by Shirish Nadkarni, author of “Winner Takes All: Case Studies in How Online Marketplaces Are Creating Modern Monopolies“
You think that you have a great idea that uses the latest technology. You are a techie so you have also been able to build a cool prototype for your product. You are ready to form your company and launch your product with a couple of customers. So, is it time to charge ahead before someone else beats you to the market?
I made the mistake of moving forward with my company the first time around without any customer research. At that time, I was working at Microsoft and had engineered the acquisition of Hotmail – the first free web email service on the internet for consumers. Once the acquisition was completed, I thought why not web based email for small and mid-sized companies? It would save them the hassle of installing and maintaining expensive email servers. I raised a considerable amount of funding for my company and launched the service. Unfortunately, the uptake was fairly poor as it became clear that need didn’t exist in the market for my product at that time (now web-based enterprise email software is fairly commonplace). I had to pivot to mobile email software which finally got traction. The company was later acquired by Blackberry.
1. Conduct Market Research.
It’s important that you start off by conducting market research on your product idea. Don’t get enamored by what technology can do because customers don’t care about technology – they are looking for solutions that address their pain points or needs. Conduct at least 25 interviews with your target customers. Don’t start by showing them their solution. Ask them first about their needs or pain points. Find out what solutions that they are currently using to solve their needs. Then, show them your solution assuming it is addressing a pain point your target customer has articulated. Ask them if your solution addresses their pain point and if it is good enough for them to try it out. If the customer doesn’t proactively ask to try out your solution, that’s a warning sign that your solution is not compelling enough for them to switch products.
2. Build an MVP (Minimum Viable Product).
Founders often make the mistake of seeking perfection with their product before shipping it to customers. However, that can mean long product development timelines and inability to get early customer feedback. You should leverage your customer interviews to understand the minimum set of features that will get them to try out your product and build accordingly. For consumer products, my rule of thumb is that it shouldn’t take you more than 3 months to build a consumer-focused MVP and 6 months to build an enterprise focused MVP.
3. Find a Co-Founder.
It is very important for you to find a co-founder who can be a partner with you on your venture especially if they have complimentary skills. Being a CEO is a lonely job and it is very helpful to partner with someone who you can brainstorm with to solve the numerous challenges that you will inevitably face. Having a co-founder is also important if you want to join an accelerator or get VC funding. Y-Combinator (a famous accelerator) will not accept any companies that have a single founder.
It is also important for you to vet your co-founder thoroughly to make sure that you have complimentary styles and can work together effectively. Talk to other people who have worked with your potential co-founder to understand their working style. If possible, bring that person in on a part time basis to see how things work out between the two of you in terms of work styles.
4. Develop a Go-to-Market Strategy.
Most techie co-founders have the attitude that “I will build it and they will come”. However, securing early customers for your product is one of the hardest things that a startup can do. This is another reason for you to conduct customer research. If you find that you are addressing a real pain point and there may be a few customers that are eager to try out your product. Once you secure a few customers to try out your product, make sure that you sign a contract to get them to pay you once the product is shipping. You can offer them an attractive discount to be your first set of customers and be willing to do a case study on their use of your product. Make sure to document the cost savings and return on investment that they get from using your product.
Once you have a few customers, develop a marketing and sales strategy to secure more customers. Understand where your customers aggregate and develop an advertising and social media strategy to secure leads. If you have an enterprise product, you will need to hire salespeople to service these leads and close sales.
5. Prepare for Fundraising.
Raising funding with just a PowerPoint presentation can be very challenging. It is only possible if you have a great idea and an incredible resume that gives investors the confidence that you can execute on your product plan. For the rest of us, we have to fund the product development ourselves – either by working on the product on the side or leaving our current job and relying on savings. However, once you have a few customers who are ready to sing your praises, you will be in a good position to raise funding for your startups. Make sure to leverage your contacts to reach out to Angels and VCs. It will also take you a good month to develop a compelling investor pitch so invest the time to do so.
Starting a tech company is not for the faint of heart. Be prepared to spend a good 2 to 3 years of your life with very little pay and possibly no return at all. However, if you have a great idea and you are passionate about it, I would say go for it!
Shirish Nadkarni is a serial entrepreneur with proven success in creating multiple consumer businesses that have scaled to tens of millions of users worldwide. He is the author of Winner Takes All: Case Studies in How Online Marketplaces Are Creating Modern Monopolies and the award-winning “From Startup To Exit: An Insider’s Guide to Launching and Scaling Your Tech Business”.