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How To Pick And Choose Early Users / Customer For Your #Napkinstage Startup?

The first few customers (or users) usually set the tone for your startup. They are the ones with either acute pain or the burning problem, and the earliest of early adopters. Usually, I have found that most entrepreneurs get their early customers because of the relationship they have with them OR they solve a really pressing problem for their customers.

When I talk to most entrepreneurs, one of the first things I recommend to them is to segment their potential customers.

The discipline of finding the factors that differentiate one set of your potential customers from another based on a set of characteristics is customer segmentation.

There are 3 important questions you will need to answer about your customer segmentation strategy before you recruit potential customers.

Most entrepreneurs, at the napkinStage end up getting customers who they know, but sometimes may not have the pain point as much. Else they end up getting customers who have the pain or are unwilling to try anything “not proven”.

When you have been out trying to get early paying customers, you will realize quickly that customers have one of several reasons for not buying or wanting to try your solution.

1. They are risk averse, and not early adopters, so while they have the pain, they use their existing  manual or alternative techniques to solve the problem.

2. They are able to deal with the pain, since they get a sense of job security knowing that they know how to solve the problem, and no product, machine or algorithm can replace them.

3. They believe the ROI from solving the pain will be negligible and their time and money is better spent elsewhere.

4. They want more mature solutions so they can handle their “special situation”, which is unique enough that no early product can customize it and be less expensive at the same time.

5. They believe the solution will weaken their position since it will solve the problem that exposes their “value-add” to the company.

6. They are not emotionally vested in either you or your startup, so they are not willing to take the leap of faith to try an early version of the product.

7. They actually dont believe your solution will solve the problem and are willing to wait and see some more proof until a point that it does.

These and many other excuses / reasons are the ones I have heard of consistently when I have been trying to get early customers for most of my startups.

If your potential customers sees a big benefit to:

a) their personal agenda (promotion, makes them look good, etc)

b) their position in the company and finally

c) their company’s standing in the market.

Picking your early customers though, is almost always a combination of personal relationships, built over time and solving a problem they have that is so intense that they are willing to try anything to get rid of it.

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The single most frequent mistake #entrepreneurs make during the #customer #development process

There are many assumptions we make about the product or the customer problem, which makes us develop solutions that may be really more complicated than required.

A friend and fellow entrepreneur I met on Friday was showing me a prototype (HML mock up with transitions, with some simple functions implemented) of this SaaS application. He had used a developer on hire at UpWork to develop the initial version. After speaking to and confirming the mockup (wireframes) with 10 different users he was off to develop and deliver the MVP. Overall he had spent about $8000 in design and development and had taken about 13 weeks to develop the MVP. Most of the time was spent back and forth with the design team for the HTML / CSS and the development team for confirming features and transitions.

Of the 13 weeks, his development team spent 2 weeks just implementing a sign up process, a user cancellation process, a payment process, a refund process, a login process, a password retrieval process, etc. Which he did not realize was the tax of developing a SaaS solution. Instead he took the 5 step approach to building a SaaS application and followed it religiously.

The critical mistake during customer development that most entrepreneurs make is to lead with the solution or product instead of spending time learning about the current solutions.

When he was showing it to potential customers, he found that most of them liked the product and said they’d use it and pay for it, if they could find value in 2-3 weeks. He was pretty happy given that most users were ready to pay for the product, which he did believe would solve a critical problem for them.

After developing the MVP and letting his users know about the product, he followed up by asking them to start to use the application. The first two days were great, with lots of feedback and improvements that they gave him about the product.

Then for the next 3 days there was radio silence. Even after his prodding and cajoling, most users were not using the application.

Instead of talking to users face to face, he instead decided to spend time with them (3 hours each user), shadowing them to understand why they were not using the application.

Turns out most of the users needed his product, but either A) did not remember it existed or B) were used to using their workaround – largely using a combination of email and cut and paste into Slack.

