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Customer, market and
business validation
For early stage startups
+ case study: TransferWise ~ the mission-driven startup
Hi, I’m Jeff!
Integral
Designs Bell Canada ING Bank Skype → Microsoft TransferWise
MSc -
Info
Science
Bachelors - Business
4 steps to world domination
Your
customer
Your
Business
Scale your
startup
Your
Market
Validate
Case Study
Grow
Validate
Your Customer
Proposition
How many startups START.
Intuitive understanding
of user need
Passion for particular
technology
Propose solution
= Success...
How many startups STOP.
Intuitive understanding
of user need
Passion for particular
technology
Propose solution
= Successf...
Jobs to be done (JTBD)
Understand Customer +
Situation
“Your customers have a job and
they’re hiring your app to solve
it”...
Learn by focusing on JTBD
How valuable is getting that job
done for this type of person?
How many people have this job?
Ho...
Problem interviews
Your goal is to learn, not sell
Start before you build anything
15 mins per interview
Do 20-60 of them
...
Structure: intro, demographics, story
Demo, as real as possible, iterate
Test price, don’t ask price
Raise friction, don’t...
...but...
You know what
customers need
It takes too long
It’s a waste of time
...but...
You know what
customers need
It takes too long
It’s a waste of time
← No you don’t, unless you’ve.
talked to eno...
Validate
Your Business Idea
Learn More: Wiki, Book
Increase probability of success by understanding
your key risks
Start with the big boxes
Value proposition, customer
segme...
✅ ✅ ✅
✅
❓ ❓
❓ ❓
Collect high quality data & validate it
Make it easy for potential
customers to tell you
what they want:
Currency
“wishlis...
Research & explore
Use data where you
can… but not as your
only source
Ask “so what” and find
the insights - who can
we he...
Validate
Your Market
Launching your MVP
Minimum Viable Product
Be an order of magnitude better
You need to be way better than
the alternative. Aim for 10X
10X faster
10X cheaper
10X mor...
MVP Learning Cycle
MVP - does not mean
“minimum viable piece of crap”
You need to understand who
your customers are and
wh...
Is your MVP Successful?
You need to understand your
metrics and set realistic targets!
This will help you define success
a...
Learn more about NPS, Product/Market fit
Achieving Market Fit
NPS! (Net Promoter Score)
Virality
Comments
Work on the detr...
Early startup KPIs
Do Not Focus On
Vanity metrics
i.e. total registered users, total volume transferred
Getting statistica...
Incubation &
Achieving Market Fit
Listen to customers
They are usually your best
critics and advisors!
Surveys
Phonecalls
Meetings
The trick is not to give ...
Iterate
Usually the one that iterates
fastest wins!
Prioritising is they key here
Make sure you know what
you effect and m...
Scaling Your Startup
Your startup
grows at.
the rate.
you learn.
What is scaling?
You have a mountain to climb to achieve
your vision - KPIs are your guideposts
Validation: It’s proof tha...
You have a hard job
You have a limited
opportunity to become
successful
Your success depends on how
quickly you learn.
Spe...
Practical tips for scaling
Marketing: Find scalable channels
Always be testing
Massive differences
between channels
Stand for something
Keep your growth sustainable
Return the savings to
your customers or to
growth
Setup backups
Renegotiate as
you scale
Do less.
Time is your most limited resource.
Make the hard choices.
Get the basics
right
Full report here
Know your.Customers.
and focus on the.
customer job.
Don’t die.
Set up your team cor...
The mission-driven startup
What is TransferWise today?
TRANSFERWISE WAS STARTED.
TO SOLVE A PROBLEM.
WHY DO PEOPLE RECOMMEND
OUR PRODUCT?
RATIONAL EMOTIONAL
PRODUCT BRAND
TO ACHIEVE ADVOCACY YOUR PRODUCT.
NEEDS TO BE AN ORDER OF MAGNITUDE.
BETTER THAN THE ALTERNATIVE.
PRICE
SPEED
COVERAGE
CONVENIENCE
BRAND
A BANK COULD HAVE STARTED
TRANSFERWISE AT ANY POINT IN
THE LAST 100 YEARS
PRICE
SPEED
COVERAGE
CONVENIENCE
A MOVEMENT
PEOPLE DON’T TALK ABOUT
MONEY TRANSFER IN THE PUB
GIVE YOUR CUSTOMERS.
