Grim lessons in customer validation
We set out to change how people work forever but fell into the pitfalls all too common for product-minded entrepreneurs.
Nearly every day, my team was congratulated for our crazy and exciting startup. Curious admirers flocked around our product like it was a neutron star at any event we participated in. It was 2016, and someone had just offered me hundreds of dollars in plain cash to buy one of the raw prototypes straight off our booth at a technology fair in Shanghai. Sold!
“If this isn’t customer validation, I don’t know what is!”, I thought. But I was so wrong. In 2017, as the CEO and chairman, I signed the official documents to shut down my first startup, eloSpaces. Even though I was downcast at the time, it feels like a graduation ceremony in retrospective. The lessons I learned turned out to be immeasurably valuable later on.
While customer validation is an obvious part of any entrepreneur’s or product manager’s daily work, there’s so much that can go wrong. This story is my attempt at unraveling the mistakes we made at eloSpaces, specifically in customer validation.
Office of the future
Early 2015, we set out to change how offices function forever. Open offices had been all the rage for quite some time and there was a clear cry for more privacy and comfort at offices around the world. It was the era that gave rise to office phone booths, portable meeting rooms and napping capsules. We wanted to take it all to the next level.
Our grand vision was to turn open offices into hybrid offices with affordable, portable and comfortable personal capsules. These capsules could fit one person and they came with integrated A/C, lights, air purification (because we operated in China), and best of all, you could deflate it and pack it up in a suitcase.
Sounds like a lot of features? We’ll get back to that soon.
First lesson: Hype vs validation
Stirring up hype was quite easy with a product like ours, so we kept attending to more events and fairs to further increase our “traction”. Seeing people get excited felt amazingly good and we had no reason to doubt if our target customers wanted what we offered. But this wasn’t real traction.
Having recently read the stories of Dinnr and Meeshkan, I now feel our startup fell into the exact same trap as they did. We mistook hype and praise for validation, while in reality, most people were just curious about the bizarre new thing. Like the CEO of Meeshkan put it, these were onlookers and not real users. This means that our traction was actually waaay smaller than we had thought.
So instead of spending a ton of time at big events, we should have put more emphasis on focused sales effort towards a narrow target customer base. Attention alone does not move the needle.
The lesson: Beware the curious onlookers. They make you feel great but won’t contribute to customer validation and certainly won’t push your business forward.
Second lesson: Talking vs buying
All the positive attention we got gave us a false sense of security. To us it was clear that we were on the right track but selling our product still felt off somehow. We weren’t quite sure why the positive reception we always had wasn’t converting into big sales deals. A sale always seemed just one feature request away.
It is easy to see in hindsight what we were doing wrong. In our discussions with target customers, we kept asking if they would buy the product when its features are ready. Very often we heard “Yes” and many companies were happy to try out a prototype at their office. But as it turned out, there’s a long way from a “Yes” to money actually changing hands. It is way too easy for potential buyers to just say nice things to you out of politeness when they don’t have to commit to anything. Asking for more features is also a polite way to decline a deal. (By the way, I highly recommend a book on this topic called “The Mom Test” which I wish I had read earlier)
We should have pressed more for real sales and real commitments from curious “customers”. Doing free trials and pilots are a great way to get your foot in the door, but they can easily blind you from seeing who your high-value customers are.
The lesson: Commitment is the highest quality customer validation possible. Without commitment from customers, you can never be completely sure who is serious and who isn’t.
Third lesson: Target customer vs actual customer
We did indeed close real sales deals and got true commitments from customers. So what was the problem then? This was the biggest lesson of them all. I believe the root of our customer validation problems was that our actual customers were not our target customers. And our actual customers did not use our product for the purpose we designed it for. Sounds confusing but let me elaborate.
We targeted modern technology companies with open offices as our primary customers, and envisioned to make their high-output employees healthier, happier and more productive. At some point it dawned on us that the real, money-exchanging traction did not come to us from improving the working conditions at software companies. Instead, our customers bought the product for its appearance, not for its features. They wanted something cool to show off at their office reception. Something fun for their employees to play around with. They were architects, design offices and the like. The whole time we had been developing high-tech features and attending to the feature requests from our target customers, we had been listening to the wrong audience.
We definitely should have paid more attention to our real customers and literally visited them more often to see what they were up to. We should have done more deep interviews to understand what really mattered to them. And we should have created a way more specific target profile than “modern tech company with an open office”. This way we could have noticed something was off way earlier.
The lesson: Truly strive to understand who your customers really are and why they want your product. Go for as small of a niche as you possibly can in the beginning to make sure you know exactly who is using your product and how.
So, what do I do differently today?
Putting lessons into practice
After saying goodbye to eloSpaces, I have continued working on tech products, this time armed with the lessons I wish I knew years earlier. For the next couple of years I went into Venture Building as a consultant, which provided the perfect playground for me to test my skills in lean product management practices, specifically in customer validation.
I soon noticed I had developed a new instinct that I keep to this very day. Whenever a new project came along during my Venture Building years, my first reaction was to seek out a handful of target users and start talking. No slides, no website, no nothing. At this stage, the only thing that matters is whether or not solving the supposed problem would bring real value to the target users. If not, it’s better to refocus onto a new problem or try with another target group.
When the target users’ pain points have been confirmed, it’s time to make a very light weight visualization on what your solution does and how it solves the user’s problems. No coding or building yet, just some simple visuals to get your point across. And sell.
- Don’t ask: “Would you buy this if we created it?” because the answer will be an untrustworthy “Looks great! Let’s continue talking when it’s ready.”
- Do ask: “Cash or credit?” because asking for commitment reveals who is your real high expectation customer. Even if you don’t manage to close any sales, the insight you gain is orders of magnitude richer compared to the previous question.
And finally, regardless of the stage of validation you’re in and how well its progressing, keep identifying your most enthusiastic users. Keep talking to them about their problems. Keep updating your target user profile. And keep double-checking that the source of your traction matches the target user profile. I have hammered these into the back of my head.
I love building cool products and you often find me creating funky prototypes for new things. On my free time I hold nothing back, but in a professional environment I suppress the urge to start building before customer validation is under control, as to not repeat the old mistakes. It’s a continuous balancing act, an endless dance between validating and building. Each rotation clears out a small bit of ambiguity and helps you see further ahead. Whether you’re stepping down a steep cliff or up to a pot of gold, proper validation gives you the information to adjust your steps accordingly.
While I’m a big believer in learning through mistakes, it sure is better to learn from the mistakes of others first. I hope you have found value in these lessons and avoid the same pitfalls. Best of luck!