How to go from idea to first customer in a startup

Authors: Matthew Wahlrab and Craig Rochester

How many startups do you know with great ideas and no paying customers? How many great ideas never launch at all? The harsh reality is that coming up with a brilliant idea is not the hard part! Landing your first customer is a gigantic step and it is one of the important factors that differentiate those who become startup successes and those who become startup failures. Taking this step is dependent on a compelling alignment of product with client pain points, snug market fit, and aggressive go-to-market engagement.

Developing a product or service requires customer and market considerations from the very beginning. All too often we see startups obsessed with internal feedback loops and tweaking technology to make it perfect before approaching customers, only to find that the customer never wanted the technology in the first place! Then, it’s sad march back to the drawing board. Here’s how to avoid that

What are the stages for going from idea to first client?

Building new products and services is a thrilling and uncertain process. Systematic new product development reduces the risk involved because it enables you to position your product or service in a compelling way to solve a real world problem of a real world client. This drives the development towards creating something that a customer is going to find immediately useful and helps the development team gain clarity on their ideas as they evolve over these seven stages.

  1. Idea generation

This is the time for brainstorming and coming up with raw, unproven ideas. This does not mean you generate random ideas on a whim, they must be grounded in addressing customer problems. Founder of Startup Secrets, Michael Skok, has come up with a 4U approach for assessing the feasibility of shortlisted problems. Problems worth addressing fit into these four categories:

  • Unworkable (customer experience gaps)
  • Unavoidable (mandatory)
  • Urgent (immediate high demand)
  • Underserved (whitespace in the market)

2. Idea screening

At this stage, you narrow down your focus to one idea that has the highest potential for success. A good strategy at this stage is a well-known one – the SWOT (strengths, weaknesses, opportunities, threats) analysis. Through a SWOT analysis you can determine the feasibility of the idea, and based on this, build out a proof of concept (PoC).

3. Concept Development & Testing

This is where you add some depth and color to the idea. It is important to carry out a competitor analysis early on to determine where the existing gaps are in the market and where you may improve on what is already being done. Based on this you can start to plan major product features and align each feature with the specific problems you want to solve. A further concept development procedure is known as a ‘Value Proposition Chart’, where you create a story for what the end product will be capable of doing, and how it will create value in the customers’ lives. Concept testing involves presenting the value proposition and major features to a focus group. This is the first step in getting user feedback, providing data about user responsiveness to the idea.

4. Market Strategy/Business analysis

This planning phase determines whether the innovation you are planning is worth the financial investment and it is when you will lay out the probable marketing plan for how to communicate, place, promote and price your product. Business analysis and marketing strategy go hand-in-hand because the pricing of a product is not just about production costs, overhead, and profit. There are psychological and brand identity considerations involved here that can greatly impact pricing. It is also quite common that a product launches with a market entry pricing strategy, where the initial pricing is way below actual production and overhead costs as a way to build a customer base quickly

5. Product Development

This begins with a prototype (UI/UX considerations and high-level impression), and minimal viable product (MVP). The MVP is the initial market launch with minimal features. Typical to this phase is the well-known concept, Agile Product Development, that is focused on iterative development, promoting collaboration and communication between customers and product teams (and the account managers/customer success liaisons between the two). This is when customers begin to interact on an ongoing basis with the product.

6. Deployment

At this stage the DevOps team gets involved and the product is deployed to a live environment. There can be two deployment tiers here – Alpha and Beta. As has been mentioned already, it is hugely important to take advantage of reviews and surveys from customers to refine development and production of subsequent product versions.

7. Market entry/Commercialization

The last stage of product development is to ensure the success of the new product through refining product-market fit. This involves marketing, branding, and community building around the product and its value proposition. If the rocket launched in the deployment phase, this is when sustained flight path is achieved.

How do I secure the first customer for my startup?

Most importantly, this process begins when you are generating your idea, because this is when you first start to determine who your customers are going to be. From the very start, ideas must address real world problems, and must be cognizant of the human story behind business offerings. Customers are people, and people have stories.  Developing an awareness of the story behind product design starts at the idea generation phase.

Market – Finding an ‘ideal’ client

The ideal client is one with a challenge or pain point – this is the gap in the market that your business will try to fill. Moreover, it is a client in an industry that is ripe for adoption of a new technology and growth.

Jeff Lawson, the founder of Twilio noticed that three businesses he was associated with in the past lacked one thing – productivity. These three businesses he worked with in the past turned out to be his ideal customers for the first iteration of Twilio. Why? He knew the business’s pain points. He knew the business processes, value, and operations intimately, and he also knew the economics; the potential budget of his customers for productivity innovations.

