Connect a Startup's First Product, Investors and Customers

First Product – What the Right Stuff? Avoid Mistakes and Get It Right

March 1, 2010

The product or service is the heart of any business proposition. Yet, investors disproportionately give the product a minority interest when they consider whether to invest in a company. Why? Because the product is to the startup what the heart is to the human body, it’s of critical importance but there are many other functions that need to work in order for the human body to function as a whole. Functioning itself is not enough; it must function efficiently, effectively and harmoniously. So while the company has no reason to exist without the product, a great product will not make a successful start-up, but it all starts with the product concept. I’ve seen rigorous investor evaluations where the product is given only 10% of the overall scoring process.

The best resource for defining and creating a new product are the customers. The seasoned marketing person with experience in the specific technology and market knows the customers well. It’s no wonder investors like to have a team with experience in the specific industry and consider the marketing person to be one of the vital team members to have from the beginning. In fact, some startup evaluations processes give the understanding of the customer a higher ranking than the product itself.

Consumers are easier to access today than ever. The Internet is primarily a consumer media and with the advent of social networking, the consumer can be directly accessed better than ever before. For example, if you want to find out what consumers think of a set of products, go to the review sites and read the most negative and positive reviews. The average review is 4.5 out of 5, in this case, ignore the numbers and read the reviews. Users will usually tell you what they loved and hated about the product, and sometime write what features they wish were available in the product. Likewise, what are people talking about on the social sites like Twitter and Facebook, and what are they searching with their keywords. Keywords can be a bit tricky. Google reported at a conference that 20% of searches conducted every day have never been done before. One third of all searches results in no click on any of the results. Thanks to the large shopping portals, you can even find out the volume of sales of various types of items. Customers vote with their money and this is easily traceable. Customers accessed through online survey sites work well too. The drawback is both you and your competitors have access to this wealth of information.

Niche consumer products can find customers congregating at events. There is a healthcare startup that setup booths at farmer markets and sporting events such as local marathons to test market their product and do customer research prior to the product being available. Business products can find their customers at trade shows and conferences as well. One marketing person of an enterprise software startup used to launch bathroom offensives to speak with these customers. He’d get the list of attendees prior to the event, memorize the names of the customers he wanted to speak with, and stake out the restroom area waiting to find one of the targeted customers. He rightly figured that eventually everyone visits the restroom area at a tradeshow.

There are two big mistakes investors always mention. The first is the entrepreneur who believes everyone is like them, and if they like the product then everyone else will to. One of the golden rules is never extrapolate the market or the crowd from your own experience. Get the product into the hands of the customer as soon as possible and see whether they embrace it. The second mistake is the techie founder, who focuses heavily on the technical aspects of the product, and not on the customers. The third mistake is not getting the product into the hands of the customer as soon as possible by waiting to introduce a feature rich, near perfect product. The first product doesn’t have to be perfect, just close enough. It will evolve and become better as more customers give feedback.

Startup teams need to fall in love with the market and customers, not with their product. The product meets the needs of the customers, not the other way around. It’s not the product itself that matters so much, but how much customers embrace it.