The Founders Guide to Customer Discovery

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The Founders Guide to Customer Discovery

This week, we’re digging in to a topic that is near and dear to my heart - customer discovery. Customer discovery - at least how I’m going to talk about it - is probably THE most important thing a founder can do, not just as you’re getting started, but the entire time you’re in the stages searching and building towards PMF. And most founders don’t do it well, or nearly enough of it to put themselves in a position to succeed. So it’s pretty important and we’re going to cover it today.

But it’s also pretty tactical, and I think what plagues most founders is they “know what to do”. So I’m not going to get into the tactics. Instead I’m going to tell you a few things you probably haven’t heard about how to approach customer discovery specifically as an early-stage founder (you can figure out the details on your own, or ask me, I’m always down to help).

But you don’t have to take my word for it - let me invoke Paul Graham and YC and their tried and tested motto: build something people want. The reality is that building something people want is WAY easier said than done. I’ll even go so far as to posit 99/100 founders don’t know what people want when they first start. And that 1/100 is just getting lucky. But that’s okay - we should just operate under the assumption that we don’t really know what people want… and it’s now our job as founders to figure it out.

That’s customer discovery.

A quick detour

How many of you know my background and the path my career has taken? I’ve told my story to the hundreds of folks who have joined Day One, but almost certainly not to most of you reading this. So let me tell you a bit about me and the path my career has taken (and you’ll then know why customer discovery is my jam).

I spent the first many years of my career obsessed with design thinking - which is a methodology made popular by the design firm IDEO back in the 80s and 90s, and just means “thinking like a designer when tackling all kinds of problems”. And “thinking like a designer” means taking into account the users of your product as much as the technical side of what you’re building and the business / money making side of what you’re doing. Back then it was a bit revolutionary to bring people back into the equation, and thankfully now it’s much more common, to the point that many founders probably practice forms of design thinking without knowing it.

Pretty much right after undergrad I went and got a masters in design thinking from Parsons School of Design (the longer story, which is a bit more fun, is I was planning to be a lawyer during college, but then dropped that path at the 11th hour, so I had no momentum as I graduated, so I went to work overseas for a year before coming back and jumping into the only grad program that would take me 1 week before classes started). After I graduated with my masters I continued to teach design thinking at Parsons, which is where I got my first taste of education and found I really loved it. I’m pretty sure I learned more from 3 years of teaching (even though I only taught one class at a time) than 2 years of almost full time studying. There’s a lesson in there…

And I did all this while working as a management consultant at Accenture - by doing both I was making sure to keep one foot in the design world while I got experience working in the corporate world. As I went from project to project, I leveraged my degree to start doing more and more design thinking related projects, until it became my full time role. Soon after I achieved my goal of working full time doing design and innovation projects using design thinking, I got the opportunity to jump into venture capital, and I took the leap to join Human Ventures, a venture studio.

As a venture studio, we built startups from the ground up, and I was fortunate enough to help craft our startup-building methodology during my three years there. Part of the reason I was recruited was to bring my design thinking and management consulting background into the startup world - because the reality is that starting a startup is one part an analytics, business-focused endeavor, and another part creative and innovative. Basically, startups require both left and right brain thinking, and I had that.

Part of what I brought to the table was expertise in all the practices that go into design thinking. And a big part of my transition from consulting to startups was figuring out what parts of the design thinking toolkit to keep and what to leave behind. Because the ways that a consultant will apply design thinking on a big project for a big client look very different to what a founder needs to do. The core principles remain, but the practice looks different.

In the end, there are two practices that I found most relevant to apply to building startups:

1. Customer discovery (which we’ll cover today)

2. Rapid, iterative testing (which we’ll cover later!)

Even so, they required a lot of translation. What you’ll read about design thinking, and the case studies you might find, largely don’t apply to how a founder needs to implement customer discovery or rapid testing. I’ve also not found many resources that actually break customer discovery down, and explain the steps and strategies in a way that works for founders.

