Every single startup founder and every single startup company is searching for one thing and one thing only – a business trend. The problem is every one attaches different definitions to this critical yet elusive notion.
When you have found a trend, you will have some level of validation that either your product/service has found a fit or that your sales efforts are paying off. (Careful of that false positive, though.)
This week I had the opportunity to hear a good pitch from a couple of young entrepreneurs. They exhibited passion, intellect, and a healthy understanding of what they wanted to accomplish. But they failed on one very simple answer; the answer to how many target customers they had talked to.
In this case, their challenge was even greater as they are creating a two-sided market so that question needed to be asked twice.
If you are a fan – and you should be – of the Lean Startup principles with special emphasis on Steve Blank, you will have heard that you need to go out and talk to 50 customers. That is BEFORE you start developing your product or service. Spending too much time inside your own head is really bad for business building. I like to say that when you are the only one in the decision room, every decision appears to be perfect.
What happens when you talk to 50 customers? You gain insight into their interest, how they might want to consume your product and even how much they might pay for it. In the example of these first-time startup founders, they will need to double that effort with their two-sided marketplace.
Obviously, this takes a lot of work as well as a lot of time. But the effort is necessary, as ultimately it will save you time and money. Please take this advice and spend the time talking to your target customers before you lock in on your product development.
Founders and companies I have advised over the past 7 years will chuckle when I share one of my favorite cliché pieces of advice. “As my old statistics professor used to say, one is a point, two is a line, and three is a trend.”
My new founder friends shared with me that they had talked to two very seasoned targets and were thinking they had validation. I strongly and honestly disagreed. Their task is to get as many data points as possible and to be diligent enough to uncover one or more trends from that data. Do it right and they just may be on their way.
Posted by Chris Heivly
Speaker, investor, mentor, startup founder. One of 3 or 4 Co-Founders of MapQuest (sold to AOL for $1.2B). Managing Director of $25M Venture Fund in late 90's. CEO, COO or President of various companies ranging from $200k to $20M in size. Currently, I am one of two Managing Directors of The Startup Factory making 10-14 seed investments per year, founder and MC of the Big Top Job Fair and national writer and speaker waxing poetic around startups and startup communities.