Here’s All You Need To Know About Conducting Customer Interviews

LIFFFT, an awesome startup here in Seattle, has put together a great presentation on everything you need to know about conducting customer interviews.

Discovering your customers and the exact problems they face is something you, as a founder, cannot predict.  So you must go and talk to them directly.  Here’s how you do it.

Pricing Is A Tricky Thing

6a00d8341c03bb53ef014e606f4675970c-800wiI was recently asked my thoughts on how to approach pricing digital products aimed at the local Small and Medium Business.

Actually, the exact question was:

Basically, I’m looking at how new startups decide on a pricing structure when they’re selling to SMBs. Essentially, you’ve got your product/platform/system, and you’ve pinpointed your target customers—now how do you determine how much to charge? Obviously market research is important, but what specific recommendations do you have in terms of how to pinpoint the right pricing for a new digital marketing/hyperlocal platform? 

My answer:

Pricing is a tricky thing.  Price too high and you put yourself out of business because no customers will pay that high of price for your product.  Price too low, and you run the risk of giving away too much for free and struggle to keep the doors open – again possibly going out of business. Digital or not, a startup needs to be able balance the need to generate revenue with the opportunity to attract as many customers as possible.

I think it comes down to doing a few key things really early on.  First, study the current market to determine who is offering what and at what price points.  You should be able to look at the market and see the high end/low end products and their associated prices.  You then look for the holes in the market – where’s the point where customers are paying too much for not enough value?  That’s where you can bring something highly valuable to the table at a more affordable price and undercut the market.

Second, it’s really important to determine what problems you are solving and what value you are actually providing.  If it’s just the same as others on the market then it will become a price war with competitors – which you probably don’t want since it usually is a race to zero.  Ask yourself how can you do something new and innovative that hasn’t been done before, and then you’ll have more freedom on the pricing structure.  McLean Reiter, CEO of hyperlocal startup Knotis, echo’s my thoughts.  He says “Most SMBs have less than $1,000 to spend on marketing, annually, so it needs to be affordable and if possible, monthly, to help them manage their cash flow better. So It all comes back to value – what do they get in exchange for what they are paying for. You need to price yourself according to the market and your overall objective, while also maintaining profitability.

Lastly, it’s truly impossible to determine your exact prices before you go to market and interact with customers.  Smart entrepreneurs engage with their customers early on, ask them about price points and adjust/iterate as they continue forward.  Founders should also use these customer interactions to uncover the hidden needs of customers, which becomes the real value of your product and thus helping to determine a pricing model.  People pay higher prices for things they really need and can’t get elsewhere.  And ultimately, companies should A/B test certain price points (offer variable pricing to random customers through marketing and study the results) to see which convert better and then optimize from there.  

 Pricing can be tricky.  So agree to understand you will not know what your pricing will be out of the gate, you will only learn what it should be over time.

Will AngelList Help Or Hurt Startup Fundraising?

Fall 2013 will be looked back on as the turning point in fundraising for early stage startups.   The JOBS Act, along with the acceptance of  “General Solicitation” has indeed changed the game for founders looking for startup capital.

Although changes in government regulation will have an impact on startup funding, I believe the biggest impact will come from innovations in the private sector – more specifically the Seed/Angel community.

AngelList has emerged as a black swan in the investment community and is opening up funding channels founders never dreamed of even just a few short years ago.   It allows well known entrepreneurs, advisors, and angel investors a digital network to follow startup activity and quickly jump into investment deals with new hot companies.  This makes it quite a bit easier for startups to close a round of seed funding.   The days of hitting Sand Hill road in hopes of simply getting your project off the ground are over.

And more recently, AngelList announced a new feature called Syndicates, where Angels can basically become “leads” and pool capital from other Angels (or Syndicates) to quickly create their own mini-fund.  They then use this to deploy into early stage companies on AngelList, with the transaction happening all through the AngelList platform.

I will not dive into details of Syndicates, please go here if you want a full description of how it works.  I simply want to touch on where this is going and why AngelList’s innovations are game changing to the larger startup community, for better or for worse.

The big question is how will this affect founders and the overall startup community?  Is it all good?  Or will there be unforeseen consequences which inevitably come with drastic changes?

Since I am not the expert I looked around to others and researched their take on the changes happening with Syndicates.

The innovations around AngelList are clearly going to benefit founders – namely to speed up the fundraising process.  Mark Suster believes it’s a net positive for the industry.  “The most obvious, syndicates can move faster in early-stage deals than rounding up 40 individual investors.”  Good, we don’t need to heard cattle as much anymore!

But what about for the angel investors?  Although it might be better deal flow, it seems market dynamics and economic factors are going to come into play on the investor side.  Hunter Walk sees interesting changes coming for angels, “My guess is there are also some angels who were popular when they represented a $25k check but won’t be as sought after if they try to push $300k into a round.”  The nuances here are not obvious and only time will tell if this is good for the angel community or not.

 Fred Wilson also believes this is good for founders.  “Angel List Syndicates are turning angels who have traditionally been followers into leads. That’s a good thing in many ways. The more folks who can lead a round, the better, at least for the entrepreneurs.”   But he goes even further to describe how it will force the investment community to grow and work harder.  “It also means that they will have to learn to lead and lead well. They will have to step up before anyone else does. They will have to negotiate price and terms. They will have to sit on boards. They will have to help get the next round done. Essentially they will have to work. That’s why they are getting carry from the syndicate, after all.”

