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Startup Advice
March 15, 2018

“Is There A Pony In There?”

Five Steps to Diligence Your B2B Startup Idea

It’s a classic question; one that plagues every serious B2B startup at inception and for months — and sometimes years — thereafter…

Is this a business? Do my customers think this is a good idea?

How do you, as an enterprise tech founder, get visibility into whether or not customers are interested in your product before you build it? There are ways to effectively do this kind of market research with B2B customers — like an enterprise CIO, a CISO, a people ops, sales or marketing leader — especially larger enterprises.

This is not a primer on broad product management. Rather, it’s a specific process to get to a yes/no answer for “is this a good idea?” and “How should I scope version 1.0, version 1.5, version 2.0?” for early-stage, B2B products that are sold (vs. organically adopted, freemium or OSS tools).

STEP ONE: Get Access to Potential Customers

There are many ways to get access to customers for early conversations. At Greylock we have a customer development program which connects our portfolio companies to early partners and C-level execs at pioneering technology customers. We’re particularly focused on opening doors to larger enterprises, whose technology environments, processes and purchasing are often more opaque to startups.

Other paths for getting access look like a “ghost” go-to-market effort:

  • Generate inbound: Blog about your unique insights on the problem space. Host, speak at and attend events. Where does your target customer spend time? What are the industry conferences and events that are considered most valuable by that customer? Organize meetups for knowledge-sharing by your target users and customers.
  • Targeted outbound: Build a target list of companies. Reach out directly through linkedin, twitter or via email (search for people in sales contact databases). Write a forwardable email asking for an introduction to the person who should care about this problem, asking for feedback on your product concept. Send it to everyone you know.

As you start this process, set a target number of potential customers with whom you want to speak; I think 20–25 is a good place to start. You’ll want a mix of the different stakeholders around your problem — product end users, anyone involved in deploying, maintaining and administering your product, and economic buyers. For example, if you wanted to build a new sales tool, you’d want to talk to sales reps, sales operations people, sales leaders, and IT.

Keep yourself organized through this process. Start by building a spreadsheet like this to track your customer conversations:

STEP TWO: Describe the Pain

The next step is to make those customer conversations useful. With nothing to sell, your objective in these conversations is to create a cycle of learning — to validate or adjust your hypotheses.

Create a 1-page datasheet and a 10–15 slide deck that both simply describe the pain, and explain the product conceptscope, and use cases. The slides should also ask questions that you’re thinking through as a founder/product creator. Another useful exercise (similar to the datasheet) is the Amazon press release.

Enrich your understanding of the problem. Some pointers:

  1. Don’t ask leading, yes/no questions, e.g. “Do you want to use AI in your business?” Who would say no? Instead, ask broadly about their challenges in an area, or describe the pain you think exists, and check if the customer agrees: “I think XYZ is really difficult for people with the current set of tools. How does that match your situation or not?”
  2. Determine how important it is to alleviate that pain. Ask your customer to place it on relative terms: “Is this one of your top 3 priorities? What else is more important? How does it fit into your overall business objectives?”
  3. Understand the status quo. How is the problem solved (or avoided) today? What is imperfect, slow, costly about that solution? How much do they spend? Does the status quo get a customer 30% or 80% of the way there? Would you be replacing one tech vendor, multiple vendors, or some non-technology process?

Ideally, you’ll be able to spend time with your customers not just in an interview mode, but in an observational research mode. Ask them to show you the applications or technology they use today, how they operate and collaborate. Ask them to point out to you what does and doesn’t work.

As you speak to your customers, track where the problem resonates. Who cares (role, company, industry, technical environment, culture etc.)? What’s the business case for a solution in this space, and who would own the budget line to pay for this?

STEP THREE: Define Your Product Concept, Scope and Use Cases

Now that you’ve reached a shared understanding of the problem with your customer, explain your product, the core 3–5 use cases for it, how you would get started using it, and why it’s 10x better than existing solutions. Allow the customer to react. Often they will bring new use cases to your attention, or push back on particular claims.

Continue to ask open-ended questions:

  1. What do they not understand, and what are they skeptical of?
  2. How does the customer wish it worked differently than you described?
  3. What’s the first way the customer would use this? What else would they want you to do?
  4. What needs do they have around implementation, integration and update cadence?
  5. What sales and adoption blockers could they foresee? Any approvals or security review?
  6. How often could they see using this? What would they pay, and what kind of pricing would make sense? How would they if they were getting value from the product, and how/when would they decide whether to keep paying (assuming a subscription product)?

Your desired outcome is to have a limited, clear and repeatable set of use cases where 1) your product is differentiated, 2) there is customer pull, 3) customers understand how the product as described by you will solve their problems, and 4) the sales blockers you have identified are addressable.

STEP FOUR: Plan Your Company Strategy

It’s essential to understand the broader environment your product will live in. Some questions to ask customers:

  1. What existing vendor do you think should build this / what vendor do they wish would build this? What existing product category is this part of, or is this most related to? For example, if something similar to your product is bundled in with an ELA by an important vendor for a company (e.g. Microsoft, Adobe, Salesforce, etc.) then you will need to have even sharper differentiation.
  2. What are the drivers and drags for adoption? What are (if any) the natural triggers of change or spending in this space? How conservative are customers about change in this area?

Sometimes it is debated if innovation in a market comes from “inside the building” (the engineering, product and design teams in a startup) or “outside the building” — from the customer. It’s obviously both; but after collecting this data, it’s your job as founder to restrict the demands of your individual customers in a way that is compelling, generalize-able across customers, and aligns with your company strategy. Often the “ideal solution” imagined by a customer will be to hire a services firm to come and fix their problem completely, or involve features/integrations that fit their very specialized workflows that are not shared by others in the market. That’s not ideal for a startup founder.

STEP FIVE: Use the Data

Once you’ve learned about your customers, its time to process their reactions. Integrate the feedback. Go back to willing customers regularly and update them on what has evolved in your thinking. As you get further along and the product comes into sharper focus, A/B test your messaging. Share your roadmap. Rinse and repeat.

Finally, if you’re convinced there’s a “pony” in your idea, make an ask! Tell interested customers you’ll come back with wireframes in [X months] and/or a beta in [Y months], and you’d love to keep them updated on your progress. Some customers will tell you they can’t be the first customer to try a new product, but they might be willing to be the tenth customer. Or, they’ll be curious to know when you land your first 1,000+ employee customer, or your first customer in financial services, etc.

Fill in the spreadsheet that you set up previously, and look for emerging patterns as to where your product is resonating. Eventually you want to get the criteria (the “qualifying questions”) that you will use to focus your initial go-to-market effort.

A successful startup is a multi-year, herculean effort. By investing in the front end, and being data-driven in the diligence of their own product concepts — would-be founders can build confidence and clarity in their ideas. Do your “product management” before fundraising, hiring, or engineering. Godspeed!