It’s a bit of a cliche these days to say that startups should get out of the building and talk to customers, yet not everybody does, and fewer still do it well. I think that’s because it’s easy to think that you already have a good feeling for customers, because talking with them is time consuming, because if you don’t do it the right way it’s easy not to learn anything, and because it takes some people out of their comfort zone. None of these are good reasons to avoid what we see as an essential discipline which often yields huge insights, and we encourage our portfolio companies to make customer conversations a big part of their early work and then a consistent ongoing activity.
Steve Blank just posted a great example of how powerful talking with customers can be. He’s into week nine of his life sciences accelerator programme and his post tells the story of Tidepool, an open data and software platform for people with Type 1 Diabetes. By week six they had spoken with over 70 patients and medical device manufacturers and the conversations transformed their business and pricing model. Initially they thought they were in a five sided market and needed to concern themselves with patients, app builders, researchers, healthcare providers and medical device manufacturers. Through their conversations they learned that they could pursue a drastically simplified two sided market of patients and device manufacturers. That level of simplification dramatically increases chances of success, but it wasn’t the only thing they learned. Their conversations also revealed that Tidepool would reduce device manufacturers’ churn allowing Tidepool to claim part of the accompanying cost savings for themselves which raised their per user revenue expectations from $36 to $90.
As Steve Blank says “there is no possible way that any team, regardless of how smart they are could figure this out from inside their building.”.
Our portfolio company ParcelBright offers another good example. The founder Daniel Lipinski knew in his gut that there is a significant opportunity in helping small ecommerce businesses ship parcels and customer conversations enabled him to change from a service that targeted developers to selling straight in at CEO level and he’s now generated his first revenues, all without writing a line of code. My colleague Dharmesh is writing a blog post that will tell the story in more detail.