Tag Archives: customer validation

Rate of customer validation is the best indicator of #napkinStage success

When you have an adviser or two on board, I would recommend a monthly check-in with your advisory deck to actually get advice. Since no amount of expertise and knowledge the adviser has will replace your daily “living” and “breathing” your startup, you will have to brief them on key accomplishments and a view of the “trees”. If you have chosen the right advisers, hopefully they will help you see the forest from the trees.

The biggest challenge is showing “early momentum” and traction. Most traction falls into 2 buckets – product or customers. Side note: When you are a larger company there would be many buckets that are news worthy – funding announcements, partners, awards, hiring, event attendance, etc. but, at the napkin stage, only product updates and customer updates are valuable.

In terms of product updates, changes, modifications and new features (including design updates) are worthy of putting on your monthly advisory update. The best updates I have seen as an adviser are those that are related to changes the product based on feedback from potential beta customers, especially if the feedback results in the customer willing to pay for the product.

The second set of updates are around customers. In this particular case, activity is an early indicator of traction, so I would try and focus more on trying to use as many referrals from people you meet to get introductions to other customers.

A trick that I have seen several people use effectively is to focus on getting 2 customer meetings or demos each day for the first 3-6 months during the customer validation phase.

The rate of early customer validation is the best indicator of early success is what I have found.

The rate of early customer validation is the total number of “prospects” or “Customers” you talk to in a given time period. So, the more customers you get a chance to talk to in 2 weeks, versus another competitor who talks to fewer customers in the same time period, the better are your chances of determining problem fit.

Customer Validation as a Service (CVAS) – an agency for small startups

Customer discovery and validation is a pretty challenging area for most startup entrepreneurs. While most can build a product and maybe even hire people to help it grow, validating with customers and cold calling people to get feedback is hard for most technology entrepreneurs.

Customer Discovery
Customer Discovery

An entrepreneur suggested to me an idea to start an agency that does Customer Validation as a Service (CVAS) or Customer Discovery as a Service (CDAS).

The key part of this service is setting up the problem statement for the entrepreneur, distilling the list of potential customers (Both B2B and B2C) and finding – emailing, talking to and interviewing potential customers to find the top 3 pain points for which they’d pay money for.

Imagine if you were a technical developer entrepreneur and you can build a good product, but your customers were in another location, or they were people you were not able to get to easily.

If a service built a website landing page, setup Google adwords, Facebook campaigns, Twitter profile and ran a campaign for a week or so to give you feedback on what’s the interest, what are potential customers interested in and what would they pay for?

I think this type of service would be very valuable for entrepreneurs. I can easily see various offerings being add-ons to this service.

1. Pricing validation

2. Content (what to write, what medium – email newsletter or Youtube Video, etc.) validation

3. Budget validation

4. Technology landscape validation (what other products should we integrate with)

5. Go to market validation (Where should we advertise, how should we market, etc.)

In the Steve Blank Model for customer discovery above, this set is most useful in the Test problem phase, followed by the Verify phase.

What do you think?

Would you buy this service for $500 – Consumer startups and $1000 for Enterprise startups?

Continuous Visible Customer Validation: Using Do, Doing Done to Customer Development

There are multiple methods to keep track of your projects and priorities. Here is one technique I used when trying to keep track of customer validation. This approach works best when teams are in one single location since it is visually appealing and easy to update.

It is called the Kanban method of Do, Doing and Done. A visual dashboard, which I used colored post it notes for, comprises of 3 buckets of work:

1. Do – has all the items that need to be still done.

2. Doing – what you are currently working on

3. Done – what’s finished

Typically we update and refresh the items each week – sometimes daily if there are enough changes, but a week is ideal.

Do Doing Done Kanban Method
Do Doing Done Kanban Method

Some folks have mentioned using Trello or Kanbanize. I have not, so I cant recommend them.

Once you understand how to segment your startups customers and you understand the 3 most important steps to segmenting your customers, most people start to put a framework for validating customer segments.