So now that you know where I’m coming from - an academic background, then dozens of customer discovery projects for clients, and then dozens more with founders - I want to do just that: share a guide for how founders should think about and use customer discovery as they build startups.

Let’s dive in.

Let’s level set on customer discovery

We’ve all heard about customer discovery to one degree or another. But from working with hundreds of founder, I know we all have a different idea in our heads of what it means to actually do customer discovery. So let’s level set a bit.

My simple definition for customer discovery is “the process of finding, engaging, and ultimately understanding your customer.”

So let me unpack that step by step.

FINDING your customer is a hugely important aspect of customer discovery. In fact, this is the part of the process that many folks are most afraid of and keeps them from doing customer discovery as deeply as they need to… because it fundamentally looks like sales, marketing and networking. It requires you to put yourself out there, and yes, you will get rejected. Even when just trying to learn!

But if you don’t find your customer you have no shot at ever understanding them. But as you find your customer, you unlock a hugely valuable aspect of doing customer discovery - you bring your customer close to you, and you begin to develop channels and tactics for finding more of them. You’re also learning quite a bit about your customer just in the process of finding them - you’re learning what they respond to, what platforms they’re on, and you’re learning who actual responds to certain types of outreach on certain platforms. So before you ever engage with a customer, you’re both learning a ton, AND you’re setting yourself up for marketing and sales in the future.

Said another way, if you do customer discovery right, you absolutely should have your first customers ready to go by the time you’re ready to sell them something.

ENGAGING this customer that you’ve now found is where most of the tactics and art of customer discovery happen. This is where design thinking comes into play, and you need to adopt principles from books like The Mom Test. I wish I had written this book, Rob Fitzpatrick gets everything right about how to talk to customers the right way - and frames it so that everyone understands that unless you’ve been trained, you’re almost certainly doing it the wrong way.

So the art of engaging your customer in the process of customer discovery is about getting real, unbiased information from them. You’ll also want to pay attention about how you move people through the process so that you keep them active (because one hugely frustrating aspect of customer discovery is that it can be slow, like when a promising potential customer flakes on you). Then you’ll want to keep them active, especially if they turn out to be your actual customer with problems that you can solve, and show them early versions of your product, and eventually sell them your product.

Lastly, UNDERSTANDING is ultimately what this whole process is about. You need to understand who your customer is - demographics, psychographics, and behaviors. You need to understand their problems, challenges, unmet needs, wants and desires. You need to understand what motivates them, and you need to understand what frustrates them or gets in their way of solving their problem or fulfilling their needs, wants and desires. And you need to understand what they use today or what they’ve tried, and why it does or doesn’t work.

So that’s a lot of understanding, and nothing in what I just outlined is skippable. Getting all that info can be quite complex, and there definitely are best practices - but what makes this so hard for a founder is knowing when to use certain tactics, how far to go, and what good looks like so that you aren’t skipping critical steps.

I might add one thing to my definition, and that’s to lay out the goal of customer discovery - which is to validate your hypotheses about who your customer is, the problem they have, why they want it solved, and how you’re solution will solve it. Having a hypothesis about your customer (who you think they are, what problem you think they have, etc.) is important and how you get started. And the end state of customer discovery is confirming (validating) that your hypothesis is right - or more likely, finding that your original hypothesis is wrong, changing it, and validating that new hypothesis.

And ultimately, you’re not just doing customer discovery because I (or anyone else) said so. Customer discovery is absolutely critical to validate some of the most important aspects of your business - and to do so BEFORE you invest time and resources in building something.

We all know that “if you build it, they will come” does not happen for founders. This is the way to make sure you don’t fall into that trap.

Customer discovery stage by stage

Almost every article on customer discovery I’ve ever read highlights the same best practices around creating personas and running good interviews. No one ever says anything that’s not right… but it’s never the complete picture.

