If you're building something that your prospects want and your demo is so compelling, then smart people will crawl over each other to get their deposit in first. I've even had propects beg me to leave my laptop after a demo so they could play with it while I built it out.
10 people saying they'll buy it is a good start, but a deposit check separates the talkers from the doers.
Sometime I think investors should require 10 deposits prior to pitching. Imagine what a difference that would make.
In the past I've done something similar where I asked potential customers to pay me to build a product and learned, before I wrote a line of code, nobody wanted what I was selling.
On the other hand, I've run into a situation recently where this didn't work as I expected. My current project is sold to businesses. When I asked a few of the businesses I was talking to if they would pay me the price I was going to charge for the service to actually make the product, something strange happened. Even though the amount of money I was asking for was quite small this request still went through the entire purchasing apparatus of the business. I figured the manager I was talking to could just write me a check, but I was wrong. Long story short they wanted to own a part of the business if they payed me money to make it, so I opted to not take their check.
I figured this was good enough validation and I'm plowing ahead on development even though I am a tad worried about what my sales cycle is going to look like. But I never would have learned this if I hadn't straight up asked for money before I even built it.
depends on what you're pitching. 10 deposits on a $5/mo service might not carry much weight to a VC. but 10 letters of intent on a more expensive b2b service is golden.
Paul Bucheit said something similar on Startup School 2008 (http://www.youtube.com/watch?v=EZxP0i9ah8E): "You should aim for 100 happy users". And he mentions that being happy is quite hard to accomplish, as happy users will not put up with any unevenness they see. I find this more useful for startups that are still looking for a business model (mostly consumer oriented startups).
I believe Tim Ferris wrote that for his business ideas he would first create the actual site to sell it and then spend a few hundred dollars on adwords. When the user clicked to purchase, they would be shown a page saying "Sorry, this product is still in development page. Please enter your email to find out when it will be available."
That would let him know exactly how many people were willing to buy.
It's a pretty clever idea. For only a few hundred dollars and a little bit of time building the website, you will be able to find out what your conversion rate would be. I may do this for an idea that I am just starting work on.
Do it politely. I saw a massive banner on the side of an industrial building advertising loft condominiums. I called, only to be told, "Sorry, we're just gauging market interest." That was a major turn-off and when they did get around to selling the units for real, I wasn't interested.
The other advantage to this (at least from what I've read, I have yet to try this) is that since they've basically already declared intent, they're also much more likely to enter that email. I mean, if it's interesting, why wouldn't you want to hear about it when it's released?
if you are going to do this, make the checkout form look completely functional(credit card, email, address etc). Why? Because there is something like a 90% cart abandonment rate...and this way you get the real numbers.
I wonder if the guys at Google, Ebay, Skype, Twitter, Yelp, Foursquare, Facebook had 10 people that were willing to purchase their software or service before they started? Did Apple have 10 people lined up to purchase their first product? Were they able to pre-sell the Mac?
I understand what the author is getting at, and it may work for a certain class of startups, but I don't think that it works 's terribly realistic to apply that to all startups. Yes, talking to people about what they want or would be willing to pay for is a good idea, but there's a lot of products that people just aren't going to understand until they see other people using it.
The vast majority of successful startups end up building a completely different product than the one they set out to build. I'd much rather build a minimal product, put it in front of people and then iterate the product until you have something that people want and use.
Besides Apple, you mentioned no companies that actually sell products so this advice isn't applicable.
Both Apple and Microsoft famously had orders before product, but that's really common in product oriented businesses. Dell made a whole company around that philosophy.
Actually, Apple did have orders for units they later built. Furthermore, as members of the Homebrew club they were very much in touch with what features their market wanted to buy and what they were willing to pay.
This is a very fair point. Take Google for example, people may not remember, but they actually were trying to sell a product when they started. They were trying to sell enterprise search. And generally people didn't want to buy it.
But they had technology so compelling that business model fell into their lap.