STORIES TO TELL.
PRICE
SPEED
COVERAGE
CONVENIENCE
OWNERSHIP
PRIDE
WHAT’S OUR MISSION?
EVANGELICAL CUSTOMERS.
INSPIRE PEOPLE WITH YOUR CAUSE
AND YOU WILL CREATE
A MOVEMENT.
BIGGER
THAN YOUR STARTUP
AND WHAT’S THE RESULT?
EXPLOSIVE GROWTH
DRIVEN BY
EVANGELICAL
CUSTOMERS
€1 BILLION IN TRANSFERS
PER MONTH
€45 MILLION OF CUSTOMERS
MONEY SAVED EVERY MONTH
TALLINN
LONDON
TAMPA
NEW YORK
REVOLUTION SUPPORTED FROM
BUDAPEST
SINGAPORE
TOKYO
CHERKASY
SYDNEY
join us
Wrap up
Recap
Startups = learning: your job is to learn
Focus on customer jobs to be done (JTBD)
Problem interview → solution inte...
Learn more
Get in touch
jeff.mcclelland@yahoo.ca
Skype: jrmcclel
LinkedIn
Useful books you haven’t read yet
Lean startup,
...
Questions?
APPENDIX:
KPIs
A/B Testing
What are well-defined KPIs?
You’ll learn faster with good KPIs
Using well-defined KPI’s help
you learn faster:
Which products/features
customers value...
5 principles of well-defined KPIs
Directional &
Not
Ambiguous
IntuitiveImportant
Reflects
reality
In control of
the group ...
The best metric/KPI
We did
another thing!
time
the
best
metric
We did
a thing!
Metric is stable and flat
when you’re not
i...
KPI Examples
Growth - Signups, Downloads, New users, Active Users, Revenue, Profit
Engagement/conversion - feature use, fr...
Where does A/B testing fit in?
What are A/B tests?
Everyone believes they know
what’s right...but they’re often
don’t.
Everyone has biases
Scientific exp...
When should you use A/B testing?
Work well for optimisation
problems - small iterative
learning
Product, pricing, messagin...
Get high volumes and be patient
waiting on results
Don’t corrupt with other
overlapping tests
Know basic statistics
AB tes...
Customer, market and business validation for early-stage startups
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Customer, market and business validation for early-stage startups

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A collection of tips on how to go about validating your offer to customers, choose a market, and scope a business. Touches on JTBD, lean startup, business model canvas. Also a brief case study on TransferWise and the keys to it's success.

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Customer, market and business validation for early-stage startups

  1. 1. Customer, market and business validation For early stage startups + case study: TransferWise ~ the mission-driven startup
  2. 2. Hi, I’m Jeff! Integral Designs Bell Canada ING Bank Skype → Microsoft TransferWise MSc - Info Science Bachelors - Business
  3. 3. 4 steps to world domination Your customer Your Business Scale your startup Your Market Validate Case Study Grow
  4. 4. Validate Your Customer Proposition
  5. 5. How many startups START. Intuitive understanding of user need Passion for particular technology Propose solution = Successful startup?
  6. 6. How many startups STOP. Intuitive understanding of user need Passion for particular technology Propose solution = Successful startup? ← Not tested. ← Customer’s don’t care. ← Not based on actual. customer needs. ← Not as likely.
  7. 7. Jobs to be done (JTBD) Understand Customer + Situation “Your customers have a job and they’re hiring your app to solve it” JTBD: weather apps, iPhone apps, SaaS/Services
  8. 8. Learn by focusing on JTBD How valuable is getting that job done for this type of person? How many people have this job? How often do they have this job? How is this job currently being done? JTBD: more info/exercises ← Willingness to pay. ← Market size. ← Usage frequency/pattern. ← Actual competition.. (usually status quo).
