Does your startup solve a hair on fire problem?
Startup success starts by working backwards from the customer
I knew we were in trouble as soon as the conversation started. We were at a construction trade show in Vegas walking the halls to meet heads of sales to demo our mobile sales app. We had some lukewarm interactions in the morning before wandering over to our 11:30 AM meeting.
We met with the VP of sales for a billion-dollar construction equipment manufacturer. As we began our pitch, the VP stops us at the very first screen and asks us, where is the spreadsheet?
“What? No, this is an app that is way better than a clunky spreadsheet. Look at this…”
We would click a button or open a menu, and he would ask more questions. This went for another five minutes, until he raised his hand and said, “I appreciate you showing me your app, but this is simply not a problem for us. Our reps like spreadsheets, we got a good process, and our forecasting works.”
He gave us his card and told us to call him if we had any questions about the industry. He was cordial about the whole encounter. But we walked away crushed.
Does your startup solve a hair on fire problem?
This is a common story for startups. They build something cool, go out to find customers, and realize that the thing they built has no market. That includes the above startup I was helping. Eventually they pivoted to something entirely different in another industry.
With Lean Startup, tons of advice online, and plenty of stories warning entrepreneurs about the dangers of “build it and they will come”, why do startup still continue to build things that no one wants?
I recently read a post about two entrepreneurs that had a novel approach to finding a startup idea to launch. After their first six attempts failed, they created a 16-point checklist of questions to find a winning startup idea. The first question on that list? Is this a hair on fire problem!
16-point checklist to find a winning startup idea
You probably do not need a big checklist to hone in on a potential big idea. You do need to figure out if your idea is of the “hair on fire” variety. If it is of the “nice to have” or “that’s interesting” variety, then it is a sure bet to crash and burn.
This is the issue faced by a gut of startups that closed huge VC rounds in 2021 that are struggling to find product-market fit. They raised on nothing more than an idea or MVP propped up by costly acquisition strategies fueled by unlimited capital. Cutoff from additional funding, these startups have stalled with a product no one needs and desperately trying to pivot to a more promising idea.
How do you find a “hair on fire” problem though? In that same post, they shared how they reached out to 75 finance executives over LinkedIn to validate and refine their idea. They were surprised, as most people are, that cold outreach on LinkedIn can work when you are just asking for advice (read this post on how to do cold outreach on LinkedIn that works).
The only way you are going to find hair on fire problems is by talking to the people that have those problems. They would pay anything if they could just get a solution today! If you talk to enough people that have a similarly urgent need for a solution, then chances are you have a promising business.
At Amazon, we call this process Working Backwards, where we talk to customers first, then start there to develop possible solutions. Steve Blank introduced the concept of customer discovery and validation in his book Four Steps to the Epiphany. Then Eric Ries refined those concepts for the Lean Startup.
Then there is how Israel, the Startup Nation, builds startups. I was there earlier in the year and had the chance to interview seven founders about their experience launching their startups. Nearly every single story followed the same eight steps:
Founders have deep domain knowledge – They grew up in the industry they are building in, through schooling, their work in the military, and jobs with leading companies.
Team worked together previously – Most founding teams had prior experience working with each other in the same military unit or during previous jobs.
Explored problem with potential customers first – They did not build anything upfront, instead they worked backwards from customers to understand the problem.
Signed up design partners, then started building – They took risk off the table and earned trust by working with customers to guide the solution.
Selective in choosing design partners – Not every potential customer was a fit early on, they only focused on the ones that had hair on fire needs.
Traction through design partners secured funding – Having notable early customers with a well-defined problem and strong team attracted VC interest.
Intense focus on refining the product – Winning the market requires a product that creates huge impact so they can use early customer case studies to build credibility.
Embrace a global first perspective – For venture-backed startups, market size is a critical success factor, so they went big to focus on global customers and larger markets.
Should every startup follow this playbook? Of course not! Every startup and startup ecosystem will have certain nuances. For example, the AWS Hong Kong team has been supporting the Hong Kong Science & Technoloy Park on their Ideation Programme, and the composition of teams and their approaches to customer discovery for their ideas has varied widely. Then there are programs like Antler and Entrepreneur First that bring talented people together that never worked together. The key point is the journey must always start with customers.
You might think that your own hair on fire problem should be enough to get started. In fact, there are huge startups like Airbnb or Slack that initially started by scratching their own itch. When you dig into those stories though, the original idea had to evolve (or change radically) before success came.
What has been your path to find the “hair on fire” problem? Are there other steps you used to help you identify customer problems faster?
Some of the most basic questions on customer discovery come down to who exactly is the customer. This might seem obvious, but it is shocking how many startups do not have a hypothesis of who their customers are.
Steve Blank, who is the Godfather of the Lean Startup movement, had created plenty of templates to help guide entrepreneurs in the customer discovery process. One the most helpful worksheets was the one that had a series of questions probing the profile of customers and their problems.
Once you have an idea of who the customer is, then you can begin the process to find the people to reach out for customer discovery interviews. And remember, this is a hypothesis, so if you sense you are not talking to the right people, then go back to the beginning and adjust the persona.
It has been great to be back in NYC to reconnect with old friends, meet new ones, and to also connect with folks from Singapore, including Edwina Yeo who is a community builder and startup founder of the community app Supermomos, and Christina Teo who is an angel investor and founder of a great community called C-Shark Tank for corporate executives that invest in startups.
Back in NYC, an amazing startup ecosystem!
AWS opened up an awesome new office right near Bryant Park, where I caught up with a CTO of an early-stage startup in the electronic device repair industry. Understanding that startups CTO’s often need their own community to get support from, AWS launched the CTO Fellowship a few years ago and a new cohort starts in October. If you are a CTO in an early stage startup that has raised capital, reach out to ask about joining.
Connecting with startup folks back in NYC
We close out August with a week in Indianapolis for the Rally conference to talk about startup ecosystems, host a few small groups to chat about Generative AI, AWS, and community, as well as join our friends at the Midwest House! If you are also at Rally, let’s plan to meet up in person!