Validating your startup idea and initial customer development

Giff Constable startups

A reader named Eric asked a question about customer validation / development on my “Bull doesn’t build” post, and I thought I would answer with a post.  Eric’s question was:

“You talk about your ‘focus right now is on building a solid foundation of product-market fit.’
At what point do you spend more time focusing on product-market fit then on actually developing the product? I’m finding myself torn as to when do i decide to commit? how developed should my idea, or product, be before i go out and get actual market feedback about it…”

Short answer:

  1. Start learning from customers right away (and research competitors). Unless you’ve been working in a space for years or your idea is incredibly simple to prototype, assume that you don’t know enough to start designing without first learning.
  2. Write down all of your hypotheses and assumptions about the problem, your solution, and your hoped-for economics (i.e. how you make money), and try to discover the truth behind those assumptions. Review this list regularly because it will change.
  3. When you talk to people, start with open-ended questions and then get reactions to specific ideas.  Ask about problems and/or behavior before suggesting your ideas for solutions. Listen, don’t talk.
  4. Talk to people.  You can do a survey and try techniques like “SEM to a mock up page” to test interest,  but nothing beats looking someone in the eye and reading their body language. (Link: great Steve Blank post)
  5. In our case (a new consumer Internet application), I connected with ~100 people first while my technical co-founder did some technology investigations. Once we felt confident that we were on to something, we committed.  We are building our first prototype now and in the meantime I am designing UI mockups to do 1-on-1 and multi-person paper tests, and continuing to learn, learn, learn.

I’ll add that with some things, like game design, you really can just jump right into crude paper testing and go from there.  A long answer is after the fold…

sectionbreakerLong answer:

My new company, Aprizi, is now only about 5-6 weeks old, and I’ll walk you through a bit of our process so far.

After the light bulb moment, I started by calling on two types of folks: 1. potential customers, and 2. some smart entrepreneurs and investors I knew.  The goal with the first group was to figure out whether people would actually want my service.  The goal with the second was to see gut-reactions to the idea, reality-check the technology concepts, network to folks with domain knowledge who could advise me, and discover previous attempts or current competitors which I had not discovered.

crowdPotential customers — Since my concept is a consumer play, I needed to cast a wide net.  I either met with or spoke on the phone with people of both genders, a mix of ages, living in city / suburbia / country, and who knew me by various degrees (and asked for introductions to folks who didn’t know me).  I started with people I knew would give me honest, blunt answers, and always started a conversation stating that I needed honesty, not kindness.

I also ran a survey with Google forms, which was interesting but at this ephemeral stage I find surveys to be most useful for gathering facts rather than subjective/opinion declarations.  In many cases, I found subjective survey responses to conflict with what I then heard in an in-person interview, and I believe the latter.

Remember that your goal is maximum honesty, not to have someone tell you what you hope to hear.  Press people about whether your idea sounds like a must-have or a nice-to-have.  Frankly, if no one is saying the latter (or worse), then you are probably doing something wrong in your approach (nothing is loved by *everyone*).  Be prepared to be wrong about what the market wants, and iterate to something better.  However, there are no one-size-fits-all rules about startups — if you are doing something truly disruptive, you might have to buckle down, believe in yourself, and bull your way through a lot of initial “you are crazy”.

coinsInvestors — Knowing that we will eventually need to raise some seed capital around this, I also have been talking to a few VC and angel investors.  One of the many differences between today and the first time I started a company (am I starting to feel old?) is that I have some great folks who are willing to let me call them with an undefined idea.  VCs have a different thought process, and you can get a feel for key trigger points that cause excitement or red flags.

If you do this, be clear about how early you are, and steer your conversation away from feeling like a pitch.  If you don’t have relationships where you can bring a half-baked idea, there are early-stage firms out there that love to stay in tune with new ideas and startup activity, and might be willing to talk to you (in New York, Charlie O’Donnell with FRC, is very open to this).  As a rule with investors, you will be better off if you can get introduced by a mutual acquaintance.

Experts — While I continually examine assumptions and try to spot gaps in my knowledge, I have been networking to knowledgeable people who can provide insights.  A lot of people find startups interesting, like rooting for the new guy on the block, and are quite open to talking.

Two side notes:
1. I find it very useful to create a financial model even at this early stage because it will reveal your assumptions, knowledge gaps, and can point out flaws and pressure points in your ideas on how to make money;

2. I don’t believe that you are helped by keeping your idea secret, although there are instances where I will hold off approaching someone too early if competitive risk feels very strong.sectionbreakerWhat’s Next?

I am lucky to have an amazing technical partner, and since no one can effectively code without uninterrupted time, I’m trying to let her stay focused on the prototype while I continue to learn from the market and just give her updates (and wear every hat *other* than coder).  Our prototype functionality is so stripped down that, at this point, the first version won’t really change much based on what I’m doing.

Customers — my immediate goal while we work on prototype v.1 is finishing UI mockups of different features we need to prioritize and using those for more 1-on-1 conversations as well as focus groups.  My goal with the focus groups is to primarily include people who do not know me (although I will be networking to them via people who do).  Once we have a prototype up, we will start a closed alpha/beta process and I might also take advantage of this cool user testing service, (which I just discovered thanks to Chris Carella).

Investors — at this point, I’ve gathered my initial data points and reactions, so I’m pausing this effort save for a few folks where I just want to get Aprizi on their radar.

Experts & Partners — I continue to network to people that can increase my knowledge and answer key questions.  I’m also having very preliminary conversations with potential partners who could be useful for distribution or other synergies.  At this point, my primary goal is not a deal but rather to understand what those partners care about — i.e. what can I bring to the table that interests them, and how does this affect my design decisions?

Startup Blogosphere — I’m also talking to other entrepreneurs and listening to the “lean startup” crowd on the Web to pick up ideas and methods that I either haven’t thought about, haven’t prioritized appropriately, or have simply forgotten.  There are lots of great ideas out there.

I hope this post has been useful — I’m sure I’ve left stuff out but it’s back to the hustle for me.  What do you think I’ve forgotten?