Maybe they were lucky, but I would say that if you have a technology that no one wants to buy, but everyone wants to use... stick with it. There's something to it.
Did Sony, Intel, Microsoft, Apple, Amazon, Google have 10 people who said they will buy their first product? (I am asking because I am not completely sure. Maybe it is a bit more complicated in case of very technology-heavy/research-based/very innovative startups?)
Sony: started in 1945 as an electronics repair shop. Built-in audience
Microsoft: in 1975, MITS requested Bill Gates and Paul Allen sell their BASIC interpreter for the Altair before it was even written
Amazon: started in 1994. Everyone buys books, they just needed people to do it online
Intel, Apple, and Google were much riskier. Google wanted to sell its search technology to giants like Yahoo, but Yahoo refused. Apple built products no one knew they needed, but now we can't live without (hackable PC). They continue this today (iPod, iPhone, iPad, etc.).
Each launch is different, and the environment for each business differs.
For some prospective projects, you might well get a launch with just one (good) customer to start with.
And from your list of businesses, you're also looking back at companies that launched years or decades ago, and into vastly different environments and markets than exist now.
Microsoft and Apple did, at the very least. Apple started out with a bunch of people trying to buy more of Steve Wozniak's hand built computers than he could keep up with, and Bill Gates sold IBM an operating system well before he had an actual product to show them.
DOS had one customer with at least thousands of units sold before MS even started on it. Apple and Google were projects-turned-businesses, but the original Apple computer had more orders than inventory at the very beginning. (Funny, their latest iPhone still has more orders than inventory.)
No, but they were "fat startups" aka startups that weren't founded on lean startup principles, like customer validation and customer development. Fat startups definitely can be successful, but it's more of a crap shoot. Lean startup advocates would claim that the probability of a lean startup succeeding is much higher.
We did this with flow.cloudomatic.com a few months back. We knew there was a need for affiliate software for web apps from our own problems, but that seemed like horseshit. So we did the whole MVP smoke test thing with a sign-up page before we even started developing it. Best decision I've ever made. We have a number much larger than ten and we saved ourselves the possibility of building something people didn't want.
Unfortunately, I think this is one of those lessons you only really learn after you've built a product no one wants. Until it happens to you, you'll always think your idea is the exception.
> If you're still not convinced, think of it as project risk management. In a big software project do you tackle the high-risk, ill-defined stuff first, or do you postpone that to the end? Obviously you address the unpredictable stuff first — most of the project risk is due to the unknown, so the earlier you can sort out uncertainty the more time you have to deal with the consequences.
That definitely opened my eyes a bit. I usually do the difficult parts of a purely software fun app first, but when it comes time to making a bigger public facing app I just build it too.
Alternatively, make sure that they are already buying it through an existing service. Now you need to make a better, easier to use product and price competitively. In a marketplace where you can harvest demand (IE: PPC) this is very effective. However, make sure that by pricing competitively you don't have a wide disconnect between acquisition costs and revenue.
What if your product is Foursquare or Twitter? There are obvious business models down the road but only until you achieve massive adoption.
I think the question to potential users is "Would you use this everyday?". This is more important than going to Starbucks and asking if they would pay to promote within the service (it's a no-brainer).
Appropriate pricing strategies are key here. We were able to get 10 'charter members' who paid $500 for a lifetime membership when our idea was just notes on 2 pieces of paper. Currently we're offering a beta, which is 2 years for the price of one and shortly we'll reach critical mass and change it again.
Offer variants of your product with different prices. The prices are the test points. See which one people would buy. Apple does it all the time and provide three products (16gb, 32gb,64gb). With three points you can interpolate a curve and locate the maxima. Note that the price difference of the products should not correspond to the production cost difference. It should be the test points.
