The startup customer-validation curve — why you need to stop caring about quantity (for now)
Over the past year, on our journey to launching Ricochet, we’ve engaged with over 100 B2B companies. All flavours and sizes, different sectors, different products, different roles— from CEOs to marketers to salespeople — to figure out how we can solve their problems.
Something we learned from all these conversations and surveys, beta-tests and trials, is how businesses all think differently about prosecting to find new customers, depending on their stage of development.
If we mapped out the data points from these qualitative (and occasionally quantative) conversations, we’d probably draw a curve that looked like this:
Let’s call it a startup customer-validation curve, and it represents the relationship between founders and their efforts to sell their product once they’ve launched.
It crystalises a paradox that often confuses first-time founders starting a new business: you need you talk to as many prospective customers as possible to work how you’ll solve their problems — but you can’t and shouldn’t trying selling that solution to everyone once you’ve built it.
Broadly speaking, these are the relevant points in the curve:
1. The Pokémon phase (“Gotta catch ’em all!”)
Startups typically target everyone at the start. They’re unsure exactly who their ideal customer is — partly because they’re still figuring out what the value of their product or service is, but also because they haven’t asked themselves the question yet.
It’s very much the “spray-and-pray” phase, when founders will scrape directories and cold-email every address they can find, throw hundreds (or thousands) of pounds at Facebook, sponsor events without understanding the ROI — in short, they’ll try any and all channels to get a sale. It’s high quantity, low-quality activity, with very little methodology or measurement of results, that eats up budget and converts into very few sales.
2. The penny drops
As the startup engages with their target market, founders start to discover that customers are complicated creatures, with different needs and niches and quirks—and plenty of them aren’t interested in buying.
And this is often when founders realise that all quantity is good for at this stage, is creating noise; it’s difficult to manage and a waste of resource. Instead, founders realise they need signal — fewer, higher quality prospects — so they can better test their assumptions and accurately measure the results.
Our understanding of our market becomes more refined with each conversation. Gradually, we start seeing patterns in behaviour, what commons pains and problems are felt by groups of individuals working in different types of business.
And the more we can segment these customers by their specific needs, the more likely we are to build something that somebody wants — and the more likely we are to describe it using language they can relate to.
This is the path to defining our Ideal Customer Profile (ICP) — a description of a hyperthetical business that’ s a great fit for our solution and would get significant value from it. Size, location, sector, processes, activity, job title — the more detail we can add to this profile, the easier it becomes to find more potential customers that match it.
But it takes time. I haven’t seen any growth-hacking techniques or Udemy courses that’ll instantly grant you a deep understanding of your target market.
3. Reaching product/market fit
Founders that constantly refine their target market, measuring and understanding feedback, iterating their product, testing with new customers that fit their evolving customer profile; from what we’ve seen, this is the behaviour that takes a startup towards product/market fit — the point at which the thing we’ve built solves a big enough problem for a big enough group of people. And unless we’re that overnight sensation that accounts for about 0.1% of all startups, it doesn’t neccessarily happen until we’ve engaged hundreds of customers.
A great example of this is Superhuman — founder Rahul Vohra individually onboarded new customers, observing their behaviour and refocussing his teams’ efforts, based on users who found value in the product. There was no interest in quantity, because scale at this point wastes effort and resource— but it can take time and experience to appreciate that. Superhuman isn’t an overnight sensation — it’s taken years, growing literally a single customer at a time.
[As an aside, every tech founder should read Rahul’s post on his process for measuring product/market fit — everyone can learn something from his reasoning, methodology and execution.]
4. Scaling up
If you’ve cracked your market, figured out how best to build something customers need and love, and there’s very little friction encountered when you try to sell it — that’s when you raise the big money and push your foot down on the accelerator. You know what the perfect customer looks like, and so long as they are plenty of them to sell to, that’s the time to really start caring about quantity again. That’s when you need to hire, formalise processes, nurture sales teams.
For most startups, the curve isn’t necessarily so neat — founders keep trying to push numbers into a ill-fitting product because of investor’s demands, or ego, or because it’s generating some revenue (even though it might mean burning through cash to do so).
The point to take away is that quantity shouldn’t be your North Star until you’ve cracked quality — and that means being able to articulate exactly who wants what you’re building, and why — and then being able to prove it.
I’m Paul — I help exceptional founders, operators and employees apply for the Tech Nation Global Talent Visa UK for digital technology. If you’re thinking of applying, book a free consultation call.
