Thursday, January 3, 2013

ask for money (thoughts for StartMate 2013 teams)


  • This post is not about asking investors to drink your Kool-Aid.
  • This post asserts that asking prospects (during customer development) to pay ($$$) you for the product is a critical and valuable step.
  • Doing this in person is a perfect complement to just running a web A/B test.

In my first startup**  I was too naive to think products could exist without paying customers. So I went out and asked a few enterprise prospects: "If I built this enterprise email filter - would you pay for it?"

They said "yes" - so I built it. Things turned out well.

At ThreatMetrix (we started out as "SpamMatters") we made the mistake of only asking one prospect and so we only made one sale for our first product. It was a big-ass sale that funded the next product but effectively it was a consulting project. This talk covers the early pivots in the ThreatMetrix adventure. Things turned out well.

At StreetHawk we only talked to consumers who wanted to use the product but we didn't spend enough time (initially) with retailers - who would pay us for our fashion aggregation app. The net result was a product that consumers were using but no way to fund an engine of growth. So we asked what product they would pay for and they told us they wanted the same technology packaged differently - dah! (So thats what StreetHawk does now. Things _should_ turn out well).

So, I've learned painfully that one of the best customer validation questions is when.... look deep into their eyes and ask for money:

  • "Would you pay for this?"
  • "How much would you pay for this?" 
  • "Will you pay me now and if I don't deliver in 3months I will give you back the money?"

are the type of questions that can save you months of time (and cash).

People are happy to blow smoke up your nether regions whilst their pecker isn't on the block. But once you ask them to pony up some cash the conversation shifts into honesty. This is a skill that most sales people understand but technologists avoid.


Sales People

Sales people understand that closing a deal is about surfacing and overcoming objections - so the good ones aren't afraid to get "buyers objections" because it really shows the potential customer is internally convincing themselves to not buy the product. The good salesperson can then counter the objections and help the prospect get those issues addressed and emotionally ready to buy.


I'm not lecturing on this - I've done this more times than I care. We (technologists) avoid this scenario, because its damn confronting. The embarrassing moment when they tell you your baby is ugly and not worth a lousy $29.95 per month. Its even more embarrassing because technologist's are not trained to handle rejection.

But you arn't selling

The good news is that you don't have to sell - you are just "asking for money" to reframe the discussion more honestly. In fact selling during customer validation is wrong - it means you aren't listening. Your goal is to capture the objections and find what key features/benefits matter****. The debate still rages when you should believe validation answers (Ries) vs when you should 'go with your gut' (Jobs) but if you are hearing "yes I will pay" from multiple people then you are heading in the right direction!

Sounds too "old school"?

Many businesses will argue that a better statistical validation is achieved with a landing page and call-to-action measurement. I think you still need to stare deeply into a few eyes to get the real response (and feel the discomfort) - otherwise you are just piling assumptions on top of assumptions. This is particularly relevent for enterprise or B2B startups - and a logical extension of Blank's 'get out of the building'.

So HTFU and just ask for money***. It will save you time. Do it soon. Do it yesterday.

** - that became part of surfcontrol - now websense
*** - yes, I was tempted....but decided to leave this is a jerry maguire free zone
**** -  I assume everyone belongs to the religion anyway so I won't rave on that.

No comments:

Post a Comment