Knowing your customers is the single biggest driver of startup success, and there's no substitute for getting out of the building to learn about their problems and needs.
How and why Customer Development shapes a startup was the subject of discussion with the two latest guests on Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111.
Clips from their interviews are below, but first a word about the show:
Entrepreneurs are Everywhere airs Thursdays at 1 pm Pacific, 4 pm Eastern on Sirius XM Channel 111. It follows the entrepreneurial journeys of founders sharing their experiences of what it takes to build a startup - from restaurants to rocket scientists, to online gifts to online groceries to entrepreneurial education and more.
The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs, lows and pivots that pushed them forward.
Matthew Wallenstein is the co-founder of Growcentia and director of the Innovation Center for Sustainable Agriculture at Colorado State University (CSU). A professor at CSU, his research examines how microbes that live in the soil respond to environmental change, and how those responses impact natural ecosystems. His work led to the development of beneficial microbes that can improve how well plants grow, which Growcentia has commercialized.
In working on the initial idea for Growcentia, Matthew did quite a bit of research and spoke with other academics about the concept. He was sure he was on to something.
Talking with customers during his participation in the 10-week National Science Foundation I-Corps program changed everything, however:
We got out of the building and talked to farmers, and guess what? They didn't care about our product.
... It was enlightening. We certainly didn't give up, so we asked the farmers what keeps them up at night? How much do they spend on fertilizer? Phosphorus was not a big deal.
... (We thought it was a big deal) because we had read papers from other academics, saying it's a big deal but we didn't get out of the building and we didn't talk to any farmers at that point.
(So) we explored other markets. We talked to people who ran golf courses. We talked to lawn care companies and agricultural companies. We did find some interest. The big agricultural companies are looking at a longer time, where as they see an emerging problem.
(We spoke to) over a hundred (customers). ... (The experience) was life changing.... It changed our perspective of how to identify real-world problems that people need help with. ...
What I didn't realize (before we got out of the building) is that I was just talking to other smart people within academics and I was not directly connected to the end user and the people that I thought might benefit from what I was doing.
Jason Young is a serial entrepreneur who caught the startup bug as a kid. In addition to co-founding MindBlown Labs, Jason is the co-founder and president of The Hidden Genius Project, a nonprofit that trains underserved black teens in technology and entrepreneur; and served on the founding team of Wikinvest.com. He was recently appointed to the President's Council on Financial Capability for Young Americans.
Like Matthew, Jason sees enormous value in talking with customers:
The biggest thing I learned was just how much you don't know. There's just so much you don't know and you're never going to know everything, but ...
.... you've got to do the customer development. You've got to do that early.
... Get out of the building. Talk to the end users. Understand who all the end users are, because that's going to have a huge impact. You can build the greatest product in the world (but it) doesn't matter if it doesn't work for the end users. You need to understand not only their needs but ... any politics that would be involved that would prevent the adoption of your product.
To hear the clip, click here.
Matthew explained Growcentia's goal:
...We're trying to ...recapture that natural ability of microbes to make nutrients available and give farmers a tool to further increase their yields. Most importantly, increase the efficiency of the fertilizer that they put on the field.
He also told me how the company stumbled on its first customer segment by accident, in conversation with prospective customer:
(They asked) Have you guys thought about cannabis?...
Steve: Cannabis, like marijuana?
Matthew: Cannabis, marijuana ... We're doing this great experiment in Colorado where it's legal to grow and to purchase and consume marijuana. There is this exciting new industry. At that point, we hadn't explored it, (but) because ... this company was serious about it, we thought we should really get serious and check it out. Sure enough, we started talking to people in the industry and it turns out they have a phosphorus problem.
... (Cannabis) is a phosphorus hungry plant during the budding phase, that plant is just sucking up phosphorus as fast as it can and they often see phosphorus deficiency in that plant.
... It turned out that we were solving an important problem that we weren't aware of at the time. ... We now have that product that we developed in the lab, in a flask, on commercials, on shelves at retail stores.
Steve: It's microbes you put in your marijuana plants and makes them grow some measurable percentage faster or better?
Matthew: That's right. We've done a lot of testing and we found that on average, yields increase 16 percent when you add our bacteria into the grow operation....
Steve: What are the other markets you're going to go into?
Matthew: Right now, we have our product in trials with tomato growers. We're looking at strawberries. ...we're now doing a systematic exploration of where we think our product can deliver the best value.
Steve: Truly engineering microbes to figure out what the right mix of microbes are particular plants?
Matthew: That's right and we'll develop future products that address other specific needs.
To hear the clip, click here.
