From 4 believers to $10k MRR

I previously wrote how we got our first 4 customers without having a product. And I can’t stress enough how important these first customers are. How small a milestone it may seem in your incredible dream of start-up success, these 4 customers are the difference between certain death and the small chance of making your dream come true.

However, after the first 4 customers, it’s time for the next hurdle. I spend a lot of time reading and talking to smart people to find out what these hurdles will be. $10k in MRR? 10 unaffiliated customers? International expansion? … It seems like I plan my hurdles further ahead the further I get.

For us, that next hurdle was $10k in monthly recurring revenue. The $10k is not a goal on itself. It’s just money: a means to an end. The real challenge was to prove our first believers we are worthy of their belief. And to expand our customer base thanks to confirming that belief.

In this post I’ll share the 6-month journey that took us from 4 believers to $10k in monthly recurring revenue. Again: this is not a checklist for success. Just as any of us, I’m vulnerable to the narrative fallacy, and above anything you should build your own checklist to success.

Prequel: Method in the madness

Us start-up people are no corporate bozo’s, and our biggest strength is ‘agility’, no doubt. But don’t be too eager in drinking the start-up kool-aid. You’ll need some kind of process if your aim is to build a high-growth but sustainable business.

Our process came to life because of a few excellent books. The most notably were The Start-up Owner’s Manual by Steve Blank and Getting Real by 37 signals.

The funny thing about process is: it won’t work for your company unless everyone believes it will. That’s why I won’t bore you with the details of our process, you’ll have to come up with those yourself. Just be aware that you’ll need structure to facilitate creativity.

Step 1: Team balance

The configuration of your team is of massive importance. In this early stage, you don’t have a financial buffer to recover from mistakes in this area. We definitely dodged a bullet when we lost our first and only developer a few months in.

Apart from that, when you’re looking for the right profiles to join your company, I believe marketing, sales and development deserve an equal amount of attention. We reflected this principle in our team:

Objectives

  • Every company is a funnel: we should balance our efforts to Get, Keep and Grow customers all at the same time.

Tools

  • People: there were three people working on Darwin Analytics full-time: one designer, one developer and one CEO/sales.

Schermafbeelding 2013-10-08 om 19.03.18Yes, we are wearing Darwin merchandising.

Invalid excuses

  • “I can’t possibly pay three people.” – Neither could I, I fixed this by getting customers before I had a product.
  • “I am the founder/CEO, but I can’t do sales.” – Either find a co-founder who can, or learn to do so yourself. To me, having a communicative (co-)founder is even more important than having a technical (co-)founder.
  • “I can’t find people who want to work for me” – as a start-up, you don’t have much to offer other than a vision and the promise of adventure. Learn to articulate that vision and share your enthusiasm to attract the right people.

The results
Having this balanced team made sure we made progress on all fronts at the same time.

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  • Design: get & keep customers
    There was enough design power to test possible new features on customers and build quality sales material to acquire new customers.
  • Development: keep & grow customers
    There was enough development power to put validated new features into production so existing customers saw progress on our platform, and new features unlocked new pricing models.
  • Marketing & sales: manage the funnel
    And there was someone in charge of marketing & sales. Which meant there was a constant buzz about Darwin Analytics, frequent communication with clients and a constantly managed sales pipeline.

My mistakes

  • It’s really hard to be the only developer on the team, definitely when you’re building a product from scratch without knowing what kind of product you’ll end up with. After a few months, we lost our first developer, and I think me underestimating this issue was one of the reasons why. As a non-technical founder, I would now probably hire an external CTO to watch over our development progress.

Step 2: Customer Advisory Boards

Monthly meetings with customers to keep them up-to-date about our progress and ask for feedback.

Objectives

  • Make sure customers know what we’re doing and why.
  • Involve customers in the decision making process.
  • Try to understand why certain features work and others don’t.
  • Make sure your team understands why certain features have a higher priority than others.

