Five startup lessons
Running a startup accelerator is a two-way learning process. In every batch of E.ON :agile Nordic, we teach startups how to achieve more with little resources. For every batch, we also get better at teaching innovation and startup methods. Today, our programme boils down to five main lessons: Research, Visualisation, Verification, Early sales and Communication.
In an early stage startup, everything about your business idea is hypothetical. Just accept this and then start figuring out your basic variables:
For customer X, we solve problem Y with solution Z
If one of these variables change in this equation, the other ones will also change. So which one do you start with? We recommend teams to always start with people. Startups need to prove that the people they want to serve really exist and then learn what problems they need help to solve. The only way for startups to learn this is to get out of the building and talk to them. In this research phase, we focus on the first part of Rob Fitzpatrick’s Mom Test.
When you understand a real problem and have an idea about a solution that might work, the next step is to visualise this idea. Visualisations help you communicate better with potential customers. We advise teams to save time and start with lo-fi visualisations such as sketches and mockups. Over time, they can move towards hi-fi representations of their product, such as prototypes or polished marketing material.
Waste your lo-fi visualisations, not your hi-fi work
Your goal is to spend just enough time to get visualisations that help you take customer conversations to the next level. If people aren’t interested in what you show them, you better figure this out quickly so you can adapt your idea into something customers want.
So, what is the “next level” in a customer conversation? A visualised idea enables you to move on to the second part of the Mom Test. In this phase, you meet with potential customers to verify that your product ideas are on the right track. You share your visualisations and listen carefully to customer feedback. Watch out for confirmation bias! It’s not enough that they say that they like it and might buy it in the future. To make sure that they are not just trying to be nice, ask them for real commitments. This means asking for more of their time, their reputation or their money.
Ask for commitments before building your product
Once early customers start offering you something that is valuable to them, you can start investing time in building hi-fi versions of your product. Asking customers for a commitment can be scary, but it’s a great way to start your sales process early.
4. Early sales
How do you sell something before it is fully built or developed? You might be able to offer your customers a service to test if they want to pay to have their problem solved. If it is important to them, they might not care if they pay for a product or for a consultant to help them. The Concierge method is an efficient early sales experiment, even if you can only serve one customer at a time. When you learn about customer needs, you often need to do things that don’t scale.
Scale only when you know what makes customers happy
Products that involve advanced tech such as computer vision or machine learning can take a long time to develop. Still it is possible to sell your solution early if you let humans do part of the job. This way to learn quickly what people like by faking a complete product is called the Wizard of Oz technique. (Pay no attention to the person behind the curtain!)
Startup founders should be ready to talk about their business and pitch at any time. Pitching means that you ask for something. It can be to ask someone to buy your product, for someone to invest in your company or for someone to join it as an employee. When trying to convince people, you fundamentally rely on three modes of persuasion.
Pathos, ethos and logos — rhetoric building blocks
Pathos deals with feelings. How does the problem make people feel? Is the solution surprising or exciting?
Ethos is your credibility. Why are you the right person or team to solve this problem? What’s your unfair advantage?
Logos is how it all makes sense. Why will your solution work better than the competitors’? Does your business model make sense?
Once you have these building blocks, you adapt your pitch depending on your audience and available time. An investor might want a lot of business info. A potential employee needs to get emotionally engaged in solving the problem. Just like when you develop your product, the better you know your audience the better you can communicate. Empathising with people is the essence of pitching as well as creating great products.