After receiving his first shipment, Nate started taking pictures of all the components and offering them for sale on the internet, figuring that his own frustration with the lack of visual guidance available for purchasing electronic parts online meant that others could be experiencing a similar problem. It was when his third order came in from France that Nate realized he might have “grossly underestimated the market.” He also realized that he was going to need a box in which to ship the order, so he went out back to the recycling bin behind his apartment to find one.

From realizing he needed a box Nate went to realizing he needed an IT department when his company had grown to about 10 people and their search field was hacked by a Spanish soccer site redirecting traffic in order to generate click-through revenue. This helped him to recognize the dangers of trying to stay too lean as a company rather than hiring to accommodate growth. In a similar way, they decided that they would probably need to transition from a house to an office when using the printer one day, in addition to all the other electronic devices they were experimenting with, caused the entire basement to plunge into darkness.

SparkFun’s creative culture and dynamic website are regarded by some as examples of brilliant marketing, but Nate describes them more as simple solutions to document problem-solving and highlight interesting projects. For example, he once created a tutorial on how to build a portable rotary phone that was so popular the website crashed. Interesting projects are encouraged with events like the Antimov competition, which awards prizes for robots that complete trivial tasks in a highly inefficient way while destroying themselves in the process.

Another event that encourages creative projects is Free Day, when the company gives away up to $100,000 in products to their customers. Nate came up with the concept mostly because he dislikes the complexity of discount codes, but the event also happened to serve the dual purpose of testing the company’s IT infrastructure and providing great viral marketing. “The first Free Day was on a Thursday, but the site broke on Tuesday because the traffic was already way too high with people pre-loading their cart. I guess it went a little viral. We did our best to patch the holes and then went for it. That week, Google had just announced the Nexus One, which was a Twitter trend. SparkFun was also a trending topic on Twitter on Free Day. We were also the number one search term on Google.”

Congratulations to SparkFun on all their success and best of luck to everyone with CUNVC!

With those odds, entrepreneurs need to step into their customers’ shoes.  A lot has to be right for a successful product launch.  The concept should meet a real need, the design has to work and the product has to be positioned well.  You’ll get these decisions right, says Dr. Moreau, if you know your customer.

80% of product development costs get locked in on the “fuzzy front end.”  That’s because we get attached to our ideas.  The key is to challenge your assumptions and talk to your customers.

So how do you talk (or better yet, listen) to your customers?  “Abstract up” to hear what they need.  A customer might not pinpoint the solution, but they know when they’re dissatisfied.  The entrepreneur’s job is to fill that abstract need: The CEO of Revlon says they sell hope.

And – profitability depends on the diffusion of your product.  Will the early adopters convince the majority to buy it?  Word of mouth is powerful, but it depends on how similar the two groups of customers are.  The early adopters might be very different from the majority.

Who first adopted digital cameras?  Not professional photographers. Real estate professionals, early web developers and others who needed online pics, even if they were grainy.  Every product has to get across the chasm between early adopters and the majority.  How many of you own a Segue?

Finally, recognize the little ways you’re asking your customers to change by buying your product; it can be the difference between flying colors and stuck in the mud.  As one student put it, if you use Skype, now you have to “get gussied up” just to talk on the phone.  On the other hand, a new insulin pen reduced the prep time from 1 minute to 10 seconds: sales went up by 30%.

For anyone who couldn’t make it to the marketing workshops with Page, we’re posting the slides on the New Venture Challenge blog.  Thanks to Mark Wiranowski for guest blogging the event.

Jason Mendelson, Co-Founder and Managing Director of Foundry Group, a Boulder venture capital firm, kicked off the New Venture Challenge Crash Course series to a packed house last night.  His wealth of experience – software engineer, then deal attorney, then venture capitalist – came through in lively style.  He’s not afraid to call a spade a spade, either.  Take his advice on very early stage financing:

“Do you really need financing yet?  Early stage financing is very risky, and therefore, expensive.  I’m going to act more like a loan shark than a VC.  An angel investor will give you a better deal.  Create value and the money will follow.”

This was the first in an every-Wednesday “Crash Course” series put on by the New Venture Challenge.  Each workshop is presented by a seasoned entrepreneur or business leaders.  Mendelson’s talk, titled “How to Build a Company,” dished out advice and highlighted common mistakes:

“You need a partner who complements your skills.  The biggest red flag for me as a VC is someone starting a company solo.”

“Most people fall down on estimating the competition.  Lots of entrepreneurs say, “We are different.”  Are you really?  Take social networking sites; your competition might just be your customers’ time.”

“Marketing and advertising will not save you: Every marketing guy knows that half of his budget is wasted; he just doesn’t know which half.”

Mendelson also praised Boulder as a place to build a company.  Successful entrepreneurs are happy to mentor those starting out, and the city is one of the most socially-networked that he’s worked in.  Mendelson illustrated with a parting shot.

“What should you say to a Sand Hill Road venture capitalist?  Compliment him on his Ferrari.”

Below are the slides from Jason’s presentation.  Thanks Jason!  Here is the video of the crash course.