Tools

Every month or so, we would have a meeting with existing customers to share our progress and ask for their feedback. A typical Customer Advisory Board meeting would look like this:

  • Talk about current usage of the app, which we measured with Mixpanel.
    The conversation was mainly to find out why someone was using Darwin Analytics the way they did. We learned a lot from these conversations, and it actually produced some of our most successful features.
  • Share mock-ups of new features, tape the responses with Silverback.
    Every new featured started with our designer building wireframes and mock-ups. We used these mock-ups to get feedback from our customers. This has two great advantages: (1) you get really specific feedback from your userbase without the need to write a single line of code, (2) you can use these mock-ups in sales meetings to test which features work in sales and why.
  • Share findings with the team
    In an ideal world, every member on the team is present at every Customer Advisory Board meeting. But when you have multiple Customer Advisory Boards planned in one week, no-one gets any work done. So we taped the conversations, and shared the details on Basecamp to get everyone on the same page. If everyone knows why you’re building something, it gets built a hell of a lot faster.
  • Follow-up!
    Definitely the most important one. We share all the details of our sprints with our customers, so they know when we are acting on their feedback. We also give explicit credit whenever we release something because of user feedback. Sometimes we even dish out gifts.

Invalid excuses

  • “My users won’t talk to me” – Sometimes, users will slip away because they don’t like the direction you’re going. That’s okay. When you’re bringing a vision into reality, you’re making choices. Choices are good. Just make sure you’re losing these customers for the right reasons, eg: for a feature they want, that doesn’t match other users’ needs.
  • “I don’t have the time to arrange all these meetings and follow-up on them” – Seriously?
  • “If Ford asked what people wanted he would’ve built a faster horse.” – Yeah. That one. First of all: stop reading the Steve Jobs book. Secondly: user feedback is only interesting when interpreted by a human with brains. Think about why users are giving you certain feedback. If users ask for a faster horse, you should be smart enough to know it is speed they’re looking for.

The results

  • Clear choices:
    We lost a few customers, but we knew why: they looked for something we weren’t going to build. On the other hand these clear choices choices made our sales process a lot easier. Instead of answering ‘maybe’ to every feature request, we now had a clear answer. Prospects felt more comfortable because of this, and were more likely to sign on.
  • A close relationship with our customers based on trust.
    We screw up some times, it happens in a start-up. But when we lost our first developer and missed deadlines because of this, our clients understood.
  • Growing early customers
    One of the greatest moments in Darwin history was the first client upgrading to a bigger license. From now on, they were measuring the marketing results of not one, but five countries with Darwin Analytics. I believe the trust we created in our customer advisory boards played a huge role in this.

My mistakes

  • I sometimes gave up on customers too early because I believed they were looking for something we weren’t going to build. In fact, it was my poor explanation about our direction which produced confusion. We managed to fix this later on, when bigger parts of our product got built, but we wasted some precious time and feedback because of this.
  • Because of the huge workload, we didn’t always take the time to share findings of every advisory board in a structured way. I would just come back from an advisory board all pumped up, share some ideas during coffee, and run off to another advisory board. You can see how that may confuse people building the product. 🙂 We now have a more structured process, where we document and process user feedback every few weeks in an all-hands meeting.
  • Because every advisory board meeting could potentially add or change a new feature, there was a lot of movement on our roadmap. Especially in the beginning, when we hadn’t made any clear choices yet. Ironically, this got some customers confused about what our plans were and when we were planning on executing them. This problem fixed itself. We now know where we are going, and our roadmap is a lot less volatile because of this.

Step 3: $10k in MRR & our first client event

We got increasingly enthusiastic reactions on the new features we were building. Early customers even started recommending us to others. We also saw our usage numbers going up, with more people using the application more frequently, and getting insights from our application that we didn’t even come up with.

We felt the time was right for our first client event.

Objectives

  • Thank our growing base of early customers for their feedback and their enthusiasm (about 12 companies attended our event)
  • State clearly what Darwin Analytics is, so they know when it’s appropriate to recommend us to others.
  • Share our plans for the future.

Tools

  • Awesome customers
  • A team with decent social skills
  • Pizza
  • A beautiful presentation about past present and future
  • A custom hand-picked book for every customer
  • T-shirts for everyone
  • A guestbook where users could share how the felt about Darwin as a product and as a company

What a great night this was. We shared the full details on the Darwin Analytics blog. In short: we gave a presentation about the past, present and future of Darwin Analytics, with highlights on how our customers had such a big impact on that journey.

Every member of our Customer Advisory Board received a unique certificate for being a member, and a book that we hand-picked for every member to help them reach their professional goals.

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Invalid excuses

  • “I don’t like pizza”
  • “We need more money to do something fancy!” – Don’t pretend to be bigger than you are. Our customers know about our runway, they appreciate our honesty and our common sense in managing our financials.
  • “Our customers don’t want to attend” – Something’s clearly broken. Fix it.
  • “There won’t be enough people” – Doesn’t matter. Get 3 people who love your product together in one room, and it’ll be awesome.

