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Customer, market and business validationFor early stage startups
+ case study: TransferWise ~ the mission-driven startup
Hi, I’m Jeff!
Integral Designs Bell Canada ING
Bank Skype → Microsoft TransferWise
MSc - Info
ScienceBachelors - Business
4 steps to world domination
Your customer
Your Business
Scale your
startup
Your Market
Valid
ate
Case StudyGrow
Validate Your Customer
Proposition
How many startups START.
Intuitive understanding of user needPassion for particular technologyPropose solution
= Successful startup?
How many startups STOP.
Intuitive understanding of user needPassion for particular technologyPropose solution
= Successful startup?
← Not tested. ← Customer’s don’t care.
← Not based on actual. customer needs.
← Not as likely.
Jobs to be done (JTBD)Understand Customer + Situation“Your customers have a job and they’re hiring your app to solve it”
JTBD: weather apps, iPhone apps, SaaS/Services
Learn by focusing on JTBDHow valuable is getting that job done for this type of person?How many people have this job?How often do they have this job?How is this job currently being done?
JTBD: more info/exercises
← Willingness to pay.
← Market size.← Usage frequency/pattern.← Actual competition.. (usually status quo).
Problem interviewsYour goal is to learn, not sellStart before you build anything15 mins per interview Do 20-60 of them
Learn more: Jeff’s highlights, from this book
Demographics - who are they?Tell a story - that covers several problems they might haveProblem ranking - which problem is most painful?Explore problems - go in depth into each problem they haveHook & Ask - keep them engagedDocument - take 5 mins, write down
Structure: intro, demographics, story Demo, as real as possible, iterateTest price, don’t ask priceRaise friction, don’t lower it. Find early adopters. Be the prize.
Solution interviewsYour startup goal is to build the simplest product that. solves a real problem.Validate your understanding of (1) customer, (2) product, (3) market propositionVisual demo of an MVP for early adopters20-60 interviews neededThe best blog post on pricing
...but...You know what customers need
It takes too long
It’s a waste of time
...but...You know what customers need
It takes too long
It’s a waste of time
← No you don’t, unless you’ve. talked to enough of them, in a. structured way.
← it’s nothing compared to.building. something for 6 months and discover. nobody will buy it.
← not if you learn what to build. and who will buy it.
Validate Your Business Idea
Learn More: Wiki, Book
Increase probability of success by understanding your key risks
Start with the big boxesValue proposition, customer segments, key partnersStart with whatever is most risky, and figure out what you need to learn to remove that risk.
Ask the hardest questions first Who’s this for? Why do they need it?How much money do you need to make to break even? Will anyone actually pay for that?How much will it cost you?
✅ ✅ ✅
✅
❓ ❓
❓ ❓
Collect high quality data & validate it
Make it easy for potential customers to tell you what they want:
Currency “wishlist”
Research & exploreUse data where you can… but not as your only source
Ask “so what” and find the insights - who can we help?
Validate Your Market
Launching your MVPMinimum Viable Product
Be an order of magnitude better
You need to be way better than the alternative. Aim for 10X
10X faster10X cheaper10X more convenient10X easier to useor a combination
MVP Learning CycleMVP - does not mean “minimum viable piece of crap”
You need to understand who your customers are and what they want.
Can your customers use your product?
Can you do for the customer what you actually promise?
Is your MVP Successful?You need to understand your metrics and set realistic targets!This will help you define success and start iterating. For instance:
New usersNPSCancellationsConversion
See appendix for more KPI examples
Learn more about NPS, Product/Market fit
Achieving Market FitNPS! (Net Promoter Score)
ViralityComments
Work on the detractorsThen neutralsThen profit
Early startup KPIsDo Not Focus OnVanity metrics i.e. total registered users, total volume transferred
Getting statistical significance, split testing (A/B testing)More than a handful of metrics
Focus onThe 3 or 4 most important metrics (KPIs) that indicate your progress. Perhaps:Growth & conversionHow you’re adding valueHow much runway you haveHelpful to work backwards from
some target state (i.e. 10K new users) and validate how you get there
Learn more about KPIs in the appendix
Incubation & Achieving Market Fit
Listen to customersThey are usually your best critics and advisors!SurveysPhonecallsMeetings
The trick is not to give them what they want but what they need.
IterateUsually the one that iterates fastest wins!
Prioritising is they key hereMake sure you know what
you effect and measure it!
A/B testing
Scaling Your Startup
Your startup grows at. the rate. you learn.
You are here
You want
to get here
What is scaling?You have a mountain to climb to
achieve your vision - KPIs are your guideposts
Validation: It’s proof that you’re moving forward
Investors/valuations
You have a hard job
You have a limited opportunity to become successful
Your success depends on how quickly you learn.
