Originally posted as a Twitter thread on March 06, 2023
When starting a company, can you get to *5 customers*? Who are they? Why will they trust YOU?
As a VC, these are questions I always try to ask (selling B2B). I’ll tell my story of how my company got our first 5, and why 5 seems like a good heuristic of “you’ve got something”
I love the term “productize” — it effectively means turn a “service” or “consulting” project into a repeatable widget. Does a large n of customers need/want the same thing, or *roughly* the same thing with few customizations? Then…it *might* just be productizable
If you get your Uncle or Cousin to use your product, maybe it was a favor…which is a feature (not bug) if it indeed is the SAME product you can sell to a few other strangers. But a lot of times a “few” customers is just a collection of favors and is Fool’s Gold…
Fool’s Gold because it’s just not repeatable and hides brutal market feedback. You can only have so many college roommates, cousins, and uncles. But if you get 5 distinct customers to “agree” on the same set of features, it’s a very good sign and you’re off to the races.
TrialPay started off as something I used for my own freemium software business. “Don’t want to pay $10 for my app? Get it for free if you sign up for Netflix or get a Discover Card or shop at Gap.” It worked great so I decided to turn it into a company…and raise venture $
But a lot of times ideas/companies come in waves — two other companies basically popped up at the same exact time. Identical idea/value prop. Lift Media (@jmurz) and MyOfferPal (later merged/renamed TapJoy). We all pitched the same VCs within weeks in 2006!
I had a key advantage over them in that I still had my software business so could “create” traction — I was my own first customer. Could figure out if things were working. But more importantly, it gave me credibility in “my community” of freemium software developers.
After starting the company, my co-founder @terryangelos and I went to the “Shareware Industry Conference” in Denver…and we signed several customers there, the largest being WinZip. I gave a talk on my results with my own products…so had the credibility and knew this niche
This was so niche that few outside of the industry even knew of this conference…or had the credibility/connections with this somewhat esoteric group of businesses/people. I remember meeting @bradfurber and @allennieman there…at a relatively unknown (but big revs!) company…
But sometimes, particularly when building a “transactional” business (versus “per-seat” where you know # of employees), there are these “diamond in the rough” customers that turn out to be huge. Brad and Allen’s company (Sammsoft) was one of them. Huge client.
My *now* friend @jmurz of Lift Media was super smart, incredibly hard-working, and was building his nearly-identical business…he was my arch-nemesis at the time!!…but we got a big early lead, which later turned into a big fundraising advantage too…
And honestly it was almost entirely because:
A. I had a captive early customer that would do anything I wanted (customer was…me!)
B. I found a bunch of other customers that “looked” like me — no chasm to cross. “I sell $30 Windows software, you sell $30 Windows software”
As we expanded, this was one thing that never ceased to amaze. Companies *across* verticals often have a hard time being the first in their space…getting Skype or Fandango to use us was not really helped by the fact we had WinZip. “Oh, that’s totally different.”
My advice to developing a killer product and go-to-market — and ensuring you don’t end up over-engineering into a void or losing to another competitor — is that you need both a founding team (founders/employees) and a founding *group of customers*
You need some vision, flexibility, and fortitude to make sure YOU are building the product, not your customers — otherwise it’s the Henry Ford “if I asked my customers what they wanted, they would have said a faster horse”
But you also need real market feedback so getting some friendly customers — who are willing to bet on you (kind of crazy to run your business on a money-losing startup!!), ride out some bumps, and give more than an occasional testimonial…is crucial
So sometimes 0->1 is not all that hard (if “1” is your Uncle). Getting 1->5 is actually what’s hard…synthesizing feedback, and building that trust that no 12-months-of-cash-left startup is just “entitled” to. It’s a crucial ingredient to success.
Some ideas on how to do this:
A. Give equity to your early customers or have them invest
B. Have no shame plumbing every connection you can – favors and believers
C. I tend to think the best companies are ones that came out of personal experience / you can be 1st customer
Thanks to @1nternetjack for the idea on this one. And watch this scene from one of the best Simpsons episodes ever, about the perils of *overly* conforming your product to just one customer: