This article is part of a series of articles, as an example how to use Customer Development in practice. If you didn’t read the introduction, please read it first.

Now we start with to State your business model Hypotheses as the first part of Customer Discovery. We use the checklists to fill. The checklists (number 3 till 12) are based on Customer Development from Steve Blank. In this part we describe checklists number 3, 4 and 5.

Checklist 3: Market size
Goal: Estimate the total market oppertunity for the company

Estimated market size value:

  • Total Available Market (TAM): Total market [Co-founders wanted]: Worldwide: US$ 41,5b (2012) [source: ey.com]
  • Served Available Market (SAM): Total market that your channels can reach  [Co-founders wanted]: Worldwide: US$ 5,7b (2012) [source: ey.com]
  • Target Market: Who will be your clients [Co-founders wanted]: € 0,5m (2014)
VC-investments

Estimate current product and follow up products

  • Appropriate metric for measuring determined  [Co-founders wanted]: number of clients, Brut margin per client (€)
    • Units/euro’s/page views/other measures?
    • Per member for subscribtion services/per page view for advertising-supported business?
  • Research conducted to “size” the overall market [Co-founders wanted]: competitors (VC, incubators) will be part of the target market
    • Read industry analysts reports, market research reports, competitors’ press releases, etc.
    • Talk with investors and customers
  • If assessing an existing or resegmented market, adjacent markets that customers might switch from are considered [Co-founders wanted]: no, only new co-founders are welcome. With financed startups we don’t com petite with VC’s but cooperate with them as partners. 
    • Will the startup’s product encourage switching?
    • Only the switchable subset counted (Beware of long-term lock-ins from incumbents)
  • If assessing a new market, the opportunities are estimated based on proxies and adjacent markets [Co-founders wanted]: it is not a new market
    • Are there comparable companies?
    • Have others grown as fast as the estimate?
    • Why will this company perform similarly?

Exit criteria: Written sense of market size, estimate of how much the company can capture.
[Co-founders wanted]: Target market size is big enough to continue.

Checklist 4: Product vision
Goal: Team agreement on the long-term vision and 18-months schedule

Reference: Value proposition, part 1 the product/service its benefits and minimum viable product)

Vision:

  • What’s your long-term vision for your company? [Co-founders wanted]: Create a place where founders with a good idea can develop themselves (by minimal paying own salary and first MVP preferable without external investors) till the Startup project reaches Product-Market fit
  • What do you ultimately want to charge or solve? [Co-founders wanted]: Stimulate and help everybody who wants to start or just started an Internet Startup to keep the learning cycles as short as possible with minimal resources. But under the condition that the found will invest in the first MVP.
  • Are you going to do it with a series of products? [Co-founders wanted]: Yes, every idea connected to an Internet Startup that passes the Validation Board (part 2) is welcome.
  • How do you expand into adjacent markets? [Co-founders wanted]: Startup market is very big, first step is to find right niches/segments.
  • Do you need to get people to change their behavior? [Co-founders wanted]: Partly, as a lot of “younger” startups are focusing on an Investor. It is easy to understand that Investments is not so important but in practice, founders need money to live from.
  • What will the world look like 3 years after you arrive in the scene? Five years? [Co-founders wanted]: 3 years: In Netherlands, Germany, Poland and Nordic countries it will be an alternative or earlier step before an incubator or investor. 5 years: To keep the learning cycles as short as possible will be the standard. People in Europe who want to start and don’t need an incubator will prefer Co-founders wanted.
  • Put together a short narrative in bullets about your strategy

[Co-founders wanted]: Strategy:

  • Use existing Co-founders wanted communities and MeetUps
  • Test various segments by networking, social media and “sponsoring” network events.
    • (Freelance) professionals that want to setup a serious Internet Company
    • Entrepreneurs from which first startup failed
    • Entrepreneurs that “won” bootcamps
    • Entrepreneurs who started a company and were focusing only to find an investor
  • Indirect focus on software development resources, as this is an “easy” entrance and Co-Founders wanted is very experienced in setting up and running Software Development Teams

Deliver dates

  • MVP Delivery date and features: [Co-founders wanted]: end of August (website), promote MVP during meetup.
  • 18-month product vision and delivery dates

[Co-founders wanted]: unfortunately time is shorter, maximal 6 months:

  • Customer development, party done, end of august
  • Website (MVP), end of August
  • Promotion Social Media, Meetups, Appointments on going
  • First client: October