As I mentioned previously, the elapsed time for these 5 steps, in my experience lasts from a 4 weeks to 3 months on average.

The most important item to remember is that the method works best for discrete, defined tasks that take a short period of time. If your item takes many weeks or months, you have to break it down into simpler steps. Customer validation or pricing strategy cant be a step. Pricing strategy has to broken up into price tiers, price testing, pricing validation, pricing research etc.

When validating customer problems, you are trying to understand the following questions:

  • Is this a real problem? Is is a big enough problem for them to look for a solution?
  • What will it take for them to adopt a solution? Adopt my solution?
  • How much will they be willing to pay to adopt?

I have used post-it notes as a great way to segment the steps in the process and use colors to validate different items I need to:

In the customer validation I put forth a process comprised of 5 steps:

1. Secondary research

2. Primary research with insiders

3. Proxy market sizing

4. Online validation

5. Customer interviews

The best way to use color is to put these various “sources” into different colors. So, influencers may be blue, proxy sizing sources may be yellow, etc.

When you get to the customer interview step, you are likely finished with the previous steps, so you can color code segments of your customer with different colors.

So “Segment A” will be yellow and “Segment B” will be green and so on.

The reason for colors is then you can put them all into a board at the end and find a way to look for patterns that correlate.

The big advantage of the visible productivity map is that everyone is motivated to make changes to the charts so you can see progress daily. Try it and let me know if it works for you.

Startup Idea validation: How many people; how long before your idea’s worth pursuing?

Lets say I have an idea. Actually 3 different ideas I want to pursue. My next step is to get validation of that idea. The top 5 questions that I am looking to answer are (not necessarily in order):

1. Is this a real problem? (Pain point validation)

2. Is what I am trying to do solving the problem? (Product – market fit validation)

3. How much of a problem is this for the person who I am providing this solution for? (Customer validation)

4. Will people pay to have this problem solved? If so how much? (Pricing validation)

5. Is the problem big enough that I can make a large company out of solving this problem? (Market size validation)?

So the question is how much do you have to get validation for these questions until you decide to pursue it?

One approach is to actually develop, have customers pay and let the market validate your idea.Which is what was suggested by a user at HN.

The approach I am going to suggest is more measured and less expensive than actually developing the solution before you figure out if that’s the right idea for you to pursue. It involves talking to customers / prospects or even putting together a simple SEM campaign to test the idea out. I think many might say that’s not a new idea, but I dont see over 80% of startups doing this.

That’s way cheaper than time or resources to build your idea to a real product. At some time you have to build a real product and there no denying that.

First I would make a target list of 20 people – 10 who are potential customers who have the same title of the person you believe has the problem you are trying to validate. If you are a consumer startup, that might be the target audience of users who might want the product / service you are building. If you are an B2B company, look for the right title of buyer.

The list should include 5 potential industry experts, who might understand the nuts and bolts better and 5 “laymen”,  or those that have not much of an idea about the intricacies.

Is the number 20 enough? Maybe, not, but its a start.

Then prepare a one paragraph elevator pitch explaining what the problem is, and how you are going to solve it. Email it to your list and track their feedback.

Then try and get prospect validation. This is because people who know you might either a) not want to discourage you, and so give invalid answers, or b) might not understand the solution well enough to provide valid feedback.

I would setup Google adwords campaign for the keywords you think people will most likely click on. If you buy a domain and hosting from Godaddy or some other providers you even get $100 adwords credit, so there’s no excuse.

Create 3 different pages with your multiple campaigns and call to actions, and have a signup sheet (this is your call to action) for each. Track and categorize results. In each of these pages, provide a screenshot of your product / service you are trying to develop.

Wait, you think, wont this give my idea away and attract more competition. Sure, I think it might, but more likely, there’s competition already and you are just not aware of it yet is my answer. Or if there’s no competition, is that not a signal anyway?