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Obsessive Focus To Product Market Fit – Tricks of the Trade and 5 Case Studies

As we begin 2019, for many startups the big question is – have they reached Product-Market fit or what should they do to reach Product-Market Fit.

Market it is!

There are 3 important ingredients for making a product – the actual product, the people who build this product and the market for which the product is built. The point of getting the right intersection of the three with success gets you to product market fit.

Marc Andreessen, whom I consider as the Father of Product Market fit, describes Market as the most important of the above 3, and Product Market fit is more likely to be achieved when you have a market – “In a great market – a market with lots of real potential customers – the market pulls product out of the startup”.

So the most important thing in your journey is to identify what market you are addressing. Basically, it means customers – businesses or consumers – who are seeking a solution, a better solution or cheaper solution to a problem.

The market definition has to be very clear and focused – as that would drive the product directions and help you get to the product – market fit.

Here are some questions you can get answered to validate the existence of the market:

Why need? – why do the customers want to solve the particular problem – what’s the real need. Is the problem that you are solving is a painkiller, vitamin or vaccine?

Why buy? – are they ready to pay for it – many solutions are liked by customers, but they could back off if they have to pay for it. So value hypothesis of this would help. Also if you are not expecting the users to pay for it, who will pay for it e.g. ads pay for social media users

Why now? – is this the right time for the product – timing is very important as customers have many solutions and many problems, and they care to address only some problems that have higher priority for them to solve – so timing is an important element to understand if there is a market that exists.

It’s happening vs not happening

How do you know if your product has hit the product market fit? Here are some nice indications

Isn’t Happening It’s Happening
Not getting any customers Customers are buying your product – at least few in B2B and many in B2C
The problem you are solving is not a high priority for your customers Usage is growing
Word of mouth is not happening You have to hire sales and support people
Customer feel your product price is not giving them enough value You are called out by the press, analyst – get good social media mentions
Press reviews are not happening, no tweets or mentions Customers send feedback and complaints – issues

Obsessive focus for Product-Market Fit

For any entrepreneur or product leader, there should be an obsessive focus to get to product market fit. The below is a Create > Prove > Iterate process that can help you to get to product market fit. Also, it’s not going to happen very fast, it needs perseverance and constant focus to move the needle – it’s a long-term journey.

During the process, you may have to do any of the following change to get to the product market fit

  • Rewrite your PRODUCT
  • GO AFTER a Different MARKET
  • REPLACE your PEOPLE or Hire SPECIALIST
  • IMPROVE THE USABILITY
  • CHANGE THE TECH ARCHITECTURE
  • UPDATE YOUR Deployment MODEL
  • Revisit PRICING STRATEGY
  • Fix Quality issues or Customer grievances

5 Takeaway case studies of Successful Product-Market Fit

I wanted to lay out few examples, all Indian, on things that will help you validate your market hypothesis as well as give some references on some generic areas that have worked. I am picking three examples in software tech and two non-software to broaden the horizon of how we should think product-market fit.

Transformation of Existing Product: Royal Enfield – You may notice in the Indian roads a lot more Royal Enfield Bullets plying which was not a case for many years when the 100cc bikes became the hot thing. This is a huge success story when it comes to finding the right Product Market Fit. Royal Enfield was in a do or die situation in the early 2000s – the discussion was around whether to sell off or shut down and its next-gen leader Siddhartha Lal stood up and asked for the last chance to revive. Here are the things they did to reach product-market fit – and the success is big case study now

  • Leisure Segment – The bike had its reputation, a cult following, an instantly recognisable build, and aspirational value. So it was given not to go to the commuter segment
  • Innovate with new tech but still keep the old charm that customers loved. They changed the engine which had 30 % fewer parts, and 30% better power, plus fuel efficient
  • Fix the quality process and problem – formed a field quality rapid action force to bridge the gap between customer expectations and the reality
  • Sales Experience had to be improved – new company-owned showrooms were launched and dealer network was expanded
  • Get the best talent – the company hired top talent – a new CEO who had enormous experience in transformation and revival, with auto experience

So as you can see over the years, there were very visible actions taken and we know how Royal Enfield is such a huge success. You can read the full case study here

Clear Definition of Market and Problem Statement: Career360 – When I was doing some innovation projects to leverage big data a few years back on EduCareer, I bumped into this startup that I thought had a very clear differentiation of their market and huge potential in India which has a huge number of young students – seeking to know what, where, why and how they should study something in order for them to reach their dreams.

The problem that they laid out to solve, is a huge one – as every student and parents of the student have this as their top priority – which validates the market need.

The objective as laid out by their founder Peri Maheshwar really makes the problem statement very clear – “

– To ensure that every student makes an informed career choice.

– To force institutions to greater transparency with their data and achievements

– To create an Information eco system suited for the 98% Indians than the 2% most meritorious one’s.

For us, a career is a life. A student isn’t any other customer. He is a life. He needs to be protected.”

