If you can't find 10 people who say they'll buy it...
blog.asmartbear.com
blog.asmartbear.com
Better yet: find 10 people to write you a check.
If you're building something that your prospects want and your demo is so compelling, then smart people will crawl over each other to get their deposit in first. I've even had propects beg me to leave my laptop after a demo so they could play with it while I built it out.
10 people saying they'll buy it is a good start, but a deposit check separates the talkers from the doers.
Sometime I think investors should require 10 deposits prior to pitching. Imagine what a difference that would make.
It's such a fantastic buzz having people send you money in exchange for product/service. Such a buzz.
With the recent announcements about God's number (for the Rubik cube) and the possibility of advances, perhaps even a solution, of P vs NP, there's even more to talk about!
I would argue that finding folks willing to give you $5 is as valuable as LOI's. The point is to validate your model. It's never enough to simply ask people "would you be willing to buy this?" You have to figure out how to validate that when push comes to shove that they'll actually take action to do it.
Talk is cheap after all. So if you can find a handful of folks to throw $5 your way, or at the very least enter into the purchase process for a $5/month subscription... well then you probably have something. Just as a LOI for a larger ticket product shows commitment from those larger companies.
Both show that you have a product your target market is willing to actually pay for. That's huge.
Once they came around to launch time, the customers had already played around with the 'beta' product and given feedback, and nearly all of them have retained their subscription at $10/mo, where as new customers have to pay significantly more.
I think its a reasonable trade off to give a discount to them, especially when they helped work through some of the bugs of the early phase. They may not be the customers that will make them rich by throwing them money, but they certainly helped get the startup to the position they are now.
On the other hand, I've run into a situation recently where this didn't work as I expected. My current project is sold to businesses. When I asked a few of the businesses I was talking to if they would pay me the price I was going to charge for the service to actually make the product, something strange happened. Even though the amount of money I was asking for was quite small this request still went through the entire purchasing apparatus of the business. I figured the manager I was talking to could just write me a check, but I was wrong. Long story short they wanted to own a part of the business if they payed me money to make it, so I opted to not take their check.
I figured this was good enough validation and I'm plowing ahead on development even though I am a tad worried about what my sales cycle is going to look like. But I never would have learned this if I hadn't straight up asked for money before I even built it.
If they'd contacted you, paperwork was involved blahdey blah, they might feel it was their IP.
In it's fair to say neither have been profitable (Gmail is a loss-leader to Google).
Now, I'm not dissing him or downing on his achievement. I'm just saying, he's done well out of building + propositioning free products.
a) the shear scale of their email operation = large costs b) poor conversion on those ads as users are not in the "search" mindset when reading emails where as they are more likely to click on an ad when searching
That would let him know exactly how many people were willing to buy.
It's a pretty clever idea. For only a few hundred dollars and a little bit of time building the website, you will be able to find out what your conversion rate would be. I may do this for an idea that I am just starting work on.
(a) Because I no longer give any e-mail address to a business unless I'm starting to deal with it Right Now. Insisting on one is a good way to make sure I never deal with you again.
(b) Because I wouldn't trust a company anyway after I discovered that it was advertising a product or service as though it were real but actually it was just messing me around and wasting my time.
This kind of thing won't work for every business, but it's a hard lesson to learn: most people are not you. I was reminded of this the other day when there was an IAMA Netflix Employee, and they mentioned that they get a fair number of phone calls asking about how to return their DVDs 'to that box outside of the gas station.' Yep, people think Redbox is run by Netflix because they both use red, and both sell movies...
1. You don't save credit card numbers...in fact you don't transmit anything from the form...just clear it out without saving.
2. You don't tell them "sorry we are fake"...you tell them "This product is no longer available for sale...your credit card will not be charged".
3. You have to remember this is a limited run. At most you'll have 10-15 buyers before you realize that you are onto something and would stop your test. So the chance of someone bitching at you for "taking" their credit card number is slim.
