Startups

Your First 10 Customers Can Make Or Break You

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Sean Jacobsohn

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Sean Jacobsohn is a venture investor at Norwest Venture Partners.

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Early in a startup’s life, the main focus is building the right product for the right market. For most B2B startups, this is the period when you start winning your first 10 customers. These 10 customers are unlike any others you’ll have over the course of your company.

You’ll sell to them differently, charge them differently and try to get different things out of the relationship than you will from those that follow. This is the group that will teach you how to refine your product, whether or not you are targeting a large enough market and how to craft a scalable sales process that will help you land your next 100 customers.

Getting these customers and working with them effectively is a challenge for any startup. Here are some tips for startup founders that I’ve learned in my years as a venture capitalist and sales executive.

You’re The First Head Of Sales

It will be tempting to hire an experienced sales veteran when you’re busy trying to get the product right and grow the company, but there is a strong argument against that.

The first 10 customers should be sold by you, the CEO or founder.

As the founder, you understand the product, as well as the market challenges and opportunities, better than anyone else. The feedback you receive during sales calls will help you understand your target customer better, and inform changes that need to be made to the product.

Selling to customers directly will help you strengthen your pitch to potential investors, partners and employees — and also will allow for you to cultivate strong customer relationships from the beginning. Once you’re ready to hire your first sales leader, you will already have valuable, firsthand insight to share with them.

Look For Young And Ambitious Customers

While it’s admirable to target big-name customers, the chances are unlikely that they’ll take a meeting or make a bet on a brand new product. Similarly, a potential customer who is far along or at the end of his career may not have a high tolerance for risk or change.

It’s best to go after customers that fit a similar profile to your startup. Specifically, try to find the bright, young executives who are still in the early stages of their careers, with a long trajectory remaining. They’re usually more forward-thinking, and want to be seen by their company as innovative, strategic leaders. Placing a bet on a new product that solves a big problem for the company could make that young exec a hero.

Focus On Engagement, Not Revenue

As you land more customers and add them to your client roster, it is essential that each initial customer uses your product at the engagement level to be considered an active user. Engagement levels — not revenue numbers — are often a stronger indication of long-term product adoption.

This should be your top priority. Your first set of customers will inevitably serve as reference accounts — and the more engaged users are, the better references they’ll provide.

Focusing your time on your initial customers will also help you to understand how frequently they are using your product and how core it is to their business. You want to get to the point where they tell you that if you remove your product, it would be destructive to their business.

Remember, your company will only achieve success if your product can solve a real problem for your customers. For young companies, frequency of use is usually a better measurement of initial product success than how much they’re willing to pay. If your product really solves their problems, they will eventually pay — and will become some of your most loyal product ambassadors.

Conversely, if a customer has already paid you, but they aren’t using your product, it likely isn’t solving an important enough problem for them — something you as the company founder or CEO needs to be personally aware of in order to increase engagement and, in turn, revenue.

Know Who To “Sign” And When To Walk Away

Focus your initial sales efforts on prospects who aren’t your friends. To be scalable, your product will need validation outside of your network, and you need the type of honest feedback that friends don’t often provide.

This may be a rockier road to navigate, but it will help you become skilled in determining which sorts of potential customers will be the best early adopters. These need to be prospects that represent vast market potential for the specific product you’re developing.

If you realize that a prospect is demanding more from your company than it can provide, or that they want your product to address more than the key pain points you’re set on solving, be prepared to walk away.

Most entrepreneurs I meet are producing nice-to-have solutions, not must-haves. If you handle your first 10 customers the right way, you’ll know you’re on the right path.

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