As the market is clear and exists, once the focused founder is on a mission to build a product for this market (Student), they were naturally able to get there. Offcourse their journey has been with a lot of hard work, innovations – it’s been great to observe from what they have started out with to how they have really transformed their product and tools to address the market. With a high school going daughter, we have been personally benefitted by them, so are the millions of students/parents in India. The best part of their offering is that they are multi-platform – Careers360’s has been reaching out to students through multiple platforms viz. print, web, mobile and TV. So it’s a case of great omnichannel experience for the student through traditional and tech channels.

Career360 is a clear example of how Marc A says “In a great market – a market with lots of real potential customers – the market pulls the product out of the startup”.

Leverage similar idea to validate market: SeekSherpa – I met this startup in one of the Google Launchpad events, and I straightaway was blown away with the idea. I have been personally tracking the travel industry very closely and how tech is helping this further. In that Airbnb, story is amazing, as it really was a huge vaccine product to address a market that existed for the “tired of hotels”travellers. SeekSherpa was a great offshoot of Airbnb type idea – in the same industry but for a different product offering. SeekSherpa connect “real” local tour guides and Sherpa’s for the “tired of regular guides” travellers.

So with the market validation, obviously the offering/product has to be compelling – and I saw their Lazor focus on great UX being a killer differentiator initially, and the ability to connect the local guides to travellers as a way to get to product-market fit. Its been a fantastic journey by Dhruv and Sukhmani who founders of this great startup, they have also addressed different channels that appeals to connect the traveller with the sherpa.  And once again, the most important thing here is that the market existed, very well validated with a similar idea which makes it easy to explain, and it’s a problem better addressed by tech.

 

Expanding product capabilities to reach market: Schoolpad – I met with this startup through iSpirit, and what really caught my attention was the way the founder Abhiraj Malhotra explained to me how he transformed his product features to make it a viable option for Schools to buy it. Schoolpad started off with a USP of improving the Parent – Teacher collaboration. Soon they realized that while this is a great capability, it cannot on its own sell. So they expanded the product to include the core School management features. So essentially it became a solid School ERP with the differentiator of the collaboration feature which was the original capability. This has helped them reach a great market – as Schools are now willing to embrace this solution.

A great story of innovating and expanding the product to get to the market – and therefore reach product-market fit.

Price point to reach market: Xiaomi Mi – Apple products are aspirational, but many cannot afford it or they don’t see the value. So customers are always looking for alternatives that are cheaper and provides near equal features. This is where a company like Xiaomi comes in, where they really penetrated into the mobile market with a great product at a very affordable price, as that then opens up a huge market.

In order to do that, they had to initially sell through only online channels – Mi sold only through Flipkart initially. Also, they couldn’t spend a lot on marketing, so they leveraged the flash sale idea to promote their products. Over the years, as others started copying their model, they have now gone into the physical store – to sell through new channels. They also make a lot of the parts locally to get a cost advantage. Finally, now they are looking to penetrate rural markets as their phones are affordable.

To read more on their story, look for their original china story and then the India story.

So again here, the market is the winner – the market here is affordable smartphones, which was not addressed by Apple.

Products do not have to be original, you can always build products to address market based on Price.

In summary, getting to a product market fit is a journey, it may take time, but most important is to identify and get the market definition right, and channel your resources to build the product to address that market.

Happy New Year 2019!

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Learnings from #PNCamp

For those who aren’t aware, PNCamp is a bootcamp event for early stage SaaS startups. We were lucky enough to get invited to the event in Pune on Oct 8. The event, like earlier SaaSx event in Chennai, is a no-nonsense event for founders and product folks. The day-long event had two tracks: one for B2B startups and one for B2C startups. We, at Fyle, were part of the B2B track.

learnings-from-pncampThe B2B track consisted of a mix of talks by accomplished folks — Suresh of Kissflow, Krish of ChargeBee and Ankit of AdPushup covering fun anecdotes, practical suggestions and cautionary tales. Here are a couple of interesting ones (more on my twitter).

Apart from these talks, there were “Product Teardown” sessions where a startup gets 10 mins to demo and talk about their product and the next 15 mins is spent in critical evaluation. The framework for the session is aptly summarized by this diagram:

Fyle got to participate in the Product Teardown session and the most important learnings for us were:

  • Pricing page and testimonials are really important to increase confidence in your product
  • Remove unnecessary friction during sign up flow. E.g. we had an email verification step which, in hindsight, is an overkill
  • Pick your audience and get them to a wow really quickly. E.g. you may restrict your app to G-Suite customers and optimize their experience by deep integrations
  • Put some effort into content marketing, it will pay in the long run
  • Saying NO — the lack of focus for a company reflects in its website and affects the product, team and business

Overall, the event was refreshing in the level of candor — founders were openly discussing problems with focus, hiring and customer acquisition and tips and suggestions were extremely practical in nature. It was part-educational and part-therapeutic for me and I highly recommend it for early stage startups.

Special thanks to all the volunteers and facilitators for organizing a fantastic event! One parting thought from Ankit on how to get fresh insights into your product which we’re going to institutionalize 🙂

Guest Post by Sivaramakrishnan Narayanan, Fyle.in. The original post can be accessed on Medium

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Announcing #PNcamp2(8th Oct, Pune) – Not bigger, but definitely better

In late 2013, the iSPIRT volunteer team I was part of decided that the best way to approach pn-camp-logo (1)the problem we had on our hands was to simplify it. We wanted to bring together a group of product people who were ready to ask each other the tough questions. When they came out of the event we were putting together, we hoped they’d be changed, they they’d find answers, and in the process, new questions as well.

