Learning Customer Development the Hard Way

December 6, 2013

10:50 am

I thought I was done with startups after 5Degrees, my previous venture, fell apart. The hard landing, foregone income, and daily ambiguity were draining.

Before I got involved in another venture, I wanted to make sure that there was a defined need we were solving for first – this meant a robust customer development process (teaser: BUY AND READ Four Steps to the Epiphany). But before I get to that, here’s the backstory:

In May 2012, I met Ximena Hartsock. Ximena was the national director of outreach for a national advocacy group; her job was to manage hundreds of social advocacy campaigns across the country. Little did I know that this meeting would lead us to cofounding Phone2Action.

Ximena learned that sending emails and calling elected officials was very effective in encouraging the passage of bills to become laws. But she was shocked that no tools existed that made it easy for people to email their elected officials from their phone. And matching people to their elected officials was another story. The entire process is as frustrating and opaque as government sometimes seems.

I put together a team at a Startup Weekend Las Vegas in July 2012 to prototype the solution and determined that, in fact, the technology was possible. But before I sunk another 2+ years  lifetime into a business venture, I was determined to qualify the business opportunity.

So I bought Four Steps to the Epiphany. After reading it, I realized that all of my business successes in my previous careers had unwittingly followed the customer-development model, while my failures had followed the product-development model. Basically, customers have to be involved at all stages as you determine if you have a viable solution (if you are solving a problem) and then to validate your solution by buying it and recommending it to their friends.

Customer Development, the Real Way

We closed one of our first contracts with a public affairs consulting group just a few months after creating our first prototype. Shifting client needs on their end – we were supplying technology for a large trade association – meant they needed us to develop a new product (rather than send communications to elected officials, our clients needed us to focus on supporter acquisition). We incorporated their feedback and developed our membership acquisition tool.

Our sales cycle is manageable (usually between one to three months) because we spent so much time on the front end assessing the market – looking at competitive feature sets and pricing – and interviewing prospective customers to understand exactly where their pain points were. We’ve also found continual customer engagement drives new product insights that we can’t see on our own. But before we started selling, we researched.

Our research included:

  • Going to industry trade shows and asking 50 prospective clients if what we were working on was a problem for them (view our original customer development document).
  • Attending Dreamforce and talking to complementary businesses, complete with their own cautionary tales and angles we should explore.
  • Asking EVERY SINGLE PERSON I spoke to in the industry if we were wasting our time. I gave people many outs.
  • Joining an accelerator, Think Big Partners, in Kansas City and relocating the company there from our original home in the San Francisco Bay Area.
  • Leveraging every single connection afforded by the accelerator to run focus groups with lobbyists, prospective clients, the Kauffman Center, and many others.
  • Conducting a thorough market analysis, not just of the immediate solutions we were building, but for the entirety of our business years down the line.

We kept trying to kill the idea. Finally, when we couldn’t, we asked customers to purchase subscriptions to the software. And they did.

The result of customer development was a clear roadmap that we have largely followed during the past year. The roadmap helped us innovate horizontal features, platform capabilities, and strategic integrations that allow us to collaborate with other players in the market.

Somewhat counter-intuitively, Steve Blank notes, “One of the best buying signs from a customer is if they have already cobbled together an internal solution.” Short of an RFP (which you should stay away from at all costs), this means the customers are feeling the restraints and are ready to invest in a solution.

We have found this true; when you have nonprofits (or for-profits, or the government for that matter) building web applications with functionality that overlaps with your products, you know you have a prospective client.

We also uncovered a few potential pitfalls to which we paid special attention. Foreknowledge of these traps has helped us avoid them. We learned:

  • Political startups are challenging to make self-sustaining because individuals are not likely to pay for solutions that streamline political connectivity – they want to be connected, but they are unlikely to pay for the privilege.
  • Many idealistic technology startups targeting political reform refrain from charging and don’t put in place a scalable revenue model. As a result, they can’t raise funding, don’t scale, and usually die or are “purchased” by larger partners, who absorb their talent for a discounted rate.
  • Targeting electoral campaigns (getting people elected) as opposed to legislative advocacy (getting bills passed) can be challenging as a software-as-a-service business because of the cyclical electoral cycle. Most candidates who run for office don’t win, and frequently run low on money at the end of a campaign, reducing the likelihood that they will become long-term, paying customers.
  • A side effect of these trends is that many venture investors are not interested in political startups precisely because many of them do not develop revenue models, and thus are not attractive investments.

We are a little over a year in right now and we are constantly applying the lessons, and the process, of customer development and customer validation to drive our product development. We will be launching the 2.0 version of Phone2Action this December; we’ve focused on integrating our product vision with the features and elements that our clients have most often requested.

We still face daily ambiguity. And our incomes are fractions of what they were when we were employees earlier in our careers. But we are making progress with the certainty that we are solving real problems, that we are powering movements that will change the world. And nothing is more invigorating than that.

Jeb Ory is the CEO and cofounder of Phone2Action, a social advocacy platform that powers the movements that change the world. An avid swimmer, Jeb recently completed a swim from Alcatraz to Aquatic Park in San Francisco. The water was cold! He lives in Washington, DC, with his wife, Lea Crusey. 

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