Steve Blank speaks to San Diego Tech Founders from Brant Cooper on Vimeo.

Contents:
00:00 My Intro
03:17 Why Accountants Don’t Run Startups
- Old constraints on startups
- Entrepreneurial explosion
- Startups vs Small Businesses vs Large Businesses
- IBM example of big company disruptive innovation
- What did my income statement say in month 1?
- “You’ve just washed ashore on an a deserted island with a knife in your mouth and a loincloth.”
- Searching for a business model, not a business plan
- Customer Development
58:26 Atoms or Bits (New Material)
- Physical vs Online products
- History of Lean
1:03:26 Sloan vs Durant
1:08:41 Q&A
1:29:50 My Conclusion

Be sure to come check out entrepreneur turned investor Mark Suster talk to San Diego Tech Founders March 31.

=> Startups RSVP here.

=> Investors, Service Providers, Professionals RSVP here.

Blank’s Customer Development is critical, otherwise speculating what comprises your startup’s business model is just another academic exercise.  Arguably, one could easily waste as much time documenting assumptions on your business model canvas as documenting them inside a 40 page business plan.  The canvas exposes your hypotthesis and customer development tests them.  It’s a laudable ambition to document and test all of your business model canvas components.

But how much is necessary to get going?

All building blocks are not created equal.  I believe there’s a natural progression towards figuring out your business model and many blocks are directly dependent on prior blocks.  Is it worth the time to document 2nd or 3rd tier blocks before establishing the reality of 1st tier?  The answer, of course, depends on you and your business.  It doesn’t hurt to go as far as you can at the start, unless the activity inhibits you from getting started, i.e., “getting out of the building.”

To use a rather simplistic example, you might presume that your customer is an enterprise-sized business that requires a field sales force and partnerships with highly technical systems integrators.  What if your customer ends up being a medium-sized business that requires SaaS product distribution?  Early customer development might very well point you down the correct path from the outset.  Some business model components flow naturally from validated core hypotheses.

The real dilemma in my mind is, what do you test first? The key to getting started is to nail the validate of the core hypotheses: Customer, Problem, Solution.

Go to the #CustDev White Board

In our book, The Entrepreneur’s Guide to Customer Development, Patrick Vlaskovits and I developed a white board exercise to help think through business model risk in order to determine what to test first.  The key components are:

=> draw the ecosystem around your business as you imagine it, including partners, distributors, customers.

=> determine which are mission critical — in other words, can you get going without any?  Which are absolutely necessary?

=> state the value proposition for each mission critical participant — what determines whether or not they join the ecosystem?

=> list the minimum product functionality necessary to get entities to participate.

=> prioritize the risks (technical and market) based on the above.

Ultimately, what you trying to prioritize is: what’s the quickest way to fail your business model. The “value path” of testing your business model runs through testing the the core value proposition of each of your mission critical ecosystem entities.  Easiest to test means:  what you can test in the shortest time frame.

If building a landing page and driving traffic to it has the potential of killing your present business model hypotheses, then it’s a legitimate “intermediate MVP” and worth testing.  But be careful.  Are you sure you’re not testing your ability to drive some amount of traffic or your positioning?  If a 3rd party API doesn’t provide the hooks you need to develop a critical piece of technology and therefore your business model fails, maybe that’s what you test first.

Documenting the building blocks of your business model = good.  Using the #CustDev White Board exercise in conjunction helps you determine what to document and test first.

How do you determine what to test first?

We’ve had the pleasure of speaking with Jeff Smith (Smule), Fabrice Grinda (Zyngy, OLX), Ranjith Kumaran (YouSendIt), and Bruce Moeller (DriveCam).  We’ve condensed their experiences into case studies which are featured in the book.  However, there was so much great material, we simply could not include all of it.  Therefore, I’d like to take this opportunity to share an insight that came out of our interview with Bruce that we found quite edifying, one that goes to the heart of the Customer Development methodologies.

