Sept. 18, 2023
When Doing Customer Discovery, Don't Do This
95% of idea-stage startups fail because they don't solve an important enough problem in the first place. The most important part of customer discovery is to make sure you are solving real problems. But almost all founders do customer discovery wrong the first few times. Check out this episode to learn which mistakes you should avoid at all costs.
01:37 - Start With Customer Problems
03:17 - Almost Everyone Does Customer Discovery Wrong
07:25 - Why "One More Feature" will kill you
14:09 - When You Dread Getting Up to Work, It's Probably Time to Quit
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So I'm reading through the transcript here of the last episode with Miles. Uh, a great founder started Chroma and he's, you know, different episode because he actually, he didn't make it right. His startup , his startup failed. He did not find product market fit. And the nice thing is though, there were tons, tons of lessons here. So the , the first observation that I thought was, was worth highlighting, I asked him at the beginning, I'm like, you know, how did you come up with your idea? And he gives me an answer that's like, if you just, if you just listen to it, it is pretty rational. Like it actually makes a lot of sense on the surface. Um, but it's also completely wrong. And so what he says to me is, I've always believed that you should be, do what you're good at. The things that we were good at, and by the way, these, these founders, so, so Miles and his team, they were ex skip the dishes, skip the dishes, is like Uber Eats like DoorDash, right? So he says, the things that we were good at were operationally intense businesses that benefited from network effects and were geographically spread out where you could launch cities zones and things like that. We started , we started to put the two, two and two together. Um, and compared like restaurants, couriers, and customers to landlords, property managers and renters. So their idea was like, look, we're really good at these operational intense businesses. We've been doing that for many years. We understand them. Where else can we apply that knowledge? Well, if you kind of compare this restaurant industry , uh, with those three kind of layers , right? The restaurants, the couriers and the customers, there's , it's kind of analog, it's a good analogy, right? To the, to the landlord world. You got landlords, you got property managers, you got renters, three-sided network effects. So that's what I mean, like it kind of makes sense, you know, shouldn't you play to your strengths? Is that the whole, isn't that like one of these tenets that that is always right? It's not, it's not. If you're trying to come up with ideas, it's actually a terrible way to start because you , you're not, here's the thing, like if you wanna come up with a startup idea, you have to start with customer problems. That's, it's literally the only way to do it. There's maybe one exception, which is like an Elon Musk or, or a Jeff Bezos that, you know, spots the internet growing at 2300% and, and thinks from first principles what he should build and decides to build an online bookstore, right? Or like Elon Musk with the price of batteries dropping and decides he wants to build electric cars. And you didn't start, like with customer problems. He started with a breakthrough or, or a trend. But that's the exception. I mean, most of the time we're talking about scratching your own edge . We're talking about building 10 x better products. We're talking about doing deep research in an industry by being an industry expert, something like that, and uncovering unsolved problems. But almost all startups, if you look at how they started, started by solving some sort of customer problem, when you start with, this is what I'm really good at, this is what I like and what should I do? You're just so unlikely to land on a true pain point, like a real pain point. You could get lucky, I guess, but it's certainly not a good strategy and it didn't work for, for Miles , um, at all. I , I, you know , and I frankly, I haven't seen it work , let's put it that way. So again, like if you're, if you're thinking about how to start, how to come up with an idea, which by the way is critical, like people will say ideas are done a dozen , um, Just totally wrong. Like coming up with a great idea that provides real value is extremely hard and you should do it the right way. Doing it the right way means finding a way to uncover real customer problems. That that's how you have to start. The second part that I, that I highlighted the second observation here is when he starts talking about , uh, he starts talking about customer discovery and customer discovery, again, it's one of these buzzwords. I think anybody that's, that started a startup , anybody that's like in that world has heard of customer discovery. They know they should do customer discovery, and almost everyone does it wrong. I can tell you I did it wrong when I first did it. Miles here . Like he goes into detail about how wrong he did it. And again, let me, let me just share some quotes here. He said we had conversations with as many small and large landlords as we could, but it's not just about having those conversations, it's about what happens in those conversations. And so he says, we asked the wrong questions, we let people to where we wanted to hear. And he goes through actual pretty specific example where he says, you know, we ask them like, okay, what are your pain points? And they start telling them , okay, well we have this pain point, that pain point, that pain point. We use all these different softwares and they're all over the place. and Miles and his team are kinda like, well, what if we could solve all that for you? What if we could do all that in what platform? And they were like, well, how much did it cost? And Miles and his team were like, well, it'll be even cheaper. And uh , so guess what? They got the hits or they wanted, I mean obviously at that point, landlords were like, yeah , uh, sure, sign me up. But what did you accomplish? Right? And by the way, we did the same thing at Gym Track . So it started getting me thinking about why do we do that, right? Like so at Gym Track we went through and we talked to 25. We , we were selling like , um, a workout system for gyms. And so we spoke with 25 different gym owners and asked them what they thought of our idea, but we didn't go in and say, and do it the right way, right? What we did specifically was here's our product, here's what we're doing. Any questions they had about our product, we do this could attract that, you know, whatever was yes, yes, yes it could. And all we wanted was these people to tell us. Yeah, that's a great idea. I think there's a deep psychological element to that. I mean, that's the only thing I can come up with because I mean, miles is not, is not a dumb guy. And I've heard so many people do this, it's not like it's a stu it's a stupid thing to do in retrospect, but when you're doing it, you don't think it's stupid. And, and it just makes me wonder, like, so why do you do it? I think the reason is all founders want to do fundamentally is build. That's what we want to do. I mean, who wants to be running around for like months or years not knowing what they're even building, right? So like if some , like if you're a founder, right? And you have an idea and people ask you, Hey, what are you working on? You can be like, I'm building, like in our case we're building gym track and it's a workout system. If you go out and you ask 25 gym owners about this and, and you do it in the right way and you don't get the answer you want, guess what? You're back to the drawing board. You don't have an idea anymore. And I've been there, I've been there as a kind of wannabe founder without an idea. It's deadly. It's terrible because all you want to do as a founder is get the building, get the selling, right? You got , you wanna do stuff. You don't wanna like just be ideating for months and months and, and again, have that kind of weird social peer pressure of people asking you like what you're working on. And if, if you're in that research mode, like you literally have to be willing to be like, I don't know, . Like, I want to be a founder, but I don't have any great ideas. I'm just trying to find one. Which is just like a hard thing to put yourself through. So I think a lot of founders, because of that psychological reason, will just rush through the customer's discovery and try to get the answers they want. They won't think about it like academics. They won't think about it like scientists, which is what you really should be doing. Because think about it, if you go on this journey, you will spend seven to 10 years trying to get this thing to some sort of an exit or to just a successful, you know, profitable company. You can run forever. That's a long time to invest. If you're gonna invest all that time, you should do the work upfront to know that it's actually worth it. And the only way you're gonna do that is if you ask the right questions. And, and like Miles was pretty close to doing the right thing, right? So like he went out and he spoke to a loss of landlords. That's good. He asked them about their pain points, that's good. The party he didn't do well is he didn't actually listen. Like he didn't actually sit back and, you know, think through all these pain points and think about how they were solved and how these landlords go about their day and all the intricacies and details that you need to understand to really be able to get an industry to the point where you can find real insights. He just didn't do that. And so he kind of just rushed through it. The next one I have is, is a common one. So I'll read you a little bit of the highlight here and then I can go through it . He's starting to speak the law land landlords at this point. And he says, in the landlord world, most of them, especially the larger landlords, already use some type of software. And so their idea , uh, miles and chroma was like, we're gonna do payments better, right? That was their whole idea. But the problem is when they would go in and say, we're gonna do payments better, all of a sudden the landlords would say, okay, well that's great, but what about all these other software features that I have already? Like maintenance, what about applications? What about background checks? What about all these different things? And what Miles and his team decide is, okay, like here's, here's the software they're already using, it's already doing all these other things in order for us to replace it, we need to also do those things and that's gonna take a long time. So we better start hiring people. And that's, that's kind of what they go after. This is pretty common, right? And , and the kind of problem if you , if you think about it is, is this idea of this one more feature, right? You have this idea that you, you have this product that you wanna put out into the market. And, and this especially happens when you're selling B two B and you go to the market and they're like, okay, that's cool. Like that's actually solid feature. I wanna buy that, but I've got this other software I'm already using that does all these other things. And unless you can replace those other things, I'm not gonna buy your, your kind of point solution. I'm not gonna buy just your product. I'm not gonna have like one more software that I need to log into unless you can kind of do everything else as well. The other way this kind of shows up is you'll show them the , the product and they'll be like, okay, well if you could just add this feature, then I'll buy it. And you add that feature and then come back like , okay, but if you could only add this other feature and you just kind of get into this game, that rarely leads to, to anything good. And the reason is you can't, this is like classic, you know, I'll go off on a tangent here. Like the , what comes into my head when I think about a startup trying to feature match existing legacy software and getting customers to kind of rip and replace an old fully featured solution for their new product, it reminds me of like David and Goliath. Like this is just classic David and Goliath. And if you look at that story, you look at the details of how David beats Goliath, right? Like this giant that's just like way stronger. He does it in an unconventional way. Like the, the kind of myth, like the story is, you know, they try and first of all they tell David, you know, you're an idiot. You shouldn't buy Frank Goliath tot get killed. And second of all, like, well if you do, here's a sword. Like here's some armor. You know, go fight the guy. 