Before ironing product-market fit, there is a more important box to check. At Atlanta Ventures, we call it finding authentic demand.
Finding authentic demand puts the entrepreneur in a position of strength. Discovering authentic demand requires imagination, creativity, patience, research, superior listening abilities, and like anything else successful, a little bit of luck. Once the entrepreneur does find authentic demand, they are now on a path of ‘building towards execution’ and not ‘building to explore.’
Here’s the difference:
- Building towards execution means you lose sleep because there is so much work to do.
- Building towards exploration means you lose sleep because you’re unsure if you’re on the right path.
- Building towards execution produces tight, engaged conversations with your targeted audience around the pain point, product, and industry.
- Building towards exploration includes conversations about the vision and future state of the product while it’s being built (painful) in nearly every interaction.
- Building towards execution requires less selling because the demand is real.
- Building towards exploration requires immense selling because the entrepreneur is normally selling a pain or predicting a compelling event: a new feature, law, macro shift in technology.
Building to explore is a costly and risky way to build a startup and a trap I’ve fallen into several times. The instant you say to yourself: “the moment we build this feature, our customers will come pouring through the door” is a key insight that authentic demand is not there. Product does not generate demand. This is an expensive and mentally exhausting way to build a startup. The world an entrepreneur wants to find themselves in is a world where fervent, early customers are ready to pay for the product even before it has been built. This “feeling” and position is a sign of authentic demand.
Sometimes building towards exploration works out and stars align, but spending more time on the early stages of starting a company, particularly finding authentic demand is worth the time and investment. Also, pivots post development are expensive.
Finding authentic demand is the quickest way to honing in on product – market fit.
Which brings us to the most important question: how does one find authentic demand and build to execute?
Step 1: Find a big market with an alleyway towards another big market. What is a big market? Ideally a market has more than three $5-7B companies already in it. Added bonuses include experience, whether work or customer experience, from the entrepreneur’s perspective. Has the entrepreneur felt the pain. Additionally, is the market growing? Ideally the market should be growing 15-30% a year. The market is one where luck can play a much larger factor. Researching growing markets today that will be multi-billion dollar markets in the future is a great exercise. On the Atlanta Ventures Studio front, we know the landscaping services industry is over $90B+. Greenzie, which provides autonomous lawncare, is not going after the entire industry, just the commercial landscaping market with large, open, and flat properties for now. Still a multi-billion dollar industry today. The big market is landscaping services. The alleyway is the smaller slice of the market — in this case, commercial lawn maintenance with flat, open, and large spaces that leads to the other big market: robotic lawn maintenance / autonomous lawncare.
Step 2: Create an assumptive value prop – particularly with a somewhat professional looking website and contact information form. Re-allocating time to “exploring” before you raise a dime, write code, or swing a hammer, is one of the best ways an entrepreneur can spend their time. The initial exploration should include a value prop — which will likely be a guess at first. If the demand is real enough, people will not only fill out your contact form but inquire about more details. The conversations will be less about you selling bits or bytes and features or function and more about their problems today. We are looking for “hair on fire” problems. For Greenzie the hair on fire problem is reducing labor costs. In the case of Intown Golf Club, golf is expensive, timely, and tough to access. Pre-covid, green grass golf was declining 1% a year, yet non-Green grass golf (TopGolf, driving ranges, etc) was growing +~20% a year. Scratching the golf itch quickly, conveniently, with more accessibility is a hair on fire problem for a large part of the market.
It’s a lot easier and less expensive to change the words in your value prop than it is to rewrite software or pull down dry wall.
Step 3: Interview potential buyers and look for leading indicators – there are several leading indicators proving authentic demand. First, is there natural inbound interest? With less than a few hundred dollars on ads, you will be able to answer that question. Second, what quality of ease do you experience getting people on the phone? Are they replying to your emails? When you schedule 15 minutes to discuss the idea, pain point, and value prop are people showing up to the call? Do they care about the conversation enough to prioritize it in their calendar? You’ll notice this is way before any sort of unit economics are explored…we are still just trying to find out if there is demand. I’ve made the mistake of interviewing potential users but not buyers. Make sure to prioritize and interview the person pulling out the credit card. There are several books about how to conduct these interviews, The Mom Test is my favorite. The conversation of an idea with authentic demand is very different from one that is not. Often entrepreneurs are able to “persuade” feedback through passion and sales skills where the feedback is not accurate or candid. You’ll get a sense of the authentic demand after your 20th interview and especially after your 100th.
Step 4: Document and gauge reaction while starting to build community. Gut feel combined with documented notes of feedback phrases is the best way to do it. The phrases of the feedback you receive here will likely be the evolved value prop renditions in the future. One of the most telling signs the authentic demand is there: the potential buyer is asking how to stay in touch? After my first year at SalesLoft (shout out to their recent news), we did not have authentic demand, however we did build community of over 6000 sales professionals that we could easily meet, connect, and converse over the pain points they felt in their profession. Building community is one of the best ways to uncover true authentic demand.
Taking the time to find authentic demand is arguably the single most important task an entrepreneur can do before starting a company. Find a big market where sub-markets will be just as big if not bigger in the future. Create compelling value props that interests the buyer to stay involved. Build the community before the product to increase feedback loops that generate motivating momentum. Doing these steps before anything else will set you on the “building to execute” path which is way more fun and rewarding!
Sounds easy in a few sentences but so much harder to put in practice. Finding authentic demand is the quickest way to getting to product-market fit.