I started up in 2017.
Between my co-founder & I, we had nearly 30 years of work experience in Financial Services.
We’d worked across New York, London, India, Hong Kong & Singapore.
We were also alums of premier, B-schools, undergrad schools and high schools.
We had two, non-overlapping, killer networks.
We set out to build SaaS for Financial Services, an industry we had grown up in.
It wasn’t hard to get first meetings with prospects.
We waltzed into rooms with warm intros & spoke about the amazing things we were building.
Almost everyone we spoke to shared our enthusiasm. Many brainstormed ideas with us.
Quite a few signed up to be trials and became design partners.
In hindsight though this would confuse & mislead us.
You need early customers for just one thing.
To achieve Product Market Fit.
Achieving PMF requires having a zen-like focus on discovering the cold hard truth.
Customers you gain through warm intros and friendly networks can’t give you the tough messages you need to hear.
Side Note 1: This doesn’t mean strangers will give you tough messages you want to hear. It’s quite likely that they’ll sugarcoat their feedback as well.
Side Note 2: Conversely, you will struggle to “fire” a customer that came through a warm intro. You will also feel obliged to overweight their asks over “stranger” paying customers.
Getting design partners through your network or warm intros creates false flags during the discovery phase.
The Talebian idea of Why surgeons should not look like surgeons works the other way too. Especially in the early days, you know that your product is working, when customers who have no reason to love you or do you favours want to pay for your product.
In this matter The Mom Test is right.
The Opposite of a Bad Idea is a Bad Idea
So the takeaway is NOT to use your network to find early customers right?
In 2022, I reconnected with an old friend from my undergrad days.
This person had slowly & diligently bootstrapped their way to successful Software Services business over a decade.
They’d not been shy about reaching out to our mutual IIT network for business.
They readily admitted that it had contributed meaningfully to their long term success.
Effectuation is the idea that entrepreneurs start by considering their resources first - what & whom they know and weave their way towards progress stumbling upon success.
My friend had effectuated.
Well, I’d tried effectuation too!
So why had I failed when my friend had succeeded?
Was I just plain unlucky?
Discovery - Product vs Services
SaaS aims to replace Services with Product.
While a sale can be influenced through marketing, distribution & sales efforts,
Renewal is the real moment of truth.
Renewal depends on only one thing.
Can your product solve the Customer’s problem well? (possibly well enough that you can raise prices) (No doubt, the customer success function does help here so it’s not all product)
You want customers to love your product
If your customers love you, then you better BE the product!
My modified thumb-rule now is that:
If you want find
- clients to serve in a services business
- investors to fund your start up
- an employer to hire you or employees to hire
- a vendor or service-provider
then all means tap your network & effectuate.
But if you want
customers to sell to
stay away from your friends
and talk to strangers first.