And that is how we decided on the bootcamp format, which was so well received that we were inundated with applications. It was a great event, and we wanted to replicate it again. But other things intervened, and PNCamp had to wait. Until now.

This time, we are doing it way better. And in the experience of other events, we have decided to keep it small. So the bootcamp becomes an actual run through a difficult trail. No one can lag behind or hide. Everyone has to run, everyone has to move.

So what will this PNCamp focus on?
These things:

1. Product Market Fit
2. Product Management Principles that actually make sense in the real world
3. Sales and Marketing things you can go and do, like right-away

With a smaller, curated audience to ensure peer- learning, to learn from other entrepreneurs challenges and solutions, and to encourage deep, interactive conversations, we are going to be having focused group round tables. There will be no PowerPoint, no monologues; just tips, insights and questions from doers like you for you to ruminate on.

Are you excited? We certainly are. We’ll have a lot of updates for you soon. Watch this space. Please apply before 15th September 2016. We will confirm your participation by 25th September 2016. 

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Why did I love this Saturday?

I usually start my weekends with an intense workout regimen. This one was also quite intense but in a very different way. I attended the 71st edition of ‘Playbook Roundtable’ on Saturday the 28th of May, 2016. Incidentally, this was my first time at any Playbook event. From the time I received the invite, I just had one question: how should I prepare to give it my very best? Little did I know that rather I would get the very best from this infectiously energetic tribe of people we call entrepreneurs on earth.

The event began at 11 A.M. with the first sip of cappuccinos and a brief introduction by everyone. We had 12 entrepreneurs (plus their co-founders), who had come to spend this Saturday to learn from one another. Besides passion, everyone was running high on desire to solve meaningful problems by using technology and change our world forever. While few of them had already (successfully) launched a product and were now facing next level growth challenges, many were still somewhere in MVP stage, figuring out product-market fit.

I was amazed to see an eclectic mix of problems these start-ups wanted to solve – beyond many industries and businesses. We had a renowned Fintech company making peer-to-peer banking easier with its latest product, a B2B engagement platform that helps convert one’s clients to promoters, a knowledge management product that makes life easier for customer support staff, a marketplace for those who want custom-tailored clothing minus hassles, an employee engagement platform that makes it easier to share ideas and innovate bottom-up, a mobile push notifications platform which has a unique ‘do it from your notification itself’ feature, an AI-based data cleaning & organizing tool, a personalized curated video platform which helps discover ‘still hard to find videos’ at YouTube, a collaboration platform which seamlessly works over Gmail, an education portal that aims to make multiple forms & cumbersome application process around admissions redundant, an open source ERP for small businesses with an enviable community across the globe, and a managed marketplace for getting super-affordable flash presentations. Phew, that was a lot… But that’s how best Saturdays are made!

The format of the event – with a handful of participants and an intimate setting over a roundtable, literally – allowed for an easy interaction for everyone. After hearing elevator pitches by everyone, we all were kicked to get into the next phase of our day – the demo!

Every entrepreneur had a total of 30 minutes to give a brief demo and then get into question-answer session, which was a unique opportunity for everyone. While a lot of questions satisfied curiosity of the audience, many entrepreneurs actually took on the audience by asking difficult questions that were giving them sleepless nights. “Almost everyone giggled when this young gentleman innocently asked – how do I reduce my cost of sales? And one response came – don’t ever sell to this segment!”

While everyone learned a thing or two, I noticed recurring themes in advice and insights that most of us agreed with. I call those timeless pieces and they are:

  1. Articulate the problem you’re solving really well (for whom, how, and why)
  2. Keep it super simple during MVP stage
  3. Speak to users, don’t assume
  4. Your product is super cool, but maybe for some other segment!
  5. Solve one problem really well for just a handful of users before conquering the world.

We concluded the session with everyone summarising their one or two key takeaways from these awesome 6 hours spent together (damn, nobody mentioned expanded LinkedIn network!) For me, more than anything, it was a humbling experience to be with these ultra-human beings for I’d like to be like them, some Saturday!

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Product Market Fit – Pre Event playbook by @Avlesh @WebEngage & Arvind Kumar, @attunetech

The morning of the SaaSx2 event saw a great pre-event playbook at the Attune Tech’s Office.

Playbook by Avlesh

Avlesh from WebEngage, Arvind from Attune Tech. and Suresh from KiSSFLOW came together to host the session and anchor the round table.

With a casual round of introductions, Suresh kickstarted the entire roundtable discussion with a question:

Who is your ideal user?

Identifying the ideal user for your product is the key to your entire product. Is it a product for developers? Is it for CEOs? Is it for mobile users? Is it for users of spreadsheets?

Once you identify your user, identify the ‘buying title’ and the ‘influencing title’. The ‘buying title’ would be the shot-caller whereas the ‘influencing title’ would play a major role in influencing the shot-caller to buy your product.

