Customer Development For SaaS Companies

by Wayne Willis on March 21, 2011

Steve Blank’s work on Customer Development, as set forth in Four Steps To The Epiphany, is the best way to reduce risk of early failure in startups.  (See my earlier post on this subject.)  It’s especially important given the speed and agility that companies have in developing new web services and promoting them efficiently through online channels of distribution.  But Blank’s work really doesn’t identify efficient methods to get inputs from prospective customers using web-based methods.

Ash Maurya

Ash Maurya

Recently, I’ve been following (and liking) the work being done by Ash Maurya (his personal blog) and his new e-book Running Lean.
.  Last year, Ash revised the model from Four Steps for web based startups, and it made a lot of sense to me.  If you are considering launching a web-based company, you need to read both of his early blog posts on the subject (part 1, and part 2), and then read Running Lean.  It will save you tons of time.

Additionally, and importantly, you should document your business plan on a one-page summary called a “business model canvas.”  Ash collaborated with others to create an online tool to help do this.  I found the tool extremely useful when evaluating, a startup that a potential partner and I were considering.  The StartupToolKit takes the business model insights from Blank, Alexander Osterwalder, Ash, and others and enables you to select a format best suited to your type of business.  For, we used the “lean business model canvas”, and it FORCED me to articulate, with brutal concision, the exact problem we sought to solve, how compelling the solution was (and how it could be articulated as a “unique value proposition”) and the other elements of the business model.  Based on that analysis we paused to consider other business ideas we think might have more legs.

Running LeanOne of the insights from Running Lean is that you can use the web to generate the leads, not just for sales, but for identifying interviewees for the customer development process itself.  Using content marketing to draw relevant eyeballs to the website you are building, you can begin a dialogue with the customer segment you seek to serve, ultimately, with the product or service being offered.  Sometimes you can offer some free information or a webinar or something and gain the sorts of Customer Development insights Blank urges you to get.  (The signup process will include email contact information and permission to contact them.)  Sometimes you simply have a “coming soon” page and a signup form; essentially, the people who leave their email address can get a “beta invitation” and you then engage with them to complete your customer discovery interviews.

A service that launched at South by Southwest 2011 allows you to do this very efficiently – see    Had we gone forward with, I planned to test various versions of our value proposition using Launchrock and Unbounce pages.

Anyway, things are moving fast.  We may press forward with some of the candidate companies – and there are some really interesting candidates in the pipeline.  Or I might do on the side, even given its very limited potential (probably < $1m in annual revenues).  Either way, you can be sure I’ll be using these tools to reduce market risk on SaaS companies I back.  Stay tuned.


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