Jason went to Harvard, working to get in to the university after a high school classmate bet him he couldn't. After college, he worked at Merrill Lynch as a senior specialist. Personal challenges brought him back to doing startups.
... I am the first in my family to graduate college, but I'm not the first to attend. My older brother, Patrick, went to college and he dropped out ... because he ran out of money. That happened because he really didn't understand the financial aid process. I think at a more holistic level, he didn't really understand the importance of college to his future success. ...
... I saw how he struggled as he came out working minimum-wage jobs and now he's doing much, much better, but it took him like a decade.
... And the second piece happened when I was in college, so during my sophomore year, I came home for Christmas break and the day after Christmas, my mother was evicted. She had ... taken out a variable rate mortgage years before. She hadn't really understood how they functioned. Interest rates increased. It was temporary, but it was long enough for her to fall behind.
... Seeing that really ... impressed upon me the need to make wise financial decisions, but it also instilled in me a very strong desire to help other people to the same.
... I knew that other people had this problem, but I had no idea how widespread it was. It wasn't until years later, when I had joined a technology startup ... that was focused on helping young adults ... make investment decisions, that I (saw how big the problem is.) ... I was volunteering on the side, helping different young adults at a very basic level with their personal finances. I was working with dropouts. I was working with folks who had Master's degrees. ...It just became really apparent to me that this problem of financial literacy was huge and that it was impacting people across the socioeconomic spectrum and ... of all ages, but that it starts young. ...
At first, MindBlown Labs was to be a tool to track allowance. Here's what Jason discovered about that concept:
We ... came to the conclusion that this thing is not going to work. ... it was a bad idea. ...
We scrapped it. .... We just didn't see the engagement with what we were doing. ... It was focused on parents and parents said, "Yeah, this is great," but it would take them forever to ... use the initial prototype.
... So we ... went back to the drawing board and that's when MindBlown Labs was born.
At that point, we decided to do a mobile game. ... We started testing it with kids initially ... we ... went to the mall (and) put it in kids' hands to see "will they play this thing?" The good news is that they did play it. And as we continued to work on it, they played it more and more.
So we saw we had something really engaging for students and that was the first (important thing), because most financial literacy, financial capability tools are boring. ... So that was a first initial premise, let's make this engaging for the end user. ...
We did that, but then we figured out that delivering it to them in the wild... really wasn't going to work all that well for our impact goals. ... So we started looking at going into classrooms. That's when we figured out that... teachers are awesome, but they have a wholly different way of looking at the world than the ultimate end user, which is the student.
We then started thinking about ways we could make the overall experience work in a classroom setting and we started talking to teachers ... gathering information. It's now used in schools and ... nonprofits.
To hear the clip, click here.
Both men are passionate about what they do.
Matthew explained that Growcentia allows him to make a bigger impact than he can doing research alone:
I looked at what I was doing and I was studying how these microbes in soils were responding to climate change and other forms of environmental change. If we were to sit next to each other on an airplane and you said, "Matt, well why should my taxpayer dollars be paying for this kind of research?"
Steve: I think Congress is asking that now.
Matthew: They always do and it's a reasonable question, I would tell you that my work is really important because it's going to allow us to better predict how the earth is going to function in a future climate and that will help inform policy. You know what, those policy makers in DC, they don't read my papers. They never read my papers. The work that I was doing was not really trickling up to have an impact on decisions that we make as a society or it wasn't really, I wasn't doing the work of translating it so that other people could use it.
... I wanted my work to have more impact and I figured I was the one who needed to do that, no one else is going to take my work and translate it for me.
As a kid, Jason worked for a neighborhood plumber earning $10 a day to do minor tasks. It opened his eyes to the prospect of running his own business and a series of small ventures followed, including selling candy to his schoolmates, and a brief foray into a housecleaning business. At 13 he tried yet again:
My next venture was a travel agency. ... I was able to get a company to let me use their license for a percentage of my revenue. ... They were web-based, so I got my mom to sign the paperwork because I was only 13 and then ... I got set up. I had Sabre ... an online booking system that gives you access to all the airlines...
Steve: You really had travel agency access and you were able to book people and how did you create demand? How did they find you?
Jason: Yellow Pages, I had an ad in the Yellow Pages, it's funny because this was all pre-2000... there was Internet, but ... I had a dial-up connection.
Steve: Did people know how old you were?
Jason: I had a deep voice, my voice changed when I was about 9. ... I also did sell to friends and families, I sold to different groups that I was a part of, like I booked a couple of conventions.
Steve: Were you hooked then on entrepreneurship?
Jason: Yes at that point I was pretty much done.
Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.
Steve Blank's blog: www.steveblank.com