Importantly, an ideal client is a client that you figure out a connection to. It is important to find a point of contact, or network link, with the ideal client because you want to develop the offering alongside them, and based on this, you want them to be your first paying customer. The ideal client is a business for whom you can create a ‘made to order’ offering. This is critical because otherwise you will find it hard to gain pithy and valuable feedback to achieve the product development cycle as laid out above.

An industry poised for adopting a new technology is an industry with a high growth rate, making it possible to compete with incumbents when customers new to the industry may be open to new providers. A key factor in this search is to look for breakthroughs in technology that can serve as enablers for further new innovations – when an industry is hot, it’s going to grow fast in a cluster-like fashion.

Another tip as you search for the right client in the right industry is to recognize that changes in behavior create new pain points. So, when there has been a major shift in the status quo – be it environmental, political, social, or economic – this will produce a series of new pain points that are ready to be addressed. One example is the Covid-19 pandemic and remote working technologies. Suddenly, technology solutions like Zoom that enabled people to work remotely  were booming.

A practical point to acknowledge is that your ideal client is also likely to be a business that is known to work with startups and that has a track record of investing in innovation. Established businesses with a Corporate Venture Capital arm are ideal.  Volvo is an example; it has a large portfolio of projects with startups. Companies that are open to startup collaboration often advertise on collaboration platforms such as innoget.com.

A quick check into the financial health of prospective customers is also wise, because even if the will is there, if the financing is not, they cannot be the client you need to launch your first product with.

Planning a sales cycle

On the whole, early stage sales is about active engagement, and not passive engagement, which more established businesses can often rely on. Early companies do not yet have brand recognition and marketing machinery to generate consistent leads. These take time and investment to build. Instead, early companies will be involved in active selling, which means directly reaching out to customers and convincing them of the value proposition of the product one at a time. This is done through an initial round of approaching direct contacts, and then, building on this, targeted aggressive marketing.

Planning a sales cycle can be divided into 3 distinct phases:

Phase 1 – Value to client

  1. Value Canvas
  2. Industry Landscape Report
  3. Micro Ad Testing
  4. Landing Page

You can gain a detailed discussion on Phase 1 in this article. The first task in planning a sales cycle begins around step 3 of new product development – this is to build a Value Canvas (aligned with a Value Proposition). This is a journey through problem detection and how to position a product to directly solve that problem. It is important to not just develop technology in relation to a problem, but to create a narrative around this that is compelling and meshes with the customer story. You can then apply your hypothesis to the market through micro ad testing and attracting direct potential customers to a curated landing page.

 

Phase 2 – Targeted marketing

  1. Account-Based Marketing
  2. Sales Collateral
  3. Social Media
  4. Ad Generation

You can gain a detailed discussion on Phase 2 in this article.  This is when you begin to establish your cadence and voice as a market leader, leveraging account-based marketing and targeted sales. Content planning here is critical, as you begin to flex your industry knowledge-muscle, and show this to potential clients. At the outset, content covered should be directly aligned with the product and services you aim to promote.

 

Phase 3 – Transition to ongoing sales

  1. Sales outreach
  2. Web page
  3. Branding
  4. Search Engine Optimization (SEO)

Building upon Phases 1 and 2, the business is now ready to expand its reach and to establish a share in the market that attracts sales and eyeballs on an ongoing basis; in other words, the ‘passive sales’ phase. This does not mean that there is no ‘active engagement,’ as sales outreach and targeted SEO strategy certainly is ‘active,’ but rather that through brand reach and the foundations in thought leader content, you are ‘known’ to the market and are able to attract leads through secondary and tertiary tier referrals, ongoing content creation, backlinking in SEO strategy, and word of mouth.

Closing your first sale

There are three critical considerations in closing sales:

  • Customer success:

Communication is everything. As the first customer is likely to be dealing with an MVP, or early version of your product/service, you are asking a lot of them in terms of faith in you as a provider, imagination in terms of what your product will be, and patience as you use them to refine and perfect your offering. It is important to make the customer know that you value them, and that you see them as being part of your journey. It is important to build a relationship, because this first customer is likely to be your most fertile stream for second, third, and fourth client leads.

  • Engineering alignment:

It is important to ensure your offering integrates with the customer’s existing systems. Do they rely on legacy code or software? If so, this is your engineering headache, not just the customer’s. It is less likely that a customer wants to adopt a new technology that is unable to integrate with their existing customer relationship management system, for example. For SaaS clients, you may also need to work with the customer to align their development timelines with the scalability of your own offering.

  • Feedback:

Ensure you are mining your first sales for golden nuggets of feedback as often and as widely as possible. Give the customer as much time and scope as possible for feedback on all aspects of your business and show them how you have adopted suggestions along the way.

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Helping technical leaders win their markets, negotiate from positions of strength, and outperform their competition for investment are Rapid Alpha’s driving aims. To talk more about how we can support your team to map, leverage, and protect its IP, don’t hesitate to get in touch.

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