Background:  DriveCam uses video technology, expert analysis and driver coaching to reduce claims costs and saves lives by improving the way people drive.  From the DriveCam website:

DriveCam’s palm-sized, exception based video event recorder is mounted on the windshield behind the rearview mirror and captures sights and sounds inside and outside the vehicle. Exceptional forces such as hard braking, swerving, collision, etc. cause the recorder to save critical seconds of audio and video footage immediately before and after the triggered event.

[Emphasis mine.]

Bruce shared an interesting story about how assumptions made in the lab, based on data and “sophisticated” math undertaken by “sophisticated” analysts, fared in the real world of cement mixer trucks.  Remember, the DriveCam device’s core feature is to record audio and video when triggered by exceptional forces such as swerving.  When DriveCam went after the cement mixer truck market, they calibrated their devices based on the assumption that cement mixers would flip only if subject to a large sideways g force.

Seems reasonable, right?  After all, cement mixers are big, heavy trucks, and not to mention, filled with, well, the eponymous cement.

Turns out, not so reasonable after all.

Bruce recounted that when one of their first customer’s cement mixer trucks flipped over, the DriveCam device had failed to record what had occurred and what may have caused the accident — the customer was irate and Bruce was more than a little embarrassed.

Turns out that (outside of the lab!) cement mixers trucks can flip at very low speeds (1-2 mph) while at normal g forces when encountering things in the chaos of the real world, very ordinary and common things such as soft road shoulders.  Bruce’s customer knew this and was counting on Bruce and the DriveCam team to know this as well.

Lesson learned:

“My philosophy is you don’t know what you don’t know and if you were ever right in a given moment, and if your guesses were ever true it would be serendipitous.  You must attack your assumptions at all times. My basic tenet: question yourself, because the world is ever-changing.”

-Bruce Moeller

For more insights that speak directly to the Customer Development processes, please purchase The Entrepreneur’s Guide to Customer Development:  A cheat sheet to The Four Steps to the Epiphany.

maybe your product focus should be what your current customers don’t ask for or what your lost customers wanted.

I invited “CustDevGuy,” author of the “Fake Screenshot/LOI” customer development case study, to write up a continuation of that story, which illustrates an easy trap to fall into when interacting with potential customers. Here’s his story:

——————————————————–

Hi there.

This guest-post is a follow-up to my original Case Study posted at the Lean Startup Circle.  (Thanks Brant for lending me your digital soapbox.)  I wanted to further flesh out an important insight that came out of conversations about my ongoing Customer Development experiences as well as address a common fallacy that keeps popping up in conversations and email threads with regards to what Customer Development is and isn’t.  The fallacy being that customers will simply hand over the Holy Grail (read: Product/Market Fit) if you go and chat a bit with them.

The insight I would like to share, one that with hindsight appears entirely obvious, is that an entrepreneur should always keep in mind, customers have their own agendas which may not have your best interests, as a start-up employing Customer Development methodologies, at heart.  Not only may they not have your best interests at heart, they may actively and skillfully manipulate you to serve their immediate needs to the detriment of your goals of product/market fit and scalability.  This is why I, like Brant, am skeptical of the maxim:

Early customers are often more visionary than the startup they work with for that product.

IMHO, if you employ any Customer Development processes you must take into account that, as Brant writes,

Customers are inherently egocentric and have a limited view.  Their motivation is to solve problems that will increase their market share, increase revenue, or decrease expenses.   They certainly don’t wish to solve their competitor’s problems, though you would be happy to solve both.

…

The danger in relying the customer’s vision is that in truth, the customer is not always right.  Their limited perspective and selfish (rightfully so) objectives means they will, if it is in their best interests, change your product to fit their needs. If you have several customers doing this, and you opportunistically give each customer what they’re asking for, you will face an untenable situation that will prevent you from scaling the business.