Sometimes, if your on-boarding process is straightforward, you can sidestep your segment. Figure out what’s happening, is your product gaining traction, etc., And then iterate your product.

Aligning Metrics – The key

This is when Avlesh (Webengage) (he was lost in the land of Chennai, damn the cabbie) joined the discussion. He stated a very crucial point, that sometimes entrepreneurs forget during their journey of building their product.

“Try aligning your product to your users’ metrics” was a great insight from him.

If you’re launching a second product, run it by your current customers.

Try answering these questions:

What’s that one thing that your user can relate to? What does he/she get out of this? What are you improving for them?

These are very practical and a data-driven points to consider before taking that step forward towards your market fit.

Instant Gratification -Connecting the dots

Arvind, connected these points to the psychological concept of ‘Instant Gratification’.  What pain point are you trying to address? What’s that ‘wow’ moment they get when they start using your product? Something as simple as what they do everyday and how you can help them do it differently. If users get an immediate result from your product, they would be hooked to it.

Stickiness. The sole determiner.

Suresh mentioned a very simple but powerful point to elucidate product market fit.

“People who like your product will help you in scaling your product. But people who love your product will be your early adopters. Will be your referrers. Will be your evangelists. And they will help you achieve your product’s market fit!”

He also spoke about how product fit is not necessarily a price fit but much more than that. If users love your product, they really wouldn’t mind shelling out some extra money to buy it.

If you had noticed, all these points have something to do with user engagement.

Users see. Users love. Users buy. Users stick on.

Product Market Fit: The process

Product Market Fit isn’t a destination you aim to reach, but it’s a continuous journey.

Here are a few pointers to follow before you set out to find your fit.

  • Understand your market.
  • Estimate the market size.
  • Don’t go after a broad range of things. You can’t be everything for everybody.
  • Identify your segment. Your niche. That sweet-spot!
  • Then, iterate your product. Strip/add features to suit the market.

Mohit from Jombay, who had some thoughtful points to add on to the entire discussion, mentioned about how it’s important to know what to focus on! Positioning your product is a prerequisite in obtaining a market fit.

Are we there yet?

When do you know your product has obtained a market fit? To understand the answer, ask this question. Are more strangers paying for your product? (not just your mom’s friends or cousin’s colleagues). Are you solving your users’ problem?

Sean Ellis answers this beautifully, in his blog.

“I’ve tried to make the concept less abstract by offering a specific metric for determining product/market fit. I ask existing users of a product how they would feel if they could no longer use the product. In my experience, achieving product/market fit requires at least 40% of users saying they would be “very disappointed” without your product. Admittedly this threshold is a bit arbitrary, but I defined it after comparing results across nearly 100 startups. Those that struggle for traction are always under 40%, while most that gain strong traction exceed 40%.”

Takeaways

Some quick points to sum up my takeaways from the session:

  • Product market Fit isn’t a destination, it’s a journey.
  • Understand your market.
  • Know your customers.
  • It’s not about the product. It’s about how you position it.
  • Keep your product sticky.
  • Align your products to your users’ metrics.

Avlesh’s sense of humor, Arvind’s sarcasm and Suresh’s guffaws helped maintain a lively atmosphere for the discussion 🙂 It was a great session overall with some brilliant takeaways from all of them.

Guest Post contributed by Anusha Murthy, ChargeBee

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Nuts and Bolts of Marketing & selling SaaS products to US customers from India for First Timers

In innumerable brainstorming and “gyan” sessions with friends, mentors and experts, one of the most stressed focus area is getting product market fit as soon as possible and then follow it up with scaling sales.  I think most early to mid stage entrepreneurs are instinctively aware of this but struggling with “Hows”.  So when I saw this playbook promising precisely to explain how, I grabbed a spot. I wasn’t disappointed. Suresh Sambandam is very down to earth and spoke earnestly and in detail about different steps he took while selling the OrangeScape’s product KiSSFLOW. Attendees who themselves run early to mid-stage companies and Kishore Mandyam of Impel CRM chipped in with their stories and inputs. Here is the detailed enough capture of the same.

The relevancy of this session is greatest to Early and Mid-stage entrepreneurs going from $0-5K MRR to $50K MRR selling to US MSB. This session is NOT meant for discovery or product market fit but I have inserted the discussion at the end.

The blog is organised as below Product Market Fit / Pricing as step 0; Followed by Inbound Sales and Marketing and then finally Outbound Sales and discussion on tools.

2014-11-15 16.37.05Product Market Fit

The absolute first step (may be zeroth step) in Sales process is getting the product market fit. You know you have a Product Market Fit with a B2B Mid-Market SaaS product when unknown folks start buying (Inbound sales is picking up traction). Unfortunately in cases that were presented at the session, the discovery process of the product happened organically based on another product that they were building.

However the generic solution for early stage product discovery goes like this.

  • Create a landing page with a “notify when ready”.

  • Create a SEO/Adword campaign for getting early adopters. You need to be very clear about the product category and fine tune your Adwords to exactly match what product aspires to solve. There are usually two approaches to any product i.e Disruptive Innovator or Faster Better Cheaper. So Adwords need to be in line with these

  • Once people signup engage with them and partner with them to fine tune the product.