The result

Customers left awesome testimonials in our guestbook, confirming that the relationship between our customers & Darwin Analytics is not just a vendor-client relationship.

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We also got some other great testimonials to use on our website, and customers are upgrading and recommending us more frequently than ever.

This solid base of customers is a crucial asset in extending our aggressive growth rate, which is one of our main focus points at this moment.

My mistakes

  • I had little to do with the event itself, I just had the idea to organize it. So little room for mistakes on my part. When it comes to those who made the event into such a success – our team and our customers – there is nothing I can think of that could’ve made this more of a success. Lesson for me: others do things better. 🙂

What’s up next?

Looking back, our $200k angel funding really brought us to a point where we have a minimum sellable product, and an enthusiastic userbase buying, using & recommending the product.

We’re growing pretty fast at the moment, and we like it. So it’s time for us to take this first validation to the next level. Right now, 4 people are working on Darwin full-time, and we have a clear view on the people we need to scale our growth.

The most important things I learned traveling from 4 believers to $10k in MRR are these:

  • Hire a designer on day one: great design maximizes the impact of technical innovation. I’m convinced that users enjoy our features ten times more because they are greatly designed.
  • Search for your non-technical co-founder: What appeared to be one of my biggest weaknesses has turned out to be a big strength. At least for now. Because I’m not technical, we have a huge focus on sales & customer success.
  • Customers are awesome: Good days or bad, if you have customers involved in your business, everything gets better.
  • Take a step back: at the beginning of Darwin, it was all about execution. The more we grow, the more I need to take the time to reflect about where we go, and plan accordingly.
  • Facilitate conversations: Honestly, I am the dumbest person working at Darwin. But when I get smart people to talk to each other, magic happens.
  • Your company is a funnel: every part of your business should be about ‘Get, Keep and Grow’ customers. From sales to development, from customer support to marketing, we plot the activities along these three goals.

I never got a degree, but I have many teachers. They just aren’t working at schools. Learn about these great people at the Darwin Analytics karma page.

If you have any feedback or questions: find me on Twitter, or reply in the comments. Looking forward!

How I got my first customers without having a product

People often ask me what they need to do to get funding. I always give the same answer: sell your product, without having the product. It’s the only way to really prove your idea is worth an investment, and it’s a great way for yourself to find out *if* your idea is worth your investment.

I realize it’s not easy. I’ve done it, and at times it was a frustrating experience. On the other hand, it taught me a lot about my target audience, pricing model and product. For free. That’s why I would like to share how I’ve done it. Not as a “six-step-program-to-get-a-customer”. But to inspire*, and to have you hack your own way towards that first magical customer.

Storefront_results

My first step, week one: the storefront

A simple landing page, stating our value proposition and a form to subscribe to our mailingslist.

Objectives:

  • Test my value proposition (Am I solving a problem people care about?)
  • Get e-mail addresses (Who cares about the problem I’m solving?)

Tools:

  • Launchrock.com
  • Mailchimp.com
  • My Twitter account

landingpage2

Invalid excuses:

  • “I first need a logo to launch that page.”
  • “Maybe I should start a blog, get a corporate twitter account, gain more followers and then launch my launchrock page.”
  • “I first need a domain to launch this page.”
  • “I need a copywriter/designer/developer/online marketeer to launch this page the way it should be launched.”

The results:

  • 1700 pageviews
  • 335 subscribers (17,5%)

I was hoping for a 15% conversion ratio to validate the problem I was solving, so the 17,5% was a modest confirmation of my value proposition. 60% of the subscribers were from advertising agencies, 30% were clients and 10% were students or press.

What I did wrong:

  • If you look closely at my storefront page, you can see I actually had 3 value propositions: “more insights, less KPI’s”, “Social media ROI, finally” and “Darwin will show you the impact of social media on your sales funnel”. It cost me a lot of effort later on to find out which proposition triggered the subscriptions.

My second step, weeks 2 to 6: the meetings

The hardest part. I e-mailed the 330 people on the list asking for a meeting to discuss the problem and pitch my idea. After a lot of reminders and follow-up calls, I was able to score 25 meetings.

Objectives:

  • Find out why people responded to the storefront.
  • Get feedback on the solution we wanted to build.
  • Get a € 4.800 commitment to try the product for  a year and be a part of the advisory board.