And that is exactly what this post is about:  my experience in following a customer (partially) down a rathole.  To recap, we used Letters of Intent (“LOI”) as follows:

On the third visit, we pressed those who saw merit in the idea to sign a legally non-binding Letter of Intent.  Namely, that they agree to use it for free, if we deliver it to them and it is capable of X, Y and Z.  And not only do they use it, but that they intend to purchase if by Y date at X price, if it meets their needs.

The LOI

The language of this plain vanilla LOI is below.  Obviously feel free to use, but we’d appreciate a link back to this post if you do.

Letter of Intent

START-UP agrees to provide its XYZ platform on or before DELIVERY_DATE to CUSTOMER without charge or fee, which will provide the following features:

• Functionality XYZ (one sentence description)
• FunctionalityABC (one sentence description)

START-UP recognizes the sparseness of detail in the aforementioned features and therefore agrees to update CUSTOMER on development progress on the following dates:

• DELIVERY_DATE minus six weeks
• DELIVERY_DATE minus four weeks
• DELIVERY_DATE minus two weeks

In exchange, CUSTOMER will avail itself on the aforementioned dates to provide feedback and guidance as to functionality and requirements.

During and after the development process, CUSTOMER agrees to fairly evaluate the product for use as their XYZ platform for a free trial ending DELIVERY_DATE plus four weeks.  Additionally, CUSTOMER agrees to use START-UP, at a 12-month rate of $XYZ/month, as their XYZ platform if START-UP satisfies their needs.  It is the intent of CUSTOMER to enter into a formal agreement with START-UP, by REASONABLE_DATE.

Due to the sensitive nature of the discounted pricing, CUSTOMER hereby agrees not to disclose pricing information and the terms of this Letter of Intent to any other person or entity that is not an employee or associate of the CUSTOMER.

Agreed and understood by:

Designated START-UP Representative

Designated CUSTOMER Representative

Nota bene:

1) We could have titled this a Memorandum of Understanding (“MOU”) as opposed to an LOI, but we wanted to strongly signal that they are demonstrating intent to buy by signing something called a Letter of “Intent”.

2) Brief description of functionality.  This is is simply to get both parties on the same page and set expectations.

3)  Development process updates.  This was to ensure us face-time with our customer.  Should our customer get busy, we didn’t want to be easily forgotten or ignored by having all our communication relegated to email and phone.

4)  Pricing and price discovery.  Our next LOI recipient got a significantly higher price.

5)  Intention discovery.  Do they actually want to buy our product?  Well, let’s test it very plainly with “It is the intent of CUSTOMER to enter into a formal agreement with START-UP, by REASONABLE_DATE.”  We have de facto started the sales cycle.

6)  Terms.  Can we sign them up for 18 months?  24 months?  3 months?  Month-to-month?  Per usage?

7)  Disclosure.  This is our effort to keep our customers from chatting with one another about the terms of the LOI as we go about price and intention discovery.

On Our Way

They signed this LOI and we were golden, eh?  So what happened?  As it turns out, much of the information we received via the LOI was valuable with one small massive hitch.  In our efforts to listen to and engage the customer, we allowed them to effectively control and drive our vision.  The customer didn’t care at all about ABC functionality, but wanted XYZ.  Not only did they not care about ABC, they quite accurately surmised that we would move Heaven and Earth to build XYZ for them to get their business, but we would probably only do so if they feigned interest in ABC. In our schoolchild-like giddiness in getting the LOI signed, we overlooked what are now obvious signals to that effect.  To wit, we allowed ourselves to get played.

Mea culpa.  Mea maxima culpa.

We thought that ABC was our unique value proposition, after all ABC got us our initial meeting with them, but we would give them XYZ to get our foot further in the door.  Plus, how difficult could providing them with XYZ be?

Very difficult.  As in very, very, very difficult for two guys bootstrapping a start-up.  But what is even more important, providing XYZ put us on a completely different trajectory in a different industry with different customers and different products and different technology and different competitors.