What I think is most important is to understand a higher level approach to customer discovery as a founder, at a stage by stage view during the early days of starting a startup. Then you’ll see how these tactics and steps play out at different moments for a founder.

Here’s what I mean. Customer discovery looks different across these different stages:

1. Idea Exploration - you have the urge to start a business, and/or you’ve stumbled upon a problem that you think you want to solve. Everyone has this moment where they decide to put some effort into starting down the founder / entrepreneur path. Customer discovery in this stage is far from a straight line. You’re looking to talk to a lot of different people to fill in your view of the overall landscape - not just customers but fellow founders, investors, and industry experts. You’re talking to a lot of different potential customers to understand who has which problems and to what intensity. Your hypotheses are very loosely formed, so your conversations are more open ended. And you’ll probably revert back to the starting line at some point, if not more than once. This phase can last a long time if you aren’t super deep in your industry, so it’s important to be patient.

2. Validation of the problem, customer and solution hypotheses - this phase is where customer discovery looks most like the how-to article, but it’s also the one that founders skip out of too quickly. When you’ve done enough exploration to have a firm hypothesis around the customer, their problem, and the solution to solve it, you need to then spend time going much deeper to validate those hypotheses. Founders often don’t go deep enough - because they’re overconfident in what they know about their customer and if their customer wants what they’re building. What is deep enough? 100 conversations. In this stage (and it might take dozens of conversations to figure out your core hypotheses during the exploration phase). 100 conversations is enough to get past the false confidence that comes getting good news or positive responses from your initial interviews, and should lead you to your first ~10 customers at least.

3. Early traction - in this phase, you’ve already made your first sales (especially if you’ve done validation correctly), but likely with an under-developed product and an under-developed GTM machine. You’re shifting into a phase of continuous, iterative improvements of both, and so your customer discovery starts to add in more “user feedback” alongside the continuous outreach and customer conversations. In this phase, the “finding” activities of customer discovery become marketing activities, and the “engaging” activities become more sales-like. And ultimately understanding comes from observing customers use your product, staying close to them and talking to them, and for the first time, quantitative data.

4. Early growth - the transition between the “early traction” and “early growth” phases is very much a gradual transition. Your GTM and product are getting more robust. The earliest hypotheses that you validated have now been built out and you’re transitioning to new strategies. if you’re raising VC, you’ve probably raised a round in between your early traction and early growth, and so now you have resources. The goal in this phase is to further refine and improve your product and GTM machine so you can hit loftier and loftier goals as you position yourself for a seed or series A. To do that requires staying close to your customers, in much the same way as before - but now, the team has also grown, so doing customer discovery is probably no longer the purview of just the founder(s). In this stage, the complexities of an evolving product, growing team, and lofty goals means customer discovery takes on a new look.

After these 4 stages, I’ll assume your business has found or is close to finding PMF. You’re both doing more of the same from the early growth stage, while also hanging on as things change rapidly with more growth capital. These are good problems to have.

I want to go a bit deeper into each of these 4 stages to really unpack how a founder should be approaching customer discovery in each.

The Idea Exploration Phase

If I’m talking to you and you’re in the idea exploration phase, here’s what you should be doing: talk to as many relevant people as you can

In this stage, my heuristic for judging how likely you are to succeed is the pace at which you’re talking to people. Potential customers, founders, investors, and industry experts should all be on your calendar every day. You should be talking to dozens of people in this stage at a minimum, and likely you’ll talk to hundreds.

This is also a phase where you don’t really control how quickly this goes (if someone takes 3 weeks to schedule, you’re waiting 3 weeks). So knowing that, you need to have a lot of forks in the fire and constantly be initiating new outreach, getting people who respond on calendar and chasing them to connect, talking to people, and on occasion doing some synthesis.

Other tactics I would layer in:

• Start with everyone you know. Revive old connections. Start to share what you’re doing and soak in what people have to say… and most importantly, mine your connections for more people to talk to.

