I meet teams trying to cold call for their first customer and I just haven’t seen it work for startups selling to businesses. Here is a relevant excerpt from Gabriel Weinberg’s interview with me for his traction book.
yegg: So it is pretty rare that the first customer is from a cold lead?
skmurphy: I haven’t seen it. The challenge with a first customer for new software is that big unknown in the prospect’s mind is if the team going to perform. One of the best ways to attack that is through testimonials, but initially it’s got to be past performance, where somebody can vouch for the person–you know I’ve worked with Gabriel at this company or I’ve worked with so and so here.
yegg: You sit down with the warm lead for lunch. Is there anything productized at this point or are you in an open-ended discussion?
skmurphy: The first and most important thing is to figure out: do they have a problem that we can help them with? Often that will initially look more like a mix of consulting and product operation. So, the technology has to at least work when it’s in the founding team’s hands. It’s nice if it can work if you give it to the customer, but the founders have to at least be able to make it work to solve a real problem for the customer that the customer will pay for.
yegg: You have no problem with a consulting aspect for the first few customers?
skmurphy: No, and I think other people have described that in different terms. There is this term Flintstoning, or Wizard of Oz–it’s not uncommon that the team has to either work around problems in the technology or on-the-fly improvise adaptations that look more like a service engagement. If you try and make your product perfect before you engage, you’ll run out of time.
yegg: Because you didn’t understand the problem?
skmurphy: Right. Another thing that can happen is entrepreneurs show us a datasheet or a feature list and they’ve got forty features listed. Maybe twenty of them are real and twenty of them are things that they are planning, and they want to go to a customer and say, what do you think of these forty features?
The reality is that if the first two, three, four, maybe five are not compelling, he is not listening to your next thirty. So, another thing we’ll help startups with is to focus on a core need or a core problem leveraging a core capability.
We help them focus on the delta between the prospect’s status quo and what their offering does to move them to a better level of profitability, level of revenue, lower error rate, faster cycle time, …. You need to proceed from some theory about a delta, some outcome you are going to create in the prospect’s business.
For more on delivering your solution as a service before trying to fully automate it in your customer’s hands see the Aardvark talk from the 2010 Startup Lessons Learned Conference on “Wizard of Oz” development. It’s 30 minutes long and worth viewing at http://www.justin.tv/startuplessonslearned/b/262666394 The WSJ also wrote up Aardvark’s approach at “How A Startup Grew By Paying Attention To What’s Behind the Curtain.”
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