Resolution

Fortunately, we failed in providing XYZ.  (You read that correctly.  I did use the word “fortunately”.)  And by that time, we realized we didn’t want to go into the XYZ business and we also realized that this specific customer was not a particularly good earlyvangelist.  By that I mean, relative to our other earlyvangelist customers, they took up an inordinate amount of time and resources which could have been deployed elsewhere for significantly better ROI for our Customer Development efforts.

So we “fired” them, and in doing so, our suspicions were confirmed.

The email trail went something like this:

Customer:  We’d like to revisit this 2010. Do you think the XYZ will be fully functioning then?

Me:  Sorry XYZ didn’t work.  BTW I also wanted you to let you know we are super busy doing ABC for other people and have revised our prices.  We’d still love to do ABC for you without XYZ.

Customer:  Great to hear that you are doing well.  We’d love for you guys to do XYZ for us.  When do you think you’ll have it ready?

Two people talking right past one another….funny, eh?  BTW some of you are probably slapping your foreheads right now, “D’oh!  Doesn’t this idiot see?  Forget ABC, and just do XYZ!  That is what your CustDev processes are telling you.”  All I can tell you is that XYZ requires a few orders of magnitude more time, money, talent, skill and luck than we have right now, while ABC lends itself better to bootstrapping, and is, not to mention, more interesting from my POV.

Lessons Learned (shamelessly borrowed from Steve Blank):

• Simply talking to customers and taking feature requests is not Customer Development.
• LOIs are great, and I will continue to use them, but Garbage In, Garbage Out still holds true.
• Customers will not actively hand you the Holy Grail (read:  Product/Market fit) because they don’t have it, nor do they care about it.
• Customers do have their own self-interested agenda (rightfully so, as Brant points out above) and will quite gladly subordinate your interests to theirs.
• The art and science of Customer Development consist of being able discern when, how and why a customer’s agenda is aligned with your own agenda/vision.

Update: If you haven’t done so, please take our State of Customer Development Survey.

Words are powerful and and the intent of catchy phrases can be lost when removed from their original context.  I brought this up before a few weeks back, when the “Fail Fast” meme was cruising through Twitter and among some cheerleaders, it seems, failing itself had become the best means to success, as if it were the end objective, as if tripping your way to finish line will ensure you are the winner.

So it goes, IMO, with this quote about the customer’s vision:

Early customers are often more visionary than the startup they work with for that product.

I’m not so sure.  So while the initial intent of the phrase is not to misplace ownership of the vision, I fear (perhaps unwarrantedly so) that upon oft-repeats or retweets, that the wrong message emerges.  Not to repeat myself, but one has to treat customer input carefully.

Customers are inherently egocentric and have a limited view.  Their motivation is to solve problems that will increase their market share, increase revenue, or decrease expenses.   They certainly don’t wish to solve their competitor’s problems, though you would be happy to solve both.

“Visionary” customers make up a statistically insignificant portion of your market.

Visionary customers likely understand the problem you’re trying to solve better than you.  They may be working internally to solve the problem.  But the objective of their solution is to solve their internal issues, not achieve your greater market vision. (If they are trying to solve that, they are a competitor, not a customer.)

This is not wordsmithing or semantics, but rather is an important distinction.  The right visionary customers for you are ones who illuminate the path toward achieving your vision.

Is Google’s vision better than Yahoo’s because Google ceded their vision to their customers?

The danger in relying the customer’s vision is that in truth, the customer is not always right.  Their limited perspective and selfish (rightfully so) objectives means they will, if it is in their best interests, change your product to fit their needs.  If you have several customers doing this, and you opportunistically give each customer what they’re asking for, you will face an untenable situation that will prevent you from scaling the business.

Facts Exist Outside the Building, Opinions Reside Within

Your vision.   Your assumptions about your vision.  Test your assumptions.  Validate the vision.  Allow customers to shape your vision.  (This is really tough!  Are speaking with the right customer?)

Non-visionary customers know the features they want.  But customer development is not about gathering feature requirements.  So early on, you must be speaking with early adopters or if you can find them, visionary customers.  As Sean O’Malley says,

[Vision] should be built by triangulating as many inputs as possible.

