“We’ve talked to 20 businesses and they’ve all told us they’d use our product.” While I guess this is better data than not talking to any potential customers, a statement like this is at best, insufficient customer development, and at worst, a false positive that will eventually run your startup aground. When I hear variations of this in pitch meetings at Homebrew it’s never convincing. I don’t care if you ask 1,000 businesses this question and get enthusiasm from all of them. The problem isn’t with the number of respondents; it’s with the question itself.
“Would you want this if it existed?” where “this” is some magical piece of software that promises to increase my revenue and/or decrease my costs? Of course I want it! The question occurs in a vacuum, a world where there’s no scarcity or prioritization, and accordingly the answer is meaningless.
What’s the right question to ask? “If this product existed, would it be important enough that you would make it one of the three priorities for you/your team/your company this year? What level of performance gains would you need to see in order to pay for this product?” and variations on that direction. Because you’re not trying to entice this customer to get excited about your product conceptually to be implemented at some time in the future for some minimal price. You’re trying to get on The Short List.
What’s The Short List? The list of shit that’s actually going to get done. If you’re on The Short List It means your product addresses a problem that your potential customer thinks about when they start and end their day. It’s one of the goals they’ve told their boss or shareholders they’re going to focus on now. Not tomorrow. Now. It solves a fear for them. Or ignites their greed. You move from ‘nice to have’ to ‘must have.’ There’s a budget line item with your name on it. As a business-facing startup, if you’re not on your customers’ Short List you are either building the wrong product, marketing it the wrong way or selling the wrong customers.
At a broader level, The Short List concept spans a broad number of situations. It’s basically mindshare. Do your customers think of you first? As we hit Homebrew’s one-year anniversary this April, one of our goals has been to get on to The Short List of top entrepreneurs and co-investors. Not just to be generally well-regarded. You know what ‘generally well-regarded’ gets you? A phone that doesn’t ring, or maybe “darn, you know we should have talked to you about this deal but sorry it’s too late. Next time for sure.” Great venture funds aren’t built on those outcomes. We aspire to be one of the first funds in your mind when you’re building a business within our focus or looking for someone to invest alongside. I feel good about our momentum in this direction and as we approach our 10th investment, honored to work on behalf of the founders we’ve backed, but there’s lots more work to do in 2014 to get firmly on The Short List and not left short.