The biggest barrier to his adoption and usage was their existing process (although inefficient) was something they were used to and so were able to “optimize” it to make it quick and “fast” for their own usage. So much that they felt that using his product (which I can assure you would be vastly superior) would slow them down.

He then pivoted his product (not idea) to implement the one feature they all wanted as a Chrome plugin. Which worked like a charm.

He then had to remove the top 3 features and undo all the user login and management, infrastructure code and other remaining features, just to support the user behavior for their existing process.

The big takeaway for him was that when you have a hammer, everything seems like a nail.

The biggest takeaway for his wife (who is his cofounder) was not over engineer the solution.

The big takeaway for me was the failed customer development process. With all our biases (which all of us have) – we always tend to lead with the solution (“let me show you a demo”), instead of understanding the problem better to focus on delivering the one feature that matters, without all the bells and whistles.

Image From:  http://www.ritholtz.com/blog/2010/05/the-visual-guide-to-cognitive-biases/

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The first 5 steps to building your own SaaS application

This post is for non developer founders who want to build a SaaS application.

Software as a Service (SaaS) is a relatively small market – at $19 Billion in total revenues, it seems large, but compared to $250 Billion of the overall software market it seems minuscule. It has grown from nothing to this large number in the last 10 years. Similar to the eCommerce market, which seems large but is less than 15% of overall retail, the opportunities will start to be in the niches is my prediction.

The big question is when and how will it grow and where are the opportunities. While there are many specialist firms focusing on SaaS alone, the incumbent software companies (the largest of who are Microsoft, SAP, Oracle, etc.) are also making their own investments to move their businesses from selling licensed software to services.

One of the key opportunities I see is that ability for smaller, niche markets to be targeted using SaaS. Since the deployment model, time to value and cost are so much lower now than 10 years ago,  it is easy to build a niche product that can gain rapid fan following among the target customers and *if that customer base* does grow and end up having more budget it can be a lucrative market.

I do get the question often about the steps to build a SaaS business. Even if you dont intend to build a Venture funded business, the economics of SaaS are determined by cost of customer acquisition (CAC) and cost of servicing the customer (developing, operating and maintaining the software).

What I am increasingly starting to see is that most prototypes are either built by a developer founder, or outsourced (by a non technical founder) to “prove that the market exists“.

1. The first step I’d recommend before you start development, is to sign up 15-20 beta customers. Target people you know well who will stick through your crappy alpha, beta and version 1, so you can convince them that the value does exist when you iterate quickly.

For early beta customers, there are many techniques you can use including: a) setting up a launch page and promoting that launch page on social media b) setting up a launch page and buying Google adwords to drive signups and following up with signups via email c) blogging about the topic to share what you know about that market d) interviewing influential users before you launch or e) setup an email newsletter of great content for that industry and have many potential users subscribe to that newsletter.

2. The next step is to create an activity model and user flows.

This step is to ensure that you can know exactly what are the top 3 features you need to implement first which will make your product “must have” to solve the problem for your users.

In fact if you can identify the top feature (just one) that people will come back and use everyday, you should be good to go to the next step. Validate the top feature with your beta customer list, so you are building what they will use.

3. The next step is to create a mockup using wireframes. These are typically good to show the screens your user will go through and the experience as well. I would get a lot of feedback on the list of steps and screens before I build the prototype.

Typically in your first pass stick to under 7 screens would be my suggestion. That’s enough for a 45 second to 1 min “demo” and should give your users a feel for what the app will do. If they ask you for “one” feature that matters more to them than the ones you have, dont mock it up yet, but put it on your list until you have enough users interested.

4. Design your database schema. A database schema is good to share with your developers entities that exist in your application and what their relationship are. I tend to use DB Schema or just Freemind to show to fields without the datatypes.

5. Understand and select your “stack”. Even if you want to outsource your application development I’d recommend you talk to a few developer friends who can educate you on the stacks they use – what the front end languages and libraries would be, what the back end language would be and the database options. You will be more confident when you talk to your outsourcing company and also be able to help make tradeoffs when you need them.