To put succinctly Bring-> Engage->Convert->Succeed; As you can clearly see from this model, “Marketing Comes Before Product” or as Suresh puts it bring the horse to the water.

Pricing and “Freemium v/s Free Trial”

So which model suits best for a SaaS product? Is there one preferable over another? Very subjective topic but the thumb rule seems to be for SMB / Mid-market SaaS Free Trial is a best method to go.

Models aside, what matters most to the conversion is the post-signup engagement and the price factor. Faster conversions are dependent on many factors but one of the key factors is pricing. If pricing is within the decision-making authority of the midlevel managers, it is easier to convert. The discretionary spending seems to be around about USD 5K. Keeping the price low per user and making minimum unit purchase of say 10 users per bundle works quite great.

Inbound Sales

WebSite – Suresh firmly believes that Website is a core asset for a B2B SaaS company and hence should not be outsourced. He advises to have a minimum team of Web Developer, Creative Designer and Automation Engineer.  This would help perpetual A/B testing in short cycles..

Couple of nifty tricks to make the whole experience frictionless is to have a one click signup. Visitor should be able to experience the main software within few seconds. The other participating companies in the round table have used various  techniques to authenticate emails like SMTP Ping, email pattern matching, etc.

It is also important to closely monitor the users interaction with the website, capture it and feed it back to the Engineers to close the gap and arguments between Sales/Marketing and Engineering. One of the recommended tools in this category is FullStory.

RajanSEO

Lot of interesting debates on this; discussion ranged from how get the right keywords for searches and what optimization works and how to track the metrics. Suresh again firmly believes in having a dedicated SEO guy and focus on defined key words. They manage about 28 keywords and track them very meticulously. Some thumb rules and objectives again are

  • Do it Slowly but Steady
  • Don’t alert Google
  • Build Backlinks (Naked and Anchor)
  • Improve Google Crawl Frequency

Adwords:

It is preferable to have one dedicated person with number crunching and finance background. This will help track the cost per signup for search ads

Content Generation:

While it is important to have this come from founders, it is very hard to find time for the founders. One technique employed by KiSSFLOW is to hire fresher from visual communication background who has a grammar nazi attitude and give a very specific target like 2 +2+2+1 per week (2 blogs published 2 interviews done, 2 assured interviews for next week and 1 research post). He also uses 10-80-10 formula for the content itself where beginning 10 and ending 10 percent are reviewed in detail by founders.  One of the other key points stressed was to have self ads in each of the content which leads to signup.

Outbound Sales

Contact DB

Obviously the most critical first step here is having a database of all the companies and the decision makers that you want to reach out. Linkedin Premium works best. This is how Suresh does it. He uses Linkedin DB to create a list of all target companies and then assigns the task of creating the contact details to an online consultant who was discovered on Elance. It usually works out to INR6-INR10 per contact. There are other dbs one can purchase directly from companies such as Data.com, Discover, rainking and slew of others.

Once contacts are obtained it is very important to use direct emails as opposed to using mailchimp, constantcontact, etc as most of them will not land in inbox. It also helps to be as personalized as possible.

Sales DNA

It is absolutely essential for the founder to set the tone of sales.  For US be ready to pull night shifts continuously.  Although it is the founders calling, it is good idea to assume the persona that appeals to US clients say Bob and position one as a sales manager. It is also important to make the sales hire to listen to the call handling to build on this.

Channels

Not all channels are suitable for SaaS and one needs to do some trial and error to figure out the best channels. The channels include Events, Road Shows, Reselling Partners and Referral/Affiliate partners, may work well but Orangescape has ignored them.

Metrics, Tracking, Tools

Meticulous tracking is critical and many tools are available to manage and measure the process. Some that are being used by the roundtable companies are listed below.

Metrics to track

Metrics to Track

Suresh SambandamTools

These are the various tools used by the KiSSFLOW team and other participant companies who attended the roundtable

tools

Conclusion

Very hard to summarize such a detailed session, but one parting thought stands out. Attention to details followed by automation and customization seems to be the way to go.

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Enterprise Sales, Product Market Fit and Partnerships: Learning from the 23rd iSPIRT Round Table

Vivek from iCreate facilitated yet another juicy round table with lessons learnt ‘from the trenches’. While this article provides a distilled summary, it cannot do justice to in-person learning.  I strongly encourage you to attend the next iSPIRT round table.

Vivek started off by saying that there is no silver bullet.  Every product exists in its specific market conditions. Different things work for different products in different domains.  Nevertheless, there are certain fundamental themes that are commonly applicable.

The fundamental problem typically during the early days of a startup is lack of clarity of what are we solving and for whom (in other words – “Product-Market fit”).  Articulating this clearly is the first thing a startup needs to get right. 

2013-11-23 16.59.13

Spend some time answering the two questions below and ensure that all of your team is on the same page. Otherwise, it will be like the classic story of six blind men describing an elephant in completely different ways.

WHO AM I?