I think that there are important distinctions between incremental and revolutionary products, and I agree that this advice may not work for the latter... now, how do you stop founders from thinking their latest idea is revolutionary just because they haven't done enough research to know any better? (This is what I wonder about with my ideas)
If you are not intuitive enough to know what people will buy and need outside validation, it may be a tough road to being a successful entrepreneur. To build great products, you have to know what people want. Maybe if your product had massive upfront capital costs - like a chip fab - you would get some signed purchase orders before hand, but if its a web app, you should be confident enough to just do it.
Sorry, but I completely disagree. Do some contract development work for awhile. People start pouring out of every crevice and crack with their brilliant ideas that they're absolutely sure will work. I know from experience that very few of them will go anywhere. Sad, but true.
The only way to build great products using your gut it to scratch your own itch. This is a completely valid approach that can work really well, but even then, you're better off doing this customer validation thing. You might be the only customer out there. And yeah, web apps are cheap to build compared to chip fab plants, but why spend several months building something and then another 6-24 months pushing it to get traction (the really hard part) if you can find out that there's no market with a few days of work?
Finally, I know quite a few successful entrepreneurs who are huge advocates of the customer development model, so I hardly think that being a great entrepreneur requires you to avoid talking to your potential customers before you start building, and hoping that you're just the 1 in a million genius who really does get it. You're almost certainly not Steve Jobs, my friend. Survivorship bias is the only reason we think we might be...we don't see the millions of failures who thought they could predict the market's desires without talking to them.
The problem with that, as far as I see it, is that even the most brilliant people are wrong sometimes, especially if they're less experienced. If you can afford being wrong (maybe multiple times) and you really believe that you're right and everyone else is wrong, that's really cool, but otherwise it's a good idea to see what potential customers might think of your concepts.
[+] [-] edw519|15 years ago|reply
Better yet: find 10 people to write you a check.
If you're building something that your prospects want and your demo is so compelling, then smart people will crawl over each other to get their deposit in first. I've even had propects beg me to leave my laptop after a demo so they could play with it while I built it out.
10 people saying they'll buy it is a good start, but a deposit check separates the talkers from the doers.
Sometime I think investors should require 10 deposits prior to pitching. Imagine what a difference that would make.
[+] [-] SMrF|15 years ago|reply
On the other hand, I've run into a situation recently where this didn't work as I expected. My current project is sold to businesses. When I asked a few of the businesses I was talking to if they would pay me the price I was going to charge for the service to actually make the product, something strange happened. Even though the amount of money I was asking for was quite small this request still went through the entire purchasing apparatus of the business. I figured the manager I was talking to could just write me a check, but I was wrong. Long story short they wanted to own a part of the business if they payed me money to make it, so I opted to not take their check.
I figured this was good enough validation and I'm plowing ahead on development even though I am a tad worried about what my sales cycle is going to look like. But I never would have learned this if I hadn't straight up asked for money before I even built it.
[+] [-] RiderOfGiraffes|15 years ago|reply
It's such a fantastic buzz having people send you money in exchange for product/service. Such a buzz.
[+] [-] noodle|15 years ago|reply
[+] [-] DanielRibeiro|15 years ago|reply
[+] [-] stingraycharles|15 years ago|reply
[+] [-] mattm|15 years ago|reply
That would let him know exactly how many people were willing to buy.
It's a pretty clever idea. For only a few hundred dollars and a little bit of time building the website, you will be able to find out what your conversion rate would be. I may do this for an idea that I am just starting work on.
[+] [-] raganwald|15 years ago|reply
[+] [-] michael_dorfman|15 years ago|reply
[+] [-] steveklabnik|15 years ago|reply
[+] [-] vaksel|15 years ago|reply
[+] [-] iamelgringo|15 years ago|reply
I understand what the author is getting at, and it may work for a certain class of startups, but I don't think that it works 's terribly realistic to apply that to all startups. Yes, talking to people about what they want or would be willing to pay for is a good idea, but there's a lot of products that people just aren't going to understand until they see other people using it.
The vast majority of successful startups end up building a completely different product than the one they set out to build. I'd much rather build a minimal product, put it in front of people and then iterate the product until you have something that people want and use.
