There is a factor that is critical to getting past the idea stage, and it’s not easy
I was hired by a local tech incubator as a part time mentor for a tech startup program. Over a three year program we worked with 36 idea stage startups in three month sessions each spring. Each year there was a selection process for twelve ‘founder’ teams who had an idea and a basic pitch. It was a requirement that they have at least two team members. There was no fee and the teams got access to three experienced mentors, a weekly progress session with the group and access to some funds and technology resources. The twelve week program ended with each team giving a pitch to a theater full of investors, economic development people, interested business people, and others. These turned out to be fun events with a large audience, stage fright, laughs, tech issues, etc. Real life in other words.
The process we taught was based on the Steve Blank lean launchpad/customer discovery model which has been widely adopted, first in the Bay area and now with startups and corporate skunkworks around the globe. There are lengthy books, worksheets, and other support materials but when you come down to it, one basic process drove it: talking to 100 people, related to the business idea, for feedback, and adapting based on what you learned. Simple, right?
How curious are you?
As a tech marketing guy I liked the idea of this process with its seat of the pants market research component. The idea was to start with a concept and evolve both it and your understanding of what starting a tech business involves. I had no illusions about how many might succeed, in fact I was pretty sure most would fail. But we would seed our area with people who had a taste of entrepreneurship and would be likely to try again. Failure was most definitely an option!
For me, as a communicator, seeing how well the teams managed the process was fascinating and frustrating at the same time. I learned that gauging a team’s level of true curiosity was a defining factor for progress. But this curiosity had to be open-minded and fearless. Just finding the people to talk and getting their time was going to test the determination and level of sheer fear that often accompanies ‘cold calling’ in sales, which is very similar. You had to be persistent, while being respectful.
100 conversations, six slides, take notes
Honestly, in hindsight, all the teams should have focused on was getting those 100 interviews. That was plenty for three months when most were working full time or attending school. We spent too much time on lectures covering product (minimum viable), presentations, pricing, market research, and other business basics. But the fact was that if they actually did those 100 interviews they would have to deal with questions about all of these things and adjust their thinking based on that feedback. The best advice I tried to share was that it was alright to say ‘I don’t know’ or ‘I never thought of that’, because they actually didn’t.
The real tools they needed were the ability to find interviewees, a super simple presentation deck or elevator speech, and an open mind. These all turned out to be big issues.
You’re not right, someone else is already doing that, yours is probably not better
Like that cold calling salesperson, my teams needed to develop thick skins and great listening skills. They would be told things they did not want to hear and they would resist that. The resistance was a real problem because if you can’t admit that good feedback is not what you want to hear, you will gradually withdraw from going after it. This was the single biggest issue we ran into and each year we got a little better at focusing on it. But not good enough, in hindsight. It turned out that the only indicator of success we should have tracked was each team’s ability to get as many of those interviews done as possible.
Most people have no idea how to start a business, and they seldom do their homework
We had team members from all walks of life and their concepts ranged from fashion to self-improvement to enterprise systems for very specialized uses. It really was a crazy quilt of experience and backgrounds, age, and skill levels. Probably the best thing about the classroom environment was the camaraderie that developed around the room with each team cheering their fellow teams on. I think the diversity kept the annual cohorts from being competitive and the atmosphere healthy.
Unfortunately, there was a unifying factor that was a problem. Most were quite uncomfortable finding and asking people for their time to do their discovery process. It was hard work. And most seemed to be trying to start something outside of their experience and often had not done basic research. Again, our team selection process got much better in the second and third years as we got more rigorous in vetting these skills.
On a positive note
Each week all the teams gave a brief presentation which incorporated things they had learned that week. The presentation was a pitch similar to the one they would present publicly at the end of the program. Each year it was quite amazing to see how these presentations improved with practice. People who had started out shy and unsure of themselves gained confidence as their stories got more focused. By the time they got in front of the large audience (~200) they were polished and compelling. In hindsight, I think we trained 36 really good public speakers!
It really was tempting for the mentor team to try and predict who would do well, even after the second year. To have done so would have been to be proven wrong, in surprising ways. Ideas I considered weak sometimes did well because their team did the hard work and shifted gears when necessary. In fact, regardless of the idea, the teams who had the most interviews did markedly better than those who made excuses for not keeping up (there was a lot of that). Here are a few observations about the overall project:
Your MVP has no moving parts
The customer success system calls for developing a minimum viable product (MVP). When I say minimum, the ideal was the proverbial napkin sketch, an idea you could clearly explain in a few minutes. For me it was that brief, simple deck and the elevator pitch. You start with that and gradually refine it based on the feedback. Instead, people immediately jumped into development and complexity, often ending up in over their heads technically. Their MVP would have been much better if it remained a concept with no actual moving parts or code. A web page, a mock up, a process diagram, a workflow.
Don’t jump into solving a problem you haven’t faced
A fairly high percentage of our startups turned out to be addressing a problem outside of their core experience. This is not uncommon in tech startups, especially when you are really at the research stage (the secret of our program and all similar ones is that they are market research projects!). But going into an idea relatively cold means you have a lot to learn that may prove to be useless in the longer run. For example, several of our teams soon discovered they were fixing a problem that had already been solved by a big player with deep pockets. The mythology of the big guy being disrupted by the little guy with gumption is just that: a myth. True disruption comes from creating something completely new like ride sharing (Uber/Lyft) that disrupts by changing the model, often enabled by technological improvements that the established players missed. For example, in the case of rideshare companies the model is changing from private car ownership to Cars as a Service. It is unlikely you are going to make this shift happen with your idea. However, you may find an idea that is lucrative but the market is not large enough for the deep pocketed competition to bother with. These are more likely to come out of something you are experienced with.
There is nothing wrong with a ‘lifestyle business’
Tech startup culture has had a record of disparaging so-called lifestyle businesses, companies whose owners do very well without constant growth and raising larger and larger amounts of capital. In fact, the vast majority of privately held businesses in this country are lifestyle businesses and the vast majority of millionaires are small business owners (according to the SBA, under 250 employees or $100 million in annual sales). Yet, the startups in our program that were most likely to succeed were never going to grow beyond that metric and their founders, if savvy, didn’t care.
10 per cent are still around
Which begs the question, how many made it? It has been a few years and I’m no longer associated with the organization that sponsored it, but I have kept in touch with the teams that made the most progress (inevitably the teams who talked to the most people in their discovery process). Of those I estimate that four are still at it and have at least some revenue. Not a great percentage, but right in line with the average for early stage startups. Others may be out there doing something completely different from their original direction, having pivoted when their concept didn’t pan out. In some cases pivots came because they discovered a different opportunity with more potential. That is a positive outcome.
The process works if you do the work, and that includes discovering your idea is not viable (before you take the deep dive)
If a team did their homework and got out into the world to learn and they discovered their idea was not viable, they were not considered failures. If they didn’t do the homework, they probably simply realized that entrepreneurship might not be for them, or their idea was not something they could stay passionate about. We didn’t grade them or pass judgement.
The customer discovery process is not limited to tech startups. It can be applied to virtually any new business concept.
Perhaps the best conclusion to this experience for me was the realization that the customer discovery process is an incredibly powerful tool for any new business or any business looking to revitalize itself. ‘Mom and pop’ businesses like food trucks or cleaning services, or small manufacturing shops, could all benefit from getting feedback within their market and listening to it. This intrigued me enough that I co-wrote, with a successful CEO who helped with the program, a short book called The Customer Discovery Matrix, that distills the process down to some simple steps and principles for use by any business from future tech giant to mom and pop store.