I’m a slow learner. It took me 8 startups and 21 years to get it right, (and one can argue success was due to the Internet bubble rather then any brilliance.)
In 1978 when I joined my first company, information about how to start companies simply didn’t exist. No internet, no blogs, no books on startups, no entrepreneurship departments in universities, etc. It took lots of trial and error, learning by experience and resilience through multiple failures.
The first few months of my startups were centered around building the founding team, prototyping the product and raising money. Since I wasn’t an engineer, my contribution was around the team-building and fund raising.
I was an idiot.
Customer Development/Lean Startups
In hindsight startups and the venture capital community left out the most important first step any startup ought to be doing – hypothesis testing in front of customers- from day one.
I’m convinced that starting a company without talking to customers is like throwing your time and money in the street (unless you’re already a domain expert).
This mantra of talking to customers and iterating the product is the basis of the Lean Startup Methodology that Eric Ries has been evangelizing and I’ve been teaching at U.C. Berkeley and at Stanford. It’s what my textbook on Customer Development describes.
Experiential versus Theoretical Learning
After teaching this for a few years, I’ve discovered that subjects like Lean Startups and Customer Development are best learned experientially rather than solely theoretically.
Remember your parents saying, “Don’t touch the hot stove!” What did you do? I bet you weren’t confused about what hot meant after that. That’s why I make my students spend a lot of time “touching the hot stove” by talking to customers “outside the building” to test their hypotheses.
However, as hard as I emphasize this point to aspiring entrepreneurs every year I usually get a call or email from a past student asking me to introduce them to my favorite VC’s. The first questions I ask is “So what did you learn from testing your hypothesis?” and “What did customers think of your prototype?” These questions I know will be on top of the list that VC’s will ask.
At least 1/3 of the time the response I get is, “Oh that class stuff was real interesting, but we’re too busy building the prototype. I’m going to go do that Customer Development stuff after we raise money.”
Interestingly this response almost always comes from first time entrepreneurs. Entrepreneurs who have a startup or two under their belt tend to rattle off preliminary customer findings and data that blow me away (not because I think their data is going to be right, but because it means they have built a process for learning and discovery from day one.)
Sigh. Fundraising isn’t the product. It’s not a substitute for customer input and understanding.
Sometimes you need a few more lessons touching the hot stove.
Filed under: Big Companies versus Startups: Durant versus Sloan, Customer Development Tagged: | Customer Development, Entrepreneurs, Tips for Startups