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Starting with an SMB focus vs. enterprise for SaaS companies. Which is better?

branches&creatures (1)In the initial days of your SaaS startup, when you are doing user development, you may find that your product will help both SMB (Small Medium Business) users as well at Enterpriseusers.

There’s a tendency to then focus more on the “customer” development than the user. Assuming you have spent enough time on the user, there is a serious possibility of getting distracted from your mission by doing “both” at the same time.

Here is a dichotomy for entrepreneurs – Knowing that the milestone of Monthly Recurring Revenue (sans Churn) is the most important metric for SaaS companies, many entrepreneurs try to take the “relatively” easy route to try and get more larger enterprise deals for their product, if that’s what they know.

I have found that most entrepreneurs with an enterprise background end up finding 5-10 early customers who are willing to pay for a good product, but in the bargain they end up flexing their enterprise sales” muscle instead of building the “SMB marketing” muscle.

There is nothing wrong with choosing either market, but there is a big enough difference between both.

The enterprise SaaS market will end up with longer sales cycles (even if you know the decision makers), larger deals and request for integration with many existing tools and processes.

The SMB SaaS market will end up with smaller individual sales, an inbound marketing driven “self service” approach to vending and a extreme focus on seamless “on boarding” of users (sans training).

Many entrepreneurs also convince themselves that they can do both at the same time.

Which cannot be farther from the truth.

So, the question I usually get asked is “Which one do investors prefer“?

The answer is either one, since investors care about quality and quantity of revenue, but above all they also care about empirical evidence that they money they invest in will generate the consistency in the business for the chosen model.

Inconsistencies kill fund raising cycles.

So, if you chose to say you will build an enterprise sales model, you need to show your financial, product, hiring and operational model to support that type of business.

If, however you say your company will build a try and buy model for SMB sales online, with minimal or zero human touch from your side, driven by digital marketing, you need to show evidence that you can do that over a 3-6 month (or more) period.

I have seen many entrepreneurs confuse any revenue with good revenue. Consistency matters.

You have to show investors that you have done what you want to do.

Empirical evidence trumps theories.

So, my suggestion is to pick a model, stick to it for some time, before you decide to pivot if that does not work for you. Before you raise money, showing that the model you are choosing is one you have relevant expertise and knowledge in running is going to be critical.

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The cofounder dilemma – or when the biggest reason for success is also the biggest for failure

MANHATTANOver the last 2.5 years I have had the chance to closely observe over 70 startup teams for more than 6 months each (some a lot more) to find out which of them succeed (by their own definition) and which of them fail.

The thing that struck me 2 nights ago at the TIE dinner was a question that was asked by one of the solo founders – why do investors insist on having co founders if one of the biggest reasons for companies closing is “founder issues”?

If you look at the data from multiple sources about the biggest reason for failure in technology startups, I am struck by how high “co founder issues” comes up in the reasons for a startup folding.

After “no market need” and “ran out of cash” – which by the way is another way of saying there was no market need, the biggest reason was team and co founder issues.

Initially that struck me as odd. I mean, as investors, we keep telling entrepreneurs that we don’t fund solo entrepreneurs. Or that we invest in teams. Or that we like a well rounded hacker, hustler and hipster teams. Most investors have a bias against solo founders. We are prone to say – if you can get one person to join you as a co founder, why should an investor join you?

I have one theory around why we do what we do and say what we say. I am going to say it is a theory for now since I have not validated this and certainly can’t speak for all investors.

The reason is that the biggest reasons for failure (poor co founding teams) is also the biggest indicator of success.

Historically, great technology companies have 2 co founders.

Most investors pattern-match.

So, they tend to talk to 20 folks and form an “informed opinion”. If you look at startups in the technology space historically, the 2 co founders insight has borne out more often than not – Microsoft, Apple, Yahoo, Google, etc.

So, as investors we assume that data (that 2 cofounders is better) trump judgement (that sometimes a solo founder can be just as good – DELL, Amazon, eBay, etc.

