Want Your Startup to Succeed? Talk to Customers FIRST.
How Customer Discovery Could Have Saved Me $97,452.98
I bet I’ll have 100 users by dinner…
I had never been more confident. I was finally launching my first startup, and I just knew that this was the day everything was going to change.
This moment had been six months in the making. What started as a simple idea that popped into my head while sitting at a stoplight, had since morphed into an obsession that consumed every waking moment. And now, sitting in a quiet Las Vegas hotel room during those few pre-dawn hours where the city actually sleeps, it was finally time to release my startup out into the world.
That startup was called Switches+Strings — a subscription-based platform for renting music equipment. The year prior, I had a painful experience trying to rent a special guitar needed for a gig, and it left me convinced that there had to be a better way…and that I was the guy to do it.
Six months later, and I had tackled everything on my pre-launch checklist. I wrote the business plan and projected 5-year financials. I came up with the name and outsourced a logo. I purchased the domain and found a developer to create the backend. I located a small space to warehouse our growing inventory of equipment. I incorporated. Got insurance. Setup a corporate bank account. I even joined a co-working space to network with other startup founders.
I had done absolutely everything — or so I thought — and now it was finally time to reap the rewards.
I turned the site on, enabled my Google and Facebook ad campaigns, and sat back in the cheap hotel desk chair with a smile. Today was the day everything would change…
While I hadn’t planned to celebrate our launch with a trip to Las Vegas, my employer at the time had other ideas. Though I was certain it was only a matter of time before my startup would “take off” and I could say sayonara to my day job, they still paid my rent for the time being. So when I was asked to attend a Vegas meeting the same day of our planned launch, I had little choice in the matter.
With my developer under strict instructions to call or text the second any issue arose, I took one last look at my computer screen and headed out the door.
“When I return this evening,” I thought to myself, “I’ll be on my way to building an empire.”
Something Must Be Wrong
My day of meetings dragged on for what seemed like forever. Thankfully, my incessant, discreet glances at my phone kept my mind at ease. No calls. No texts.
No news is good news, right?
Once we finally broke for the day, I raced back down the strip to my hotel. I couldn’t wait to see how many users had signed up while I was gone. My goal was 100. Not only was this a nice round number, but with first month’s membership fees, it would mean a much needed $3,000 would be hitting my startup bank account within the next few days. This business had not been cheap to launch, and I had already burned through all my savings and had moved onto my credit cards. I was excited about the new influx of member cash to stop the leak…
I raced up the elevator and down the hallway. Bursting through the door I dropped my bag and furiously shook the mouse to wake my computer screen. Clicking refresh on the dashboard I eagerly awaited the good news…
0
Huh? I refreshed again….
0
Is the internet working? I tried a few bookmarks. Hmm, everything seems to be working fine. Maybe our ads failed to launch properly? I checked those dashboards as well as Analytics.
798 clicks. 798 new users on site. 1:12 average browse time.
Ok, so people were reaching the site. Something must be wrong. I called our developer to see what was up.
“Hey, something’s up with our dashboard. I am showing 800 people have already visited the site but we’ve had zero signups. Is something wrong with the checkout? Why didn’t you call me if there was an issue!?”
“Yeah, well, that’s the thing…the site’s working just fine. I’ve checked and checked again all day long. It’s not a technical issue. People just aren’t signing up…”
People just aren’t signing up.
How could that possibly be? I had worked so hard and poured my soul into this idea. I had done everything I could possibly do to build an amazing service. Did I miss something? Did I skip a step? Had I made a mistake somewhere?
As it turns out, I had…
I never spoke to my potential customers.
Why Customer Discover Must Be Step #1
I eventually got my 100 users. In fact, I got several times that number. But, I never was able to course-correct for my fatal error at the start. In retrospect, my failure to speak with potential customers before I launched was one of the biggest reasons my startup shuttered two years after launch (and left me with $97,452 in debt in the process).