I am better than ____ (existing way of solving the problem)

For ________ (what problem)

Because _____ (differentiation)

As a result of ____ (your secret sauce)

Answer this for your product.  This manifests in your strategy, marketing communications etc.

WHY BUY ME?

Create a sentence with 10-15 words.  I am better than X because of Y and solving the problem of Z. 

Articulate this clearly and crisply. Otherwise, you are confused and it is also confusing to your customers.

Without clarity, you knock on a lot of doors and have lots of meetings, but with no results.  This can be very frustrating.

Domain Knowledge

It is very important that you have a very good understanding of the domain in which you are playing.  Depth of problem understanding is a must.

Do you know who the buyer really is? It is not enough to say company C is the customer. Who exactly in the company is your customer? Why should the user spend time to understand your product? Why should the user talk to you? What is his/her role? What are their motivations and fears?  What is their procurement process? Are you sure you qualify to pass those gates?

You need to have differentiation in your product with respect to your competition. It can be things like premium domain knowledge, completeness of the solution, cheaper pricing etc.  You should be clear about your USP (Unique Selling Proposition) and articulate it to your team and prospective customers.  The differentiation should be outcome-based and not based on things like technology stack.

People pay a premium for completeness. Plus it is easier to understand. And we can show the value to the user. E.g. architecturally, well designed modules are all fine, but from the customer point of view, he needs to see a complete use case coverage.

There is a popular Hindi saying “Jo dikha hain, wo bikta hain” (meaning “only what can be seen can be sold”).  It is tougher to convince with words.  Ensure you can clearly demonstrate the value of your product in action.

Pay close attention to your problem space and understand the dynamics. For example, in banking domain, the customers are married to existing platforms such as SAP, Oracle etc. So when you make technology choices, ensure that they work with the incumbent platforms.

Product Market Fit

Product market fit is critical.  Have a plan to get to product market fit as fast as possible.  Danger is you might run out of money, so get to product market fit fast.  iCreate was providing services and used these revenues to fund their product development. This way they had a longer runway to get to product market fit.

If you need to educate the value of your product, then there is a segmentation mismatch. Better to find a market place where they see the value clearly and it is more about demonstrating your value. If you have to explain why they should use your product, then product market fit is not there.

In your universe of market place, there will be big clients, small clients and medium clients with different attributes. Do not try to solve the problem for everyone. Pick your initial target segment as narrow as possible and play there. Pick a demographic where the user sees the value immediately and get them to start adopting. You can later expand to other segments when you see success. 

Qualify your market segment and leads. If they don’t have the problem, don’t spend time with them. You will see a glimmer of hope everywhere, but you are not going anywhere.   This will give you a false sense of accomplishment and is a dangerous situation to be in.

Having a vertical offering works better than a horizontal offering (i.e. applicable to everyone in the world).  Having a generic mother of all products means multiple stakeholders need to be convinced and the message also gets diluted.  It is better to choose a specific problem and completely solve it.  You can sell faster and also sell for more and get customers faster.  For example, iCreate had a generic solution which took 9-12 months to close the deal. With a single point solution, the time reduced to 3-4 months.

As a startup, you want to do several different things, but you don’t have resources.  You need to make the hard call and pick the 1 or 2 things you want to pursue.  Platform to solve N problems takes 2 or 3 times more time than solving 1 problem.  An amorphous offering is more dangerous and takes more time.

Another example that was shared was of a language translation product. They struggled to find market fit for their generic language translation services.  Then they verticalized it to retail segment where their product translated customer messages to native language and vice versa.  They were able to then go and penetrate this market segment.

As a startup, it is challenging to verticalize a horizontal offering due to resource constraints and the temptation to have a large market size, but this needs to be done.

Finding the first customer willing to use the product is a big challenge.  Be prepared for a long grind, and it can be a very frustrating experience.  Sometimes it can take a long time to get the product market fit (several months).  However, you should keep an eye on whether you are making progress or the product is not viable as a business.  You need to introspect if you are getting product-mismatch feedback.  Set clear goals and metrics. Don’t go by sentiments.  You have to be dispassionate.  Come up with some objective metric such as “The way for me to validate X is Y”.

If founders can’t sell, nobody else can sell. Look at the offering instead of finding a sales guy.

Every company needs one or two key inflection events change the trajectory completely. You also need some luck to get your first break.  Try to get top marquee client vs. a small client.  Marquee client also helps in marketing and validation and others will have lesser resistance to trying your product.

Product Merit is a must. In addition, try to show up where your customers hang out e.g. have stalls in conferences.

The next big challenge is getting the first paid customer. Then, you need to get your first referencable customer. 

You need to inculcate champions among your existing customers.  They will also tell their peers. This is critical during early days. Investors and prospective customers want to talk to existing customers.

2013-11-23 15.23.21

Creating a Sales Team

Look for partners or non-founding sales ONLY after getting product market fit and messaging right.  Till then, the founders should be the sales team. In iCreate, pre-investor stage sales team was zero.

Initial sales guys that you hire should be comfortable with the ambiguity of startups. 

