Critical startup basics I couldn’t really understand by reading #1: Value
If I truly understood key entrepreneurship terminology back when I got started, my life as a founder would have been easier. Trouble is, no matter how much we try, just reading about it doesn’t translate to understanding.
My goal in this post is to explore one of these terms and how my view of it changed, so that when you think you understand it in the future, you may think back to my post and reexamine your conclusions. See what you’ve learned since you last thought about it, and how it affects what you do.
Then repeat at every stage of your company from investor pitching, through customer value proposition and sales, all the way to how you develop your product.
It’s a struggle, and it’s constant. The first trick to winning it is to be aware of it.
TL;DR — Make something people want.
Step 0: Pitching value
Some of your first pitches are to investors. While it is best to derisk as much as you can, when raising a seed you simply are not going to be able to back up every claim.
The beauty of raising a seed if that you are not expected to be able to explain everything, after all, taking a risk on the market is what you are raising a seed for. Your reason for raising the money is to prove a point, whether it is that the technology works, that your team works, or that the market exists.
Thus, you need to choose a value propositions out of many available, based on which is your best researched guess on what would achieve your goals, and/or is the most derisked.
Uber for example could choose any number of value propositions when it just got started, from bridging the inequality gap by providing added income to anyone, to reducing the friction of ordering a taxi.
What’s important is a coherent and convincing, derisked story. Your investors are not dumb — They want to see you’re not either.
Moving on to customers.
Step 1: Technical value: What vs. Why
I remember when I was much younger, I watched an interview with Woz. He mentioned how he used to be able to show people what something does, while today he knows to show them what it does for them.
Value starts from asking yourself what your solution will do for your customer. You may have the best solution in the world, or the most technically advanced one. The question you should be asking yourself is:
What problem does my technology solve for my customer?
And continue by examining precisely who that customer is, and what they currently use to solve that problem,
Step 2: Technical value vs. business value
While your solution may solve the world’s problems, and may have unbelievable technical value, is it a business requirement?
It doesn’t necessarily follow that just because something is a technical need it is also a business need.
What is the business currently using? Is this a big enough problem for them? Has anyone defined solving this problem as a requirement? Does it have a budget allocated? Has a project been created to handle this issue?
If not, are you saving them money or other resources such as time? How difficult would it be for them to implement? Would they have to spend effort on it over time?
At my startup, Cymmetria, one of the security (technical) value points, or deliverable — The what, would be:
“Deploying data across endpoints which will redirect attackers’ efforts to environments we control, detecting them faster along with the associated forensic information.”
While faster detection is valuable, it may not be enough. A lot of solutions would try to claim being faster at something. Another pitfall is showing value, but not one that directly affects your customer:
“Punching attackers by shifting the economics on them. Increasing their costs exponentially, catching them and collecting the associated forensic information much faster.”
Instead, an example business value proposition, or benefit — The why, would be:
“Cyber deception counters attackers once they already gained access to your environment. It provides with visibility into your perimeter, with a control for catching attackers once they attempt lateral movement.”
Step 3: Qualifying your customer
Only when you explain the business value would you be able to start exploring your market. You’ll also be able to gather feedback on how palatable the idea is to your potential customers. Being right too soon is a major sin of entrepreneurship.
Qualifying a customer isn’t just for the sales process. It’s critical when exploring your idea and doing market research.
You may start hearing objections such as “this is very interesting, but we have a lot on our plate right now.” Or “we like this a lot, but we don’t currently have the resources to do so due to other projects.” Or maybe “we would be happy to take a look at this next year.”
Remember, even if your contacts see the value, their boss might not, and their bonuses are tied to them meeting KPIs their management set.
The entire first year of our startup revolved around objections such as this.
Step 4: Shifting with your customer vs. educating the market
Constantly reexamine your messaging. Pivoting does not have to be changing what your company does, it can be as simple as adjusting your value proposition to fit what you do to what your customer needs. Product market fit is undeniable when it exists. Your growth is like fire burning through a dry field. However, product market fit is rarely immediate.
That said, the pain of educating the market can last years, and outlast your funding.
That is not to say you should give up on your idea, choose entrepreneurship with no innovation, or choose to avoid ideas where market education is required. In fact, some of my best friends build startups only around ideas so innovative, educating the market and the pain associated with it is the course they must take.
Don’t be afraid to innovate, it’s what you’re here for. Remember what Ford said on what customers would have asked for if he asked them? They would have wanted faster horses.
More on product market fit in a future post, though.
MVP as a way of life
Value is not just about messaging. Your entire startup must be a part of the value seeking process. I am happy to explore new technologies, but I always ask myself: Why? What is the customer value?
Then, I proceed to qualify it, and choose whether I want to take a risk on it or not. Remember, entrepreneurship is about risk taking, but only you can determine your risk appetite.
Most importantly though, I test the waters. Developing anything more than the most basic bare-bones MVP, for any feature, makes little sense (in most cases) without customer traction.
Therefore, as the classic generic advice goes: Go to your customer! Build a bare-bones system in a few weeks — if you spend more time on it you’re likely doing it wrong — And change your goal to a new battle — finding a place to test
#startups #valueproposition #productmarketfit #pitching #messaging #MVP