelerating growth flywheel:  Other companies that were able to grow through unique growth loops include [Dropbox](https://www.dropbox.com/) and [PayPal](https://paypal.com/) (super-successful referral programs), [Slack](https://slack.com/) and [Figma](https://www.figma.com/) (the epitome of bottom-up growth), and a media payroll company called [Wrapbook](https://www.wrapbook.com/) (disclaimer: I’m an investor) that grows through both its supply and demand moving to new gigs and bringing Wrapbook with them: **How might you create this advantage?** It’s very difficult to layer on if this isn’t natural to your product, but check out [this post](https://www.lennysnewsletter.com/p/increasing-virality) for inspiration. #### **3. Being first on an emerging platform** [Zynga and Facebook](https://www.nytimes.com/2020/12/31/technology/farmville-zynga-facebook.html), [Instagram and the iPhone](https://www.investopedia.com/articles/investing/102615/story-instagram-rise-1-photo0sharing-app.asp), [Pinduoduo and WeChat Mini App(s)](https://turner.substack.com/p/pinduoduo-and-vertically-integrated), [Veeva and Salesforce](https://www.veeva.com/resources/veeva-systems-extends-salesforce-com-partnership-into-2025/)—so many companies broke out by riding the wave of new emerging platforms. Check out this thread for many more examples: I’m sure many companies tried this strategy and failed (e.g. betting on VR, Google Glass, the Twitter API, etc.), but it does work and can work in a big way. **How might you create this advantage?** Tinker with new platforms (e.g. VR, Snapchat apps, Substack, etc.) when they do launch to see if they are worth investing in, and check out [Mike Maples’s writing on inflection points](https://medium.com/@m2jr/how-to-build-a-breakthrough-3071b6415b06) for inspiration on what to look for. #### **4. Having a remarkable story** Companies like Airbnb, Etsy, Zillow, TaskRabbit, and Instacart grew primarily through (free) PR and word of mouth. Why? They are each remarkable—worth remarking about. Thus, reporters and people loved talking about them, which earned them each a ton of free awareness.  The more interesting, unique, or surprising your product, team, or events are, the more you’ll be able to take advantage of this distribution advantage. Note that every founder thinks their product and story are remarkable—the bar for this is higher than you think. **How might you create this advantage?** Find ways to make your story more “remarkable.” What impossible obstacles have you overcome? What’s something you’ve done that is insanely clever or creative? What’s something people won’t be able to stop talking about? #### **5.** Starting with pre-existing strategic relationships A fifth type of distribution advantage, for B2B businesses in particular, is having a lot of pre-existing direct connections with your target buyers. Basically, having warm intros vs. having to go cold. [Commsor](https://www.commsor.com/) sells community management software and also runs the biggest [community managers community](https://www.community.club/). [Twine](https://www.twinelabs.com/) sells HR software and also runs the biggest [chief people officers community](https://www.twinelabs.com/CPOHQ). Atlassian was popular with the open-source community and sold to this group when it first launched. Carta had connections (through its investors) to dozens of startups looking for cap table management help. This is exactly why joining programs like YC can be so effective for B2B startups—the other startups are often an ideal customer base. This is also why working with large funds like a16z, Sequoia, and Benchmark is powerful—they can connect you to their early-adopter portfolio founders. **How might you create this advantage?** Begin building a community, a network, or individual connections to people who may one day need what you’re building. If you don’t have these connections by the time you launch, look for an accelerator or network you can join that’ll get you access to your target audience. #### **6. Closing strategic partnerships** A few companies saw huge success in securing early strategic partnerships. [Netflix made a deal with DVD manufacturers](https://observer.com/2017/07/how-netflix-used-coupons-to-become-a-70-billion-company-reed-hastings-mark-randolph/#:~:text=By%20July%201999%2C%20Netflix%20had,shipped%20%5Bin%201999%5D.%E2%80%9D) to insert flyers into DVD player boxes, [Kayak made a deal with AOL](https://techcrunch.com/2012/03/30/founder-stories-kayaks-paul-english-discusses-big-wins-important-strategic-alliances-tctv/) to use it for flight search, and [PayPal partnered with eBay](https://www.vox.com/2018/1/31/16957212/ebay-adyen-paypal-payments-agreement) to handle payments. A few more examples: All of these deals basically made these companies, and if you can make this happen, do it. In practice, however, relying on partnerships early on is rarely successful and often a waste of time. Big companies rarely benefit from working with startups, and it takes them a loooooong time to make anything happen. **How might you create this advantage?** Come up with a list of potential partners and ask yourself what you can do to help *them* achieve *their* goals. Then go find someone at these companies to pitch, and figure out how long it might take to actually launch something together. #### 7. Bringing extraordinary hustle A final distribution advantage is simply making sh\*t happen—no matter what. Tony Xu personally delivered food in the early days of DoorDash.  Jack Dorsey walked from retailer to retailer pitching the Square dongle to owners. Travis Kalanick handed out Uber coupon codes at Caltrain stations. Ben Silbermann went to Apple stores and changed their homepages to Pinterest.com. There’s also Steve Jobs, Bill Gates, Marc Benioff, Zuck … the list goes on. If you have none of the other distribution advantages, focus on this one. Make sh\*t happen.  **How might you create this advantage?** Fight. Fight. Fight. Remember, you don’t *have* to have a unique distribution advantage. Many hugely successful companies succeeded without any special advantages early on (as far as I know). Companies like Thumbtack, Segment, Robinhood, Substack, etc. But, without a distribution advantage, you’re probably fighting an uphill battle against founders who do. And that means you need to execute better, faster, and you have less time to lose. Go get ‘em! *If you have any thoughts or have come across other distribution advantages, please share!* [Leave a comment](https://www.lennysnewsletter.com/p/distribution-advantages/comments) ### 📚 Further study 1. [A Customer Acquisition Playbook for Consumer Startups](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups) 2. [Increasing virality](https://www.lennysnewsletter.com/p/increasing-virality) 3. 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