Startups and Beer


    It seems that if you’re from Detroit, everyone expects you to write about cars, comparing your topic to the history of the automobile industry.

Looking at the number of auto startups that existed in Detroit a hundred years ago, it’s easy to see similarities to today’s startups.   The auto industry is a good example of what happens where there’s a lot of competition, consolidation, and near-extinction.  Been there, done that.

So, let’s talk about beer, instead!  Few people know that Detroit was a beer mecca before Milwaukee took the crown. It seemed like all that was needed was desire, a recipe and a little marketing savvy.  My personal experience was limited to my cousin Walter who worked at the Stroh’s Brewery in downtown Detroit.  He told stories of  being allowed to drink beer while on the job!

This sparked my interest to read a great book (see picture) about the history of Detroit breweries.  As I read this book, I kept thinking about similarities to software startups.

Folks who started beer companies loved to drink beer, enjoyed experimenting with their own recipes, and wanted others to share in their passion.  Why else would anyone start a beer company in Detroit when there were already dozens of companies already competing?

Let’s explore:

  • First, as a startup, they had to understand their customer.  Beer was very much in-demand after Prohibition, so there was a large market.  Many startups  targeted specific preferences such as lager, ale, hefeweizen, stouts, porters, schwarzbiers, grains; there was a beer for every taste!    When it comes to technology startups, do you know exactly who is going to download and use your app?  Have you focused on your target customer?  Will they come back for more?
  • Secondly, what would compel someone to buy a new brand of beer over another, already established, brand.  The trick was sometimes a bit of street marketing, literally driving around providing samples.   Similarly, you need to differentiate your value by providing a model that will make it easy for prospective customers to evaluate and use  your product.  Compelling design, ‘freemium’ licensing model, super-fast performance.  Get them in cheap and sell up!
  • Next, the product itself and everything that goes into it.  Quality ingredients, bottling, marketing, sales; there’s a lot to consider going from one to ninety-nine bottles of beer! (I had to say that).
  • Employees – Brewers, like programmers, were in high demand and owners went to great lengths to steal a master brewer from a competitor.  They also tried to lock them up with equity and loyalty tactics.  Take good care of your key employees!
  • Partners & Allies – Ingredient providers, bottle-makers, designers, taverns, they (and you) have to be good at relationships and negotiations.
  • Distribution – Well, at least you don’t need a horse-and-carriage to deliver your app to your customers.
  • Pricing – Sounds easy, right?  By the barrel?  The keg?  The pint?  Pricing is the toughest decision you’ll make.
  • Next Target – This is always interesting.  Non-alcoholic beer, soda-pop, even ice-cream has been adjacencies that beer companies have explored.  Be ready to move in any direction, but every time you do, you have to re-evaluate every part of your strategy, especially competition.

So, there you have it, whether it’s software or beer, business challenges are similar for any startup.  Unless, of course, you are going to write a ‘beer-goggles’ app.  Ummm, I have to defer comment, but feel free to look it up for yourself!