How an Early Stage Startup Can Operationalize Its Way to Product-Market Fit.
With more startups emerging, founders wanting to sell the businesses should listen to buyer needs.
In 2018, CB Insights, a renowned business analytics consultancy, revealed that 42 percent of startups fail because the market deems the product to be undesirable. Two years later amidst the height of the coronavirus, the US Census Bureau observed that applications for new businesses hit a 13-year high.
The success of these startup companies, especially if they’re product-based solutions looking to sell businesses, lies in their abilities to create products that solve problems for their buyers. But with more first-time entrepreneurs taking risks in starting a new business in these uncertain times, it is more imperative than before on the aggregate scale that such risks yield a positive outcome for the first-time entrepreneur. And in business, positive outcomes in the long-run means revenue growth from sales.
In this new emerging paradigm, only the best founders will emerge with successful businesses after the pandemic with desirable products. And as such it is more crucial for businesses to have forefront abilities to execute on products that will become future needs for buyers after the pandemic. If you’re one of the many entrepreneurs trying to figure it out in this new normal, then here’s a method to optimize for product success.
Hypotheses Not Ideas
When founders emerge with a startup idea, it’s only a conceptual idea. Nothing more. That might seem obvious to you but many founders in the initial stages can get carried away with their own excitement on how their idea might “change the world”.
From day one, founders must commit to is a scientific mindset of hypothesis testing. Essentially, “ideas” need to be viewed as hypotheses based on previous real-world observations that need to be tested and validated by the market (aka the buyer).
Everyone has a plan until they get punched in the mouth — Mike Tyson
The reason such a mindset is so crucial is that it provides a framework to systematically de-risk. The mindset of hypothesis testing by definition requires the founder to be open-minded to the fact that their idea could be wrong. It essentially becomes a process of constant iteration on the initial test-hypothesis. Because the reality is that it would be a waste of resources and time if the founder were to commit to building a product when the degree of trajectory could be false.
Critics of this approach might could sum this method as “analysis paralysis”. However, the truth is that a degree in trajectory difference means miles of separation later down the road. And hypothesis testing allows you to de-risk your journey by potentially saving tones of time down the line.
A great hypothesis centers around a solution to a problem that you’ve observed in the market or real world.
Here’s one hypothetical example:
Data from the Vancouver Zoo suggests that monkeys don’t like being fed green apples, we think that we could solve monkey food dissatisfaction by feeding them bananas.
The example above, silly as it is, demonstrates the problem versus solution framework that any hypothesis needs. That is that you provide an observation of a problem — data suggesting monkeys don’t like apples — and a proposed solution (also referred to as the “founder’s vision”)— bananas.
Now, here’s what’s super crucial: this entire hypothesis can all be wrong.
What that means is that not only can your identified solution be wrong, but also the problem you’ve observed. And because it can all be wrong, you as the co-founder must go out and talk to monkeys on this problem, if they consider it to be one. You need to essentially spend time speaking and learning what monkeys think of your hypothesis.
With that in mind, the crucial next step for founders must be to reach out to whoever could be your target customer. And revealing your intentions in this step is super crucial.
Planting the Seeds
Unless a business is cost-cutting, products are usually bought because they’re looking to improve on current methods of operation. In essence, such purchases are done so because they yield a return on investment over a period of time.
Founders have many tasks when they first start their business, but atop on their to-do-list must be an outreach plan to potential buyers. This stage is typically referred to as “seeding” in some mentor circles. Essentially seeding is the process of establishing contacts and buy-in from potential buyers to validate your hypothesis. This is done by getting out there and meeting where your buyers are. Whether they be online conferences, Reddit, Twitter, or e-mail. The founder, and particularly the CEO, must be spearheading this approach.
When this approach is being conducted, the messaging must remain honest. That is that you have an idea, you’re an early-stage company, and looking for feedback based on their particular background and expertise. Keeping the approach honest is crucial for building a lasting relationship that can be leveraged down the line.
Here’s an example of an email template:
Hey _____,
I’m the Founder & CEO of _____, and we just launched our company last week. The reason I’m reaching is because we’re on a mission to build a tool that allows folks like yourself to _______.
We’re looking for experts like yourself to give us some advice and feedback before we start selling products no one wants.
Here’s our idea: {describe your idea in some detail here in 2–3 sentences}. Do you think software like this can save you and your team time and money? or are we just wasting our time here?
Thanks in advance,
It’s worth noting that the aim of such a template is to ultimately get a meeting from them to build rapport, trust, and buy-in for future meetings. With that in mind, it becomes essential to invest early-on in email automation software so that follow-up emails are automated, yet written in a customized fashion. Tools like HubSpot or Apollo.io are wonderfully great at this.