I’d later learn about Steve Blank and Eric Reis, two serial entrepreneurs known for developing what’s called the Lean Startup methodology. The goal of a lean startup is to test your business ideas and assumptions with as little time, money, and other resources as possible. In other words, do the exact opposite of what I did…instead of sinking $97,452 into a business idea that ultimately did not work, find a way to test the idea before you build.
And the best way to test your business idea? Customer Discovery.
What is Customer Discovery?
Customer Discovery is a process that brings your potential customers into the fold at the beginning of your startup. Through a series of interviews, you lean on your potential future customers to identify problems, validate assumptions, and ultimately refine your startup idea until you are confident that if you build it, customers will come.
While methods vary, the core Customer Discovery process can be broken down into four main steps:
1. Define a Hypothesis
2. Define Your Assumptions
3. Ask Good Questions
4. Evaluate and Refine
[Check out a great detailed breakdown of the 4-step process here]
In essence, Customer Discovery is a scientific process where you test assumptions and hypothesis with real potential customers before you build a single product or service.
Why Is Customer Discovery Important?
With my first startup, I made a major assumption based on a personal experience. I had a problem renting music equipment and wished there was a better way, and so I assumed that other musicians had the same problem.
But there was just one issue…I never actually asked other musicians if they had the same problem. As it turned out, many of them did not feel the same way at all. Sure, a small pocket did and grew to love our service, but it was nowhere near the % of the market we needed for the economics to make sense.
Customer Discovery would have saved me 2 years and nearly $100,000. What could it save you?
“I always get this strange question of ‘how do I get my first users?’ which always kind of confuses me, because theoretically you decide to solve a problem that you know someone has. So, the way you get your first user is you talk to that person that you know has the problem.”
-Michael Seibel, CEO, Y Combinator; Co-Founder, Twitch
By now, most anyone in the startup space had probably heard the harrowing statistic that 90% of startups fail. While eye-opening, this statistic only really matters if we learn why nine out of ten fails. Thankfully, CBInsights conducted a thorough study to identify the top reasons so many startups go out of business.
Taking the number one spot?
There was no market need for their product or service.
Or in other words, the startup built something that no customer wanted.
How is it possible that so many businesses work so hard over so many years to introduce something to the world that isn’t needed? Simple, they skip the most important step: Customer Discovery.
How to Get Started with Customer Discovery
Thankfully, as the Lean Startup methodology has grown, so have the number of resources available teaching the Customer Discovery process. Here’s a list of some of my favorites to get you started:
The Lean Startup by Eric Reis
Why the Learn Startup Changes Everything by Steve Blank
The 4-Step Guide to Customer Discovery by Future Founders
How to Build an MVP by Y Combinator
Customer Discovery Will Change Your Life
Since my own failed startup, I have become obsessed with seeking out stories of successful Customer Discovery. Recently, I had the pleasure of attending a talk with the founder of one of the fastest-growing SaaS companies in the country, whose meteoric rise reads like a case study on how Customer Discovery will change your life.
This particular founder’s origin story had all the makings of a great Silicon Valley tale. The tech whiz college dropout coding away on a single feature “product” that eventually morphed into one of the most advanced marketing automation tool suites on the market.
When asked how this founder was able to successfully scale from a single tool into an entire SaaS suite, his answer was simple:
He listened to his customers, and built tools to solve the problems they were already having.
As he went on to explain, nothing his company has ever created was developed without validation from direct conversations with customers. Unless there was a clear, consistent theme of customers struggling with a problem AND actively seeking a solution, it didn’t get built.
In fact, Customer Discovery is so important to this CEO, that he still starts and ends each day reading the feedback from customer interviews conducted by his teams. As he sees it, this is the only way he can ensure that his company continues to focus on solving the right problems, for the right people.
Solving the right problems, for the right people. It’s all about the people. That’s why with my latest venture into non alcoholic wine, YOURS, we’re taking our time to build a community and listen. We’ve built a blog catering to the alcohol free community, and are using it to engage and understand their problems before we roll out new products.
It seems simple, right? Well as shown, at least 42% of the new startups out there will miss this step. But thankfully you don’t have to be part of this statistic.
All you need to do is start with Customer Discovery.
