Posted: 12 August 2016
Today’s talk was about customer development. The emphasis was really on talking to customers. It’s easy to build a start-up, but it’s hard to build a product people want. There are tons of stuff that people should want, but don’t want.
For example, the job of a physiotherapist is to make sure that their clients fully recover. If you create an app that reminds clients to do their work out for only 15 minutes a day, it would greatly improve the recovery of the clients. Both clients and the physiotherapist should want this app, but would the physiotherapist want it? That means fewer personal sessions at the gym, and that affects profitability in the long run. Hence, reinforcing the point that there are tons of stuff that people should want, but don’t want.
By extension, product-market fit is extremely important. Companies succeed not because they had a great product, great team, or great talent. They built something that people really wanted. I’m not sure where these numbers were obtained, but 10% of companies fail because of engineering, 90% fail because they can’t find a market and customers. The bet EF takes is that you can build your idea, so find customers first!
A good measure of when you have enough customer development, is when you sit down and talk to someone about your idea and that person said “oh this guy is doing this, oh this guy is doing that”, and you say “oh yes yes I know about this and that!”.
So how do you actually get down to it? Well there are the early adopters and the majority. Look for the one percent of people who are innovators and are willing to take up your tech. But how do you find that one percent? You just have to email people. Lots of people. Talk to everyone and find out as much as you can from them. Keep options open as this is a really exploratory stage.
When you talk to people, always remember that they can be broadly classified into two categories. A navigator and a champion. A navigator can help you introduce to other people within the company so you can find out more about the problem. A champion is the one who pays.
An efficient way to send lots of emails will to be use the tools that Alex discussed. This part is really just about being a honey badger.
In the afternoon, we had the privilege of having Anthony Finkelstein talk to us. He’s had lots of experience and has held many appointments in various organizations. Hot areas for him in the next few years would include homomorphic encryption, side channel vulnerabilities, supply chain security (where does your hardware and software come from), etc. Not surprising since he has a security background. More importantly, his start-up experience was what we wanted to hear. He shared with us a few valuable lessons:
It’s about the money. A company is about the money. There are many times where you might love your technology so much that you’re fixated on it. Companies only survive because there’s money. Always keep that in mind.
Get out to the customer really really early (sounds like what Alex said). And of course, learn how to sell.
The team. You’re going to be building a company and that means hiring people. The tendency would be to hire people that are similar, but don’t ever do that. A diverse skill set might be a better idea.
Constant slow growth, or explosive growth? Take on the right amount of money at the right time. Getting investment is a great day for your company but the worst day of your life.
Have the courage to decide that a certain market is bad (customers not buying is a good cue), and then change your solution. Listen to the market.
Sort out company structure and equity structure early on to avoid awkward conversations. Especially the option pool.
Equity is for future contribution, not past contribution.
100% of nothing, is nothing. Be willing to release equity to future bright employees who are willing to grow the company.
Sometimes, you might not want to go to your biggest and most obvious customer first. This is because you might not be ready to meet him/her.
What’s your customers win condition? What’s yours? Align both and we have a win-win.
When asked about early stage start-ups working with governments:
In the evening, we had Turochas with us. The learning points were:
VCs are prepared to lose money. They are banking on the few to succeed. Zero To One by Peter Thiel mentions this as well.
You only take money when you need to take the money (similar to what Anthony Finkelstein mentioned).
Business, is really business. It’s not really very “clean” per se. Do what it takes to get your customers, but of course, legally!