'cause that's how they normally fought with like big, you know, heavy armor and, and shields and swords or whatever. And David didn't do it. David's like, no, I'm gonna use this like slingshot or whatever in these rocks, and, and anyways, and he hits him in the forehead and, you know, Goliath dies or whatever. Point is, if you're a tiny little startup, like if you're a David and you try and fight an incumbent on their own terms, right? With the sword and the armor and you're gonna get killed . Like there's no way. If you go up against status quo on status quos terms, you will get crushed. You can't go to a large property manager that's already has a software solution that's been in market for a long time, that's has all these employees, you know, bill that's probably profitable or super well-funded, that's already entrenched and everybody in that property management company is used to using it and say, okay, I'm gonna just rebuild this whole thing and you're gonna buy minus instead of that and you're gonna switch it. No, it's not gonna happen. What you've gotta do, because by the way, every startup, every single startup is going after status quo. And so if you're a startup and you're trying to beat startup quo , you gotta think like David, you've gotta be like, what can I do that's unconventional? What can I do that's different to beat status quo? And usually that's by going at the weak part of status quo. So I've come up with these sort of examples before, but like specifically for something like chroma, it might look like not going after the really large property managers, the ones that are perfectly serviced by these incumbent , uh, property management software platforms. It might be by going at like the little, like the single landlords that have one or two properties. The the long tail of it, or it might be by trying to understand deeply what the bigger landlord's problems actually are. The ones that are truly hair on fire, top of mind problems that are not solved by these proper management software companies. What you can't do is say, okay, this is status quo. It's land . Big landlords using big property management companies. I'm a tiny under-resourced startup. I'm going to rebuild the whole product and get them to switch. That'll never work. You have to find the weak part of status quo. You have to be like David and Goliath. You've got to fight. You've gotta find how to fight on your own terms in some unconventional way. Oh, by the way, just as an aside, , uh, you know, I asked him, you know, how many miles, how many, how many people did you get to without any meaningful revenue? And he said he had 17 employees, not all full-time, but still, I'll tell you something, if you don't have like any meaningful revenue, and he , he even says this later on like five people, that's it. Like five people , more than five people. If you don't have any real revenue, it's just 99% of the case of the times. It's not just waste in terms of like how much your burn . Like that's not the biggest issue because sometimes you can get grants or you can for whatever reason be in a good financing environment and like, you know, easily raise money. It's not about that. It's about the fact that if you don't have any meaningful revenue, you don't have any meaningful customer traction, you're guaranteed going to have to pivot hard probably multiple times. You're gonna have to be extremely adaptable. That's the key characteristic that wins before you have product market fit. Certainly before you have any like real value proposition is adaptability. It's flexibility, it's speed. And guess what, it's a lot easier to get 3, 4, 5 people to agree on something to make quick decisions to communicate with each other and iterate than it is to get 17 people swimming the same way. So when you have 17 people instead of five and you don't even have a real proven value proposition, you're doing yourself total this service stay lean. Last one, which I thought was quite compelling, you know, there's like this idea in startup land that you should never give up and there's some truth to it. That's why these things become cliches, relentlessness, perseverance. Like they're kind of must have qualities because even the best startups will go through insanely, you know, rocky days and the lowest of lows. And so if you type person that gives up easily, you're not gonna make it through the other side. Having said that, there's always a time and place to give up. 'cause the reality is mostly stars fail. And so at some point you and your team, just everybody involved is probably better off saying, okay, you know, this thing didn't work. Let's go off and do something else. And so I asked Miles, you know, at some point you decided that it was time to, to kind of wind things down. What led to that. And by the way, he still, he didn't run outta money, he still had cash. He could have kept going , going on for longer. His answer I thought was compelling. He said, when you dread getting up to work, it's probably time. And, and he says, look, like you're , you're gonna have hard times . It's gonna be like weeks go by where you don't want to go to work because you're going through something particularly hard. That's fine when you feel like you consistently just like aren't fully in it anymore, right? It's been weeks, it's been months, and you start having this feeling. And I remember this actually my time at Gym Track when I finally decided like, you know, the the jig the thing , the jig was up, right? Like the thing wasn't gonna work, Sorry for me to do something else. It was exactly that. It was just like all of that passion I had. And , and it's not one day to , to the next, but you kind kind of realize it at some point. Like that passion you have is gone. You don't get as excited to go into work. You , you sometimes even, yeah, you dread going into work. And if you're a founder and you're feeling those things, and it's not just for like a few days, it's not just for a few weeks because you're going through some particularly challenging time, probably time to move on. And I think that's be , it'd be hard pressed to come up with a better signal that, that it's time to quit than what Miles said.
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