Why Ads Are Toxic To Early Stage Startups

If you just started a company for the first time and you’re using ads to get your first paying customers, you’re doing it wrong. Unless you’re a repeat successful founder, you’ll be out of business in 2 years. I’m sure of it.

I often times post about my opinion on ads via Facebook or LinkedIn and get an emotional response, likely from people using ads themselves. I have a very aggressive stance against using ads to get your first customers because I think ads literally kill companies that could have been great. Here’s why:

You Are Pre Product-Market Fit

If you just started a company, you are not in the scaling phase yet. You are a lost soul, swimming in the pre-PMF (Product Market Fit) sea, trying to find a sector of customers who will pay you money for what you built, and will continue to pay you money over time. Finding product-market fit is really hard, but the only way to get through it is to talk to potential customers, get their feedback, iterate on your product, ship new code, and go back to the customers. Otherwise called the Lean Methodology.

It’s a process that takes companies years to do, but if you don’t have PMF, you will end up like Homejoy…dead. Homejoy raised $65,000,000 dollars for their company, but failed. Why? Because they had a leaky bucket.

What’s a Leaky Bucket?

A leaky bucket happens when pre PMF startups scale. As they scale, they are losing a large % of their customers/users, because they didn’t take the time to truly build something people wanted. In Homejoy’s example, their retention was dismal, and 65 million dollars couldn’t even save them. Ads couldn’t even save them ?.

If you just started a company, you don’t have product-market fit yet, so the money you spend on ads will be wasted, because you also have a leaky bucket. All startups start out as leaky. The goal is to fill in the hole, then fill the bucket with water. Not fill it with water while figuring out how to fill the hole. Ads are for scale, not for starting.

It Shows A Lack of Resourcefulness

If you just started a company, you probably don’t have that much money in the bank. Even with that knowledge, you’re willing to pay per click to your website, draining your bank account on potentially the worst form of customer acquisition? How about you manually recruit your first 20 paying customers. Work your network. Cold email. Go to free events. Show that you have the resourcefulness of a founder and get those customers on your time, not your dime.

PubLoft spends about $130/mo-ish on marketing software and we’ve gotten over 40 customers who have paid us about $70,000. We don’t spend money on ads. We use our creativity to find customers, not because we can’t use ads, but because we know we’re more creative than that and I prefer to save the money.

If you default to using ads to get your first customers, it shows me that you may not be a purebred founder. You don’t have the resourcefulness to do it yourself. Earn your stripes, save your money, and get out of the office and find your customers.

You Are Automating The Only Thing That Matters

Lastly, if you’re using ads and you’re not the technical co-founder, what the hell are you doing with the rest of your time? Conferences? Partnerships? Social media? Business development? No. Just no. If you’re the business end of your company, you should be spending ALL OF YOUR TIME selling to, talking to, and learning from your potential customers. You have no other job other than finding PMF and the only way to do that is to talk to your customers.

With ads, you don’t even get to talk to them! They come to you and you don’t get any feedback from them, advice from them, data from them…it’s just..automated. Automation is not good when talking about your customers. Do things that don’t scale, manually recruit your first customers, and learn as much as you can from them.

The Bottom Line

Yes, ads work. Yes, you can use them. But if you do, you’re going down a much more expensive and lazy path. Use them at your own peril. Once you find PMF, go nuts! Until then, hunker down be a great founder, and win.