Research and customer development for a start-up

Based on experience, let us say there are three main categories of goals you can pursue with your research:

Validate your market and do customer development

Leverage the insights as a guide for decision-making (try not to reverse it and use insights to justify your decisions)

Planning and operations

Throughout this series, we will write about these different forms of research and how to carry them out with regards to your start-up. There are differences across industries so we will primarily focus on the Software as a Service (SaaS) market essentially, not catering to hardware-oriented companies including medical devices and healthcare products. However, some of the operational stuff like setting up a company, taxation, and options you have in Germany can be applied to most ventures.

Let us start off with basic research on your customers. So, you have a product idea in the realm of SaaS. Your main costs will be building the product and then acquiring users to grow. But here you face a conundrum: there are a myriad of software services out there. Your first step is to figure out whether there is in fact a demand for what you are building. No, asking your parents and friends does not count! You must talk to your target customers. It could be that your mum and dad fall into the category, but your aim is to assess as objectively as possible if people would buy your product and why would they buy it? In short, you need to find out the pain points of your customers that you hypothesize your product is solving.

It could be as simple as Airbnb’s initial pitch deck citing three issues:

Price point when booking hotels
Hotels leaving you disconnected from the culture of the city
Lack of a platform that allows you to book a room with a local or become a host

Keep in mind this is a market-place model which is slightly more complicated than normal two-way, buyer-seller relationship model.

Let us look at the example of Coinbase’s initial problem definition:

Their hosted bitcoin wallet aims to resolve the problem of the non-user friendliness of the current tools that enable the storing and transactions related to Bitcoin

Another example is Dropbox and their Freemium business model.

In their own words: “It’s 2007 and it’s still a pain to…

         Work on multiple computers
Share files across a team
Put photos, videos onto the web
Protect files from loss”

 Reading about these in retrospect is a bit of a fallacy too. It seems easy and quite obvious that this was the pain point they were solving. But diffusing the technology and getting it to be widely respected entailed raising huge financing rounds and a lot of time. 97% of the start-ups fail, 75% of venture backed start-ups fail so we believe:

                                 “Fail fast and reiterate faster to get your product market fit”

So, what is the best way to conduct research pre-product to validate your market? Here are some tools:

Business Model Canvas
Semi-structured in-depth interviews
Surveys (willingness to pay)

We will throughout this series expand on each one. Stay tuned!

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