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.
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Filed under: Corporate/Gov't Innovation, Customer Development | Tagged: Customer Development, Entrepreneurs, Tips for Startups |
Steve, you stated:
“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.”
What are all the important questions that a VC will or should ask? This could be useful information for those that want to get involved with a early stage start-up and want to evaluate it but not necessarily for funding. Maybe they just want to work with a start-up.
Steve,
This post has probably triggered a paradigm shift in the way that I’ve been approaching my startup. I thought, since I was coming from the same background as you, that I should go about things in the manner you spoke of at the beginning.
I see now how this method brings much more value to the table and how I have fit my place in with the idea that I am trying to accomplish, even if my skills and abilities are not technical. Honestly, I am grateful for your work, and I’m going to continue to be a devoted student. Hope to audit/attend your class in the fall.
-Raj
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Steve, at least they’re talking about burning other people’s money. Lots of people keep their ‘head in the cave’ and go without customer contact while burning their savings and running up credit cards.
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Steve,
How can we get real user feedback without a prototype to show them?
Don’t we have to get the site/plugins up and running before we gather information from users?
Here’s my first time entrepreneur dilemma. I have an idea for how to connect user social web conversations to 2-way search and contextual advertising. It’s taking time and effort to the build the prototype.
I do have a quick and dirty sample up on victusmedia.com. The google adsense search button gives a feel for the direction of relevant advertising. 2-way search is still in the works but I have the semantic extracted tags (thanks to Zemanta) feeding in to many search engines (activate realtime frankensearch).
What type of feedback do you think I should go after?Obviously the layout of this page is more engineering/testing geared than user friendly. I’d simply the interface and page before getting more feedback. How can users know they like or dislike the idea of automated passive 2way search and relevant advertising unless they’re using the real deal?
Speaking from experience, this post hits the nail on the head. Once you experience the trials and tribulations that most do when they first start out. Feeling the pain makes the importance of customer development sink in.
[…] Steve Blank on entrepreneurship and startups Written by Chris F. Masse on August 30, 2009 — Leave a Comment Steve Blank on entrepreneurship and startups: […]
[…] met one of each in the last week. This is why I’m so perplexed by this recent Steve Blank comment: Entrepreneurs who have a startup or two under their belt tend to rattle off preliminary customer […]