So, the question is – why we do insist on having a 2 founder (or more) team than a solo founder?

The answer is fairly simple – investors, like entrepreneurs have biases, or a deviation in our judgement.

If you are a pattern-matching investor, with not much operating experience, then you will go by “best practices”. Then you find other ways to rationalize those decisions. For example – you will quote how startups are very hard and during the hard times you need someone (your co founder to keep your spirits up), or that you need folks with complementary skills to form a company, etc.

Those are largely true and maybe not rationalizations at all, based on the experience of many investors, but I have found that early stage (angel investors) tend to have these biases formed and opinions they have been “handed down” from seasoned investors, who have their own biases.

So, what does this mean if you are a solo founder and still need a “cofounder” since your investors are telling you they invest in teams.

Ideally, you should look for people you want to work with and have worked with before. Note, I did not say “you know well” – that’s necessary, but insufficient. If you worked with them that’s the ticket.

If you don’t have that person and keep getting feedback from investors you are trying to get on board that they don’t fund solo founder companies, what they are really telling you is that there’s other problems that make them not want to invest.

The problem might be that dont know the market, dont understand your product, or any number of other reasons.

That’s the real problem to solve as a solo founder, before you solve “let me get a cofounder” problem.

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A comparison of business software review sites: Credii, ITCentral, G2Crowd, BestVendor and GetApp

There are an estimated 5K to 10K SaaS and enterprise software companies that provide solutions for small, mid-sized and enterprise companies.

The large IT analyst companies such as Gartner, Forrester, IDC, EMR and Burton Group have made a $billion business out of evaluating and ranking these vendors on a magic quadrant or waves.

Over the last few years a host of companies have tried to disrupt the evaluation, comparison, review and ranking portion of the business.

The companies, G2Crowd, SoftwareSuggest, Credii, ITCentralStation, BestVendor and GetApp all pretty much offer a similar service with a few twists. The ability for business users to review, evaluate and filter the software solution for the based on their custom need.

Given the explosion of startups (thanks to the lower cost of starting a company), there are tons of choices for any buyer of software and many deployment models as well – mobile app, mobile web, SaaS, etc.

I had a chance to look at all these companies, and the intent was to review them from the point of view of a buyer of technology. I was initially looking for the best Early stage private company database, and stumbled upon one of these websites and went to research and see if there were others as well providing Yelp-type reviews for startups in a “crowd sourced” way.

There are 3 different approaches taken by these companies. While G2Crowd, ITCentral station and Best Vendor are more crowdsourced platforms, where any user can write a review and rate the vendors, Credii is more like a “Analyst on Demand” or ” Analyst as a Service” solution. GetApp is a pure marketplace and seems to want to follow the App store model with some reviews, but more a listings website.

There were 3 things I was looking for when searching for a database of startups – first a good comprehensive listing of vendors, followed by analysis of their features and pricing, and finally reviews and recommendations by users like me.

Of the 5 solutions (none of who are comprehensive) I found Getapp to have the most listings – for other solutions than the one I was looking for. G2Crowd was a close second. The rest were pretty poor in the comprehensive nature of their coverage of a domain or the products within a domain.

In terms of analysis of features and pricing, company information, I found g2Crowd the best, but Credii very comprehensive. The limited nature of editorial reviews in the other sites, make them hard to take seriously.

Finally in terms of user reviews, getApp was the best by far with the most reviews. followed by G2Crowd. ItCentralStation was poor but definitely better than the other two.

If you are an SMB vendor with an interest in reviewing products and learning more about products before you start to shop, I’d be hard pressed to say an of them will truly meet your needs. They might be a starting point, but if you are expecting an Amazon like listing, with great reviews, multiple feature comparisons, you will be sadly disappointed.

Reblogged from Best Engaging Communities blog

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Top 10 reasons why NASSCOM Product Conclave is #unique this year #NPC2013

1.       Speakers who you will not be able to hear any other place in India. While most other conferences will get you the name-brand speakers or practitioners from India, we went far and wide to get you Rahul Sood (head of Microsoft Ventures, founder of Voodoo PC and entrepreneur), Orna Berry (SVP of EMC, a very successful entrepreneur and Charles Phillips (CEO of Infor, previously at Morgan Stanley and board of directors at Oracle) and 4 more high quality speaker who will not be speaking at any other event in India.

2.       The global business and startup #quiz – the funnest session on the planet. If you are a startup junkie and have a knack for trivia, team up with fellow entrepreneurs and participate in the global startup quiz.  This session promises to have you learn the most useless of trivia, but those that you cannot forget.

3.       The largest gathering of payments experts in India in one place. The #payments track is hosting the top 10 investors, companies, entrepreneurs and innovators all working on sharing with you opportunities in payments in India.

4.       Enough talk, more demos. 25 of India’s best mobile applications, SaaS solutions, a few robotics and hardware companies and very early stage payment companies will demo their solution live to give you a flavor for building awesome applications. Some of them will be launching for the first time.

5.       Open your eyes to the largest opportunities in the biggest markets. For those looking to startup a new company or those already in their own startup, NPC features the large opportunities and the future of Automobile technology, Salesforce application platforms & medical software technologies.

6.       The funniest two technologists will share their top secrets to being spontaneously creative and funny while still being in your startup. Twitter celebrity Ramesh Srivats (@rameshsrivats) and Blogger Krish Ashok (@krishashok) will take you through their recipe for building great stories and still keeping your mind fresh.

7.       One word – BitCoin. Even if you don’t know what it is, or are an expert miner you will see for the first time in India any session on the future of this digital currency. NASSCOM product conclave will feature the session on giving you an overview to bitcoin and its implications on the future of currency.

8.       The best 3 workshops on Design – for the design oriented developer by Intuit, on the design of mobile applications by Source Bits and the design philosophies of award winning designers from Cleartrip.

9.       Networking with Angel investors from the world over who have invested in startups from India – and are looking for interesting opportunities. Early stage angel investors from Singapore, New Zealand, Russia, Switzerland, London, Indonesia and Sri Lanka will be there at NPC. This is the only conference where we are providing a more structured means for you to connect and talk to them about your startup.

10.    The most advanced topics on sales – from making a move from an engineer to a sales person, to the best way to split your base and commission compensation for sales professionals. There’s also a workshop on getting started with your inside sales led by 2 folks who have grown from INR 0 to INR 50 Cr. in revenue. The track also features startup sales managers who have grown their sales teams and will share their hands-on knowledge of how to hire and manage sales people in India.

This year’s NPC promises to help you learn from your peers, get inspired by successful entrepreneurs and network with the right folks to help you build great products- you gotta be at NPC this year.

Register now.

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What should you expect from an accelerator?

I have written previously about how to evaluate accelerators and choosing the right accelerator since there are so many of them these days and also about what the goal of an accelerator is.

I wanted to share somethings that entrepreneurs should expect from an accelerator from a perspective of a startup founder. I think the best thing that has happened is that so many accelerators have opened in the last few years. Similar to eCommerce companies in 2010-11, I expect many to close or shut down within the next 2-3 years.

There are 3 top things an entrepreneur needs according to me:

1. Access to customers: Whether it is beta customers for feedback, early adopters for providing traction (paying customers) or larger customer for growth, startups thrive on customers. Depending on the stage of your company, if an accelerator does not help you get customers, they are not doing their job. That’s the first lens I would adopt to judge accelerators. If you have access to customers, you can practically write your own destiny. If all the accelerator does is provide advice on getting customers but does not provide introductions to customers, or have customers be ready to adopt and review your platform, you are not going to get much traction or be “accelerated”.