  9. 9. Problem interviews Your goal is to learn, not sell Start before you build anything 15 mins per interview Do 20-60 of them Learn more: Jeff’s highlights, from this book Demographics - who are they? Tell a story - that covers several problems they might have Problem ranking - which problem is most painful? Explore problems - go in depth into each problem they have Hook & Ask - keep them engaged Document - take 5 mins, write down
  10. 10. Structure: intro, demographics, story Demo, as real as possible, iterate Test price, don’t ask price Raise friction, don’t lower it. Find early adopters. Be the prize. Solution interviews Your startup goal is to build the simplest product that. solves a real problem. Validate your understanding of (1) customer, (2) product, (3) market proposition Visual demo of an MVP for early adopters 20-60 interviews needed The best blog post on pricing
  11. 11. ...but... You know what customers need It takes too long It’s a waste of time
  12. 12. ...but... You know what customers need It takes too long It’s a waste of time ← No you don’t, unless you’ve. talked to enough of them, in a. structured way. ← it’s nothing compared to.building. something for 6 months and discover. nobody will buy it. ← not if you learn what to build. and who will buy it.
  13. 13. Validate Your Business Idea
  14. 14. Learn More: Wiki, Book
  15. 15. Increase probability of success by understanding your key risks Start with the big boxes Value proposition, customer segments, key partners Start with whatever is most risky, and figure out what you need to learn to remove that risk. Ask the hardest questions first Who’s this for? Why do they need it? How much money do you need to make to break even? Will anyone actually pay for that? How much will it cost you?
  16. 16. ✅ ✅ ✅ ✅ ❓ ❓ ❓ ❓
  17. 17. Collect high quality data & validate it Make it easy for potential customers to tell you what they want: Currency “wishlist”
  18. 18. Research & explore Use data where you can… but not as your only source Ask “so what” and find the insights - who can we help?
  19. 19. Validate Your Market
  20. 20. Launching your MVP Minimum Viable Product
  21. 21. Be an order of magnitude better You need to be way better than the alternative. Aim for 10X 10X faster 10X cheaper 10X more convenient 10X easier to use or a combination
  22. 22. MVP Learning Cycle MVP - does not mean “minimum viable piece of crap” You need to understand who your customers are and what they want. Can your customers use your product? Can you do for the customer what you actually promise?
  23. 23. Is your MVP Successful? You need to understand your metrics and set realistic targets! This will help you define success and start iterating. For instance: New users NPS Cancellations Conversion See appendix for more KPI examples
  24. 24. Learn more about NPS, Product/Market fit Achieving Market Fit NPS! (Net Promoter Score) Virality Comments Work on the detractors Then neutrals Then profit
  25. 25. Early startup KPIs Do Not Focus On Vanity metrics i.e. total registered users, total volume transferred Getting statistical significance, split testing (A/B testing) More than a handful of metrics Focus on The 3 or 4 most important metrics (KPIs) that indicate your progress. Perhaps: Growth & conversion How you’re adding value How much runway you have Helpful to work backwards from some target state (i.e. 10K new users) and validate how you get there Learn more about KPIs in the appendix
  26. 26. Incubation & Achieving Market Fit
  27. 27. Listen to customers They are usually your best critics and advisors! Surveys Phonecalls Meetings The trick is not to give them what they want but what they need.
  28. 28. Iterate Usually the one that iterates fastest wins! Prioritising is they key here Make sure you know what you effect and measure it! A/B testing
  29. 29. Scaling Your Startup
  30. 30. Your startup grows at. the rate. you learn.
  31. 31. What is scaling? You have a mountain to climb to achieve your vision - KPIs are your guideposts Validation: It’s proof that you’re moving forward Investors/valuations
  32. 32. You have a hard job You have a limited opportunity to become successful Your success depends on how quickly you learn. Specifically, how quickly you learn how to deliver: A product customers value A sustainable business at scale
  33. 33. Practical tips for scaling
  34. 34. Marketing: Find scalable channels Always be testing Massive differences between channels Stand for something
  35. 35. Keep your growth sustainable Return the savings to your customers or to growth Setup backups Renegotiate as you scale
  36. 36. Do less. Time is your most limited resource. Make the hard choices.
  37. 37. Get the basics right Full report here Know your.Customers. and focus on the. customer job. Don’t die. Set up your team correctly. (didn’t speak about but book recommendation . at the end).
  38. 38. The mission-driven startup
  39. 39. What is TransferWise today?
  40. 40. TRANSFERWISE WAS STARTED. TO SOLVE A PROBLEM.
  41. 41. WHY DO PEOPLE RECOMMEND OUR PRODUCT?
  42. 42. RATIONAL EMOTIONAL
  43. 43. PRODUCT BRAND
  44. 44. TO ACHIEVE ADVOCACY YOUR PRODUCT. NEEDS TO BE AN ORDER OF MAGNITUDE. BETTER THAN THE ALTERNATIVE.