Tools:

  • Keynote
  • Survey questions to ask during the meeting
  • Wireframe to illustrate what solution we wanted to build
  • Highrise CRM to facilitate the follow-up

Invalid excuses:

  • “I can’t draw a wireframe”
  • “No one wants a meeting with me”
  • “I’m not that good in making up survey questions”
  • “My slidedeck won’t be pretty enough”
  • “I haven’t really settled on pricing”

These are the survey questions I came up with:

These are the slides I used to demonstrate our solution:

The results:

  • 25 meetings & responses to my survey
  • Survey quotes I could use on our website to build trust with prospects
  • 4 paying customers

The 25 respondents were kind enough to give me honest and sometimes harsh feedback. It turned out I was wrong about many assumptions I made concerning the product. (I was convinced it had to look like a funnel. Everyone disagreed.) I also noticed people didn’t lack data. They just didn’t know what to do with it, or how to get the insights they were looking for from that data. This was an insight we could build on.

The people who signed up as customers were a direct or indirect part of my network. People who had no connection with me whatsoever lacked the trust to sign on in this early stage. I added a task in our CRM to follow-up with them in a few months. Some of them signed on when we had something more than a few wireframes.

What I did wrong:

  • I was talking/selling way too much in the first meetings. It took me some time to switch into ‘listening’ mode. The survey questions were a way to force myself to shut up.
  • My survey questions were very biased. It was almost impossible for someone to give a wrong answer.
  • I tried to get quantitative results from these surveys, but this was impossible given the limited amount. The fact that I was talking to my target audience proved to be more important than the tools I used to talk to them.

My third step, week seven: having a product without having a product

Objectives:

  • Gather product feedback from our first four customers
  • Refine our sales process: use the logo of our first customers and a first case study to build more trust

The tools:

  • Two freelance developers for one week
  • Myself, the copy-paste monkey

I hustled my way to four sales. Only one problem: there was no product for the customers to use. Two freelancers were going to build the first version of the product, which would automatically collect data from API’s (Facebook, Google Analytics, Twitter, Adwords, …), process that data, and visualize it on a dashboard. The problem was it would take them 12 weeks to build, and I only had one week.

In what I remember as a creative but sweaty meeting, we decided to scrap everything that wasn’t absolutely necessary. The end-result was pretty down-to earth: the front-end worked like it had to, but the entire back-end was replaced by me, the copy paste monkey. I would wake up every morning, log in to every analytics account of our customers, and copy paste their data manually into Darwin Analytics. By the time our customers woke up, they could log into Darwin Analytics, and have all the data they needed.

copypaste

It’s safe to say this way of working was not scalable. But it’s not like people were banging on our doors screaming for Darwin Analytics.

Invalid excuses:

  • “I can’t even pay those two freelance developers for one week!”
  • “The first version of my product can’t be build in one week. Im-possible.”

The results:

  • Four customers who signed up before the product existed, and gave very helpful feedback on the first version of our product in a customer advisory board.
  • Logo’s we could use in our revamped sales presentation, to build trust with prospects.
  • Time to prepare a seed-investment

What I did wrong:

  • I wasn’t measuring how clients were using the product, this could’ve taught me a lot
  • The people on my advisory board were busy, which made it harder to get them in a meeting. If I were a better scheduler, I could have gotten more feedback meetings.

And now…

After the first four customers we got a seed investment (200k) and some government funding (50k) for the research we are doing. 3 people are working for Darwin Analytics full-time, and we are looking for two more to join us. At the time of writing, we have 11 clients using the product. Some of them have become true Darwin Analytics fans, which makes working on the product even more fulfilling.

Our test-driven approach remains one of the things that defines us most. Right now we’re testing our marketing with paid advertising and different landing pages, and we’re using usage data from clients to change our product. I’ll write more about this later.

If there are some general rules I would share with you after these first few months, these would be it:

  • Eliminate dependencies. “I have to do x before I can do Y” is just an excuse not to get started.
  • Don’t be scalable. Surely mailbox had a lot of traction before they got started. You’re not mailbox.
  • “Sales cure all.” & “Always be selling” – I didn’t invent these, doesn’t make them any less true.
  • Prepare for a marathon, not a sprint. A quick silicon valley exit probably won’t be for you. Build a business that can outlast you.
  • Know your runway. You can experiment all you want, but make sure that you know how much cash & runway you have left.

*A lot of people  deserve credit for being an inspiration. Check them out at the Darwin Analytics karma page.

I love feedback and fresh ideas. Go nuts in the comments:

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