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đ Thought Bubble: Honing Your Target Customer
Last week, I participated as a mentor for a startup accelerator. All of the companies were pre- or early revenue, and as mentors, we met with the founders back-to-back to brainstorm how they might overcome company challenges. The meetings were short and the goal wasnât to completely solve the problem but point out potential blind spots the founders might be missing in the day-to-day of running the business.Â
Not surprisingly, the number one issue for companies in the program was how to build the top of the sales funnel and/or convert customers quicker. While some of this was normal early-stage sales challenges, when probed deeper, it became clear a portion of this was a symptom of something else, a target customer base that was too broad. Few founders could clearly articulate exactly the type of customer they felt was most acutely experiencing the pain associated with the problem being solved.
Weâve discussed how important specificity is in relation to the problem and value prop, but my recent mentoring experience got me thinking about how important narrowing down the profile of the initial target customer is. It is not enough to say that the focus is on âbanksâ or âhospitalsâ. In the early days, it needs to be laser focused on the profile of those that are in the best position to buy.Â
This is why customer discovery is so important. Itâs critical to understand who âgetsâ the problem being solved and feels the urgency to purchase today versus those that are going to need more time and proof points. That is not to say you shouldnât be talking to folks who fall in the latter category but that you should understand how they fit in your go-to-market strategy.
During diligence, an investor has to get to conviction that a business can (quickly) scale. A founder needs to paint a picture of how the company starts with a segment of customers and ladders up to a larger opportunity. Successfully doing this shows an investor that the founder knows the market and their customers, both of which are essential traits that investors look for when evaluating founding teams.Â
A big part of startup success is quickly validating (or invalidating) assumptions that get the company one step closer to product-market fit. Being very precise in customer discovery and effectively communicating your customer focus instills confidence in investors that founders can lay the groundwork for scalable growth and ultimately build a fantastic business.
𧨠A Hot Take on Rules for Founders
K.P. Reddy, an ATL-based entrepreneur and managing director at Shadow Ventures, posted on LinkedIn (here) the seven rules for founders entering his incubator. There were a few jovial hot takes, including âSoup is not a mealâ, but there were more serious topics that provide solid guidance to early-stage founders. The seven rules cover the ways to turn the dial on valuation and the need for an AI strategy, whether itâs on the back end to drive capital efficiency or product features to differentiate.
STV Take: The number one rule for K.P. is that the first $1M in recurring revenue needs to be secured by the founders so that the founders understand the natural marketing and sales motion for their business. As the âThought Bubbleâ alludes to, the most successful founders we work with know their customers and their pain points better than anyone else. Bringing in sales and marketing professionals too early risks putting too much space between founders and their customers, inhibiting the learning that is so critical for finding product-market fit.
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STV Take: Outsourcing your finance function is a no-brainer for startups. Weâve known AVL Growth Partners for over a decade and they have a stellar reputation.
â Avoid Pitch Deck Design Mistakes
A lot of ink has been spilled on the type of content to include in a pitch deck (here for example), but equally problematic can be a bad design. This Switch article discusses some common pitch deck design mistakes. A few of the five mistakes they call out are long form bullet points and a generic intro slide.
STV Take: The design of a pitch deck can feel inconsequential. After all, itâs the substance that matters, right? Wrong. The mistakes brought up in the article, such as long-form bullet points, can be distracting and interfere with the ability of the reader to quickly digest the information being presented.
đ Selecting Product KPIs
In this blog post, Jason Cohen outlines a system for selecting product metrics that cater to the needs of various stakeholders within a company. It emphasizes the importance of choosing a framework that addresses all key needs, suggesting a value-chain approach for identifying metrics that reflect both immediate actions and long-term outcomes. Cohen advocates for metrics that are easily understood, actionable, and aligned with the product's strategic goals, providing a checklist for selecting effective KPIs.
STV Take: As investors, we are frequently asked about the metrics that matter most to a business. Of course, revenue is one of the most important ones we track, but as Jason identifies, it is usually a lagging indicator. Revenue doesnât materialize if teams arenât completing their work or people arenât using the features being rolled out. This article is a good breakdown of how to think about tracking metrics that can help you better connect revenue with actions.
đ´ Decompression Zone
We have all heard how important it is to let our brains rest, but why? An article in Quantum Magazine discusses research into our brainâs âdefault modeâ and how different regions of our brain interact. It made me realize and appreciate the complexity of simply doing nothing.Â