Here lies the intuitive and creative part of being an entrepreneur.  You are the pied piper, who plays snippets of music you hear customers humming.  You need to select — all through product development, not just at startup time — the minimum features required to keep existing customers satisfied and acquire new ones within your defined segment, while heading toward fulfilling your vision.

Intuit didn’t know that printing checks was going to be the “killer feature” that would win the day (until they talked to customers), but they did envision that a financial management system that made it easy for home computer users to pay bills could be a big winner.

At SuperMac, desktop publishers bought their graphics cards because they solved their application problems.  But Steve Blank had the marketing vision to implement a strategy to target desktop publishers.

Friends & family, employees, partners, customers, investors, analysts & media will all attempt to alter your vision based on their personal experiences and needs.

In The Four Steps to the Epiphany, Steve Blank writes:

[Visionary Customers] are a special breed of customers willing to take a risk on your startup’s product or service because they can actually envision its [your product!] potential to solve a critical and immediate problem]

Your product.  Your vision.  The customer is the expert about their problem.  You may need to shape your vision as you learn more about the problem.

You must skate the fine line between holding onto your vision, while receiving input that helps shape the vision and providing the path toward achieving it.

Comments are welcome!

Relevant to ongoing discussions about Blank’s “Customer Development,” I wish to highlight a few of these “inflection points.”

The first step in Blank’s model is “Customer Discovery.”   This step seeks to answer this fundamental question:

Are there customers who are experiencing a problem severe enough that they are willing to pay for your solution.

You assume this to be true or you would not start the business.

Gut check #1 – Validate the vision

You need to test the assumption.  I have a sneaking suspicion that some entrepreneurs would rather work on a funded project that has no chance to succeed, than have their vision painfully rebuked at the outset.  (It’s amazing and unfortunate that such ventures get funded.)

Perhaps there are nagging doubts in the back of your mind.  It is important to have the discipline to expose those doubts, regardless of whether you can get funding or have good contacts into 4 or 5 organizations who you can convince to beta your future product.  Is there a real market?  There are myriad reasons why the answer might be no, but the most typical is that the pain is just not big enough right now.  No matter how great your solution is, the problem must be so painful, such that:

pain  > ($ of product + $implementation + risk of change) * status quo coefficient.

In other words, even if you can cost-effectively solve a real problem, you have to be good enough to overcome inertia.

Of course,  typical investor pitches claim the opposite phenomenon — there are too many potential customers to shake a stick at and the target market is all of ‘em.  This is followed by a “conservative” estimate of 1% of the market, and voila, we have 100M/year business.  Not only is this a red flag that true market validation wasn’t done, but you can’t build a viable business plan based on “going after all of ‘em.”

Gut check #2 – Go-to-market segmentation

When building your business plan, you need to choose which customer you will target and choose wisely.  Who your customer is determines the operations you need to build in order to sell to and support the customer.   There are numerous criteria you can use to determine which segment to pursue, but a few of the most important are severity of pain and market type.

Severity of pain typically dictates availability of budget, length of sales cycle, and size of market, i.e., revenue proximity.  Market type determines business model, competition, marketing strategy and ultimately, cost of acquisition.

The point is that if your product has broad enough appeal, you are likely to be able to choose your segment.  Market Type is one criteria of segmentation.   Even if a “new product in an existing market” or a “new product in a new market,” you can operate like a “new product in a segmented market” with proper segmentation.

Regardless, segmentation should provide you several candidate customer types to target and customer validation provides you the process for testing and choosing which to pursue.

The additional benefit from proper segmentation when developing your business plan, is that that your revenue targets are built from the bottom-up and hence are more achievable than the top down approach of taking a “conservative” guess at your sliver of the TAM.

The lure to pursue several segments (and more) simultaneously will be tremendous.  I would daresay that most high tech businesses take an opportunistic approach early on.

Gut check #3  – Avoiding  Opportunism

If you set sales folk free on the market prior to knowing how to sell what to whom, you might hit your first revenue target.  Congratulations.  You might not hit another.  Opportunistic selling most often results in false positives.  It leads to creating multiple customized products for niche markets, marketing into dead-ends; exposure to unintended competition; confused customers; mis-labeling by media and analysts; and ultimately, a company without a vision, without an identity, and without ability to scale.

Avoid opportunism by segmenting your market and validating your assumptions prior to launching massive marketing and sales campaigns.

So what do you do if you are in a company with flat revenues, customers spread across multiple segments, and internal resources are stretched thin across the morass?

Gut check #4 – Starting Over (almost)

Perhaps the most impressive thing about Steve Blank’s SuperMac story is that he was allowed to apply his customer development process at all.  Blank says:

So perhaps a more accurate description was that the company was a “restart.”

The fortitude to start over really can’t be overstated.   Businesses fail all the time.  There are millions of reasons shy businesses fail.  In many respects, it’s easier to admit failure, point fingers at external (uncontrollable) conditions or internal scapegoats, than admit mistakes.  (Blank talks about this, too.)

My experience applying principles similar to the customer development model tells me that the most difficult time to apply customer development process is after the first revenue targets are missed.  Remember, typically these are businesses who have completely built out their sales teams.  “Marketing” is either run by sales and so is reactively building competitive analysis models and sales tools trying to overcome the objection du jour or is a “Madison Ave” group arguing for thousands to run an print ad campaign.

The team has missed 1 or 2 revenue targets, the board is getting impatient, the CEO is getting anxious…heads are going to roll.

Clearly, the earlier customer development principles are applied the better.  Investors should demand to see a go-to-market strategy that is built upon a process-oriented approach to validating the business model.  There’s no reason why hardware and software companies cannot be validating customer assumptions at the same time engineering is building first prototypes, in a fashion similar to some Internet based companies.

As one is learning how to sell, some opportunism may be inevitable.  But a proper feedback process minimizes going too far afield through the continuous  measurement of relevant metrics and phase gates.  It’s not wrong to make a mistake, but hopefully you have a mechanism that let’s you know sooner than later, and you shouldn’t make the same one twice.  Finally, in the business world, it would be wrong to say “it’s never too late to start again.”  Failed businesses rarely get another chance.

But I wrote a post about an iterative, process-oriented approach to high-tech sales and marketing on 2.9.9.   Shortly thereafter, Andrew Beinbrink, CEO of the interesting San Diego start-up SportsTV, introduced me to Seal Ellis who introduced me to Steven Blank’s book The Four Steps to the Epiphany, which sounded an awful lot like what I had blogged about.  Whew.  Oh, and Steve’s even got a new blog.

Eric Ries melded Blank’s customer development with Agile product development methodologies and lo and behold, when it comes to Internet-based products, we’ve got a whole movement going on here.

My thoughts were initially guided by a paper I read in 2005, The Enterprise Sales Learning Curve (ESLC), written by Mark Leslie and Charles A. Holloway, subsequently published in the Harvard Business Review in 2006.   This was the first paper I had seen that clearly articulated the gap between high tech marketing and sales methods and well, reality;  the reality defined by customers. You know, the people with the money.   Let it be known that 1) you should read the paper, and 2) there was a decent amount of buzz in 2005/6; but now, not so much.  Will customer development have a similar fate?

There are some differences:

• Scope: Blank’s customer development takes on a broader scope, i.e., not only sales and marketing, but a system for integrating customer input into all business operations.
• Timing:  Adherents to Customer Development are primarily Internet-based businesses, which has an advantage in terms of customer outreach, as well as testing and implementation compared to software companies, who were the primary audience for the ESLC paper.

Sean Murphy kindly pointed me to several other sources of people thinking along a similar vein, including the  “Sell, Design, Build” model from the SyncDev team at http://www.productdevelopment.com/ and Bijoy Goswami’s “Demo, Sell, Build.”

