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Marketing is one of those words without meaning. Or at least a consistent meaning for most people. Recently, I met a very bright marketer who broke down a few of the different marketing disciplines and matched them to a freemium sales funnel. His framework is a stroke of genius. I’ve drawn it below.

The Four Disciplines of Funnel Marketing

The triangle on the left is a standard freemium customer conversion process. First customers become aware of the product, then they use the free version of the product, then they convert to paid either by themselves or with the aid of an inside sales team, and finally they are retained as customers.

Last night I spoke at the Enterprise Tech VC Panel. We discussed five trends in the seed market and the outlook for 2013. These are the five most important trends for 2013, in my view.

MicroVC Funds Have Doubled Their Assets

Call it micro-VC or mega-seed fund, there’s a new investor class which raises funds between $50 and $100M to invest in seed-stage companies. Felicis manages a $70M fund, Jeff Clavier at Softech invests from a $55M fund and Steve Anderson of Baseline has raised at two funds totaling $100M. These seed investors invest larger amounts than before (both initially and during follow-on rounds) and invest in more startups.

If asked to describe the characteristics of a successful freemium business, I might highlight three things: effective community marketing, command of new distribution platforms, and a paid product users love that is priced by usage.

Look no further than ZenDesk, Evernote, Expensify, Dropbox. Each of them has built a vibrant user base using freemium products.

But what if instead of pointing to SaaS companies as the vanguards of this movement, I lauded The Atlantic, The New York Times and the Financial Times? In fact, SaaS companies can learn quite a lot from the marketing efforts of content companies. In both cases, a great product alone is not sufficient to maximize growth. Marketing plays an essential role.

In HBR this month, two British researchers reported on their study of the impact of competition on startups. In a study of over 2M companies spanning 10 years, the researchers determined that if a startup faced competition in its first year, it was more likely to fail. But if the startup survived its first year, it’s survival rate jumped nearly 30%.

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/q_auto/f_auto/w_auto/image_146_735522163">

This data screams survivorship bias. Of course the startups who navigate hostile waters deftly in their first year will have a higher likelihood of success. These startups' management teams have already proven they can develop marketing and sales competencies while bringing a product to market.

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/q_auto/f_auto/w_auto/image_147_724326134" width="500px">

Successful startups are money machines: they ingest a dollar of investment and produce more than a dollar in revenue.

There are three steps to build a money machine:

1. Find or create a product many people will use.
2. Convince customers to buy the product.
3. Mechanize the two processes above, reducing costs and increasing profitability to finance growth.

Startups repeat these three steps many times during their lifespans. In a team of seven people, there may be five engineers building the product, one product manager marketing the product and one salesperson. But to grow to be a big company, all those teams and functions must be continuously reinvented, tuned and refined.

For sales people, social proof is one of the most powerful forms of influence, as Robert Ciadini proved in his seminal book on the topic. It’s no secret that the best leads are referrals. Second best is the friend who is a customer in common: “Oh, Peter chose Salesforce for his CRM. Maybe I should consider them too.” Social proof confers the trust of a relationship to the salesperson improving close rates.

On a Saturday morning in August of 2006, Sergey Brin and a team of Googlers flew to Los Angeles to meet Tom Anderson and his MySpace team. By the next afternoon, the two founders shook hands on a three year $900M contract. About twelve months later, I found myself as the product manager for the team in Marrakesh, Google’s executive board room, reporting the state of affairs to Eric, Larry and Sergey.

If you’re a Netflix subscriber, in all likelihood you’re a big fan of “House of Cards.” Netflix designed it that way.

With the release of “House of Cards” Netflix began the Moneyball-era of content production. The majority of Netflix subscribers watch Kevin Spacey, political thrillers and David Fincher’s movies. Guess what? “House of Cards” has all three.

In baseball, on-base percentage is the best predictive metric for team success. In content production, the best predictor is user viewership behavior.

When interviewing product managers at Google, we ranked candidates on four metrics: technical ability, communication skills, intellect and Googliness. A Googley person embodies the values of the company - a willingness to help others, an upbeat attitude, a passion for the company, and the most important, humility.

In the past week, I asked two heads of engineering to identify the most important characteristic in new hires. Both responded, “humility”. For one startup ascertaining humility is so important, it is the first filter in the interview process.

Kenny Van Zant is a marketing wizard. Before his current role at Asana, Kenny managed products and marketing for Solarwinds, a publicly traded company that sells networking equipment to the mid-market. Solarwinds pioneered the low-friction, high-velocity sales model in their segment to great success.

SolarWinds offered free products to their customers to gain usage data that informs their sales and marketing efforts. As one might expect, inside sales reps would call upon the most likely customers to up-sell them to paid. And of course, SolarWinds employed the enterprise sales team to win the business of the largest customers. Plain vanilla freemium, right?