So there is no fraud, no identity theft...the only unethical thing you are doing...is making someone read a description of a product that's not available for sale.
And in return you get your REAL numbers...not the inflated ones that can send you chasing the wrong idea. I'll give you an actual example...156(order form impressoins) = 18(order form submits) = 13(actual sales)
Would you tell them "This product is no longer available for sale" when it never was? In fact it doesn't even exist.
Would it be fair to make people spend their time filling a form that won't result in anything?
Who can guarantee you did not collect the data submitted by the form?
It's simple market research. Would you rather spend 6 months hacking together a product just so you don't offend 10 people?
if you always play by the rules you'll never make it. While you spend 6 months to try one idea, and another 6 months for another. Your competitor is going to run 10 tests in 1 week to find the idea that is the most profitable for him.
So by the time you get done with your 2nd test, the other guy has already been in a profitable business for a year.
Probably not, if by "offend" you mean "market research", but that is not what I'm talking about. I'm specifically talking about the method you proposed, which I don't find to be fair.
In your question, you seem to imply that "market research" as a whole is offensive, which is not what it seems to me. Look at the Dry Test (the method Tim Ferris wrote about) mentioned up in this thread. It seems fair enough to me, and you still get the email of the people who are interested in your product.
"if you always play by the rules you'll never make it."
I simply don't buy that. Do you really mean never?
Except the dry test won't tell you anything. Cart abandonment rate means that the numbers you get don't mean anything. Your actual sales maybe 10 times less.
If you are bootstrapping then yes...I do mean never. Well there are probably a few exceptions...but that's just pure luck.
I suspect many people reading this very forum are living proof that you are wrong. Indeed, two of the most popular themes in the experience of successful founders seem to be building mutually beneficial relationships with business contacts and building a trustworthy brand in your market.
In any case, "this is business" is not an excuse for antisocial or unethical behaviour, and a cheap throwaway line is not justification for deliberately messing other people around.
Saying "I can't succeed with X ethically" is no excuse. Then you ditch X.
1. where you stretch the rules a little, break the whole "please respect our TOS" thing. Might include spamming a few blogs to get backlinks. Might include posting on HN with 2 accounts. Might include creating a back story to make your startup a lot more interesting. "No really...we wanted to save the world...we didn't even think about the money"
2. white collar crime...telling investors that you have 50,000 users...when in reality you only have 5,000
3. killing people.
If you want to get a bootstrapped startup off the ground...somewhere in the early days...you'll have to break #1.
Frankly I feel like the whole make them fill out an order form to see how many actually want to buy, falls under 0 or .5. Yes it's a dick move...but that's the only way you'll get real market research, instead of getting 100 people to say "yes I'd buy it"...only to find out a year later that when the time comes to pulling out their credit card all of them say "no thanks"
This is baloney and has a higher chance of making great cofounders and hackers (like, for example, Marc Andreessen: http://pmarca-archive.posterous.com/how-to-hire-the-best-peo...) run for the hills rather than work with you. If investors or business partners catch you seriously lying once you are basically permanently blacklisted. You might be able to eke out some kind of business from that black hole, but it is not easy.
"Third and final criterion: ethics.
Ethics are hard to test for.
But watch for any whiff of less than stellar ethics in any candidate's background or references.
And avoid, avoid, avoid." - pmarca
Or maybe it's the same Marc Andreessen that sits on the board of Facebook which did a ton of unethical things to get off the ground?
The bottom line is that if you can think of a successful business...somewhere in it's early days they've done something that would be considered unethical in order to gain traction. The guys who played by the rules when they had nothing are no longer around.
Granted there are probably a few companies that actually survived...but chances are they got extremely lucky.
I understand what the author is getting at, and it may work for a certain class of startups, but I don't think that it works 's terribly realistic to apply that to all startups. Yes, talking to people about what they want or would be willing to pay for is a good idea, but there's a lot of products that people just aren't going to understand until they see other people using it.