[+] [-] jonknee|15 years ago|reply
Both Apple and Microsoft famously had orders before product, but that's really common in product oriented businesses. Dell made a whole company around that philosophy.
[+] [-] raganwald|15 years ago|reply
[+] [-] kenjackson|15 years ago|reply
But they had technology so compelling that business model fell into their lap.
Maybe they were lucky, but I would say that if you have a technology that no one wants to buy, but everyone wants to use... stick with it. There's something to it.
[+] [-] tomwalker|15 years ago|reply
I put in my own money to buy a small supply, sold it based on direct sales.
Used the profit to buy more supply and get basic marketing material printed, sold that next supply.
Improved my packaging/printed marketing material/got a website built etc.
It has been slower but this is my first proper business so it means that I am learning fast, maintaining control and proving myself.
I would recommend this way to anyone that isnt doing a "next big thing" project. It keeps you on the cutting edge of customer feedback.
[+] [-] nadam|15 years ago|reply
[+] [-] byoung2|15 years ago|reply
[+] [-] Hoff|15 years ago|reply
Each launch is different, and the environment for each business differs.
For some prospective projects, you might well get a launch with just one (good) customer to start with.
And from your list of businesses, you're also looking back at companies that launched years or decades ago, and into vastly different environments and markets than exist now.
[+] [-] jonafato|15 years ago|reply
[+] [-] philwelch|15 years ago|reply
[+] [-] BobbyH|15 years ago|reply
[+] [-] jasonlbaptiste|15 years ago|reply
[+] [-] cloudkj|15 years ago|reply
[+] [-] chaosmachine|15 years ago|reply
[+] [-] DanielBMarkham|15 years ago|reply
[+] [-] orblivion|15 years ago|reply
[+] [-] decadentcactus|15 years ago|reply
That definitely opened my eyes a bit. I usually do the difficult parts of a purely software fun app first, but when it comes time to making a bigger public facing app I just build it too.
Good post.
[+] [-] bryanh|15 years ago|reply
[+] [-] awt|15 years ago|reply
[+] [-] mpc|15 years ago|reply
I think the question to potential users is "Would you use this everyday?". This is more important than going to Starbucks and asking if they would pay to promote within the service (it's a no-brainer).
[+] [-] thentic|15 years ago|reply
[+] [-] rama_vadakattu|15 years ago|reply
[+] [-] chmike|15 years ago|reply
[+] [-] jasonlbaptiste|15 years ago|reply
[+] [-] tieTYT|15 years ago|reply
[+] [-] alexrodygin|15 years ago|reply
[+] [-] startuprules|15 years ago|reply
If you're building an incremental product, please do ask 10 people.
If you're building a revolutionary product, build a prototype first, then ask 10 people. Otherwise people will just ask for horses with wheels.
[+] [-] wolfrom|15 years ago|reply
[+] [-] pella|15 years ago|reply
[+] [-] atomical|15 years ago|reply
[deleted]
[+] [-] ariels|15 years ago|reply
[+] [-] hop|15 years ago|reply
[+] [-] ryanwaggoner|15 years ago|reply
The only way to build great products using your gut it to scratch your own itch. This is a completely valid approach that can work really well, but even then, you're better off doing this customer validation thing. You might be the only customer out there. And yeah, web apps are cheap to build compared to chip fab plants, but why spend several months building something and then another 6-24 months pushing it to get traction (the really hard part) if you can find out that there's no market with a few days of work?
Finally, I know quite a few successful entrepreneurs who are huge advocates of the customer development model, so I hardly think that being a great entrepreneur requires you to avoid talking to your potential customers before you start building, and hoping that you're just the 1 in a million genius who really does get it. You're almost certainly not Steve Jobs, my friend. Survivorship bias is the only reason we think we might be...we don't see the millions of failures who thought they could predict the market's desires without talking to them.
[+] [-] DrJokepu|15 years ago|reply