• Eventually, and probably fairly early on, will have to do cold outreach. I would lean into both Twitter and LinkedIn. That means setting up your profiles so they put your best foot forward. That means engaging with people on the timeline so you’re more known and folks are likely to respond to you (this is more a Twitter tactic than LinkedIn). And then yes, you’re going to do searches for profiles, and send DMs a few dozen at a time, repeatedly.

• These conversations can be broad and open ended. You’re not yet putting someone through a rigorous user interview. You should be somewhat wary of leading your witness and just getting them to nod along, so be curious ask about what they do, think, see, vs. talking a lot yourself.

The goal of this stage is to create a firm hypothesis around your customer, your solution, and your overall business model. Halfway through (or after enough conversations that you’re starting to have firm ideas) I would create

1. a persona document (a 1 page bio of who your target customer is)

2. a landing page (that encompasses your core value proposition, benefits, key features, pricing and how to get started - to me this is as good if not better than a product roadmap)

3. and a pitch deck - yes, the standard 12 slide VC pitch deck will be the place where you document and refine your overall business strategy

These three artifacts won’t just be bad at first (which is okay, you’ll have plenty of time to iterate and improve before you these need to be ready for real), they’ll be wrong. Allow for drastic changes as you refine your hypotheses.

You’ll know you’re ready to switch gears and start going deeper with your customer when your conversations don’t take you into entirely new areas, your idea is starting to feel refined, and folks are getting it.

The Validation Phase

Like I said before, this is where your customer discovery toolkit comes into play the most. With a good sense of your target customer (as documented in your persona), you can now start outreach in earnest and more focused customer discovery.

I said before you need to have 100 conversations. I’ll up the ante a bit. If you want to move with pace and really set yourself up for success, I would have 100 conversations in 100 days. So that’s just under 1.5 a day if you take weekends off. The key like all things is consistency. Here’s how it’s likely to go.

• You’ll have your first 10-25 user interviews from your existing network. These will come relatively easily, and will be important to give you a baseline understanding of your customer, help you refine your questions and approach to the interview, and overall get comfortable. But don’t put too much weight into the answers and insights you get from these more friendly convos.

• What you’ll do is you’ll push along and your next 25 interviews will be with people who are either strangers who opted into a cold outreach, or a connection of a connection, someone who’s a better fit. Now you’re getting to real people who are much more like the customer that you’ll find and have to sell in the wild. And I promise you, in this second batch of 25 interviews, you will start to have some awesome a-ha moments that change your thinking, take you deeper, and meaningfully move things forward.

• But you can’t stop there. The real magic happens in the last 50 interviews. Here’s why. To hit 100 interviews, you’ll have to really refine the kind of cold outreach or engagement you lean into, to the point where you won’t just find folks who fit your target market and tell you about their problems - but you’ll start to find real early adopters. You’ll find people who are actively going out of their way to solve the problem you’re exploring, and if you listen to they’re needs, you’ll convert these people into customers before even having a real product. This might have happened a couple or a few times in your first 50 interviews, but you really need a cohort of 10+ customers who are all excited for what you’re building and eager to help.

There are additional benefits as well. The machine you build to reach out to enough strangers to get a few into calls to find your first 10 customers will be far more robust than most early stage founders. Even if its highly manual, you’ll know quite a bit about how and where to find and engage your customer. You’ll be setting yourself up to continue to gain traction at a meaningful rate.

Yes, it’s within this journey that you’ll pull out your interview guide, screening questions, outreach tools, and all the best practices. If you need help going through this stage - whether it’s the details and tactics, or just the guidance and motivation to hit those 100 interviews, seriously get in touch and I can help.