Long term product strategy

  • Will your product create network effects? [Co-founders wanted]: Hopefully Word of mouth, promoted via Social Media (for example Co-founders wanted groups on LinkedIn)
  • Can you price it with a predictable model?  [Co-founders wanted]: Yes, client gets a package for the first MVP, including Lean Startup management, support, design and development. For next MVP’s there will be also fixed packages available.
  • Can you create customer lock-in/high switching costs?  [Co-founders wanted]: Yes, as soon as development starts it is hard to switch.
  • Can you have high gross margins?  [Co-founders wanted]: Not sure, the “big” profit will be the participation. So long term profits.
  • Does or have organic demand versus requiring marketing spend?  [Co-founders wanted]: Personal approach via networking. If there enough clients then experiment with sponsering of MeetUps and helpfull “Co-founder tools” on website of Co-founders wanted)
  • List product enhancements anticipated up to 18 months enhancement. [Co-founders wanted]:
    • (Free) tools on website
    • “Own” Lean Startup software
    • More dedicated consultants, who participate
  • List key follow-on product enhancements [Co-founders wanted]: None

Exit criteria

  • Vision: [Co-founders wanted]: passed
  • Narrative: [Co-founders wanted]: passed
  • Long term product strategy [Co-founders wanted]: passed
  • Update you Business Model Canvas [Co-founders wanted]: see part 6

Checklist 5: Product features and benefits
Goal: Explain what the product is and why people will buy and use it

Reference: Product Features/Benefits Hyphothesis and Low fidelity MVP Hyphothesis

What problem or need are you solving?

  • What do you think the biggest pain is in how your customers work/play? [Co-founders wanted]:
    1. Founders can not find an investor because they only want to invest time themselves and not money
    2. Founders like to work with cheap outsourced freelancers in low labor costs countries but in practice it is expensive because MVP’s are not understand and not delivered well.
    3. Business minded people can not communicate with technical people
  • If they could wave a magic wand and change anything what would it be? [Co-founders wanted]:
    1. Get money for their plans (as every founder thinks that his solution is the best)
    2. Get cheap freelancers creating what they want and above all freelancers would advice founders how to create the MVP from a business perspective.
    3. Explain the business to a technical employee/freelancers and it will work like explained
  • How does the product solve those problems or needs? [Co-founders wanted]: It is a service, Co-Founders wanted help founders to create MVP’s with the target to reach Product-Market fit with “own” money. At that stage it is easier to find an investor if it is still needed. Co-founders wanted tries to teach the founders and creators (developers, designers etc.) during creating MVP’s  how to communicate, using Lean Startup methodology as the base.
  • What do people do today to solve their problem? [Co-founders wanted]: networking, visit meetups, look for investors, look for “cheap” developers, try to do as much as possible themselves and gain the experience.

Product Benefits List

  • List the benefits through the customer’s eyes [Co-founders wanted]: Experienced team that can solve the problem.
  • Something new? Better? More? Faster? Cheaper? Etc. [Co-founders wanted]: Better and faster. The founder will move forward (in stead of spend time on looking for an investor and/or developer or gaining (technical) experience to do it themselves)
  • Underneath the features above summary benefits for each [Co-founders wanted]:
    • Better, because of less resources (focus on short Learning Cycles)
    • Better, because of more structure (Lean StartUp method)
    • In the end cheaper, because of less development and the development that needs to be done, will be made by the team in Poland
    • Faster because of present struggle
    • BUT difficult because client need to minimal take care about own salary and spendings
  • Will these Benefits be accepted as such or do they need explanation? [Co-founders wanted]: Probably the solution needs an explanation

Describe the Minimum Viable Product (MVP) [Co-founders wanted]:  Website to refer in pitch (on social media or MeetUps)

  • What do you learn?  [Co-founders wanted]: If segments are -in general- interested in the approach and why they are interested.
  • From who?   [Co-founders wanted]: Potential clients, so founders
  • What is the smallest feature set?   [Co-founders wanted]: Landingpage for one segment/niche, promotion via meetups

Create a One-Page user story: Include product vision, features, benefits. [Co-founders wanted]: Privately created

Exit criteria

  • Describe the product’s features and benefits. [Co-founders wanted] Founder doesn’t need to focus on looking for investor or developer but can do his Customer Development.
  • Describe the MVP.  [Co-founders wanted] Website for various segments (starting with landingpage for one segment), promoted via meetups and later Social Media.
  • Create a User Story describing what job the product will do. [Co-founders wanted]: Privately created
  • Update your business model canvas.  [Co-founders wanted]: see part 6

>>> Go to next part (part 4)

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