2. Access to talent: In India, for startups, good development talent is hard to get , marketing & sales talent is harder and design talent is extremely challenging to get on board. If your accelerator does not help you with talent sourcing or provide talent in house to help you tide these critical areas when you need them most, you should run away. I have heard the notion that the graduates of the accelerator will help you, but entrepreneurs helping other entrepreneurs by providing time  is not very sustainable. Most of the very successful startups and their executives are extremely busy. While a sense of pay-it-forward does exist, its just not sustainable is what I have found. There’s no substitute for dedicated people to help you with development issues, help you with User experience and design (mockups, wireframes, HTML/CSS development and information architecture) or marketing talent to roll up their sleeves and run campaigns.

3. Access to capital for growth: While I am personally not a big fan of funding as a metric for accelerators to gauge their success, capital is nonetheless needed to grow and thrive, especially in India, where most founders are not serial, successful entrepreneurs or those that come from a “rich family”. So look for an accelerator that provides you an extensive and wide set of investors from seed to early stage and from venture to growth. If all the accelerator does is “showcase you in front of several investors” but does not actively nudge investors to help take a closer look at your company, I dont think they are doing their job.

There are several other things that matter which include a support system of the existing entrepreneur network from their previous batches, access to meetings internationally that possibly help get some global exposure, and a great space to work from, besides other things. However if you dont have access to customers, talent and capital, there’s no value in joining an accelerator.

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#ReversePitch “The day VCs pitch the Startups”

Depending upon who do you ask the question, the answer to “Indian Startup ecosystem has a shortage of good quality?” would oscillate between kick-ass investors and great customers. While the presence of both is crucial to validate the success of the startup, founders always seem to be cut-off from both of kick-ass investors. With India poised towards climbing up the entrepreneurial ladders, no wonder we would see more first generation product startups coming out of unheard Indian towns and cities.

With this in mind, the recent edition of #ReversePitch took place at 91SpringBoard. The premise is simple, at any conventional networking/demo event the startups are the ones pitching their ideas and its potential to a room full of investors. But by turning the tables in favor of the startups the idea of reverse pitch was born. Investors now make their pitches to a room full of potential startups as to why they are the best bet.

For those of you wondering whether this was another bout of “networking” and “gyaan” session by investors making tall claims for their funds haven’t seen Mukund Mohan in action. Seeing that the founders were taking time to warm up that too in a room full of people having the exact same question in mind. Mukund brought everybody at ease and what followed were interesting rounds of presentation by VCs and subsequent Q&A by the audience.


The questions were spread across the entire spectrum from the usual one on how to raise their seed fund to a startup specific. What tricked both the founders and the VCs were the most simplest of questions which required the greatest insights. Not many might have wondered about “How do VCs actually decide their investment amount?” or our personal favorite “Who gives money to the VCs?” The latter had the entire crowd glued should they find their secret!


With the wheel set in motion the post event discussion was full of its own share of fun. Where else can you find a startup sharing their experiences on raising their first round with a former-founder-turned-VCs chipping in to reminisce about his own life.


This was not the first time #ReversePitch took place in India and this will definitely not be the last time it takes place in Delhi. Nothing is more better than learning from shared experiences. For those of who missed the event can search for the official hashtag #ReversePitch on twitter and relive the moments and maybe even catch the VCs no hold barred in the after party!


A handy list of the VCs who presented at #ReversePitch in no particular order of their likeliness to fund your venture:

 


The pitch sessions was followed by networking with the investors and the community had an amazing time. Thanks to Subhendu(ReversePitch), Mukund, Mukul(Saif Partners), Apurv & for the 91Springboard team for putting together an amazing show. Stay tuned for some more excitement in the next few months!

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Announcing the angel investor office hours in Bangalore

Following up on this post by Mukund Mohan, the first session of the office hours will be held on 8th January (Tuesday) at the Microsoft Accelerator (Lavelle Road, Bangalore) from 3PM – 5PM.

4 startups that apply on a first come first serve basis will be given a chance to meet, pitch and take feedback from Anil Joshi from Mumbai Angels or if you are really good, Anil might agree to fund you right there!
Each startup will be given 30 mins, 10 mins for pitching and 20 mins for discussions.
So fill in this form if you are interested!
Volunteered by Brijesh Bharadwaj, TunePatrol