Startup Customer Development - testing your startup hypotheses

1. Copyright
DKParker, LLC
2015
Customer Development
Dave Parker
@DaveParkerSEA
www.dkparker.com/blog
Dave@dkparker.com

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DKParker, LLC
2015
Agenda
¤ About Dave
¤ Customer Development
¤ What to do
¤ What not to do
¤ +5 Hypotheses
¤ Iterations/Pivots
¤ Q&A – Your questions

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DKParker, LLC
2015
Where to start?
You have opinions
You have Data
You get money!
Investors have opinions
They have money

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DKParker, LLC
2015
You are not Henry Ford

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DKParker, LLC
2015
Customer Development Goals
¤ Find out if customers care?
¤ What do they want?
¤ Determines the difference your product at launch and at
scale
¤ Feature priorities
¤ Product Roadmap
¤ Market Timing – see Bill Gross Ted Talk

6. Copyright
DKParker, LLC
2015
Customer Development
¤ Steve Blank – Four Steps to the Epiphany
¤ Customer Discovery
¤ Customer Validation
¤ Customer Creation
¤ Company Building
¤ Eric Reis – Lean Startup
¤ Learn - Ideas
¤ Build – Code
¤ Measure – Data

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DKParker, LLC
2015
What To Do
¤ YOU get out of the building and interview prospects (they
aren’t customers until they use or pay)
¤ 50 B2B interviews
¤ 100 B2C
¤ Standard set of questions
¤ Google form – you fill it in
¤ 1) Face to face 2) Skype or hangout
¤ Watch
¤ Ask the next question – why?

8. Copyright
DKParker, LLC
2015
What Not To Do
¤ You are not the customer
¤ Don’t tolerate a small sample set – this could delay your
success by Years
¤ Avoid “Selection Bias”
¤ “Isn’t our product amazing”
¤ No rhetorical questions
¤ No blind surveys
¤ Can’t outsource

9. Copyright
DKParker, LLC
2015
What do you want to know?
Negatives
¤ If you have a fatal flaw in
your assumptions – when
do you want to know?
¤ If it was to fail why would it
fail?
Positive
¤ Do they really want it
¤ Pain Pill
¤ Vitamin
¤ What will they pay
¯_(ツ)_/¯

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DKParker, LLC
2015
Tooth Brush Test

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DKParker, LLC
2015
+5 Hypotheses

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DKParker, LLC
2015
What can you test?
¤ Price
¤ Sales Model Hypothesis – how will you sell it?
¤ Demand Hypothesis – is anyone looking
¤ Business Model Hypothesis – how will you make money
¤ Customer Acquisition Cost (CAC) /Life Time Value (LTV)
Hypothesis
All of these are required for your forecast

13. Copyright
DKParker, LLC
2015
Price
¤ Value based pricing vs. cost base pricing
¤ Monthly Recurring Revenue
¤ Packaging
¤ 90% startups start too low

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DKParker, LLC
2015
Sales Model Hypothesis
Known
Market
Unknown
Market
Low Price
Point
High Price
Point
Known Search
Words
Unknown
Search
words
Web Direct ✔ ✔ ✔
Direct ✔ ✔ ✔ ✔ ✔
Indirect ✔ ✔ ✔
Licensing ✔ ✔
Retail

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DKParker, LLC
2015
Demand Hypothesis
¤ Is anyone looking for what you are doing
¤ Key word/phrases
¤ SEO – long time to build
¤ SEM
¤ AdWords Key Word Planner
¤ Display Ads
¤ This gives you top of funnel/marketing spend

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DKParker, LLC
2015
Business Model Hypothesis
¤ B2B
¤ 9 Model
¤ Market Metric
¤ B2C
¤ 10 Models
¤ Market Metrics
http://dkparker.com/businessmodels/

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DKParker, LLC
2015
Customer Acquisition Hypothesis
The following apply regardless of models
¤ Cost of Customer Acquisition (CAC)
¤ Lifetime value of Customer (LTV)
¤ 36 month calculation in a mature business, 12 months for you
¤ Time to close sale
¤ How does this change with product/market maturity?
¤ Churn/Retention
¤ Word of mouth vs. Virality

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DKParker, LLC
2015
Iterations & Pivots

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DKParker, LLC
2015
Iterations and Pivots
Iterations
¤ Features
¤ Target customers
¤ Pricing
Pivots
¤ Are painful – Tires to
Airplanes
¤ Mike Maples – Thunder
Lizards
¤ Five Famous Pivots
¤ Odeo become Twitter

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DKParker, LLC
2015
Repeat after me…
¤ I’m an entrepreneur
¤ Half my ideas are amazing
¤ Half are crap
¤ We need to find out which one this is!

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DKParker, LLC
2015
Q&A – Your Questions

22. Copyright
DKParker, LLC
2015
dave@dkparker.com
www.dkparker.com
@DaveParkerSEA