It’s also important to highlight that such an approach should be used only to select the number of people you’ve identified as those you’d like to hear and work with. This could be based on any number of factors such as geography, company, tenure, or whatever factor you’ve identified as relevant.
Meetings in Action: What To Do
Ok, so you’ve sent out these emails to your target buyers and got some meetings scheduled. What’s now important is that you enter this meeting with a curious mindset. However, equally important, is that you also highlight to the prospective customer that you value their experience, expertise, and would love to learn from them further by asking probing questions.
It is so important that you do not pitch your product or ideas at this stage. This meeting is designed to get details and insight on what pains your target customers day-to-day and how they might use a product that you’re looking to build to solve those pains.
So you must present your frame your questions through your hypothesis while allowing the prospect the freedom to exercise their opinions on your hypothesis based on their expertise and experience. All in all, you should be looking to see if your proposed hypothesis (the solution you think your product brings) is validated by the customer. You should also look to ask questions pertaining to themselves, such as their responsibilities in their role, and more.
At this meeting, you need to be in an inquisitive, yet social mindset to build rapport. The last thing you want to do is make the customer feel like they’re about to go through a survey of questions for your own self-interest. It’s in your interest that you maintain a continuous dialogue over time. So make sure they’re well respected and that their input and willingness to share their expertise is highly valued, and reasonably caution them that you’re about to ask a lot of questions.
In the meeting, you must be ready to ask a series of questions on several topics related to your hypothesis. This can include topics such as demographics, business priorities, their current process, and much more. Even more critically, you must understand the motivation or “the why” behind their answer. Never take anything at face value, dig deeper to understand root causes.
The point of asking such a wide range of topics is that over a series of interviews, you’re able to aggregate data and insight on your hypothesis that would be used for version one of your minimum viable product.
Let’s turn to our silly example of monkeys (please assume that monkeys can talk, receive your emails, and able to agree to do meetings with you). You’ve now entered a meeting, a elder monkey from the San Francisco zoo is intrigued and happy to talk to you. For example purposes, here are some questions I might ask the elder monkey:
What species of monkey are you? (to account for potentially different customer personas)
How many monkeys are in the zoo?
Have others felt that? Why?
Ideally, how would things look like in a perfect world? Why?
What tools do you use to eat?
Is this a big problem for you? How big of a priority would you say it is? Why?
We’ve observed from the Vancouver zoo that monkeys hate apples, do you feel the same? If so, then why?
The above questions are far from perfect and simple examples that should by all means not be your playbook. But the core essence is that there’s a follow-up question to every question asked in an inquisitive manner with a purpose to solve a problem and the root causes of such a problem.
At the end of the meeting, it becomes crucial that expectations for a follow-up meeting to take place. Get their buy-in to do so, you’d be surprised how people love being the expert and offering help, especially when it’s potentially a product that can offer them something in the future. The partnership is what’s more valuable than money at this stage.
As for your job after the meeting, the data you’ve now collected should be aggregated and stored effectively. And this leads perfectly to our next point.
Data Clarity & the MVP
As you do more of these meetings, it becomes critical for you to keep clear notes and data on what’s been said and expressed by potential buyers. This step is the key to deciding what you choose to build. So the implication of bad notes and data deeply influences the trajectory of launch, which over an amount of time, can be very costly if gotten wrong.
So it’s imperative that the data is stored in one place and consistently updated. Customer Relationship Management (CRM) is a wonderful place to start. But given that this is still a product-focused step, it would be more prudent to use cloud collaboration software such as Asana or Airtable at this given point in time. The reason for such a move is because collaboration software is more optimized for information entry and data analysis as opposed to CRM software that is more in-tune with Sales.
The bottom line is that you want easy-to-use software for data analysis to look for patterns on what your customers want and to see if your hypothesis has been validated. It’s in this crucial step that you begin to decide on whether your hypothesis needs to be adjusted, or completely changed. And through the birth of a new hypothesis, you must begin to prioritize what to include when you build version one of your MVP.
The Cycle Continues
The MVP-1 is not the final product. We all know this. MVP-1 is a new iteration of a hypothesis that needs to be tested out again. So this means, booking new meetings with new people who you’ve identified as great prospective buyers and users, and of course, continuing the reception of feedback with those you already met.
This iterative cycle never ends and must continue as you strive for perfection so that the product is finally deemed desirable. The graphic above displays the customer-product-development cycle. Ultimately, the world is your oyster and my tactical guide today is just one perspective. Though I hope my two-cent view on how an early-stage startup can operationalize it’s way to product-market fit has been beneficial to you.
Good luck!