Specifically, how quickly you learn how to deliver:
A product customers valueA sustainable business at scale
Practical tips for scaling
Marketing: Find scalable channels
Always be testingMassive differences between channels
Stand for something
Keep your growth sustainable
Return the savings to your customers or to growth
Setup backups
Renegotiate as you scale
Do less.
Time is your most limited resource. Make the hard choices.
Get the basics right
Full report here
Know your.Customers. and focus on the. customer job. Don’t die.
Set up your team correctly. (didn’t speak about but book recommendation . at the end).
The mission-driven startup
What is TransferWise today?
TRANSFERWISE WAS STARTED. TO SOLVE A PROBLEM.
WHY DO PEOPLE RECOMMEND OUR PRODUCT?
RATIONAL EMOTIONAL
PRODUCT BRAND
TO ACHIEVE ADVOCACY YOUR PRODUCT. NEEDS TO BE AN ORDER OF MAGNITUDE.
BETTER THAN THE ALTERNATIVE.
PRICESPEEDCOVERAGECONVENIENCE
BRAND
A BANK COULD HAVE STARTED TRANSFERWISE AT ANY POINT
IN THE LAST 100 YEARS
PRICESPEEDCOVERAGECONVENIENCE
A MOVEMENT
PEOPLE DON’T TALK ABOUT MONEY TRANSFER IN THE
PUB
GIVE YOUR CUSTOMERS. STORIES TO TELL.
PRICESPEEDCOVERAGECONVENIENCE
OWNERSHIPPRIDE
WHAT’S OUR MISSION?
EVANGELICAL CUSTOMERS.
INSPIRE PEOPLE WITH YOUR CAUSE AND YOU WILL CREATE
A MOVEMENT.
BIGGERTHAN YOUR STARTUP
AND WHAT’S THE RESULT?
EXPLOSIVE GROWTH
DRIVEN BY EVANGELICALCUSTOMERS
€1 BILLION IN TRANSFERS PER MONTH
€45 MILLION OF CUSTOMERS MONEY SAVED EVERY MONTH
TALLINNLONDON
TAMPA
NEW YORK
REVOLUTION SUPPORTED FROM
BUDAPEST
SINGAPORE
TOKYO
CHERKASY
SYDNEY
join us
Wrap up
Recap
Startups = learning: your job is to learnFocus on customer jobs to be done (JTBD)Problem interview → solution interview → build MVPDe-risk with business model canvasBe 10X better, focus on KPIs, and listen to your customers
From TransferWise: Cultivate a mission bigger than yourself
Learn more
Get in [email protected]: jrmcclelLinkedIn
Useful books you haven’t read yet
Lean startup, theoretical
Lean startup, practical
Bootstrapping (starting without
investors)
Founder equity that makes sense
These slides:
Questions?
APPENDIX: KPIsA/B Testing
What are well-defined KPIs?
You’ll learn faster with good KPIsUsing well-defined KPI’s help you learn faster:
Which products/features customers value
How effectively you’re scaling:marketing channels costsoperations
Which activities you should focus on
5 principles of well-defined KPIs
Directional & Not Ambiguous
IntuitiveImportant Reflects reality
In control of the group it’s measured against
if performance is good, it's good for the user and for the company
Can be explained why it's important for the user and to the company
Proportional to reality, dynamic enough to raise attention (not flat day-after-day), but not so jumpy that you can’t discern signal from the noise
higher or lower is always better all other things being equal
so that the team can commit to and be accountable for improvement (for targets in particular)
The best metric/KPI
We did another thing!
time
the bestmetric
We did a thing!
Metric is stable and flat when you’re not influencing it
KPI ExamplesGrowth - Signups, Downloads, New users, Active Users, Revenue, ProfitEngagement/conversion - feature use, frequency of use, # featuresQuality - Net Promoter Score (NPS), Customer Satisfaction (CSAT)Profitability/Sustainability/cost per user (marketing and/or OPEX)Churn - users stop using your product/service, downgradeVirality/network effects - spreading the word, building the network, market shareSpeed/Efficiency/Backlog/Queues/Time to X - efficiency of your machineRisk/Exposure - Leverage, FX Exposure, Value at Risk, SLA, cash/runway
Where does A/B testing fit in?
What are A/B tests?Everyone believes they know what’s right...but they’re often don’t. Everyone has biasesScientific experimentsA/B Tests can help you learnIf done well they give you unbiased “proof” of whether A is better than B
When should you use A/B testing?Work well for optimisation problems - small iterative learning
Product, pricing, messaging, support all possible
But even if you could, you sometimes shouldn’t as they can be expensive. Learning is expensive.
Get high volumes and be patient waiting on results
Don’t corrupt with other overlapping tests
Know basic statistics
AB testing 101
Are your results significant? tl;dr: no
It’s difficult to achieve statistical significanceYou need to:Plan/design in advancePick the right KPI(s) & scopeRandom or pseudo-random
allocation