Hire folks who can put ‘skin in the game’, aligning with wealth creation (e.g. ESOP) or a percentage of revenue.  Incentives also work – for example, “If you get $X revenue in Y months, you will get a car”.  Make the incentives outcome based and not effort based

In India, typically R&D budget is much more than the sales budget, but as you get traction investment in sales should increase.  One rule of thumb is to have 60:40 (engineering to sales) during growth stage. In US, mature companies have R&D costs around 15% of revenue and 50% of revenue is invested in Sales.

If the sales team is sub-optimal, firing early is better. You might make mistakes, but it is liberating when you fire a misfit as you can focus on important things better.  

Without raising money, growth can be slower.  If you raise money, growth is much faster.  Raising money for growing is a very good idea.

Partnerships (Distribution and SI)

First, have a story to sell. You put in initial effort to get initial customers in your target geographies. Then attract partners using these success stories.

We discussed two kinds of partnerships.

  1. Distributor – who just resells your product.
  2. System Integrator (SI) – who resells your product along with implementation or other services.

In every market, nuances are different e.g. private vs. public banks, different geographies etc. You need to figure out which kind of partnership is suitable to your product.

In mature markets like US or Hong Kong, you can sell direct and may not partners.  US is a great place to do business, as you get quick and clear feedback – positive or negative.  If they see value, they will buy. However, the sales cost in US is expensive.

In emerging markets, people want in person meetings and they do not say yes or no immediately. This can lead to mixed signals and longer sales cycle.

In geographies like Africa you might have to work with local partners. Your direct sales may not work. In general, East Africa and West Africa need distribution partner to set up meetings. Then your sales guy has to do the work.  Look at sector focused players e.g. computer warehouse in Nigeria, Simba in Kenya.  

Middle East and Africa are brand conscious – they don’t want to go with small startups.

In mature organizations, SI plays a major role and has a lot of influence on decisions.  Evangelize both with SI and clients. Once SI sees a win for your product, they will want to replicate that in similar contexts.

2013-11-23 15.26.17Be generous with commissions to your partners.  Once they see the money, they’ll show more seriousness.  See if your partner can make commitments to gauge their seriousness.  The commitment is not necessarily in money terms only. For example, ask if the partner is willing to send their employee for training on your product to your location.

It was observed that strategic discussions with SIs not as fruitful as tactical ones.  If there is an immediate opportunity, SI and you can have a meaningful tactical discussion.  Strategic level discussions might give you a good feeling, but not much might come out of it.

Channel partners need to see a clear way of how and how much money they can make. Find a channel partner who already has a user base of stakeholders of your interest.  To find out, look at other players in your space and which partners they are using.

Remember that your product is just an additional product for your channel partner.

Partners want to look at value addition, not just cost or feature arbitrage.  Partners compare your deal with existing big names to see if they get to benefit more by pitching your product.  

Partners need to be given all intelligence on a platter. They don’t want to spend on learning or figuring out. They don’t want you to experiment at their cost.

Some participants were worried that brands from India might have to first fight the battle of perception of being an India based company. But feedback was that it might be an issue in the beginning, but once you get traction and the product has merit, this problem is not insurmountable.

Government tenders is a complicated process.  You need to be proactive about positioning your product even before tender process. 

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Product Positioning

There are different stakeholders in a B2B context – could be the CEO, IT Manager, or VP of a business unit.  All of them are looking at different parts of the problem (one might be looking at cost savings, one might be looking at value delivered by the product and another might be looking at maintenance costs).   Create your message for each stakeholder.

For your product positioning, consider the following:

  1. For the points of your differentiation, reinforce in your messaging.
  2. For points of parity with competition, highlight them.
  3. And for points of despair, mitigate or downplay them.

From your client’s point of view (particularly in large enterprise context) “he will never get fired for hiring a well-known brand. It will be risky for him to try a startup’s product”. Reduce the risk for your client and also demonstrate differentiated value of your product.

Proof of Concept

Instead of free proof-of-concept (POC), ask for conditional order.  This shows commitment and also the buying process will start early. In B2B context, the process can be quite long.  If the POC is not successful, the order can be cancelled.  If you can get a paid POC, that is the best.   Free POC can be a waste of time if the person driving the pilot does not have buying authority.

Advisors

It is good to have an advisory committee of domain experts. This is good for validation. You can never be an expert in every area, so have advisers.  Typically, you meet them once a month or once a quarter.

There are three common models for compensating advisers:

  1. Free.  They like your passion and are willing to give you advice from their experience.  But this can be good only for some time. Otherwise, you will start feel guilty about taking their time for free.
  2. Stock options.  This is better as they will benefit when you benefit.
  3. Payment for their time. This is the standard consulting by the hour model.

Conclusion

While there is no silver bullet that works in every scenario, there are certain fundamental aspects that are common. 

Unfortunately, a lot of learning is experiential.  And it will take time. You’ll do wrong things but when you navigate, you can course correct earlier by having the knowledge from those who have tread this path before you.

Please share your thoughts in the comments section below.

Tweetable tweets

The first problem a startup must solve is product-market fit.  Everything else comes later. Tweet this.

It is very important that you have a very good understanding of the domain in which you are playing. Tweet this.

People pay a premium for completeness. Better to solve one problem completely than N problems partially.Tweet this.