The Early Traction Phase

This is the phase where your startup is going to start to get more complex, and begin to look and feel much more like a business. You’ll need to build enough of a product to serve those first 10 customers, and then the next 100. To find those next 100, you’ll probably have to keep doing what you were doing, and also add in some more scalable techniques. But honestly, if you can just stay the course and put in 10x the effort to go from 10 to 100 customers… just do it. Don’t get cute with it. It’s way better to tell investors how close you are to each customer and to know everything about them. You won’t be dinged for not knowing your CAC/LTV ratio at this point (if you get asked that, send them to me).

So what I want to see you doing now is continuing the hand to hand combat of talking to potential customers, finding the right ones and selling them on your product. You’ll also be able to start collecting feedback from people who have used your product. This is key. And while most of us would like to either just look at usage data or send a survey… nothing beats another interview or conversation with your customer.

If you’ve kept your customer close and onboarded many of them by hand, then you’ll have a leg up when it comes to engaging them as they / after they use your product. But even if a customer comes through an ad and converts on a landing page, many respond positively to a real email from the founder of the startup they just signed up for. So stay high tough, and have a semi-structured interview with as many users as you can.

The goal of this phase is not necessarily to grow fast. It’s to know three things:

1. Who your customer is (you won’t have 100 identical customers, but by triangulating feedback and which of your customers get the most value, you’ll be able to hone in on your best target customer)

2. Why your customer needs your solution and is willing to the pay to solve their problem (this comes from knowing your customer’s circumstance and context, their motivations and frustrations - essentially, why did they go through all the hassle to find you, click through your landing page, pay you to sign up, and do all the work to get started)

3. How your solution solves their problem (even your customer doesn’t know exactly how your solution will work for them - does it blow them away, does it barely work, does it work in ways you and they expected, or in other ways - you’ll need to know all this)

If you can understand these three things, and have a machine that can get you ~100 customers, you’ll be in a very good spot to raise money and/or start acquiring customers at a quicker/more profitable rate.

The early growth phase

This last phase that I’ll talk about keeps a few things going from the early traction phase, but then looks different in a few ways.

In this phase, your product and GTM are continually and iteratively improving. You’re probably doing less hand to hand sales and marketing, and starting to layer in and do more scalable tactics. So the natural trend is to talk less to customers who are in the market - which is the risk we’ll want to mitigate.

You’ll also naturally have more customers, which is a double edged sword. On one hand you’ll have more data and people to learn from. On the other, it’ll be harder to stay high touch.

Lastly, you’ll start to have more people around the hoop. You might have designers or PMs who are taking on certain customer discovery jobs. You might have new people focused on sales or customer success. All of these jobs touch on customer discovery, so it’s possible that the insights get lost in the hand off and collaboration between these functions.

So you’ll want to be aware of all this. If you want to stay in touch with new customers, you’ll want to ensure your sales and marketing team is doing customer discovery (and not just sales). You’ll want to empower your PMs and customer success team to really get to know your customers and not just serve them or gather quantitative data. And within all these teams, you’ll need to figure out an operating model, culture and process that keeps the customer front and center.

This is a critical stage to get these things right (or close to right) - because if the business succeeds, and you go from 100 to 1,000 customers and beyond, the next phase of take off is only going to get crazier. These are all good problems to have in the big scheme of things and indicate to me you did a lot right in the early days… but losing sight of your customer is a recipe for trouble as you move along.

Closing thoughts

If you made it this far, I hope I’ve armed you with a 10k foot view of how to approach customer discovery. This is what I’ve found most founders are missing. And if you’re one of the many founders who aren’t on the path I’ve laid out, don’t fret! Just take stock of where you are, how you’re approaching customer discovery, and jump right in.

If you’ve made it this far and either 1) still have questions about what to do, or 2) just need help and support to do this (because it is certainly quite a lot), then get in touch. Seriously, here’s my calendar link, feel free to grab a time with me. I have a lot of wisdom I can share when it comes to doing this, and at Day One we can lean in and support.

And as always, please share any thoughts or feedback, would love to know what you think.