So maybe it’s too early to tell how AngelList will affect the ecosystem but questions loom.

Is this actually going to flatten the playing field for all of us founders looking for seed capital?  Or is it just going to make it even easier for “highly connected” founders to close a deal even quicker than before?  You only get discovered on AngelList if you can float to the top by “trending” on the network.   What does “trending” mean on AngelList?  And how do you achieve that if you are not in in the Bay Area, in 500 Startups or a part of YCombinator?  Is AngelList inevitably the web 2.0 version of the Old Boys Club?  Or is it the fundraising mecca all of us founders have dreamed of when we say to ourselves “if only we had access to more angel investors!”

We shall see!

In the end,  AngelList is a new beast and we don’t know what the effect will be on the industry as a whole but I am fascinated with the direction things are going.  My hope – easier access to angels and seed capital for all qualified startups no matter their location.

In a recent Founders RAW conversation I asked Duxter founder Adam Lieb his thoughts on AngelList.

Great Founders Learn To Toe The Edge Without Falling Off The Cliff

19_20120115feet-cliff032That statement emerged from a conversation I was having recently with a founder friend of mine.

This individual is struggling in their current situation – not far enough along to support themselves with their endeavor but not wanting to let go (if only slightly) to do other work which would pay the bills.   They said it feels like being between a rock and a hard place, and it’s painful.  I felt it was more like a cliff.

I simply said:  “Great Founders Learn To Toe The Edge Without Falling Off The Cliff “

I know this spot really well because I was there for quite a while and I remember almost falling off more than a few times.

What I learned through the process was how to toe the line – balance on the edge if you will – without falling off the cliff.  I realized entrepreneurship is balancing the risk of great rewards with the risk of detrimental actions.

How do you know which is which and what to do when you find yourself getting weak knees as you get pushed towards the cliff?

You have to look deep inside yourself and ask “what do I gain from staying here?  Do I really only have one option, which is to stay here and not evaluate my other options?”

Notice I said “gain” not “lose”?  There’s a big difference between those two perspectives.  When you are standing on the edge looking far down the cliff, you have much to lose.  So much in fact it’s hard to pinpoint exactly what you are doing and why.  Founders face so much challenge and adversity they can easily lose their perspectives and clarity of thought.

I told my friend he needs to look inside and ask what he gains from staying there.  He needs to look out for himself first and foremost.  He needs to take care of his basic needs – be it money, food, shelter, stress relief, relationships – and only them will the company stuff  work itself out.

I said, “trust me, it won’t get any better if you don’t step away from the ledge.”

Stepping away from the ledge is exactly what I did and I am so much better for it.  Yes, I had to swallow the pill and realize my “first” attempt at building my company wasn’t going to end like I dreamed it would just a few short years ago.  But as I backed away from the ledge and got my priorities/basic needs back in order, things started happening I never thought possible.

You would be amazed what happens to your business life when you remove self inflicted pain and stress from your personal life.

It’s That Time Again! The Seattle Startup Crawl 2013 Is Happening Oct 18th At 5pm

We are kicking off this year’s Seattle Startup Week festivities with a Startup Crawl on Friday October 18th in Pioneer Square. The Seattle Startup Crawl 2013 is part of Seattle Startup Week, Oct 18th-25th (www.seattlestartupweek.org).

Here’s your chance to mix some of the best things known to man – Beer, Technology, Entrepreneurship, and Seattle – all together in the same event.  The Seattle Startup Crawl 2013 will be a great opportunity to gather together the startup community in Seattle for an evening of socializing and learning a little more about each other as well as see inside the walls of a few staple companies in the tech community.

It will be in the form of a progressive party, with each host providing their choice of snack/beverages.  We will start at approximately 5pm.

RSVP Here!

Date: Friday October 18th

Time: 5pm and later

Cost: $5.00

5pm: EnergySavvy 

159 S Jackson St‎ #420
Seattle, WA 98104
 

6pm: BlueKai

720 3rd Ave suite 2300,
Seattle, WA ‎
 

7pm: SURF Incubator/Founders RAW

821 2nd ave,
Seattle WA 98104
 

Yes, Youth Can Be Entrepreneurs Too

Adam Lieb, founder and CEO of Duxter, started his entrepreneurial journey at a very early age.  He founded and sold his first company at the age of 11! Not too shabby, eh.

I sat down and talked with Adam during one of my recent Founders RAW conversations where we covered what it’s like to start a company so early in life, the value of Law School and how easy (or hard) it is to raise money for a growing startup.

What a great conversation!

Fear – It’s Just Part Of The Process

If you are a founder – or thinking about starting your own company – a really important lesson is to realize fear will always be present with you.  There’s no way around it.

You will question your ability.

You will wonder what is going to happen to your company tomorrow.

You will be scared to talk to investors, customers and potential new hires.

You will be worried as to what the media will write about you and your idea.

All this will be there, don’t fool yourself otherwise.  The best thing for an entrepreneur to do is come to grips with the fact that your fears will persist.  The next best thing to do is to find ways to deal with those fears, and to grow through them.  Finding advisors, talk with other CEO’s or founders, reading others thoughts about starting companies.  All these things help us get through the challenging times of starting our companies.

Or go to Founders RAW and watch what others are saying!