March 15, 2012 Leave a comment
In the early stages of any business, proving that customers are willing to pay for your product is essential. What makes it tough is that no one knows who you are (no brand), the product is basic (feature-less) and the business model is certainly not stable (not sure if you can make money). This last point is one of the more difficult things to figure out as a startup – which markets do we serve, who are my customers and how much do we charge them? You may think that you know these answers early, but in my experience you are rarely right out of the gate. You run customer experiments, develop hypotheses, test them, then adjust. This process can take months and really requires discipline to ensure decisions along the way are informed by market feedback.
And just when you think you’ve got the right industry, segment and customer profile nailed, you get an inbound inquiry from a “big fish” in a different market where the application of your product *might* prove valuable. But, serving this tangential market would require significant investment of time, energy and mind share to create the delivery capability required to be successful – in product, technology and/or people. The temptation to chase these improbable leads can be maddening, particularly when there is uncertainty about your current target market hypothesis and you have someone who is interesting in exploring a partnership with you that is unsolicited.
My approach to these tangential inbounds? Only pursue them if there is –
- A direct application for your product or technology with minimal customization or feature development,
- At least two interested (willing to pay) customers in the same market – which means you may have to do some outreach to uncover the second, and
- Enough resources in the company to continue proving or disproving the target market hypothesis without undue distraction.
I doubt there are many big inbound opportunities that meet all three of these criteria. That said, I don’t want to confuse chasing a tangential market (Losing Focus) with pivoting your business as a result of experimentation and testing in your target market (Seizing Opportunity). The latter is a process that unfolds over time as you iterate with customers and prospects while the former is a “leap” and significant investment of time and resources to address a perceived or real need in a market you don’t currently service and probably know very little about.
What makes this decision process a “fine line”? As a startup, there is likely a high degree of uncertainty that you can be successful in your TARGET market, so ANY opportunity that presents itself can be deceivingly attractive. Don’t be fooled, persist and perservere until and if your target market customers and prospects disprove your hypotheses, thus requiring a data-driven decision to seek alternative paths.
Just make sure you keep the phone number for the “big fish”.