Jo dikha hain, wo bikta hain (“only what can be seen can be sold”).  Tweet this.

If you need to educate the value of your product, then there is a segmentation mismatch. Better to find a market place where they see the value clearly. Tweet this.

If founders can’t sell, nobody else can sell. Look at the offering instead of finding a sales guy. Tweet this.

Tactical discussions with System Integrators are more fruitful than strategic ones. Tweet this.

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What is win or loss means in the game of enterpreneurship

I have been interacting with various startup teams over the last several years, predominantly around ideation, product-market fit, funding, scaling, and strategy aspects of the companies. Before I was an investor, I spent a lot of time around product creation with two successful startups in the Silicon Valley and managing business in a large Internet company. In recent times, I have been spending a lot of time on the board of several Indian companies who are starting to scale.  Over many years of this engagement with startups, I have come to believe in few things, and one of it is what I call “Rules of the Game”. The sporting analogy is deliberate, as I use it throughout this article.

The Rules of the Game

In India, most of the founders get into their entrepreneurial journey with very little preparation and knowledge. In fact, it looks like most of them jump in based on how their friends have done or the founders in the company they work have done. Some of the serial entrepreneurs are starting to plunge in their second attempt, much more prepared and know a lot more about how the game of entrepreneurship is played. However, most of the entrepreneurs haven’t thought through the rules of this game, especially, the difference between a win, a draw and a loss in the game of entrepreneurship.

What is a win, draw and a loss?

Most of the entrepreneurs start their journey with an intention to solve a problem that they have identified is important and useful. If one has setup a small company with a tiny team, has solved the problem well and has great number of customers, and customers are paying, the game is already looking interesting for you. If you are making profits, and you are paying yourself a market salary, and you are self sufficient with enough room to grow, make no mistake about it, you are winning the game.

If you have raised money, built a great team, an outstanding product, a defensible growing business and you know how to take the company to profitability, and you are geared towards an exit or have already done, you are a role model.  This is definitely a BIG win.

On the other hand, you invested time and effort in building the product out, you made attempts to find product-market fit, you learnt how to market, sell, and support customers, hired few good team players, and overall you have done every thing possible. However, you come to know that the business model is not viable and you cannot service customers within the budget. After all fixes to business model, if things don’t change you may decide to shut down and look for your next gig. From my point of view this is definitely a “draw”. It is draw because in the process, you have learnt a lot of things around entrepreneurship; the rules of the game and you come out very strong in your next gig.

A loss is when you are caught in a rut. You have built some sort of a solution, you have few customers, but they are not very happy.  You are not able to scale the company as the product-market fit is not yet accomplished and at the same time you have just enough revenues to pay your bills and manage your employees.  You know at the bottom of your heart that you can continue the way it is for several years, but you don’t see a big change. This is a classic “loss”.

I’ve always believed that the loss is where you don’t want to be, because of the uncertainty about which direction you need to take. Conversely, a draw can be bounced back from. Everything you’ve learnt and gone through is invaluable. You’ll be a far better entrepreneur the next time around.

But is there a better way to learn, to get the experience of the win, draw, loss without actually playing the game? That would be brilliant, wouldn’t it?

Ideation vs. Execution

Of course there is a better way to learn. In fact, there are reams of startup literature out there; the best of them are free, actually, and your first step should be to read them and read up on your domain as much as you can. In fact, I have even counseled people to do nothing except read for a month before getting into the game. Read interviews of very successful entrepreneurs and grasp around “why” they were successful. What was the context under which these folks operated and how they tuned their operations to be successful against others is a great learning. This knowledge is out there. You just need to take it and apply to your world.

However, most of the time, reading and understanding isn’t going to be enough. Reading about it and executing it are two completely different things. This is where the value of the ecosystem and mentoring becomes very useful. A mentor can take all that knowledge you have imbibed and help you translate it into meaningful, decisive actions in your context. And again, the quality of such mentors matter. A mentor who makes a business out of ‘guiding’ startups is not a mentor. An excellent mentor is very articulate, keen observer, and some one who has gone through their own iterations of their idea, started a company, learnt every thing possible about their customers, and eventually was able to scale the company. Your best bet is to find such mentors and interacting with them is of significant help.

In a fledgling software product ecosystem like ours, finding enough successful mentors to support many of our startups is very tough. This is where, I see the value of efforts like the inaugural #PNCamp. Throwing in just-started practitioners with experienced practitioners and having them help each other is in my view, the best thing that can be done to push the ecosystem to accelerate faster. I am hoping that many other such practitioner lead hangouts happen in the country to boost our eco-system to next orbit.

Looking at the agenda and participants of #PNCamp, it looks like there will be an incredible amount of exchange of practical knowledge among attendees and also bit customized as each session being small (around 20 folks).

If you want to see an example of practitioner-lead-mentor, see the movie “Miracle” based on the real-story of US Olympic ice-hockey team winning against the invincible Russian team. The credit of the win goes to the player who turned coach; Herb Brooks who guides and empowers the team for a win that no one thought was possible.

All the best for the #PNCamp and thanks to Sairam for putting this together.