  45. 45. PRICE SPEED COVERAGE CONVENIENCE BRAND
  46. 46. A BANK COULD HAVE STARTED TRANSFERWISE AT ANY POINT IN THE LAST 100 YEARS
  47. 47. PRICE SPEED COVERAGE CONVENIENCE A MOVEMENT
  48. 48. PEOPLE DON’T TALK ABOUT MONEY TRANSFER IN THE PUB
  49. 49. GIVE YOUR CUSTOMERS. STORIES TO TELL.
  50. 50. PRICE SPEED COVERAGE CONVENIENCE OWNERSHIP PRIDE
  51. 51. WHAT’S OUR MISSION?
  52. 52. EVANGELICAL CUSTOMERS.
  53. 53. INSPIRE PEOPLE WITH YOUR CAUSE AND YOU WILL CREATE A MOVEMENT. BIGGER THAN YOUR STARTUP
  54. 54. AND WHAT’S THE RESULT?
  55. 55. EXPLOSIVE GROWTH
  56. 56. DRIVEN BY EVANGELICAL CUSTOMERS
  57. 57. €1 BILLION IN TRANSFERS PER MONTH
  58. 58. €45 MILLION OF CUSTOMERS MONEY SAVED EVERY MONTH
  59. 59. TALLINN LONDON TAMPA NEW YORK REVOLUTION SUPPORTED FROM BUDAPEST SINGAPORE TOKYO CHERKASY SYDNEY join us
  60. 60. Wrap up
  61. 61. Recap Startups = learning: your job is to learn Focus on customer jobs to be done (JTBD) Problem interview → solution interview → build MVP De-risk with business model canvas Be 10X better, focus on KPIs, and listen to your customers From TransferWise: Cultivate a mission bigger than yourself
  62. 62. Learn more Get in touch jeff.mcclelland@yahoo.ca Skype: jrmcclel LinkedIn Useful books you haven’t read yet Lean startup, theoretical Lean startup, practical Bootstrapping (starting without investors) Founder equity that makes sense These slides:
  63. 63. Questions?
  64. 64. APPENDIX: KPIs A/B Testing
  65. 65. What are well-defined KPIs?
  66. 66. You’ll learn faster with good KPIs Using well-defined KPI’s help you learn faster: Which products/features customers value How effectively you’re scaling: marketing channels costs operations Which activities you should focus on
  67. 67. 5 principles of well-defined KPIs Directional & Not Ambiguous IntuitiveImportant Reflects reality In control of the group it’s measured against if performance is good, it's good for the user and for the company Can be explained why it's important for the user and to the company Proportional to reality, dynamic enough to raise attention (not flat day-after-day), but not so jumpy that you can’t discern signal from the noise higher or lower is always better all other things being equal so that the team can commit to and be accountable for improvement (for targets in particular)
  68. 68. The best metric/KPI We did another thing! time the best metric We did a thing! Metric is stable and flat when you’re not influencing it
  69. 69. KPI Examples Growth - Signups, Downloads, New users, Active Users, Revenue, Profit Engagement/conversion - feature use, frequency of use, # features Quality - Net Promoter Score (NPS), Customer Satisfaction (CSAT) Profitability/Sustainability/cost per user (marketing and/or OPEX) Churn - users stop using your product/service, downgrade Virality/network effects - spreading the word, building the network, market share Speed/Efficiency/Backlog/Queues/Time to X - efficiency of your machine Risk/Exposure - Leverage, FX Exposure, Value at Risk, SLA, cash/runway
  70. 70. Where does A/B testing fit in?
  71. 71. What are A/B tests? Everyone believes they know what’s right...but they’re often don’t. Everyone has biases Scientific experiments A/B Tests can help you learn If done well they give you unbiased “proof” of whether A is better than B
  72. 72. When should you use A/B testing? Work well for optimisation problems - small iterative learning Product, pricing, messaging, support all possible But even if you could, you sometimes shouldn’t as they can be expensive. Learning is expensive.
  73. 73. Get high volumes and be patient waiting on results Don’t corrupt with other overlapping tests Know basic statistics AB testing 101 Are your results significant? tl;dr: no It’s difficult to achieve statistical significance You need to: Plan/design in advance Pick the right KPI(s) & scope Random or pseudo-random allocation

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