The vast majority of successful startups end up building a completely different product than the one they set out to build. I'd much rather build a minimal product, put it in front of people and then iterate the product until you have something that people want and use.
Both Apple and Microsoft famously had orders before product, but that's really common in product oriented businesses. Dell made a whole company around that philosophy.
1) Games - how to you verify that a game is "fun" before you build it? Cardboard cutouts and early play testing?
2) Marketplaces - You can verify that people hate eBay or VRBO, but what sort of early validation could you do to take them on?
3) User generated content - What could Yelp have done to validate the market?
Those are just a few off the top of my head. Not saying that you can't "get outside the building"-- just that it might take a different type of thinking...
But they had technology so compelling that business model fell into their lap.
Maybe they were lucky, but I would say that if you have a technology that no one wants to buy, but everyone wants to use... stick with it. There's something to it.
I put in my own money to buy a small supply, sold it based on direct sales.
Used the profit to buy more supply and get basic marketing material printed, sold that next supply.
Improved my packaging/printed marketing material/got a website built etc.
It has been slower but this is my first proper business so it means that I am learning fast, maintaining control and proving myself.
I would recommend this way to anyone that isnt doing a "next big thing" project. It keeps you on the cutting edge of customer feedback.
Each launch is different, and the environment for each business differs.
For some prospective projects, you might well get a launch with just one (good) customer to start with.
And from your list of businesses, you're also looking back at companies that launched years or decades ago, and into vastly different environments and markets than exist now.
Sony: started in 1945 as an electronics repair shop. Built-in audience
Microsoft: in 1975, MITS requested Bill Gates and Paul Allen sell their BASIC interpreter for the Altair before it was even written
Amazon: started in 1994. Everyone buys books, they just needed people to do it online
That definitely opened my eyes a bit. I usually do the difficult parts of a purely software fun app first, but when it comes time to making a bigger public facing app I just build it too.
Good post.
I think the question to potential users is "Would you use this everyday?". This is more important than going to Starbucks and asking if they would pay to promote within the service (it's a no-brainer).
If you can't explain your idea in 10 seconds now, you probably won't be able to later. If people have to really play with it to understand what it is and how it'll be useful, you're doomed. See Google Wave.
How many Twitter founders spent and why they still don't know the business model that will work?
Facebook started as somewhat of a ripp-off but actually people weren't willing to 'buy' it, hence these stories over IP that Facebook got into over the initial days
If you're building an incremental product, please do ask 10 people.
If you're building a revolutionary product, build a prototype first, then ask 10 people. Otherwise people will just ask for horses with wheels.
The only way to build great products using your gut it to scratch your own itch. This is a completely valid approach that can work really well, but even then, you're better off doing this customer validation thing. You might be the only customer out there. And yeah, web apps are cheap to build compared to chip fab plants, but why spend several months building something and then another 6-24 months pushing it to get traction (the really hard part) if you can find out that there's no market with a few days of work?
Finally, I know quite a few successful entrepreneurs who are huge advocates of the customer development model, so I hardly think that being a great entrepreneur requires you to avoid talking to your potential customers before you start building, and hoping that you're just the 1 in a million genius who really does get it. You're almost certainly not Steve Jobs, my friend. Survivorship bias is the only reason we think we might be...we don't see the millions of failures who thought they could predict the market's desires without talking to them.
Folks unsure of their product/idea tend to not have a great product or are just not good at starting a business. But the people that know a market exists for their idea and just need it implemented are more than likely to succeed.
I'm racking my brain to think of any successful entrepreneurs that had to get validation before they started. Jeff Bezos? No, he had an idea for an online bookstore, quit his job, moved to Seattle and started one. 37Signals? I bet Jason Fried asked for lots of validation. Steve Jobs? No, they built the Apple 1 and started selling it. Henry Ford famously said "If I had asked people what they wanted, they would have said faster horses."
I just don't get why you wouldn't try to find out if you'll be able to find customers before you spend all the time and money to build the thing.