I enjoyed Goswami’s bootstrapping video series and particularly appreciated his quoting E.P. Box regarding these types of models:

All models are wrong.  But some are useful.

The similarity between business models and scientific theories is that they both (may) accurately describe the past.  The difference, however, is that good scientific theories predict outcomes.  IMO, this is what is most interesting about the Internet based Lean Start-up model, is that we can produce a test of the theory that can be replicated, rather than merely construct a model that more or less describes the past.

That being said, we can never achieve the predictability of manufacturing models which served as the premise for both ESLC and customer development.  Humans, despite what the Invisible Hand aficionados wish to believe, do not behave in a way that approaches the definitiveness of mathematics.  Hence, all models based on such, will in some way come up short.

Not that key lessons can’t be learned.  What strikes me, however, about both the ESLC and Blank’s Customer Development, is the presumption that businesses deploying these models have not only been funded, but likely have finished product.  Again, the nice thing about the Internet model being played out today, is that this is not necessarily true.  Entrepreneurs, rejoice!

But what is scary, in my opinion,  is that businesses continue to get funding despite the fact there’s no real evidence that a market exists other than what was written down in the business plan.

Are you kidding me?

More on that in a future post.

To make a short story long, it is looking to me that for Internet-based start-ups, the Lean Start-up model is proving useful.

“Lean Start-up” is a phrase, I believe, coined by Eric Ries of Lessons Learned. This is a great blog and well worth you spending time with it. In a nutshell, a Lean Start-up is one that combines fast-release, iterative development methodologies (e.g., Agile) with Steve Blank’s “Customer Development” concepts.  The objective is to efficiently create customer-driven products quickly and with a low burn rate.

Though I believe these principles are likely to fare well for software and even hardware products, it appears that most of those implementing the Lean Start-up are Internet-based products.   Without getting too deep into the specific practices, Internet products offer several advantages:

• the target market is assumed to be online, so product, marketing, and customer dev activities are easily conducted online;
• abundance of opensource software and tools;
• web deployment of product updates is fast;
• actionable metrics are easily tracked.

So that’s what we’re trying to do with the start up I’ve been discussing.   Parts I and II of the discussion are here and here, respectively.  Last time, we were still defining stuff.  Now, we’re getting “out of the office.”

We’ve taken a stab at defining our minimum viable product (MVP). What’s the MVP?  Here’s my working definition, though it may differ from others:  The MVP is the minimum level of product functionality needed to reach the next objective on the path of achieving your vision. Next week we will soon have HTML mock-ups of the pages.

The CEO is meeting with half a dozen potential customers, interviewing them in order to validate (as best as possible pre-product) our market assumptions.   He will continue these interviews for the next several weeks.

This week, we are also launching our first user survey.  I differentiate users and customers, since the former will not (initially, at least) pay, while the latter will (hopefully).  How did we find target users?  Through our personal networks.  I consider this first round of questioning to be for “friends of the business,” yet who still represent the target market. Again, the objective is to test assumptions and hopefully learn more about how close we are with the MVP.

I won’t name the company until the time is right, but I’ll tell you a little about it:

- Company is self-funded.  This is a good thing.  Not only is it a bad time to seek funding, it’s a great time to prove the business model prior to funding.

- Product is barely started.  This is a good thing, as well.   This should enable us to run customer development principles in parallel with development.  The days of figuring out who your customers are after product completion (often after funding) hopefully will soon be over.

- Team of 3:  vision guy, domain expert and business development (CEO); developer; marketing guy (me, FWIW).

- Business plan assumes a Freemium model, with additional revenue from highly targeted advertising, lead selling, and a la carte purchases.

Week 1 Tasks:

• Document Business Hypotheses – market segment, customers, pain, acquisition methods, etc.
• Identify 100 potential users to interview.
• Identify 50 potential partners to interview.
• Create interview process and objectives.
• Create MRD based on “vision.”
• Identify key metrics for proving model.
• Prepare blog launch using company domain.

Comments welcome